Document:

Moody National REIT II, Inc. 8-K

 

Exhibit 10.3

 

PROMISSORY NOTE

 

	Date:           	October 24, 2018
	 	 	 	 
	Maker (whether one or more): 	Moody National Operating Partnership II,
    LP and
	 	 	 	Moody National REIT II, Inc.
	 	 	 	 
	Makers’ Mailing Address: 	6363 Woodway Drive, Suite 110, Houston, Texas 77057
	 	 	 	 
	Payee:	Green Bank, N.A.
	 	 	 
	Place of Payment:	4000 Greenbriar, Houston, Texas 77098
	 	 	 	 
	Principal Amount:	SIXTEEN MILLION AND 00/100 DOLLARS ($16,000,000.00)
	 	 	 	 

Annual Interest Rate on Unpaid Principal from
Date:

 

This Note shall bear interest,
except on past due sums, at a rate per annum which shall from day to day be equal to the lesser of (a) a fluctuating rate per
annum (the “Contract Rate”) which is two and 50/100 percent (2.50%) per annum above the Index Rate (as hereinafter
defined) in effect from time to time, each such change in the Contract Rate to become effective, without notice to Maker, on the
effective date of each determination of the Index Rate with respect to any Interest period (as defined below) as provided below,
or (b) the Highest Lawful Rate (as hereinafter defined); provided, however, if at any time the Contract Rate shall exceed the
Highest Lawful Rate, thereby causing the Contract Rate to be limited to the Highest Lawful Rate, then notwithstanding any subsequent
change in either the Contract Rate or the Highest Lawful Rate that would otherwise reduce the Contract Rate to less than the Highest
Lawful Rate, the Contract Rate shall remain equal to the Highest Lawful Rate until the total amount of interest accrued equals
the amount of interest which would have accrued if the Contract Rate had at all times been in effect. As used herein, the “Index
Rate” shall mean the 1 month London Interbank Offered Rate (“LIBOR Rate”) as administered by the “ICE
Benchmark Administration Limited” (“IBA”) or such other organization who takes over the administration of such
rate, for the first day of each Interest Period (as defined below) and as shown on the display designated as “ICE LIBOR”
on Bloomberg for the purpose of displaying such rate rounded upward if necessary to the nearest whole 1/100 of 1%. Each change
in the rate to be charged on this Note will be made and become effective without notice on the commencement date of each Interest
Period based upon the Contract Rate then in effect. As used herein, the term “Interest Period” shall mean initially,
the period commencing on the effective date of the Contract Rate and through the last day of the month that the Contract Rate
became effective. Thereafter, each Interest Period shall commence on the 1st of each month and shall continue up to, but shall
not include, the 1st day of the immediately following month; provided, however, if any Interest Period would otherwise end on
a day which is not followed by a Business Day (as defined below), such Interest Period shall be extended to the next day which
is followed by a Business Day. Interest on this Note shall be computed on the basis of a year of 360 days, and for the actual
number of days elapsed, unless such calculation would result in a usurious rate, in which case interest shall be calculated on
the per annum basis of 365 or 366 days, as the case may be. The rate in effect from time to time is herein referred to as the
“Stated Rate”; provided, however, in no event shall interest on the Promissory Note (“Note”) ever be charged
or paid at a rate greater than the maximum non-usurious rate permitted by applicable federal or Texas law from time to time in
effect, whichever shall permit the higher lawful rate (the “Highest Lawful Rate”). At all such times, if any, as Texas
law shall establish the Highest Lawful Rate, the Highest Lawful Rate shall be the “weekly rate ceiling” (as defined
in Texas Finance Code, Chapter 303, as amended) from time to time in effect; provided that Payee may also rely on alternative
maximum rates of interest from time to time in effect under other applicable laws. If adequate and reasonable means does not exist
for ascertaining the LIBOR Rate as set forth herein then, Payee shall select an alternative interest rate methodology to determine
the LIBOR Rate that gives due consideration to conventions then being used by Payee to determine rates of interest in similar
types of credit facilities as those hereunder, and such new rate shall be substituted for the LIBOR Rate for all purposes hereunder. 

 

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	Moody National REIT II, Inc. 

     

    

 

Annual Interest Rate on Matured, Unpaid Amounts:
The lesser of twelve percent (12%) per annum and the Highest Lawful Rate.

 

Terms of Payment (principal and interest):

 

Monthly installments of interest,
the first such installment being due and payable the first Business Day after the 15th day of the month immediately
following the month this Note is executed and each subsequent installment shall be due and payable on the same day of each succeeding
calendar month thereafter until six (6) months from the date hereof, when the then remaining unpaid principal and accrued
unpaid interest of this Note is due and payable. Commencing with the first installment of interest hereunder and on the same day
of each succeeding calendar month thereafter, a principal payment equal to the greater of (a) $1,500,000.00 or (b) fifty percent
(50%) of Consolidated Net Cash Flow (calculated the first Business Day after the 15th of each month with respect to the calendar
month then most recently ended). Each payment will be credited first to the accrued unpaid interest and then to reduction of principal.
Interest will be calculated on the unpaid principal to the date of each installment. Consolidated Net Cash Flow is defined in the
Loan Agreement of even date herewith.

 

	Prepayment Penalty: 	This note may be prepaid in whole or in part at any
time without penalty. All prepayments in excess of accrued interest shall be applied to the outstanding principal balance of this
note in the inverse order of maturity.

 

Security for Payment

 

		(a)	Security Agreement and Financing Statement from Maker to Payee that covers such personal property
as is described therein (“Property”).

 

		(b)	Collateral Assignment of Deposit Account from Moody National REIT II, Inc.

 

Maker promises to pay to the
order of Payee at the place for payment and according to the terms of payment the principal amount and interest at the Stated Rate.
All unpaid amounts shall be due by the final scheduled payment date.

 

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	Moody National REIT II, Inc. 

     

    

 

Subject to Maker’s rights
to notice of default and opportunity to cure as set forth in the Loan Agreement of even date herewith, if (a) Maker defaults in
the payment of this note, or in the payment or performance of any obligation in i) the Loan Agreement executed by Maker and
Payee providing for the making of a loan to Maker in the original principal amount of $16,000,000.00, together with all renewals
of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for such Loan Agreement (the “Loan
Agreement”), (ii) any instrument securing or collateral to it, or (iii) any renewals and/or extensions of any of the foregoing
(“Related Documents”), or (b) any other Event of Default, as defined in the Loan Agreement, shall occur and be
continuing, then Payee may declare the unpaid principal balance and accrued unpaid interest on this note immediately due. and shall
be entitled to invoke all of its rights under the terms of all said such Related Documents. Subject to Maker’s rights to
notice of default and opportunity to cure as set forth in the Loan Agreement of even date herewith, Maker and each surety, endorser,
and guarantor waive all demands for payment, presentations for payment, notices of intention to accelerate maturity, notices of
acceleration of maturity, protests, dishonor, notice of protest and notice of dishonor, to the extent permitted by law.

 

If this note or any instrument
securing or collateral to it is given to an attorney for collection or enforcement, or if suit is brought for collection or enforcement,
or if it is collected or enforced through probate, bankruptcy, or other judicial proceeding, the Maker shall pay Payee all costs
of collection and enforcement, including reasonable attorney’s fees and court costs, in addition to other amounts due.

 

This Note shall be governed
by and construed in accordance with Texas law and applicable federal law. The parties hereto intend to conform strictly to the
applicable laws governing maximum interest rates permitted. In no event, whether by reason of demand for payment, prepayment, acceleration
of the maturity hereof or otherwise, shall the interest contracted for, charged or received by Payee hereunder or otherwise exceed
the maximum amount permitted under applicable law. If from any circumstance whatsoever interest would otherwise be payable to Payee
in excess of the maximum lawful amount, the interest payable to Payee shall be reduced automatically to the maximum amount permitted
by applicable law. If Payee shall ever receive anything of value deemed interest under applicable law which would, apart from this
provision, be in excess of the maximum lawful amount, an amount equal to the amount which would have been excessive interest shall
be applied to the reduction of scheduled principal payments owing hereunder in inverse order of their maturities and not to the
payment of interest, or if such amount which would have been excessive interest exceeds the unpaid balance of principal hereof,
such excess shall be refunded to Maker. All interest paid or agreed to be paid to Payee shall, to the extent permitted by applicable
law, be amortized, prorated, allocated, and spread throughout the full stated term (including any renewal or extension) of such
indebtedness so that the amount of interest charged or paid on account of such indebtedness does not exceed the maximum permitted
by applicable law. The provisions of this paragraph shall control all existing and future agreements between Maker and Payee. In
determining whether interest of any kind paid or payable hereunder exceeds the highest rate, the undersigned and Payee shall, to
the maximum extent permitted under applicable law (a) characterize any non-principal payment as an expense, fee or premium, (b)
exclude voluntary prepayments and the effects thereof and (c) amortize, prorate, allocate and spread, in equal parts, the total
amount of interest throughout the entire contemplated term of the indebtedness in order to render the interest rate uniform throughout
such term. Without limiting the generality of the foregoing, the amount of any late payment fee or charge provided for herein or
in the Security Documents (whether or not the same are construed as interest under applicable laws) are limited to and shall never
exceed an amount which, when added to all items called or deemed to be interest in connection with the transactions contemplated
herein, does not exceed the maximum amount of interest payable on the principal balances involved under applicable law. On any
acceleration or required or permitted prepayment, any such excess shall be canceled automatically as of the acceleration or prepayment
or, if already paid, credited on the principal of the debt or, if the principal of the debt has been paid, refunded. This provision
overrides other provisions in this and all other instruments concerning the debt.

 

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	Moody National REIT II, Inc. 

     

    

 

In addition to and without
limitation of any defenses to which Payee may be entitled under applicable law, Maker and any obligor agree to provide Payee with
written notice and a reasonable opportunity of at least 60 days to correct any excessive contract, charge or receipt, and any corrective
action by Payee shall relieve Payee of any liability regarding same. Any such notice to Payee must be by certified mail, return
receipt requested, and must provide Payee with specific details regarding the nature and extent of any alleged excessive contract,
charge or receipt.

 

For purposes of any suit relating
to the Note, Maker hereof submits itself to the jurisdiction of any court sitting in the State of Texas and further agrees that
venue in any suit arising out of the Note or any venue shall be fixed in Harris County, Texas. Final judgment in any suit shall
be conclusive and may be enforced in any jurisdiction within or without the United States of America, by suit on the judgment,
a certified or exemplified copy of which shall be conclusive evidence of such liability.

 

The Maker agrees that the sums
evidenced by this Note are not for personal, family or household purposes, and that it is to be used primarily for business and
commercial purposes.

 

It shall be a default hereunder
if Payee discovers that any statement, representation or warranty in the Note, any security agreement or in any other document
or instrument delivered to or relied upon by Payee in connection with the indebtedness secured hereby is false, misleading or erroneous
in any material respect.

 

It shall be a default hereunder
if Payee deems itself insecure as to the repayment of the indebtedness secured hereby or the adequacy and sufficiency of the property
as security for the indebtedness secured hereby.

 

Maker, at any time and from
time to time, shall furnish promptly, upon request, a written statement or affidavit, in such form as may be required by Payee,
stating the unpaid balance of the Note and that there are no offsets or defenses against full payment of the Note and performance
of the terms hereof, or if there are any such offsets and defenses, specifying them in reasonable detail.

 

Whenever any payment to be
made under this note shall be stated to be due on a Saturday, Sunday or legal holiday for commercial banks under the laws of the
State of Texas, then such payment shall be made on the next succeeding Business Day.

 

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	Moody National REIT II, Inc. 

     

    

 

If more than one person or
entity executes this Note as Maker, all of said parties shall be jointly and severally liable for the repayment of the indebtedness
evidenced hereby. Maker and all sureties, endorsers, guarantors and any other party now or hereafter liable for the payment of
this Note, in whole or in part, hereby severally: (i) waive grace, demand, presentment for payment, notice of nonpayment, protest,
notice of intention to accelerate, notice of acceleration, all other notice, and diligence in collecting this Note or enforcing
any of this Note; (ii) agree to any substitution, subordination, exchange or release of any such security or the release of any
party primarily or secondarily liable hereon; (iii) agree that Holder shall not be required first to institute suit or exhaust
any remedies against Maker or others liable or to become liable hereon or to enforce its rights against them or any security for
this Note; and (iv) consent to any extension or postponement of time of payment of this Note and to any other indulgence of Holder
with respect to any duty of Maker without notice hereof to any of them.

 

The Maker understands and agrees
that (i) Payee’s document retention policy may involve the imaging of executed loan documents, which includes but is not
limited to any note, guaranty, deed of trust, security agreement, assignment, financing statement and any other document which
evidences any indebtedness owed by Maker and/or Guarantors to Payee and/or secures such indebtedness and/or relates to the indebtedness
and/or the collateral securing such indebtedness and the destruction of the paper original, including the original note and (ii)
the Maker waives, any rights and/or defenses that it may have to the use of such imaged copies of loan documents in the enforcement
of any of Payee’s rights in a court of law or otherwise and/or as to any claim that such imaged copies of the loan documents
are not originals.

 

THE PARTIES TO THIS AGREEMENT
HEREBY, UNCONDITIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COUNSEL, WAIVE, RELINQUISH AND FOREVER FORGO THE RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR ARISING OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT. 

 

Business Day shall mean any
day, other than a Saturday or a Sunday that Payee’s central business office is open for business.

 

Payee reserves the right, in
its sole discretion, without notice to the Maker, to sell participations or assign its interest, or both, in all or any part of
this note.

 

LATE CHARGE. If a payment is
ten (10) days or more late, Maker will be charged five percent (5.00%) of the regularly scheduled payment.

 

Maker reserves the right to
prepay this Note in any amount at any time prior to maturity without penalty.

 

When the context requires,
singular nouns and pronouns include the plural.

 

    	 -5-
	Moody National REIT II, Inc. 

     

    

 

SIGNATURE(S) FOUND ON FOLLOWING PAGE(S)

 

    	 -6-
	Moody National REIT II, Inc. 

     

    

	 	 	 	 
	 	MAKER:	 
	 	 	 
	 	Moody National Operating Partnership II, LP,	 
	 	By: Moody National REIT II, Inc.,	 
	 	a Maryland corporation, its general partner	 
	 	 	 	 
	 	By: 	 	 
	 	 	Brett C. Moody, President	 
	 	 	 	 
	 	Moody National REIT II, Inc.,	 
	 	a Maryland corporation	 
	 	 	 	 
	 	By:	 	 
	 	 	Brett C. Moody, President	 

 

    	 -7-
	Moody National REIT II, Inc.Moody National REIT II, Inc. 8-K

 

Exhibit 10.4

LOAN AGREEMENT

 

This Loan Agreement (the
“Agreement”) is made and entered into on October 24, 2018 by and between Green Bank, N.A., having its principal
office in Harris County, Texas (the “Lender”), Moody National Operating Partnership II, LP whose
address is 6363 Woodway Drive, Suite 110, Houston, Texas 77057 and Moody National REIT II, Inc., whose
address is 6363 Woodway Drive, Suite 110, Houston, Texas 77057 (the “Borrower”, whether one or more),
as follows:

 

W I T N E S S E T H:

 

WHEREAS, Borrower has
applied to Lender for and Lender has agreed to make Borrower a loan (the “Loan”) in the amount of
SIXTEEN MILLION AND 00/100 DOLLARS ($16,000,000.00), for the purpose of providing
funds to Borrower for the refinance of existing indebtedness;

 

WHEREAS, Borrower and
Lender wish to enter into this Agreement in order to set forth some of the terms and conditions of the Loan:

 

NOW, THEREFORE, in
consideration of the mutual covenants contained herein and other good and valuable consideration, Borrower and Lender hereby agree
as follows:

 

1.             LOAN
DOCUMENTS Borrower has executed and delivered, or caused to be executed and delivered, to Lender this Agreement and the following
loan documents (collectively and together with this Agreement and all other documents securing the Loan, the “Loan Documents”):

 

A.          Note.
A promissory note (the “Note”) of even date herewith, payable to the order of Lender and in the principal amount of
SIXTEEN MILLION AND 00/100 DOLLARS ($16,000,000.00). The term “Note”, as defined herein, shall include any renewal(s),
extension(s) and/or modification(s) thereof.

 

B.          Financing
Statements. Security Agreement and one (1) or more Financing Statements for the benefit of Lender.

 

C.          Guarantees.
None

 

2.            TERMS
AND CONDITIONS In addition to the terms and conditions contained in the other Loan Documents, the Loan shall be subject to
the additional terms and conditions set forth in this Agreement. The terms and conditions set forth in the other Loan Documents
and this Agreement supersede, amend and replace any prior terms and conditions by and between Lender and Borrower with respect
to the Loan.

 

    -1-

     

    

 

3.             REPRESENTATIONS
AND WARRANTIES Borrower represents and warrant to Lender as follows:

 

A.          Formation
and Standing If Borrower is not an individual, it
is validly formed, and duly existing at this time, in good standing under the laws of the state of its organization and is authorized
to do business in , and has the power to own its property and to carry on its business, in the state of Texas and in each other
jurisdiction in which Borrower operates and the failure to be so qualified could reasonably be expected to have a material adverse
effect on Borrower or its financial condition.

 

B.           Authority
and Compliance Borrower has full power and authority to enter into this Agreement, to make the borrowing hereunder, to execute
and deliver the Note and to incur the obligations provided for herein, all of which has been duly authorized by all proper and
necessary action. No consent or approval by any other party or public authority is required as a condition to the validity of this
Agreement or the Note (or if required, has been obtained), and Borrower is in compliance, in all material respects, with all laws
and regulatory requirements to which it is subject.

 

C.           Binding
Agreement This Agreement constitutes, and the Note and Loan Documents when issued and delivered pursuant hereto for value received
will constitute, valid and legally binding obligations of Borrower enforceable in accordance with their respective terms.

 

D.          Guarantor(s)
and Guaranty Agreement Intentionally deleted.

 

E.           Litigation
There are no proceedings pending or, to the knowledge of Borrower, threatened before any court or other administrative agency which
will or may have a material adverse effect on the financial condition or operations of Borrower, any of its respective properties
or any general partner of Borrower, except as disclosed to Lender in writing prior to the date of this Agreement.

 

F.           No
Conflicting Agreements There are no charter, bylaw or stock provisions and no provisions of any existing agreement, mortgage,
indenture or contract binding on Borrower, or affecting any of their respective property, which would conflict with or in any way
prevent the execution, delivery or carrying out of the terms of this Agreement, the Note, any other Loan Document, or the grant
of any security interest or lien made in connection with the Loan.

 

G.          Ownership
of Assets Borrower has indefeasible title to any collateral (the “Collateral”) pledged to secure the Loan and the
Collateral is owned free and clear of liens.

 

H.          Taxes
All income taxes and other taxes due and payable through the date of this Agreement by Borrower or assessed against the Collateral
have been paid prior to becoming delinquent.

 

I.            Financial
Statements The books and records of Borrower properly reflect their respective financial condition in all material respects,
and there has been no material change in their respective financial condition as represented in the statements most recently delivered
to Lender.

 

    -2-

     

    

 

J.            Places
of Business and Residence Borrower’s principal place of business is in the state identified with Borrower’s address
set forth above.

 

4.             AFFIRMATIVE
COVENANTS Until payment in full of the Note and performance of all other obligations of Borrower hereunder, Borrower will:

 

A.          Financial
Recordkeeping Keep adequate records, in accordance with generally recognized federal income tax basis accounting principles,
of all its transactions, so that at anytime, and from time to time, its true and complete financial condition may be readily determined
and to, upon request, make such records available for Lender’s inspection during all business hours.

 

B.           Financial
Reporting/Covenants and Other Reporting Borrower agrees to maintain and shall provide
or will cause to be provided to Lender:

 

All terms and calculations to
be according to GAAP, and prepared by Borrower, unless specified otherwise.

 

(1)     Moody
National REIT II, Inc. shall provide annual CPA audited financial statements within 120-days of each year-end.

 

(2)     Moody National REIT II, Inc. shall provide quarterly financial statements within 45-days of each quarter-end.

 

(3)     Moody
National REIT II, Inc. shall provide quarterly Compliance Certificates within 45-days of each quarter-end on the form attached
as Exhibit B.

 

(4)     Moody
National REIT II, Inc. shall provide a monthly Consolidated Net Cash Flow calculation on the first business day after the 15th
of each month.

 

(5)     Annually
and in any event within 30-days following the filing thereof, but in no event later than November 15th of the year due, copies
of income tax returns, including all schedules and K-1s, filed by Moody National REIT II, Inc. and properly filed extensions thereof.

 

(6)     Minimum Fixed Charge Coverage Ratio: Beginning December 31, 2018 Maker shall maintain
a Fixed Charge Coverage Ratio of not less than 1.20 as of each fiscal quarter end, determined on a trailing 12 month basis.
Fixed Charge Coverage Ratio is defined as the adjusted EBITDA (adjusted net operating income of all properties within Moody National
Operating Partnership II, L.P., plus Net Equity raised less Selling, General and Administrative Expenses) divided by actual debt
service on Moody National REIT II, Inc. (but not final balloon payments at maturity) assets, plus actual Lender interest expense,
plus current maturities of Lender debt (but not final balloon payments at maturity).

 

    -3-

     

    

 

(7)    Consolidated Leverage Ratio: Borrower shall maintain a maximum Consolidated
Leverage Ratio of no more than 70% at all times, tested quarterly. Consolidated Leverage
Ratio is defined as consolidated indebtedness of the Moody National REIT II,
Inc. and its consolidated subsidiaries; consolidated indebtedness shall include the
pro-rata share of indebtedness from any unconsolidated joint venture) divided by consolidated total asset value (appraised value
as of December 31, 2017 on all existing Moody National REIT II, Inc. assets plus cost value on any properties acquired after December
31, 2017).

 

(8)     Borrower agrees that, except with Lender’s prior written consent, neither Moody National REIT II, Inc. nor Moody National
Operating Partnership II, LP neither shall incur any additional debt, other than existing first liens on properties as of the
date hereof.

 

(9)     Moody National REIT II, Inc. shall not, and shall not permit any of its Subsidiaries to, declare or make any Restricted Payment;
provided, however, that so long as no default or Event of Default would result therefrom Moody National REIT II, Inc. may make
distributions not to exceed the current distribution rate of seven point fifty-six percent (7.56%) per annum in effect as of the
date hereof, and the Borrower may make distributions to its third party Equity Interests owners. Further, so long as the Loan
and the Note remain outstanding, the Moody National REIT II, Inc. shall not change its distribution strategy or repurchase or
redeem equity without the prior written approval of Lender (other than redemptions upon death or disability consistent with past
practices). Upon a Default or Event of Default which remains in existence, Moody National REIT II, Inc. will be restricted from
making any Restricted Payments other than those required to maintain REIT status. If any monetary or bankruptcy related default
shall occur and be continuing, including any Default pursuant to covenants related to the Lender debt, or if there is an Event
of Default resulting in acceleration of the maturity date of the Note, Borrower will not be permitted to make any distributions.

 

    -4-

     

    

 

(10)   Certain Definitions:

 

Consolidated
Net Cash Flow for any period is defined as the net cash flow of Moody National REIT II, Inc. (subject to the terms of any underlying
debt documents) for such period, as further calculated in accordance with Lender requirements.

 

Net
Equity is defined as the gross offering proceeds of equity issuances by the Moody National REIT II, Inc. less reasonable total
offering costs, including, but not limited to all reasonable legal fees, filing fees, selling commissions, printing fees and accounting
fees and expenses.

 

Equity
Interests is defined as with respect to any person, any share of capital stock of (or other ownership or profit interests in)
such person, any warrant, option or other right for the purchase or other acquisition from such person of any share of capital
stock of (or other ownership or profit interests in) such person, any security convertible into or exchangeable for any share of
capital stock of (or other ownership or profit interests in) such person or warrant, right or option for the purchase or other
acquisition from such person of such shares (or such other interests), whether voting or nonvoting, and whether or not such share,
warrant, option, right or other interest is authorized or otherwise existing on any date of determination, and any other ownership
or profit interest in such person (including, without limitation, partnership, member or trust interests therein). 

 

Restricted
Payment means (a) any dividend or other distribution, direct or indirect, on account of any Equity Interest of Moody National
REIT II, Inc. or any of its Subsidiaries now or hereafter outstanding, except (i) a dividend payable solely (A) in shares of that
class of Equity Interests to the holders of that class, or (B) a cash dividend paid by a Subsidiary of Borrower to Borrower or
to another Subsidiary that is wholly owned by Borrower, (ii) issuance by Moody National REIT II, Inc. of shares for conversions
of units in the Borrower; (b) any redemption, conversion, exchange, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any Equity Interests of Moody National REIT II, Inc. or any of its Subsidiaries now
or hereafter outstanding and (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire any Equity Interests of Moody National REIT II, Inc. or any of its Subsidiaries now or hereafter outstanding.

 

    -5-

     

    

 

Subsidiary
means for any person, any corporation, partnership, limited liability company or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors
or other persons performing similar functions of such corporation, partnership, limited liability company or other entity (without
regard to the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such person or one or
more Subsidiaries of such person or by such person and one or more Subsidiaries of such person, and shall include all persons the
accounts of which are consolidated with those of such person and reported on a consolidating basis pursuant to GAAP.

 

(11)   Any other financial reporting, upon Lender’s reasonable request.

 

C.           Insurance.
Maintain insurance with responsible insurance companies on such of its properties, in such amounts and against such risks as
is customarily maintained by similar businesses operating in the same vicinity, specifically to include a policy of fire and extended
coverage insurance covering all assets, business interruption insurance and liability insurance, all in accordance with the terms
of any indebtedness secured by the property so insured or otherwise on commercially reasonable terms. From time to time, upon Lender’s
request, Borrower shall provide evidence of such insurance to Lender.

 

D.          Existence
and Compliance with Laws As appropriate, maintain its existence in good standing and comply with all laws, regulations and
governmental requirements applicable to it or to any of its property, business operations and transactions, except to the extent
that failure to do so could not reasonably be expected to have a material adverse effect on Borrower or its financial condition.

 

.

 

E.           Adverse
Conditions or Events Promptly advise Lender in writing of any condition, event or act which comes to its attention that could
reasonably be expected to materially affect either Borrower’s financial condition, Lender’s rights in or to the Collateral
under this Agreement or the Loan Documents, and of any litigation filed against Borrower that, if decided adversely to Borrower,
could reasonably be expected to materially affect either Borrower’s financial condition.

 

F.           Taxes
Pay all taxes prior to delinquency, unless being contested in good faith pursuant to appropriate procedures.

 

    -6-

     

    

 

G.           Maintenance
Preserve and maintain all licenses, privileges, franchises, certificates and the like necessary for the operation of its business.

 

       

 

5.             NEGATIVE
COVENANTS Until payment in full of the Note and performance of all other obligations of Borrower hereunder (other than surviving
indemnity obligations as to which no claim is then pending), Borrower will not, without the prior written consent of Lender:

 

A.          Liens
Knowingly grant, suffer or permit liens on or security interests in the Collateral.

 

B.           Transfer
of Assets Enter into any merger or consolidation, or sell, assign or otherwise dispose of or transfer any assets except in
the normal course of its business.

 

C.          Ownership.
Allow Moody National REIT II, Inc.’s ownership interest in Mood National Operating Partnership II, LP, to change or be restructured.

 

6.       EVENTS
OF DEFAULT If one (1) or more of the following events (in each case, subject to the notice and cure provisions set forth in
Section 7.L, an “Event of Default”) shall occur, all outstanding principal plus accrued unpaid interest of the Loan
shall, at the option of Lender, be due and payable immediately and Lender shall have no further obligation to fund under this Agreement
or the Note:

 

A.          Default
shall be made in the payment of any installment of principal or interest upon the Note or any other obligation of Borrower to Lender
under the Loan Documents when due and payable, whether at maturity or otherwise; or

 

B.           Default
shall be made in the performance of any term, covenant or agreement contained herein or in any other Loan Documents; or

 

C.           Any
representation or warranty herein contained or in any financial statement, certificate, report or opinion submitted to Lender in
connection with the Loan or pursuant to the requirements of this Agreement shall prove to have been incorrect or misleading in
any material respect when made; or

 

D.          Any
material judgment against Borrower or any material attachment or other levy against the property of Borrower with respect to a
claim remains unpaid on appeal, undischarged, not bonded or not dismissed for a period of ninety (90) days; or

 

E.           There
shall occur any “Event of Default”, as defined in the Note or any other Loan Document; or

 

    -7-

     

    

 

G.           If
there shall be a default that continues beyond the expiration of any applicable grace or cure period under any other debt secured
by the Collateral or any other obligation of Borrower to Lender for borrowed money; or Borrower defaults, beyond the expiration
of any applicable grace or cure period, under any loan or extension of credit owed to any other creditor that could reasonably
be expected to materially affect any material portion of Borrower’s property or Borrower’s ability to repay the Loan
or perform Borrower’s obligations under this Agreement or any other Loan Document;

 

then upon the happening of any Event of
Default and during the continuation thereof, Lender may declare the unpaid principal balance and earned unpaid interest on the
Note immediately due and Lender may avail itself of all rights, powers, and recourses allowed or permitted herein and/or by law.

 

7.             MISCELLANEOUS

 

A.          Expenses
Borrower agrees to pay all out-of-pocket expenses of Lender in connection with this Agreement and the collection of the Note. Borrower
also agrees to pay all reasonable attorney’s fees and all expenses incurred in recording any documents securing the Loan.

 

B.           Cumulative
Rights and Waivers Each and every right granted to Lender hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity shall be cumulative of and may be exercised in addition to any and all other rights of
Lender, and no delay in exercising any right shall operate as a waiver thereof, nor shall any single or partial exercise by Lender
of any right preclude any other or future exercise thereof or the exercise of any other right. Any of the foregoing covenants and
agreements may be waived by Lender but only in writing signed by a Vice President or higher level officer of Lender. Except for
such notices as are expressly provided to be given herein or in any other Loan Document, Borrower expressly waives any presentment,
demand, protest or other notice of any kind. No notice to or demand on Borrower in any case shall, of itself, entitle Borrower
to any other or further notice or demand in similar or other circumstances. No delay or omission by Lender in exercising any power
or right hereunder shall impair any such right or power or be construed as a waiver thereof or any acquiescence therein, nor shall
any single or partial exercise of any such power preclude other or further exercise thereof, or the exercise of any other right
or power hereunder.

 

C.           Applicable
Law This Agreement and the rights and obligations of the parties hereunder shall be governed by and interpreted in accordance
with the laws of the state of Texas.

 

D.          Amendment
No modification, consent, amendment or waiver of any provision of this Agreement, nor consent to any departure by Borrower therefrom,
shall be effective unless the same shall be in writing and signed by a Vice President or higher level officer of Lender and then
shall be effective only in the specific instance and for the purpose for which given. This Agreement is binding upon Borrower,
its successors and assigns, and inures to be benefit of Lender, its successors and assigns.

 

    -8-

     

    

 

E.           Multiple
Counterparts This Agreement may be executed in one (1) or more counterparts, and each counterpart when so executed and delivered
shall constitute an original hereof, but all such separate counterparts shall constitute one (1) and the same instrument.

 

F.           Severability
of Provisions In case one (1) or more provisions of this Agreement shall be invalid, illegal or unenforceable in any respect
under applicable law, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected
or impaired.

 

G.           Imaged
Documents The Borrower and all sureties, endorsers, and any other party now or hereafter liable for the payment of the Note,
in whole or in part, understand and agree that, (i) Lender’s document retention policy may involve the imaging of executed
Loan Documents, which includes but is not limited to any note, guaranty, deed of trust, security agreement, assignment, financing
statement and any other document which evidences any indebtedness owed by Borrower to Lender and/or secures such indebtedness and/or
relates to the indebtedness and/or the collateral securing such indebtedness, and the destruction of the paper original, including
the original note and (ii) the Borrower and all sureties, endorsers, and any other party now or hereafter liable for the payment
of this Note, in whole or in part, waive any rights and/or defenses that it may have to the use of such imaged copies of Loan Documents
in the enforcement of any of Lender’s rights in a court of law or otherwise and/or as to any claim that such imaged copies
of the loan documents are not originals.

 

H.          Jury Waiver. THE PARTIES TO
THIS AGREEMENT HEREBY UNCONDITIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COUNSEL, WAIVE, RELINQUISH AND FOREVER FORGO
THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR ARISING OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT.

 

I.            Notice
Waiver. Upon an Event of Default and during the continuation thereof, at the option of Lender, the Loan and any and all other
indebtedness of Borrower to Lender shall become and be due and payable forthwith without demand, notice of default or of intent
to accelerate the maturity hereof, notice of acceleration, notice of nonpayment, presentment, protest or notice of dishonor, all
of which are hereby expressly waived by Borrower.

 

J.            Cross-Default/Cross-Collateralization Intentionally
Deleted

 

K.          Loan
Fee Borrower shall pay to Lender the loan fee in the amount of $160,000.00 upon the execution this Agreement.

 

    -9-

     

    

 

L.           Notice
and Cure Notwithstanding anything contained herein, in the Note or in any of the Loan Documents to the contrary, (i) upon a
monetary/payment default hereunder or any other Loan Document (excluding maturity of the Note), Borrower may cure such default
if it does so within five (5) days of the date of notice by Lender to Borrower of such monetary/payment default, and (ii) upon
a non-monetary default hereunder or any other Loan Document, Borrower may cure such default if it does so within twenty (20) days
of the date of notice by Lender to Borrower of such non-monetary default.

 

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

SIGNATURES FOUND ON FOLLOWING PAGE(S)

 

    -10-

     

    

 

	 	“BORROWER”
	 	 
	 	Moody National Operating
Partnership II, LP,
	 	By: Moody National
REIT II, Inc.,
	 	a Maryland corporation,
its general partner
	 	 
	 	By: 	 
	 	 	Brett C. Moody,
President
	 	 	 
	 	Moody
National REIT II, Inc.,
	 	a Maryland corporation
	 	 	 
	 	By:	 
	 	 	Brett C. Moody,
President
	 	 	 
	 	“LENDER”
	 	 	 
	 	Green
Bank, N.A.
	 	 	 
	 	By:	 
	 	 	Peyton Jones,
Executive Vice President

 

    -11-

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