MOODY NATIONAL REIT II, INC. 8-K [mnrtii-8k_042919.htm]

EXHIBIT 10.10

 

 

PROMISSORY NOTE

 

$22,550,000.00April 29, 2019

 

FOR VALUE RECEIVED, MOODY NATIONAL OPERATING PARTNERSHIP II, LP, a Delaware
limited partnership (“Borrower”), hereby promises to pay to the order of RI II
MC-HOU, LLC, a Delaware limited liability company (together with any and all of
its successors and assigns and/or any other holder of this Note, “Lender”),
without offset, in immediately available funds in lawful money of the United
States of America, the principal sum of TWENTY-TWO MILLION FIVE HUNDRED FIFTY
THOUSAND AND NO/100 DOLLARS ($22,550,000.00) (or the unpaid balance of all
principal advanced against this Note, if that amount is less), together with
interest on the unpaid principal balance of this Note from day to day
outstanding as hereinafter provided.

 

Section 1.                Payment Schedule and Maturity Dates. Principal and
interest on this Note shall be payable as follows:

 

(a)       On April 29, 2019, Borrower shall pay $7,824,082.00 toward the
principal sum.

 

(b)       Beginning on May 15, 2019 and occurring on the 15th day of each month
thereafter through and including October 15, 2019, Borrower shall pay
$2,000,000.00.

 

(c)       The entire principal balance of this Note then unpaid, together with
all accrued and unpaid interest and all other amounts payable hereunder, shall
be due and payable in full on December 15, 2019 (the “Maturity Date”).

 

Section 2.                Interest Rate. Interest on the outstanding principal
balance of, and all other sums owing under this Note, which are not past due,
shall accrue and be payable at a per annum rate which is equal to the lesser of
(i) the Maximum Lawful Rate (as defined below), or (ii) the Note Rate (as
defined below). Interest shall be computed for the actual number of days which
have elapsed, on the basis of a 360-day year. The term “Note Rate” shall mean
three percent (3.00%) per annum. The term “Maximum Lawful Rate” shall mean the
maximum lawful rate of interest which may be contracted for, charged, taken,
received or reserved by Lender in accordance with the applicable laws of the
State of Texas (or applicable United States federal law to the extent that such
law permits Lender to contract for, charge, take, receive or reserve a greater
amount of interest than under Texas law). If any amount payable by Borrower
hereunder is not paid when due, such amount shall thereafter bear interest at
the Past Due Rate (as defined below) to the fullest extent permitted by
applicable law. Accrued and unpaid interest on past due amounts (including
interest on past due interest) shall be due and payable on demand, at a rate per
annum (the “Past Due Rate”) equal to the lesser of (y) eighteen percent (18%),
or (z) the Maximum Lawful Rate.

 

Section 3.               Prepayment. Upon five (5) days advanced written notice
to Lender, Borrower may prepay all or any portion of the principal amount of
this Note without penalty. In connection with any such prepayment of principal,
Borrower acknowledges and agrees that interest shall always be calculated and
paid through the last day of the month in which the prepayment occurs. Any
prepayments shall be applied to amounts owed under this Note in the order set
forth in Section 5 below.

 

Section 4.                Late Charges. If Borrower shall fail to make any
payment under the terms of this Note (other than the payment due at maturity)
within five (5) days after the date such payment is due, Borrower shall pay to
Lender on demand a late charge equal to five percent (5%) of the amount of such
payment. Such five (5) day period shall not be construed as in any way extending
the due date of any payment or the Maturity Date. The late charge is imposed for
the purpose of defraying the expenses of Lender incident to handling such
delinquent payment. This charge shall be in addition to, and not in lieu of, any
other amount that Lender may be entitled to receive or action that Lender may be
authorized to take as a result of such late payment.

 

 

Section 5.                Certain Provisions Regarding Payments. All payments on
this Note shall, at the sole option of Lender, be applied at any time and from
time to time and in any order, to the following: (a) the payment or
reimbursement of any expenses, late charges, costs or obligations (other than
the principal hereof and interest hereon) for which Borrower shall be obligated
or Lender entitled pursuant to the provisions hereof, (b) the payment of accrued
but unpaid interest hereon, and (c) the payment of all or any portion of the
principal balance then outstanding hereunder. Remittances shall be made without
offset, demand, counterclaim, deduction, or recoupment (each of which is hereby
waived) and shall be accepted subject to the condition that any check or draft
may be handled for collection in accordance with the practice of the collecting
bank or banks. Acceptance by Lender of any payment in an amount less than the
amount then due on any indebtedness shall be deemed an acceptance on account
only, notwithstanding any notation on or accompanying such partial payment to
the contrary, and shall not in any way (a) waive or excuse the existence of an
Event of Default (as hereinafter defined), (b) waive, impair or extinguish any
right or remedy available to Lender hereunder, or (c) waive the requirement of
punctual payment and performance or constitute a novation in any respect.
Payments received after 2:00 p.m. shall be deemed to be received on, and shall
be posted as of, the following Business Day. Whenever any payment under this
Note falls due on a day which is not a Business Day, such payment may be made on
the next succeeding Business Day.

 

Section 6.                Events of Default. The occurrence of any one or more
of the following shall constitute an “Event of Default” under this Note:

 

(a)           Borrower fails to pay when and as due and payable any amounts
payable by Borrower to Lender under the terms of this Note.

 

(b)           Borrower fails to timely perform, observe or keep any covenant,
agreement or condition in this Note and (other than a monetary payment under (a)
above) and such failure continues uncured for a period of thirty (30) days after
notice from Lender to Borrower.

 

Section 7.                Remedies. Upon the occurrence of an Event of Default,
Lender may at any time thereafter exercise any one or more of the following
rights, powers and remedies:

 

(a)           Lender may accelerate the Maturity Date and declare the unpaid
principal balance and accrued but unpaid interest on this Note, and all other
amounts payable hereunder, at once due and payable, and upon such declaration
the same shall at once be due and payable.

 

(b)           Lender may set off the amount due against any and all accounts,
credits, money, securities or other property now or hereafter on deposit with,
held by or in the possession of Lender to the credit or for the account of
Borrower, without notice to or the consent of Borrower.

 

(c)           Lender may exercise any of its other rights, powers and remedies
at law or in equity.

 

Section 8.               Remedies Cumulative. All of the rights and remedies of
Lender under this Note are cumulative of each other and of any and all other
rights at law or in equity, and the exercise by Lender of any one or more of
such rights and remedies shall not preclude the simultaneous or later exercise
by Lender of any or all such other rights and remedies. No single or partial
exercise of any right or remedy shall exhaust it or preclude any other or
further exercise thereof, and every right and remedy may be exercised at any
time and from time to time. No failure by Lender to exercise, nor delay in
exercising, any right or remedy shall operate as a waiver of such right or
remedy or as a waiver of any Event of Default.

 

 

Section 9.                Costs and Expenses of Enforcement. Borrower agrees to
pay to Lender on demand all reasonable costs and expenses incurred by Lender in
seeking to collect this Note, including court costs and reasonable attorneys’
fees and expenses, whether or not suit is filed hereon, or whether in connection
with bankruptcy, insolvency or appeal. Nothing in this Note shall affect the
right of Lender to serve process in any manner otherwise permitted by law and
nothing in this Note will limit the right of Lender otherwise to bring
proceedings against Borrower in the courts of any jurisdiction or jurisdictions.

 

Section 10.             Heirs, Successors and Assigns. The terms of this Note
shall bind and inure to the benefit of the heirs, devisees, representatives,
successors and assigns of the parties. The foregoing sentence shall not be
construed to permit Borrower to assign the Note.

 

Section 11.              General Provisions. Time is of the essence with respect
to Borrower’s obligations under this Note. If more than one person or entity
executes this Note as Borrower, all of said parties shall be jointly and
severally liable for payment of the indebtedness evidenced hereby. Borrower and
each party executing this Note as Borrower hereby severally (a) waive demand,
presentment for payment, notice of dishonor and of nonpayment, protest, notice
of protest, notice of intent to accelerate, notice of acceleration and all other
notices (except any notices which are specifically required by this Note),
filing of suit and diligence in collecting this Note or enforcing any of the
security herefor; (b) agree to any substitution, subordination, exchange or
release of any such security or the release of any party primarily or
secondarily liable hereon; (c) agree that Lender shall not be required first to
institute suit or exhaust its remedies hereon against Borrower or others liable
or to become liable hereon or to perfect or enforce its rights against them or
any security herefor; (d) consent to any extensions or postponements of time of
payment of this Note for any period or periods of time and to any partial
payments, before or after maturity, and to any other indulgences with respect
hereto, without notice thereof to any of them; and (e) submit (and waive all
rights to object) to non-exclusive personal jurisdiction of any state or federal
court sitting in the state and county in which payment of this Note is to be
made for the enforcement of any and all obligations under this Note; (f) waive
the benefit of all homestead and similar exemptions as to this Note; (g) agree
that their liability under this Note shall not be affected or impaired by any
determination that any title, security interest or lien taken by Lender to
secure this Note is invalid or unperfected; and (h) hereby subordinate any and
all rights against Borrower and any security for the payment of this Note,
whether by subrogation, agreement or otherwise, until this Note is paid in full.
A determination that any provision of this Note is unenforceable or invalid
shall not affect the enforceability or validity of any other provision and the
determination that the application of any provision of this Note to any person
or circumstance is illegal or unenforceable shall not affect the enforceability
or validity of such provision as it may apply to other persons or circumstances.
This Note may not be amended except in a writing specifically intended for such
purpose and executed by the party against whom enforcement of the amendment is
sought. Captions and headings in this Note are for convenience only and shall be
disregarded in construing it. This Note and its validity, enforcement and
interpretation shall be governed by the laws of the State of Texas (without
regard to any principles of conflicts of laws) and applicable United States
federal law. Whenever a time of day is referred to herein, unless otherwise
specified such time shall be the local time of the place where payment of this
Note is to be made. The term “Business Day” shall mean any day other than a
Saturday, Sunday or other day on which commercial banks are authorized to close
under the Laws of Texas. The words “include” and “including” shall be
interpreted as if followed by the words “without limitation.”

 

 

Section 12.              No Usury. Interest on the debt evidenced by this Note
will not exceed the maximum rate or amount of nonusurious interest that may be
contracted for, taken, reserved, charged, or received under law. Any interest in
excess of that maximum amount will be credited on the unpaid principal of this
Note, if the principal has been paid, refunded. On any acceleration or required
or permitted prepayment, any excess interest will be cancelled automatically as
of the acceleration or prepayment or, if the excess interest has already been
paid, credited on the principal or, if the principal has been paid, refunded.
This provision overrides any conflicting provisions in this Note. Borrower
hereby agrees that as a condition precedent to any claim seeking usury remedies
or penalties against Lender, Borrower will provide written notice to Lender,
advising Lender in reasonable detail of the nature and amount of the violation
and Lender shall have sixty days after receipt of such notice in which to
correct such usury violation, if any, by either refunding such excess interest
to Borrower or crediting such excess interest against the Note then owing by
Borrower to Lender. To the extent that Lender is relying on Chapter 303 of the
Texas Finance Code to determine the Maximum Lawful Rate payable on the Note or
any other portion of the Indebtedness, Lender will utilize the weekly ceiling
from time to time in effect as provided in such Chapter 303, as amended. To the
extent United States federal law permits Lender to contract for, charge, take,
receive or reserve a greater amount of interest than under Texas law, Lender
will rely on United States federal law instead of such Chapter 303 for the
purpose of determining the Maximum Lawful Rate. Additionally, to the extent
permitted by applicable law now or hereafter in effect, Lender may, at its
option and from time to time, utilize any other method of establishing the
Maximum Lawful Rate under such Chapter 303 or under other applicable law by
giving notice, if required, to Borrower as provided by applicable law now or
hereafter in effect. In no event shall the provisions of Chapter 346 of the
Texas Finance Code (which regulates certain revolving credit loan accounts and
revolving triparty accounts) apply to the Note.

 

16.       Further Assurances and Corrections. From time to time, at the request
of Lender, Borrower will (i) promptly correct any defect, error or omission
which may be discovered in the contents of this Note or in the execution or
acknowledgement thereof; (ii) execute, acknowledge, deliver, record and/or file
(or cause to be executed, acknowledged, delivered, recorded and/or filed) such
further documents and instruments (including, without limitation, further deeds
of trust, security agreements, financing statements, continuation statements and
assignments of rents) and perform such further acts and provide such further
assurances as may be necessary, desirable, or proper, in Lender’s opinion, (A)
to carry out more effectively the purposes of this Note and the transactions
contemplated hereunder, (B) to confirm the rights created under this Note, and
(C) to protect and further the validity, priority and enforceability of this
Note; and (iii) pay all costs in connection with any of the foregoing.

 

17.       Rate Change for Failure to Provide Financial Information. Borrower
shall provide Lender from time to time with current financial information for
Borrower, as such financial information is reasonably requested by Lender. in
the event Borrower shall fail to provide such financial information to Lender
whether pursuant to a request from Lender, Borrower and Lender acknowledge and
agree that the Note Rate shall increase by one percent (1.00%).

 

18.       Debtor and Creditor Relationship. Notwithstanding any prior business
or personal relationship between Borrower and Lender, or any officer, director
or employee of Lender that may exist or have existed, the relationship between
Borrower and Lender is solely that of debtor and creditor, Lender has no
fiduciary or other special relationship with Borrower, Borrower and Lender are
not partners or joint venturers, and no term or condition of this Note shall be
construed so as to deem the relationship between Borrower and Lender to be other
than that of debtor and creditor.

 

APPLICABLE LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF TEXAS AND ANY APPLICABLE LAWS OF THE UNITED
STATES OF AMERICA.

 

WAIVER OF JURY TRIAL. BORROWER AND LENDER (BY ACCEPTANCE OF THIS NOTE) WAIVE
TRIAL BY JURY IN RESPECT TO ANY DISPUTE AND ANY ACTION ON SUCH DISPUTE. THIS
WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND
BORROWER AND LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION
HAVE BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR
TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES ENTERING INTO THIS NOTE. BORROWER AND LENDER ARE EACH
HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER OF JURY TRIAL. BORROWER FURTHER REPRESENTS AND WARRANTS
THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF
THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE
REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT
IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

 

BALLOON PAYMENT. THIS NOTE IS PAYABLE IN FULL ON DECEMBER 15, 2019 . YOU MUST
REPAY THE ENTIRE PRINCIPAL BALANCE OF THE NOTE AND UNPAID ACCRUED INTEREST THEN
DUE. THE LENDER IS UNDER NO OBLIGATION TO REFINANCE THE NOTE AT THAT TIME. YOU
WILL, THEREFORE, BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS YOU MAY OWN, OR
YOU WILL HAVE TO FIND A LENDER WILLING TO LEND YOU THE MONEY AT PREVAILING
MARKET RATES, WHICH MAY BE CONSIDERABLY HIGHER OR LOWER THAN THE INTEREST RATE
ON THIS NOTE. IF YOU REFINANCE THIS NOTE AT MATURITY, YOU MAY HAVE TO PAY SOME
OR ALL CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN
REFINANCING FROM THE SAME LENDER.

 

ENTIRE AGREEMENT. THIS NOTE CONTAINS THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG
THE PARTIES.

 

(remainder of page intentionally left blank; signature page follows)

 

 

IN WITNESS WHEREOF, Borrower has duly executed this Note under seal as of the
date first above written.

 

  BORROWER:         MOODY NATIONAL OPERATING PARTNERSHIP II, LP, a Delaware
limited partnership         By: Moody National REIT II, Inc., a Maryland
corporation, its general partner         By: /s/ Brett C. Moody   Name:   Brett
C. Moody   Title:     CEO