Exhibit 10.56.2

 

PROMISSORY NOTE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal

$5,858,134.26

Loan Date

03-05-2019

Maturity

03-01-2024

Loan No

 

Call / Coll

8100

Account

Officer

403

Initials

References in the boxes above are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.

Any item above containing "***" has been omitted due to text length limitations.

 

 

Borrower:

LF3 Cedar Rapids, LLC

Lender:

Western State Bank

LF3 Cedar Rapids TRS, LLC

 

West Fargo

1635 43rd Street South, Suite 205

 

P.O. Box 617 755 13th Ave E

Fargo, ND 58103

 

West Fargo, ND  58078

 

 

 

 

Principal Amount: $5,858,134.26

Date of Note: March 5, 2019

PROMISE TO PAY. LF3 Cedar Rapids, LLC; and LF3 Cedar Rapids TRS, LLC
("Borrower") jointly and severally promise to pay to Western State Bank
("Lender"), or order, in lawful money of the United States of America, the
principal amount of Five Million Eight Hundred Fifty-eight Thousand One Hundred
Thirty-four & 26/100 Dollars ($5,858,134.26) or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each advance until
repayment of each advance.

PAYMENT. Borrower will pay this loan in accordance with the following payment
schedule, which calculates interest on the unpaid principal balances as
described in the "INTEREST CALCULATION METHOD" paragraph using the interest
rates described in this paragraph:  12 monthly consecutive interest payments,
beginning April 1, 2019, with interest calculated on the unpaid principal
balances using an interest rate of 5.330% per annum based on a year of 360 days;
47 monthly consecutive principal and interest payments of $34,350.00 each,
beginning April 1, 2020, with interest calculated on the unpaid principal
balances using an interest rate of 5.330% per annum based on a year of 360 days;
and one principal and interest payment of $5,467,647.10 on March 1, 2024, with
interest calculated on the unpaid principal balances using an interest rate of
5.330% per annum based on a year of 360 days. This estimated final payment is
based on the assumption that all payments will be made exactly as scheduled; the
actual final payment will be for all principal and accrued interest not yet
paid, together with any other unpaid amounts under this Note. Unless otherwise
agreed or required by applicable law, payments will be applied first to any
accrued unpaid interest; then to principal; then to any late charges; then to
any escrow or reserve account payments as required under any mortgage, deed of
trust, or other security instrument or security agreement securing this Note;
and then to any unpaid collection costs.  Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in writing.
All payments must be made in U.S. dollars and must be received by Lender
consistent with any written payment instructions provided by Lender. If a
payment is made consistent with Lender's payment instructions but received after
West Fargo/Fargo: 7:00 PM Central Standard Time; Devils Lake: 6:00 PM Central
Standard Time, Lender will credit Borrower's payment on the next business day.

ESCROW PROVISION. LF3 Cedar Rapids, LLC and LF3 Cedar Rapids TRS, LLC will be
required to escrow for real estate taxes at the Bank for all properties securing
this promissory note.  The initial monthly escrow amount will be as follows:
(subject to change annually)

 

1230 Collins Road NE, Cedar Rapids, IA 52402; $9,665.00

LF3 Cedar Rapids, LLC and LF3 Cedar Rapids TRS, LLC will be responsible to
ensure the real estate taxes of the subject property or properties are paid in
full by the County Treasurer deadline, whether the Bank pays the real estate
taxes directly on LF3 Cedar Rapids, LLC and LF3 Cedar Rapids TRS, LLC’s behalf
or not. The Bank will not be liable if the real estate tax escrow has
insufficient funds to pay for the property taxes.  If the escrow balance is less
than the amount due to the County Treasurer on the due date, LF3 Cedar Rapids,
LLC and LF3 Cedar Rapids TRS, LLC will be responsible to immediately deposit
additional funds to cover the full amount of real estate taxes due. Bank will
not cover escrow shortfalls. Any excess escrow funds may be refunded to LF3
Cedar Rapids, LLC and LF3 Cedar Rapids TRS, LLC upon the their request
contingent upon the Bank’s analysis of the next real estate tax payment due, the
current balance of the escrow account, and future escrow payments.

INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360
basis; that is, by applying the ratio of the interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. All interest payable under
this Note is computed using this method.

PREPAYMENT PENALTY. Upon prepayment of this Note, Lender is entitled to the
following prepayment penalty: The Borrowers will incur a prepayment penalty
equal to 2% of the principal balance of this loan that is paid within the first
12 months of the loan.

At the one-year anniversary, the Borrowers will incur a declining prepayment
penalty of 3%, 2%, 1% and 1% of the principal balance of this loan that is paid
within the following 4-year period from any proceeds. The prepayment penalty
will be 3% of the principal balance if paid within year two, 2% in year three
and 1% in any of the remaining two years. The Borrower is not permitted to
pre-pay the principal on this loan more than 5% per year. Anything in excess of
this amount would require prior written Bank approval.  The Bank would waive the
prepayment penalty if the property were to be sold in an arms-length transaction
to an independent third party or refinanced onto the secondary market. Except
for the foregoing, Borrower may pay all or a portion of the amount owed earlier
than it is due.  Early payments will not, unless agreed to by Lender in writing,
relieve
Borrower  of  Borrower's  obligation  to  continue  to  make  payments  under  the  payment  schedule.  Rather,  early  payments  will
reduce the principal balance due and may result in Borrower's making fewer
payments. Borrower agrees not to send Lender payments marked "paid in full",
"without recourse", or similar language. If Borrower sends such a payment,
Lender  may accept it without losing any of Lender's rights under this Note, and
Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or other
payment instrument that indicates that the payment constitutes "payment in full"
of the amount owed or that is tendered with other conditions or limitations or
as full satisfaction of a disputed amount must be mailed or delivered to:
Western State Bank, West Fargo, P.O. Box 617 West Fargo, ND  58078.

LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment or $25.00,
whichever is greater.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, the interest rate on this Note shall be increased by adding an
additional 3.000 percentage point margin ("Default Rate Margin"). The Default
Rate Margin shall also apply to each succeeding interest rate change that would
have applied had there been no default.  After maturity, or after this Note
would have matured had there been no default, the Default Rate Margin will
continue to apply to the final interest rate described in this Note. However, in
no event will the interest rate exceed the maximum interest rate limitations
under applicable law.

DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:

Payment Default.  Borrower fails to make any payment when due under this Note.

Other Defaults.  Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.

 

Default in Favor of Third Parties. Borrower or any Grantor defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or
any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's ability to repay this
Note or perform Borrower's obligations under this Note or any of the related
documents.

False Statements. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf under this Note or the related
documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.

Death or Insolvency. The dissolution of Borrower (regardless of whether election
to continue is made), any member withdraws from Borrower, or any other
termination of Borrower's existence as a going business or the death of any
member, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the loan. This includes a garnishment of any of
Borrower's accounts, including deposit accounts, with Lender.  However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
guaranty of the indebtedness evidenced by this Note.

Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of this
Note is impaired.

Insecurity. Lender in good faith believes itself insecure.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance under this Note and all accrued unpaid interest immediately due, and
then Borrower will pay that amount.

EXPENSES. If Lender institutes any suit or action to enforce any of the terms of
this Note, Lender shall be entitled to recover such sum as the court may adjudge
reasonable. Whether or not any court action is involved, and to the extent not
prohibited by law, all reasonable expenses Lender incurs that in Lender's
opinion are necessary at any time for the protection of its interest or the
enforcement of its rights shall become a part of the loan payable on demand and
shall bear interest at the Note rate from the date of the expenditure until
repaid. Expenses covered by this paragraph include, without limitation, however
subject to any limits under applicable law, Lender's expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), and appeals, to the extent permitted by applicable law.   Borrower
also will pay any court costs, in addition to all other sums provided by law.

 

JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other.

 

GOVERNING LAW. This Note will be governed by federal law applicable to Lender
and, to the extent not preempted by federal law, the laws of the State of North
Dakota without regard to its conflicts of law provisions. This Note has been
accepted by Lender in the State of North Dakota.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Cass County, State of North Dakota.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.

COLLATERAL.  Borrower acknowledges this Note is secured by the following
collateral described in the security instruments listed herein:

(A)a Mortgage dated March 5, 2019, to Lender on real property located in Linn
County, State of Iowa.

(B)an Assignment of All Rents to Lender on real property located in Linn County,
State of Iowa.

(C)a Commercial Security Agreement dated March 5, 2019 made and executed between
LF3 Cedar Rapids, LLC and LF3 Cedar Rapids TRS, LLC and Lender on collateral
described as:

All Fixtures at 1230 Collins Road NE, Cedar Rapids, IA 52402

(D)a Commercial Security Agreement dated March 5, 2019 made and executed between
LF3 Cedar Rapids TRS, LLC and Lender on collateral described as:

Assignment of License Agreement dated November 30, 2018 between HOLIDAY
HOSPITALITY FRANCHISING, LLC, a Delaware Limited Liability Company and LF3 Cedar
Rapids TRS, LLC, a Delaware Limited Liability Company. This License constitutes
a license to operate a hotel as Holiday Inn Express brand hotel located at 1230
Collins Road NE, Cedar Rapids, IA 52402

(E)a Commercial Security Agreement dated March 5, 2019 made and executed between
LF3 Cedar Rapids, LLC and LF3 Cedar Rapids TRS, LLC and Lender on collateral
described as:

All inventory, equipment, accounts (including but not limited to all
health-care-insurance receivables),  chattel  paper,  instruments (including but
not limited to all promissory notes), letter-of-credit rights, letters of
credit, documents, deposit accounts, investment property, money, other rights to
payment and performance, and general intangibles (including but not limited to
all software and all payment intangibles); all oil, gas and other minerals
before extraction; all oil, gas, other minerals and  accounts  constituting
as-extracted collateral; all fixtures; all timber to be cut; all attachments,
accessions, accessories, fittings, increases,  tools,  parts, repairs, supplies,
and commingled goods relating to the foregoing property, and all additions,
replacements of and substitutions for all or any part of the foregoing property;
all insurance refunds relating to the foregoing property; all good will relating
to the foregoing property; all records and data and embedded software relating
to the foregoing property, and all equipment, inventory and software to

 

 

PROMISSORY NOTE

(Continued)

 

 

 

utilize, create, maintain and process any such records and data on electronic
media; and all supporting obligations relating to the foregoing property; all
whether now existing or  hereafter arising, whether now owned or hereafter
acquired or whether now or hereafter subject to any rights in the foregoing
property; and all products and proceeds (including but not limited to all
insurance payments) of or relating to the foregoing property.

LINE OF CREDIT.  This Note evidences a straight line of credit.  Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note may be requested only in writing by Borrower
or as provided in this paragraph. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender's
office shown above. Borrower agrees to be liable for all sums either: (A)
advanced in accordance with the instructions of an authorized person or (B)
credited to any of Borrower's accounts with Lender.  The unpaid principal
balance owing on this Note at any time may be evidenced by endorsements on this
Note or by Lender's internal records, including daily computer print-outs.

REPLACEMENT RESERVE. LF3 Cedar Rapids, LLC and LF3 Cedar Rapids TRS, LLC will be
required to maintain a Replacement Reserve account at the Bank, beginning
12-months following loan closing. A hold will be placed on all funds maintained
in this account.  Required deposits into the reserve account will be equal to 1%
of gross revenues for the first 12-months following loan closing, 2% of gross
revenue for the next 12-months, and 3% of gross revenues for the remaining
term.  Borrower will be required to provide the Bank with a written request of
at least

$50,000 for any withdrawals from this account with all withdrawals subject to
Bank approval.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.  
Borrower may notify Lender if Lender

reports any inaccurate information about Borrower's account(s) to a
consumer  reporting agency.  Borrower's  written notice describing  the specific
inaccuracy(ies) should be sent to Lender at the following address: Western State
Bank 110 4th St SE Devils Lake, ND 58301.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them.  Each Borrower
understands and agrees that, with or without notice to Borrower, Lender may with
respect to any other Borrower (a) make one or more additional secured or
unsecured loans or otherwise extend additional credit;  (b) alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of any indebtedness, including increases and decreases of
the rate of interest on the indebtedness;  (c) exchange, enforce, waive,
subordinate, fail or decide not to perfect, and release any security, with or
without the substitution of new collateral; (d) apply such security and direct
the order or manner of sale thereof, including without limitation, any
non-judicial sale permitted by the terms of the controlling security agreements,
as Lender in its discretion may determine; (e) release, substitute, agree not to
sue, or deal with any one or more of Borrower's sureties, endorsers, or other
guarantors on any terms or in any manner Lender may choose; and (f) determine
how, when and what application of payments and credits shall be made on any
other indebtedness owing by such other Borrower. Borrower and any other person
who signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The obligations
under this Note are joint and several.

PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE. EACH BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:

 

LF3 CEDAR RAPIDS, LLC

 

LODGING FUND REIT III OP, LP, Sole Member of LF3 Cedar Rapids, LLC

 

LODGING FUND REIT III, INC., General Partner of Lodging Fund REIT III OP, LP

By: /s/ Corey R. Maple

Corey   R.   Maple,   Chief   Executive   Officer   and Secretary of Lodging
Fund REIT III, Inc.

 

LF3 CEDAR RAPIDS TRS, LLC

 

LODGING FUND REIT III TRS, INC., Sole Member of LF3 Cedar Rapids TRS, LLC

By: /s/ Corey R. Maple

Corey   R.   Maple,   Chief   Executive   Officer   and Secretary of Lodging
Fund REIT III TRS, Inc.

 

 

LENDER:

 

WESTERN STATE BANK

 

By: /s/ Ryan Rued Ryan Rued, VP/Business Banking Officer

 

 

LaserPro, Ver. 19.4.10.036  Copr. Finastra USA Corporation 1997, 2020.   All
Rights Reserved.   - ND  C:\LASERPRO\CFI\LPL\D20.FC  TR-3523  PR-8

 

 

PROMISSORY NOTE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal

$9,444,500.00

Loan Date

06-19-2019

Maturity

07-01-2024

Loan No

 

Call / Coll

8100

Account

 

Officer

403

Initials

References in the boxes above are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.

Any item above containing "***" has been omitted due to text length limitations.

 

 

Borrower:

LF3 Eagan, LLC

Lender:

Western State Bank

LF3 Eagan TRS, LLC

 

West Fargo

1635 43rd Street South, Suite 205

 

P.O. Box 617 755 13th Ave E

Fargo, ND  58103

 

West Fargo, ND  58078

 

 

 

Principal Amount: $9,444,500.00

Date of Note: June 19, 2019

PROMISE TO PAY. LF3 Eagan, LLC; and LF3 Eagan TRS, LLC ("Borrower") jointly and
severally promise to pay to Western State Bank ("Lender"), or order, in lawful
money of the United States of America, the principal amount of Nine Million Four
Hundred Forty-four Thousand Five Hundred & 00/100 Dollars ($9,444,500.00),
together with interest on the unpaid principal balance from June 19, 2019,
calculated as described in the "INTEREST CALCULATION METHOD" paragraph using an
interest rate of 4.600% per annum based on a year of 360 days, until paid in
full. The interest rate may change under the terms and conditions of the
"INTEREST AFTER DEFAULT" section.

PAYMENT.    Borrower  will  pay  this  loan  in  59  regular  payments  of  $53,484.01  each  and  one  irregular  last  payment  estimated  at

$8,387,843.24. Borrower's first payment is due August 1, 2019, and all
subsequent payments are due on the same day of each month after that. Borrower's
final payment will be due on July 1, 2024, and will be for all principal and all
accrued interest not yet paid. Payments include principal and interest. Unless
otherwise agreed or required by applicable law, payments will be applied first
to any accrued unpaid interest; then to principal; then to any late charges;
then to any escrow or reserve account payments as required under any mortgage,
deed of trust, or other security instrument or security agreement securing this
Note; and then to any unpaid collection costs. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. All payments must be made in U.S. dollars and must be received by
Lender consistent with any written payment instructions provided by Lender. If a
payment is made consistent with Lender's payment instructions but received after
West Fargo/Fargo: 7:00 PM Central Standard Time; Devils Lake: 6:00 PM Central
Standard Time, Lender will credit Borrower's payment on the next business day.

ESCROW PROVISION. LF3 Eagan, LLC and LF3 Eagan TRS, LLC will be required to
escrow for real estate taxes at the Bank for all properties securing this
promissory note.  The initial monthly escrow amount will be as follows: (subject
to change annually)

 

3000 Eagandale Place, Eagan, MN 55121; $14,670.00

LF3 Eagan, LLC and LF3 Eagan TRS, LLC will be responsible to ensure the real
estate taxes of the subject property or properties are paid in full by the
County Treasurer deadline, whether the Bank pays the real estate taxes directly
on LF3 Eagan, LLC and LF3 Eagan TRS, LLC’s behalf or not. The Bank will not be
liable if the real estate tax escrow has insufficient funds to pay for the
property taxes. If the escrow balance is less than the amount due to the County
Treasurer on the due date, LF3 Eagan, LLC and LF3 Eagan TRS, LLC will be
responsible to immediately deposit additional funds to cover the full amount of
real estate taxes due.  Bank will not cover escrow shortfalls.  Any excess
escrow funds may be refunded to LF3 Eagan, LLC and LF3 Eagan TRS, LLC upon the
their request contingent upon the Bank’s analysis of the next real estate tax
payment due, the current balance of the escrow account, and future escrow
payments.

INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360
basis; that is, by applying the ratio of the interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. All interest payable under
this Note is computed using this method.

DRAW DOWN LINE OF CREDIT. This Note evidences a straight line of credit. Once
the total amount of principal has been advanced, Borrower is not entitled to
further loan advances. Advances under this Note may be requested only in writing
by the Borrower or as provided in this paragraph. All communications,
instructions, or directions by telephone or otherwise to Lender are to be
directed to Lender's office shown above. Borrower agrees to be liable for all
sums either: (A) advanced in accordance with the instructions of an authorized
person or (B) credited to any of the Borrower's accounts with the Lender. The
unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (A) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (B) Borrower or
any guarantor cases doing business or is insolvent; (C) any guarantor seeks,
claims or otherwise attempts to limit modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (D) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender; or (E) Lender in good faith believes itself insecure.

PREPAYMENT PENALTY. Upon prepayment of this Note, Lender is entitled to the
following prepayment penalty: The Borrower will incur a declining prepayment
penalty of 3%, 2%, 1%, 1% and 1% of the principal balance of this loan that is
paid prior to the five year maturity from any proceeds. The prepayment penalty
will be 3% of the principal balance if paid within the first year, 2% in the
second year and 1% in any of the remaining three years. The Borrower is not
permitted to pre-pay the principal on this loan more than 5% per year. Anything
in excess of this amount would require prior written Bank approval. The Bank
would waive the prepayment penalty if the property were to be sold in an
arms-length transaction to an independent third party or refinanced onto the
secondary market. Except for the foregoing, Borrower may pay all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments under the payment schedule.   Rather, early payments will
reduce the principal balance due and may result in Borrower's making fewer
payments.   Borrower agrees not  to send Lender  payments marked "paid
in  full", "without recourse", or similar language. If Borrower sends such a
payment,  Lender  may  accept  it  without  losing  any  of  Lender's  rights  under  this  Note,  and
Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or other
payment

instrument that indicates that the payment constitutes "payment in full" of the
amount owed or that is tendered with other conditions or limitations or as full
satisfaction of a disputed amount must be mailed or delivered to: Western State
Bank, West Fargo,

P.O.Box 617 West Fargo, ND  58078.

LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment or $25.00,
whichever is greater.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, the interest rate on this Note shall be increased by 3.000 percentage
points.  However, in no event will the interest rate exceed the maximum interest
rate limitations under applicable law.

DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:

Payment Default.  Borrower fails to make any payment when due under this Note.

 

 

Other Defaults. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.

Default in Favor of Third Parties. Borrower or any Grantor defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or
any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's ability to repay this
Note or perform Borrower's obligations under this Note or any of the related
documents.

False Statements. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf under this Note or the related
documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.

Death or Insolvency. The dissolution of Borrower (regardless of whether election
to continue is made), any member withdraws from Borrower, or any other
termination of Borrower's existence as a going business or the death of any
member, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the loan. This includes a garnishment of any of
Borrower's accounts, including deposit accounts, with Lender.  However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
guaranty of the indebtedness evidenced by this Note.

Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of this
Note is impaired.

Insecurity. Lender in good faith believes itself insecure.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance under this Note and all accrued unpaid interest immediately due, and
then Borrower will pay that amount.

EXPENSES. If Lender institutes any suit or action to enforce any of the terms of
this Note, Lender shall be entitled to recover such sum as the court may adjudge
reasonable. Whether or not any court action is involved, and to the extent not
prohibited by law, all reasonable expenses Lender incurs that in Lender's
opinion are necessary at any time for the protection of its interest or the
enforcement of its rights shall become a part of the loan payable on demand and
shall bear interest at the Note rate from the date of the expenditure until
repaid. Expenses covered by this paragraph include, without limitation, however
subject to any limits under applicable law, Lender's expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), and appeals, to the extent permitted by applicable law.   Borrower
also will pay any court costs, in addition to all other sums provided by law.

JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other.

GOVERNING LAW. This Note will be governed by federal law applicable to Lender
and, to the extent not preempted by federal law, the laws of the State of North
Dakota without regard to its conflicts of law provisions. This Note has been
accepted by Lender in the State of North Dakota.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Cass County, State of North Dakota.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.

COLLATERAL.  Borrower acknowledges this Note is secured by the following
collateral described in the security instruments listed herein:

(A)a Mortgage dated June 19, 2019, to Lender on real property located in Dakota
County, State of Minnesota.

(B)an Assignment of All Rents to Lender on real property located in Dakota
County, State of Minnesota.

(C)a Commercial Security Agreement dated June 19, 2019 made and executed between
LF3 Eagan, LLC and LF3 Eagan TRS, LLC and Lender on collateral described as:

All Fixtures at 3000 Eagandale Place, Eagan, MN  55121

(D)a Commercial Security Agreement dated June 19, 2019 made and executed between
LF3 Eagan TRS, LLC and Lender on collateral described as:

Assignment of Franchise Agreement dated June 19, 2019 between Hilton Franchise
Holding  LLC,  a  Delaware  Limited  Liability Company and LF3 Eagan TRS, LLC, a
Delaware Limited Liability Company. This Franchise Agreement constitutes a
license to operate a hotel as Hampton Inn by Hilton brand hotel located at 3000
Eagandale Place, Eagan, MN  55121.

(E)a Commercial Security Agreement dated June 19, 2019 made and executed between
LF3 Eagan, LLC and LF3 Eagan TRS, LLC and Lender on collateral described as:

All inventory, equipment, accounts (including but not limited to all
health-care-insurance receivables),  chattel  paper,  instruments (including but
not limited to all promissory notes), letter-of-credit rights, letters of
credit, documents, deposit accounts, investment property, money, other rights to
payment and performance, and general intangibles (including but not limited to
all software and all payment intangibles); all oil, gas and other minerals
before extraction; all oil, gas, other minerals and  accounts  constituting
as-extracted collateral; all fixtures; all timber to be cut; all attachments,
accessions, accessories, fittings, increases,  tools,  parts, repairs, supplies,
and commingled goods relating to the foregoing property, and all additions,
replacements of and substitutions for all

 

 

PROMISSORY NOTE

(Continued)

 

 

 

 

or any part of the foregoing property; all insurance refunds relating to the
foregoing property; all good will relating to the foregoing property; all
records and data and embedded software relating to the foregoing property, and
all equipment, inventory and software to utilize, create, maintain and process
any such records and data on electronic media; and all supporting obligations
relating to the foregoing property; all whether now existing or  hereafter
arising, whether now owned or hereafter acquired or whether now or hereafter
subject to any rights in the foregoing property; and all products and proceeds
(including but not limited to all insurance payments) of or relating to the
foregoing property.

REPLACEMENT RESERVE. LF3 Eagan, LLC and LF3 Eagan TRS, LLC will be required to
maintain a Replacement Reserve account at the Bank, beginning 12-months
following loan closing. A hold will be placed on all funds maintained in this
account. Required deposits into the reserve account will be equal to 1% of gross
revenues for the first 12-months following loan closing, 2% of gross revenue for
the next 12-months, and 3% of gross revenues for the remaining term. Borrower
will be required to provide the Bank with a written request of at least $50,000
for any withdrawals from this account with all withdrawals subject to Bank
approval.

SUCCESSOR INTERESTS.   The terms of this Note shall be binding upon Borrower,
and upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.  
Borrower may notify Lender if Lender

reports  any  inaccurate  information  about  Borrower's account(s)  to
a  consumer  reporting agency.  Borrower's  written notice describing  the
specific inaccuracy(ies) should be sent to Lender at the following address:
Western State Bank 110 4th St SE Devils Lake, ND 58301.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them.  Each Borrower
understands and agrees that, with or without notice to Borrower, Lender may with
respect to any other Borrower (a) make one or more additional secured or
unsecured loans or otherwise extend additional credit;  (b) alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of any indebtedness, including increases and decreases of
the rate of interest on the indebtedness;  (c) exchange, enforce, waive,
subordinate, fail or decide not to perfect, and release any security, with or
without the substitution of new collateral; (d) apply such security and direct
the order or manner of sale thereof, including without limitation, any
non-judicial sale permitted by the terms of the controlling security agreements,
as Lender in its discretion may determine; (e) release, substitute, agree not to
sue, or deal with any one or more of Borrower's sureties, endorsers, or other
guarantors on any terms or in any manner Lender may choose; and (f) determine
how, when and what application of payments and credits shall be made on any
other indebtedness owing by such other Borrower. Borrower and any other person
who signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The obligations
under this Note are joint and several.

PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE.  EACH BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:

 

LF3 EAGAN, LLC

 

LODGING FUND REIT III OP, LP, Sole Member of LF3 Eagan, LLC

 

LODGING FUND REIT III, INC., General Partner of Lodging Fund REIT III OP, LP

By: /s/ Katie Cox

Katie Cox, Chief Financial Officer of Lodging Fund REIT III, Inc.

 

LF3 EAGAN TRS, LLC

 

LODGING FUND REIT III TRS, INC., Sole Member of LF3 Eagan TRS, LLC

 

By: /s/ Katie Cox Katie  Cox, Chief Financial Officer of Lodging Fund REIT III
TRS, Inc.

 

 

LENDER:

 

WESTERN STATE BANK

 

By: /s/ Ryan Rued

Ryan Rued, VP/Business Banking Officer

 

 

LaserPro, Ver. 19.4.10.036  Copr. Finastra USA Corporation 1997, 2020.   All
Rights Reserved.   - ND  C:\LASERPRO\CFI\LPL\D20.FC  TR-3942  PR-8