Document:

Exhibit 10.6
AMENDED AND RESTATED TERM LOAN NOTE
Dated as of August 14, 2020 (the “Amended Note Date”)
Note Amount:  $9,620,000.00
FOR VALUE RECEIVED, LF3 PRATTVILLE, LLC, a Delaware limited liability company and LF3 PRATTVILLE TRS, LLC, a Delaware limited liability company (individually and collectively, “Borrower”), promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION, and its successors and assigns (“Lender”), at 1808 Aston Avenue, Suite 250, Carlsbad, California 92008 (or such other place as may be designated by Lender), the principal sum stated above as the Note Amount, with interest thereon, on the dates and at the rates and upon the terms and conditions specified below.  This Amended and Restated Term Loan Note (this “Note”) is the Note referred to in the Loan Agreement dated as of July 11, 2019, as affected by that certain Forbearance Agreement entered into as of April 22, 2020 to be effective as of May 1, 2020, and as amended pursuant to that certain First Amendment to Loan Agreement dated as of the date hereof, between Borrower and Lender (as it may be amended, restated, supplemented, extended or renewed from time to time, the “Loan Agreement”) and is being executed and delivered pursuant thereto (the loan made pursuant to this Note and the Loan Agreement being referred to in this Note as the “Loan”).  Capitalized terms used in this Note and not defined in this Note have the meanings given to such terms in the Loan Agreement.
1.         Interest Rate.
(a)       Interest.  The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) at a fixed rate of 4.134% per annum.
(b)       Basis of Computation.  The interest rate is an annual rate and will be computed using a 360-day year and charged for actual days elapsed.
(c)       Definitions. As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:
(i)         “Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in the U.S. are authorized or required by Law to remain closed.
(ii)       “Cost of Funds Rate” means the yield as of the initial date of funding of this Note, on United States Treasury bills, notes or bonds, selected by Lender in its discretion, having maturity comparable to the scheduled maturities of the installment(s) being prepaid.
(iii)      “Current Value” means the net present value of the dollar amount of the interest to be earned, discounted at the Treasury Rate.
(iv)       “Original Note” has the meaning specified in Paragraph 12.
(v)        “Original Note Date” means July 11, 2019.
(vi)       “Payment Day” means the first day of each calendar month; provided that, if a Payment Day is not a Business Day, such Payment Day shall be the next succeeding Business Day.  The Maturity Date shall also be considered a Payment Day.
(vii)     “PIK Interest” has the meaning specified in Paragraph 2(d).
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(viii)    “Treasury Rate” means the yield, as of the date of prepayment, on United States Treasury bills, notes or bonds, selected by Lender in its discretion, having maturities comparable to the scheduled maturities of the installment(s) being prepaid.
2.         Payments.
(a)       When Due; Maturity Date.  Interest on the Loan shall be paid in arrears.  Interest accrued on the Loan from the Original Note Date to the first Payment Day to occur after the Original Note Date is due and payable on such first Payment Day.  Regular monthly payments (each, a “Monthly Payment”) will commence on the first Payment Day to occur after the Original Note Date, and will continue on each Payment Day thereafter through the Payment Day occurring on August 1, 2024 (the “Maturity Date”).
(b)       Monthly Payment Amounts.  Each Monthly Payment will be equal to installments of principal and interest in the amount set forth on Exhibit A with respect to the month in which such payment is due, which, for the avoidance of doubt, reflects repayment of the PIK Interest.
(c)       Payment at Maturity.  On the Maturity Date, in addition to the required Monthly Payment, Borrower shall also pay the entire remaining unpaid balance of the Loan, if any (including without limitation any outstanding PIK Interest); all accrued and unpaid interest to the Maturity Date; and any other amounts payable under this Note and the other Loan Documents.
(d)       The Borrower acknowledges that, as of the date hereof, pursuant to that certain Forbearance Agreement between Borrower and Lender entered into as of April 22, 2020 to be effective as of May 1, 2020, the Borrower paid interest in kind on this Note in the amount of $100,877.93 (the “PIK Interest”).
3.         Prepayments.
(a)       Except as may otherwise be expressly provided in this Note and the other Loan Documents, Borrower may not make any prepayment of the Loan except as follows:   (i) Borrower must give Lender at least 30 days’ prior written notice of the proposed prepayment; and (ii) the prepayment must be accompanied by payment to Lender of the following:  (A) any and all costs, fees, and other expenses, including late fees, then due and payable with respect to the Obligations; (B) interest on the prepaid principal through the prepayment date (C) (to the extent not prohibited by law) Breakage Costs as liquidated damages for loss of a bargain and not as a penalty, which Breakage Costs shall be calculated in accordance with the provisions of subsection (b) below; and (D) a Prepayment Fee in the amount described in subsection (c) below, unless the Loan Documents specifically state that, with respect to a particular prepayment, no Prepayment Fee is due.  INTEREST ON THE PREPAYMENT AMOUNT MUST BE PAID THROUGH THE PREPAYMENT DATE.  Any prepayment shall be without prejudice to Borrower’s obligations under any swap agreement (as defined in 11 U.S.C. § 101), which shall remain in full force and effect subject to the terms of such swap agreement (including provisions that may require a reduction, modification or early termination of a swap transaction, in whole or in part, in the event of such prepayment, and may require Borrower to pay any fees or other amounts for such reduction, modification or early termination), and no such fees or amounts shall be deemed a penalty hereunder or otherwise.
(b)       Breakage Costs.  In the event that there occurs a prepayment of the Loan pursuant to subsection (a) hereof, Insurance Proceeds are applied by Lender to payment of the Obligations following a Casualty pursuant to Section 4.5(c) of the Loan Agreement, or all or any part of the Obligations are declared to be due and payable pursuant to Section 6.2 of the Loan Agreement, “Breakage Costs” shall accrue and equal the Current Value of:
(i)         the interest that would have accrued on the principal amount prepaid at the Cost of Funds Rate, minus
(ii)       the interest that could accrue on the principal amount prepaid at the Treasury Rate.
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In both cases, interest will be calculated from the prepayment date to the Maturity Date.  In no event shall the Breakage Costs be less than zero.
If the indebtedness evidenced by this Note is accelerated in accordance with the terms of this Note or the Loan Agreement, the resulting balance due shall be considered a prepayment due and payable as of the date of acceleration.
The Borrower agrees and acknowledges that the Lender will have suffered damages on account of the early repayment of the Loan and that, in view of the difficulty in ascertaining the amount of such damages, the Breakage Costs constitute reasonable compensation and liquidated damages to compensate the Lender on account thereof.
The Breakage Costs and their payment shall not in any way reduce, affect or impair any other obligation of the Borrower under this Note or the other Loan Documents.
(c)       Prepayment Fee.  The “Prepayment Fee” will equal (i) 3.0% of the prepaid principal, if made prior to the first anniversary of the Original Note Date; (ii) 2.0% of the prepaid principal, if made on or after the first anniversary of the Original Note Date but prior to the second anniversary of the Original Note Date, and (iii) 1.0% of the prepaid principal, if made on or after the second anniversary of the Original Note Date; provided that in the event that the Site is sold by Borrower to an independent third party (i.e.: not an Affiliate of the Borrower) in an arms’ length transaction, the Prepayment Fee will be waived.
(d)       Application of Prepayment Amounts.  Subject to the provisions of Section 2.8(c) of the Loan Agreement:  (i) amounts paid pursuant to Section 3(a) shall be applied in payment of the amounts specified therein; (ii) all prepaid principal shall be applied to the unpaid principal balance of this Note; provided, however, that any permitted partial prepayment of principal shall be applied to principal in the inverse order of maturity, such that the scheduled Monthly Payment amounts for the Loan otherwise calculated do not change; and (iii) all other payments pursuant to this Note shall be applied first to accrued and unpaid interest on the Note and the balance to reduction of principal on the Note, in the inverse order of maturity.
4.         General Payment Provisions.  All payments due pursuant to this Note shall be payable at the place and in the manner provided in Section 2.8 of the Loan Agreement and otherwise in accordance with the provisions of that Section, which Section is incorporated herein by this reference.
5.         Default Interest.  From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or upon the occurrence and during the continuance of an Event of Default, then at the option of Lender, in its sole and absolute discretion, the outstanding principal balance of this Note shall bear interest at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to 4% above the rate of interest from time to time applicable to this Note (the “Default Rate”).
6.         Late Fees.  If Borrower fails to make any payment pursuant to this Note or any other Loan Document on or before the 5th day after the due date for such payment, then Borrower shall pay Lender a late fee equal to 5% of such past-due payment.  Such late fee will be immediately due and payable and is in addition to any other charges, costs, fees, and expenses that Borrower may owe as a result of the late payment, including the imposition of a default rate of interest pursuant to this Note or any other Loan Document.
7.         Waivers.  Borrower and all endorsers, guarantors, and sureties of this Note waive presentment, demand for payment, notice of dishonor, notice of protest, and protest, notice of intent to accelerate, notice of acceleration and all other notices or demands in connection with delivery, acceptance, performance, default or endorsement of this Note.
8.         Lender Computations Final.  Lender’s computations, in accordance with the terms of this Note and the Loan Agreement, of interest rates, Monthly Payment amounts, and final payment amounts, and other amounts due and owing from Borrower to Lender shall be final and conclusive, absent manifest error.
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9.         Maximum Rate of Interest.  Anything herein to the contrary notwithstanding, the obligations of Borrower hereunder or pursuant to any other Loan Document shall be subject to the limitation that payments of interest shall not be required, for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment would be contrary to the provisions of any Applicable Law limiting the highest rate of interest which may be lawfully contracted for, charged or received by Lender, and in such event Borrower shall pay Lender interest at the highest rate permitted by Applicable Law.
10.       Inconsistencies.  If there are any inconsistencies between the terms of this Note and the other Loan Documents, the provisions of this Note shall control.
11.       Applicability of General Provisions.  All provisions of the Article in the Loan Agreement titled “General Provisions”, as well as the defined terms in the Loan Agreement, including in the Schedule of Defined Terms attached thereto, apply to this Note, the same as if such provisions were set forth in full in this Note.
12.       Amendment and Restatement.  This Note is an amendment and restatement of that certain Term Loan Note dated as of July 11, 2019 payable by the Borrower to the Lender (the “Original Note”).  This Note is not intended to be, nor shall it be deemed to be, a novation of the Original Note or the indebtedness evidenced thereby.  All references in any of the Loan Documents to the Original Note shall be deemed to mean and refer to this Note.
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[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Borrower has executed this Note as of the date stated above.
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	BORROWER:

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	LF3 PRATTVILLE, LLC, a Delaware limited liability company

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	By:
	Lodging Fund REIT III OP, LP, a Delaware limited partnership, its Sole Member

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	By:
	Lodging Fund REIT III, Inc., a Maryland corporation, its General Partner

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	By: 
	/s/ Katie Cox

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	Name: 
	Katie Cox

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	Title: 
	Chief Financial Officer

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	LF3 PRATTVILLE TRS, LLC, a Delaware limited liability company

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	By:
	Lodging Fund REIT III TRS, Inc., a Delaware corporation, its Sole Member

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	By: 
	/s/ Katie Cox

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	Name: 
	Katie Cox

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	Title: 
	Chief Financial Officer

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Signature Page to Amended and Restated Term Loan Note

EXHIBIT A
PAYMENT SCHEDULE

​Exhibit 10.7
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this “Amendment”) is made and entered into effective as of August 14, 2020, between LF3 PRATTVILLE, LLC, a Delaware limited liability company (the “Landlord Borrower”), LF3 PRATTVILLE TRS, LLC, a Delaware limited liability company (the “Tenant Borrower” and, together with Landlord Borrower, individually and/or collectively, as the context may require, “Borrower”), COREY R. MAPLE (the “Guarantor”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, as lender (the “Lender”).
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to that certain Loan Agreement dated as of July 11, 2019, as affected by that certain Forbearance Agreement (the “Forbearance Agreement”) entered into as of April 22, 2020 to be effective as of May 1, 2020 (as may be or as may have been amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Loan Agreement”);
WHEREAS, Borrower executed and delivered to the Lender that certain Term Loan Note dated as of July 11, 2019 (the “Note”);
WHEREAS, the Guarantor executed a Guaranty dated as of July 11, 2019 (the “Guaranty”), to secure the liabilities and obligations of the Borrower under the Loan Agreement;
WHEREAS, pursuant to the Forbearance Agreement, the Lender agreed to (i) forbear from exercising its remedies during the Forbearance Period with respect to Borrower’s failure to make interest payments that were to become due and payable during the Forbearance Period (that being the payments due on May 1, 2020, June 1, 2020 and July 1, 2020) which constitute Events of Default under Section 6.1(a) of the Loan Agreement (collectively, the “Projected Events of Default”), and (ii) to defer such interest payments on the Loan, provided that such accrued interest, in an amount equal to $100,877.93, was paid-in-kind and added to the outstanding principal balance of the Loan (the “PIK Interest”);
WHEREAS, the Borrower has requested that the Lender (a) waive the Projected Events of Default and (b) make certain modifications to the financial covenants set forth in the Loan Agreement;
WHEREAS, the Lender has agreed to waive the Projected Events of Default and such requested modifications, subject to (i) the amendment of the Loan Agreement as further set forth herein to, among other things, (a) add a minimum monthly liquidity requirement, (b) provide for a reduction in the payment of management fees, (c) provide for additional reporting requirements, (d) add a limitation on equity distributions, (e) add a limitation on capital expenditures relating to the Site, and (f) add a limitation on payment of guarantor fees, and (ii) an amendment and restatement of the Term Note to add certain additional prepayment provisions;
WHEREAS, the Guarantor desires to reaffirm the terms of the Guaranty as a condition precedent to this Amendment becoming effective; and
WHEREAS, the Borrower, Guarantor and the Lender desire to amend the Loan Agreement as more particularly described herein.
NOW, THEREFORE, for and in consideration of the above premises, Ten Dollars in hand paid and other good and valuable consideration, the receipt and sufficiency whereof are hereby acknowledged, the Borrower, the Guarantor and the Lender hereby agree as follows:
1.            Capitalized Terms. Capitalized terms used herein but not defined herein shall have the respective meanings ascribed thereto in the Loan Agreement.
2.            Waiver of Projected Events of Default. The Lender hereby waives the Projected Events of Default and agrees not to pursue any remedies under the Loan Agreement or any of the other Loan Documents as a result of the Projected Events of Default.  Other than the Projected Events of Default, the Lender does not waive any other defaults that may now exist under the Loan Agreement or any of the other Loan Documents.  Additionally, the Lender does not waive the Borrower’s or Guarantor’s compliance with all other terms, covenants and obligations of the Loan Agreement
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and the Loan Documents, as herein modified.  To the extent that the Lender, in the course of performance or execution of any of the Loan Agreement or any other Loan Document, have departed from the terms of the Loan Agreement or any other Loan Document or received money under such departure, notice is hereby given that the Lender intends to rely on the exact terms of the Loan Agreement.
3.            Modification to Section 4.7 of the Loan Agreement.  The Loan Agreement is hereby modified and amended effective as of the date hereof by deleting Section 4.7 in its entirety and simultaneously substituting in lieu thereof the following:
“4.7        Franchise Agreement.  Borrower will timely comply with and perform all of its obligations under each Franchise Agreement, including all remodeling and re-imaging obligations, and will give Lender prompt written notice of the occurrence of any default by any Credit Party or Franchisor under such Franchise Agreement and of any notice of default given to any Credit Party by Franchisor.  Borrower will send Lender copies of all notices given by a Credit Party to Franchisor concurrently with the giving of such notices to Franchisor.  Borrower will keep each Franchise Agreement in full force and effect and will exercise all available options, such that the term of each Franchise Agreement, as so extended, will not expire prior to the Maturity Date (as defined in the Note).  Borrower will notify Lender immediately if any Site becomes subject to any PIP (other than the existing PIP), and Borrower shall provide such information with respect to such PIP as Lender may require, including the expected expenses, required reserves and compliance requirements.  Borrower will complete (or cause to be completed), in lien free condition, all improvements required pursuant to the PIP by July 6, 2021.”
4.            Modification to Section 4.8 of the Loan Agreement.  The Loan Agreement is hereby modified and amended effective as of the date hereof by adding the following sentence at the end of Section 4.8:
“Within five (5) business days of the First Amendment Date, Borrower shall provide Lender with an amendment to the Management Agreement reflecting that, until the Financial Covenants Benchmark is satisfied, the amount of the Management Fee (as more particularly defined in the Management Agreement) that shall be paid in cash shall be reduced from 4.00% of the gross revenue from the operation of the Site to 3.00%, provided that the unpaid portion of such Management Fee (the “Accrued Management Fees”) may accrue and may be paid in cash after the Financial Covenants Benchmark is satisfied, so long as Borrower is in pro forma compliance with the financial covenants contained herein after giving effect to such payment.”
5.            Modification to Section 4.15(a) of the Loan Agreement.  The Loan Agreement is hereby modified and amended effective as of the date hereof by deleting Section 4.15(a) in its entirety and simultaneously substituting in lieu thereof the following:
“(a)         Quarterly Reports.  Within 45 days after the end of each Fiscal Quarter of Borrower (excluding the last Fiscal Quarter in each Fiscal Year, but including the fourth (4th) Fiscal Quarters of 2020 and 2021), Borrower shall deliver to Lender:
(i)         Complete Financial Statements for the Fiscal Quarter then ended (other than for  individuals).  Financial Statements are to include standard hotel data of rooms sold and rooms available for the Fiscal Quarter, as well as gross revenue breakdown of room revenue from other revenue for such period, so that occupancy ADR and RevPAR statistics for such Fiscal Quarter can be calculated;
(ii)       The Smith Travel Research Reports for such Fiscal Quarter; and
(iii)      Copies of the most recent Franchisor quality assurance reports available to Borrower.”
6.            Modification to Section 4.16 of the Loan Agreement.  The Loan Agreement is hereby modified and amended effective as of the date hereof by deleting Section 4.16 in its entirety and simultaneously substituting in lieu thereof the following:
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“4.16    Financial Covenants.  Borrower shall comply with each of the following financial covenants:
(a)       Debt Service Coverage Ratio.  Borrower must maintain a Debt Service Coverage Ratio of
(i)         prior to the date the Financial Covenants Benchmark is satisfied, at least the amount set forth below as of the last day of the applicable Fiscal Quarter.
	Measurement Period
	Debt Service Coverage Ratio

	3rd Fiscal Quarter of the 2020 Fiscal Year and the 4th Fiscal Quarter of the 2020 Fiscal Year
	1.30 to 1.00

	1st Fiscal Quarter of the 2021 Fiscal Year 
	1.10 to 1.00

	2nd Fiscal Quarter of the 2021 Fiscal Year 
	1.15 to 1.00

	3rd Fiscal Quarter of the 2021 Fiscal Year and each Fiscal Quarter thereafter
	1.30 to 1.00

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(ii)       from and after the date the Financial Covenants Benchmark is satisfied, at least 1.30 to 1.00 as of the last day of each Fiscal Quarter throughout the Loan term.
(b)       Debt Yield.  Borrower must maintain a Debt Yield of at least 10.0%, measured as of (i) the earlier of (A) December 31, 2021 and (B) the last day of the first Fiscal Quarter after the First Amendment Date during which the Financial Covenants Benchmark is satisfied and (ii) the last day of each Fiscal Quarter of Borrower’s next succeeding Fiscal Quarters throughout the Loan term.
(c)       Liquidity Requirement.  Until the Financial Covenants Benchmark is satisfied, the Borrower hereby covenants and agrees that the Borrower shall at all times maintain a minimum amount of $155,000.00 in cash in the hotel operating account for the Site, to be first tested as of the First Amendment Date and on the last day of each calendar month thereafter. To evidence Borrower’s compliance with the foregoing requirement as of each applicable testing date, the Borrower shall provide to Lender within ten (10) days after the end of each calendar month, copies of the Borrower’s hotel operating account statement for the Site evidencing the Borrower’s compliance with this Section 4.16(c).”
7.            Modification to Section 5.7 of the Loan Agreement.  The Loan Agreement is hereby modified and amended effective as of the date hereof by deleting Section 5.7 in its entirety and simultaneously substituting in lieu thereof the following:
“5.7        Management Agreement Changes; Management Fees.
(a)          No Credit Party shall (i) agree to any Management Agreement amendment that (A) could reasonably be expected to materially and adversely affect the rights and privileges of the owner thereunder or the rights, privileges, and remedies of Lender under the Loan Documents with respect to the Collateral or the Management Agreement; or (B) that would be inconsistent with the operational restrictions set forth in Section 5.4; (ii) assign, transfer, mortgage, pledge or otherwise encumber the Management Agreement or any interest therein to any Person other than Lender; (iii) make any change in Manager; or (iv) become obligated with respect to any other Contractual Obligation for the maintenance or operation of any Site or for providing services in connection with such Site, other than the Management Agreement and other agreements entered into in the ordinary course of business and on normal and customary terms.  Borrower will send Lender a copy of all Management Agreement amendments promptly following execution thereof by all parties thereto.
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(b)          During the period commencing on the First Amendment Date and ending on the date the Financial Covenants Benchmark is satisfied, the Borrower shall not pay Management Fees (as more particularly defined in the Management Agreement) in cash in an amount in excess of 3.00% of the gross revenue from the operation of the Site; provided, that during such period the Accrued Management Fees may accrue and may be paid in cash after the Financial Covenants Benchmark is satisfied, so long as Borrower is in pro forma compliance with the financial covenants contained herein after giving effect to such payment.”
8.            Modification to Section 5.10 of the Loan Agreement.  The Loan Agreement is hereby modified and amended effective as of the date hereof by deleting Section 5.10 in its entirety and simultaneously substituting in lieu thereof the following:
“5.10      Equity Distributions.  Until the Financial Covenants Benchmark is satisfied, Borrower shall not make any cash dividend or distribution for or on account of equity interests in Borrower. From and after satisfaction of the Financial Covenants Benchmark, Borrower shall not make any dividend or distribution for or on account of equity interests in Borrower if, either before or after giving effect to such dividend or distribution, a Default or Event of Default would occur or has occurred and is continuing.”
9.            Modification to Section 5.12 of the Loan Agreement.  The Loan Agreement is hereby modified and amended effective as of the date hereof by deleting Section 5.12 in its entirety and simultaneously substituting in lieu thereof the following:
“5.12      No Further Indebtedness.  Borrower shall not create, incur, assume, permit to exist, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, other than (a) the Obligations and trade indebtedness incurred in the ordinary course of business provided, that such trade indebtedness shall be unsecured trade payables incurred in the ordinary course of its business that are related to the ownership and operation of the Site and the Collateral not to exceed two percent (2%) of the outstanding balance of the Loan, and which is not evidenced by a note and which must be paid within sixty (60) days and which are otherwise expressly permitted under the Loan Documents; (b) subject to the strict compliance with the terms and conditions set forth in Section 5.17, a PPP Loan; (c) obligations of Borrower existing or arising under any Related Swap Contract in form and substance satisfactory to Lender entered into by Borrower in connection with the Loan; and (d) obligations of Borrower existing or arising under any other Swap Contract entered into by Borrower in connection with the Loan provided that (i) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person, and not for purposes of speculation or taking a “market view;” and (ii) such Swap Contract does not contain any provision exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party.”
10.          Modification to Article V of the Loan Agreement.  The Loan Agreement is hereby modified and amended effective as of the date hereof by adding the following new Sections 5.15, 5.16 and 5,17 in the appropriate numerical order after Section 5.14:
“5.15      Capital Expenditures Limitation.  Until the Financial Covenants Benchmark is satisfied, the Borrower shall not make any payment with respect to capital expenditures relating to the Site, or enter into any binding agreement that would obligate Borrower to make any such payment; provided that Borrower may make capital expenditures relating to the Site (i) to the extent necessary to remediate a present danger to the health or safety of the employees and guests at the Site, or (ii) to the extent required expressly by the Franchisor, so long as the costs of such capital expenditures are funded solely with equity contributions made to the Borrower and not from cash from the Borrower’s balance sheet.
5.16        Guarantor Fees. Until the Financial Covenants Benchmark is satisfied, the Borrower shall not make any cash payment with respect to the Guarantor Fees. From and after satisfaction of the Financial
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Covenants Benchmark, Borrower may pay the Guarantor Fees in cash, so long as (i) no Default or Event of Default shall have occurred and be continuing or would occur as a result thereof, and (ii) the Borrower is in compliance with the financial covenants contained in Section 4.16(a) and (b) on a pro forma basis for the most recently ended Fiscal Quarter after giving effect thereto.
5.17        Paycheck Protection Program.  As a result of the COVID-19 pandemic, the Borrower (a) informed the Lender that the Borrower and/or its Subsidiaries desired to participate in and obtain a Small Business Loan on or about April 17, 2020 under the federal Paycheck Protection Program provided in Section 7(a) of the Small Business Act of 1953, as amended by the Coronavirus Aid, Relief, and Economic Security Act (as amended from time to time, the “PPP”), in a principal amount not to exceed an amount to be approved by the Small Business Administration (such loan in such amount, the “PPP Loan”) from a lender participating in the PPP that is acceptable to the Borrower (the “PPP Lender”).  In connection therewith and as a result of the COVID-19 pandemic, the Borrower requested that the Lender: (i) consent to the incurrence by the Borrower and/or its Subsidiaries of the PPP Loan; and (ii) consent to the Borrower using the proceeds of the PPP Loan solely in accordance with and for the limited purposes set forth in the terms, provisions and guidelines of the PPP.  The Lender has agreed to do so, subject to the following terms and conditions:
(a)          So long as the Borrower at all times comply with the PPP Conditions (as defined herein), the Lender consents to the Borrower and/or its Subsidiaries applying for, obtaining and incurring the PPP Loan from the PPP Lender.
(b)          The foregoing consent of the Lender is expressly subject to and conditioned on the continuing satisfaction of the following conditions, covenants and agreements (collectively, the “PPP Conditions”):  (A) the principal amount of the PPP Loan shall not exceed the amount approved by the Small Business Administration; (B) the PPP Loan shall at all times be unsecured; (C) the Borrower shall use the proceeds of the PPP Loan solely in accordance with and for the limited purposes set forth in the terms, provisions and guidelines of the PPP; (D) the Borrower shall comply with all of the terms and guidelines of the PPP with respect to the PPP Loan; (E) the Borrower shall use its best efforts to ensure that the PPP Loan shall be forgiven in accordance with the PPP; (F) all information provided by the Borrower to the PPP Lender, the Small Business Administration or other applicable Government Authority or otherwise under or in connection with the PPP Loan shall be true in all material respects; and (G) the Borrower covenants and agrees that (x) the Borrower shall comply with the PPP Conditions, and (y) the Borrower shall upon receipt thereof, promptly (and in any event within three (3) Business Days) provide the Lender with copies of any correspondence from the PPP Lender, the Small Business Administration or any other applicable Government Authority with respect to the PPP Loan following the PPP Lender’s making the PPP Loan available to the Borrower (including any notices of defaults thereunder, any requirement of Borrower or any affiliate or any shareholder, member or partner of any of the foregoing to make any payment on the PPP Loan and the forgiveness of all or any portion of the PPP Loan, and including any notice which would cause any portion of the PPP Loan to be a Non-Qualifying Portion pursuant to clause (d) below).
(c)          The Borrower and the Lender hereby agree that (i) the PPP Loan shall constitute Indebtedness of the Borrower for purposes of this Agreement and the other Loan Documents, other than for purposes of determining (A) compliance with any financial covenants contained in this Agreement, (B) any financial ratio used in connection with any basket or incurrence test contained in the Loan Documents, and (C) determining the interest rate applicable to the Loans (except for, in each case, any Non-Qualifying Portion referenced in clause (d) below), and (ii) any portion of the PPP Loan which is forgiven shall be disregarded in the calculation of Net Operating Income for all purposes, including, without limitation, calculating financial covenants, basket levels, pricing and other items (including affirmative and negative covenants) governed by reference to Net Operating Income.
(d)          Notwithstanding anything to the contrary contained in clause (c) above, to the extent all or any portion of the PPP Loan cannot reasonably be expected to be forgiven in accordance with the PPP or the Borrower or any of its Subsidiaries receives notice from the PPP Lender, the Small Business Administration or any Government Authority that all or any portion of the PPP Loan will not be
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forgiven (any such portion, a “Non-Qualifying Portion”), such Non-Qualifying Portion shall constitute Indebtedness for all purposes of this Agreement and the other Loan Documents, including those purposes set forth in clauses (c)(i)(A), (B), and (C) above.”
11.          Modification to Exhibit 8.1 of the Loan Agreement.
(a)          Exhibit 8.1 of the Loan Agreement is hereby modified and amended effective as of the date hereof by deleting the definition of “PIP” in its entirety and substituting the following in lieu thereof:
“PIP” means the Property Improvement Plan dated February 11, 2019, issued for the Site by the Franchisor, together with any amendments, supplements or modifications thereto agreed to by Franchisor extending the completion date thereof due to the impacts of the COVID-19 pandemic.
(b)          Exhibit 8.1 of the Loan Agreement is hereby modified and amended effective as of the date hereof by adding the following new definitions in the appropriate alphabetical order:
“Accrued Management Fees” has the meaning specified in Section 4.8.
“Financial Covenants Benchmark” means Lender’s determination that Borrower has maintained a Debt Service Coverage Ratio of at least 1.30:1.00 and a Debt Yield of at least 10.00% measured on a trailing twelve month basis for at least two consecutive calendar quarters (but, for avoidance of doubt, in no event before June 30, 2021), as evidenced by a Compliance Certificate, with accompanying Financial Statements, delivered to and approved by Lender.
“First Amendment Date” means August 14 2020.
“Forbearance Period” means from the period of time commencing May 1, 2020 and ending July 31, 2020.
“Guarantor Fees” shall mean that certain annual fee payable to the Guarantor equal to 1.00% of the principal amount of the obligations secured by the Guaranty, paid on a monthly basis.
“Non-Qualifying Portion” has the meaning specified in Section 5.17.
“PPP” has the meaning specified in Section 5.17.
“PPP Conditions” has the meaning specified in Section 5.17.
“PPP Lender” has the meaning specified in Section 5.17.
“PPP Loan” has the meaning specified in Section 5.17.
12.          Representations and Warranties.  Borrower and Guarantor each hereby represent and warrant as follows:
(a)          after giving effect to this Amendment, each of the representations and warranties respectively made by such Person in Article III of the Loan Agreement and in each of the other Loan Documents are true and correct in all material respects (without duplication of any materiality qualifier contained therein) on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date;
(b)          no Default or Event of Default under any Loan Document to which such respective Person is
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a party has occurred and is continuing as of the date hereof;
(c)          the execution, delivery and performance by the Borrower and Guarantor of this Amendment has been duly authorized by all requisite company action on the part of the Borrower and Guarantor and will not violate any of their respective articles of organization, bylaws, operating agreements, or other organizational documents;
(d)          this Amendment has been duly executed and delivered by the Borrower and Guarantor, and this Amendment constitutes the legal, valid and binding obligation of the Borrower and Guarantor, enforceable against each party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, liquidation, reorganization and other laws affecting the rights of creditors generally, and general principles of equity; and
(e)          no action or proceeding, including, without limitation, a voluntary or involuntary petition for bankruptcy under any chapter of the Bankruptcy Code, has been instituted or threatened by or against such Person.
13.          Reaffirmation of Guarantor. The Guarantor hereby reaffirms all the terms and provisions of the Guaranty, and agrees that such Guaranty shall continue to be valid and enforceable until all liabilities of the Guarantor under such Guaranty have been paid in full.  The Guarantor further acknowledges that the Guaranty is such Guarantor’s valid obligation, enforceable in accordance with its terms, without any counterclaim, defense or setoff.  The Guarantor agrees that this Amendment shall in no manner affect the obligations of such Guarantor under its Guaranty and that the obligations of the Guarantor under its Guaranty shall include all PIK Interest.
14.          Reaffirmation and Ratification.  Each of the Borrower and Guarantor acknowledges and agrees that the security interests and liens granted to the Lender pursuant to the Loan Documents shall remain outstanding and in full force and effect in accordance with the Loan Documents, and shall continue to secure the Obligations, and that the security and other interests granted to the Lender thereby are hereby ratified, confirmed and continued by execution and delivery of this Amendment.  The Loan Documents shall remain extant and in full force and effect following the execution and delivery of this Amendment and the other Loan Documents executed in connection therewith, if any.
15.          Conditions to Effectiveness.  This Amendment shall become effective as of the date hereof provided the Lender shall have received the following in form and substance satisfactory to Lender:
(a)          counterparts of this Amendment duly executed by and on behalf of the Borrower, Guarantor and the Lender;
(b)          an original Amended and Restated Term Loan Note executed by the Borrower;
(c)          an amendment to the Guaranty;
(d)          copy of Borrower’s hotel operating account statement for the Site evidencing a minimum amount of $155,000.00 in cash as of the First Amendment Date; and
(e)          all reasonable and documented out-of-pocket fees and expenses payable or reimbursable by Borrower as of the date hereof, including, without limitation, all reasonable and documented out-of-pocket costs, fees and expenses of the Lender in connection with the preparation, execution and delivery of this Amendment and the other instruments and documents to be delivered pursuant hereto (including the reasonable and documented out-of-pocket fees and expenses of counsel for the Lender with respect thereto).
16.          Post-Closing Covenants.  The Borrower agrees that within five (5) business days of the First Amendment Date, it shall provide to the Lender a fully-executed amendment to the Management Agreement reflecting that, until the Financial Covenants Benchmark (as defined in this Amendment) is satisfied, the amount of the Management Fee (as more particularly defined in the Management Agreement) that shall be paid in cash shall be reduced from 4.00% of the gross revenue from the operation of the Site to 3.00%, provided that such amendment may provide that the unpaid portion of such Management Fee may accrue and may be paid in cash after the Financial Covenants Benchmark is
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satisfied, so long as Borrower is in pro forma compliance with the financial covenants contained herein after giving effect to such payment.
17.          No Other Amendments; No Novation.  Except as expressly modified and amended hereby, the Loan Agreement shall be and remain in full force and effect and unchanged and is hereby ratified and confirmed.  The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as an amendment, waiver or modification of any right, power or remedy of the Lender under any of the Loan Documents, nor constitute an amendment, waiver or modification of any other provisions of the Loan Documents.  Neither the execution and delivery of this Amendment, nor the consummation of any transaction contemplated hereunder, is intended to constitute a novation of the Loan Agreement or of any of the other Loan Documents or any obligations thereunder.  This Amendment shall constitute a Loan Document for all purposes.
18.          Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES.
19.          Counterparts and Headings.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.  Receipt by the Lender of a copy of an executed signature page hereof by facsimile or other electronic means of transmission (including “pdf”) shall constitute receipt by the Lender of an executed counterpart of this Amendment.  The headings of this Amendment are for convenience of reference only, are not part of this Amendment and are not to affect the construction of, or to be taken into consideration interpreting, this Amendment.
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[SIGNATURES COMMENCE ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, Borrower, Guarantor and the Lender party hereto have caused this Amendment to be executed as of the day and year first above written.
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	BORROWER:

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	LF3 PRATTVILLE, LLC, a Delaware limited liability company

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	By:
	Lodging Fund REIT III OP, LP, a Delaware limited partnership, its Sole Member

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	By:
	Lodging Fund REIT III, Inc., a Maryland corporation, its General Partner

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	By: 
	/s/ Katie Cox

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	Name: 
	Katie Cox

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	Title: 
	Chief Financial Officer

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	LF3 PRATTVILLE TRS, LLC, a Delaware limited liability company

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	By:
	Lodging Fund REIT III TRS, Inc., a Delaware corporation, its Sole Member

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	By: 
	/s/ Katie Cox

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	Name: 
	Katie Cox

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	Title: 
	Chief Financial Officer

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	GUARANTOR:

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	/s/ Corey R. Maple

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	COREY R. MAPLE

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[Signature Page to First Amendment to Loan Agreement]

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	LENDER:

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	WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender

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	By:
	/s/ Darcy McLaren

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	Name:
	Darcy McLaren

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	Title:
	Director

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[Signature Page to First Amendment to Loan Agreement]

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