Document:

Exhibit 10.5.6

 

SECURITY AGREEMENT

 

This Security Agreement (Agreement) is effective as of August 22, 2018 between Lodging Fund REIT III OP, LP a Delaware limited partnership, of 1635 – 43rd Street South, Suite 205, Fargo, North Dakota 58103 (Debtor), Midwest Bank - Detroit Lakes Branch, 613 Highway 10 East, P.O. Box 703, Detroit Lakes, Minnesota 56501 (Secured Party).

 

RECITALS

 

A.            Secured Party will loan Debtor Three Million Dollars ($3,000,000.00) (Loan) evidenced by the Promissory Note (Note) dated August 22, 2018.

 

B.            Debtor, pledges Three Hundred Thousand partnership units in Debtor, in exchange for the Loan, as collateral to secure Debtor’s performance under the Note.

 

For good and valuable consideration:

 

1.              Incorporation of Recitals. The above statements of facts, including all defined terms, are incorporated into this Agreement by reference.

 

2.              Grant of Security Interest. Debtor pledges as collateral to the Secured Party, Three Hundred Thousand (300,000) issued, but not outstanding, partnership units (Collateral). For these purposes the term “Obligations” shall mean any and all indebtedness, liabilities, and obligations of Debtor to Secured Party of whatsoever nature, whether owing or incurred in the past, present, or future, direct or indirect, primary or secondary, absolute or contingent, secured or not secured, matured or not matured, joint or several, whether for principal, interest, fees, costs, expenses, or otherwise, including, without limitation: all the unpaid principal of and accrued interest on the Note executed in connection with the Loan and any and all extensions, renewals, supplements, modifications, or future advances;

 

3.              Representations and Warranties. Debtor represents and warrants to Secured Party that:

 

A.  Authorization; Enforceability. This Agreement has been executed, delivered and constitute the legal, valid, and binding obligation of Debtor, enforceable in accordance with its terms. The execution and delivery of this Agreement do not constitute a breach of any provision contained in any agreement or instrument to which Debtor is or may become a party or by which Debtor is or may be bound.

 

B.  Solvency. Debtor is solvent and is paying its debts as they become due and owing as it affects the Collateral, and the Debtor. Debtor shall remain solvent on the execution and compliance of the terms of this Security Agreement and the Obligations it secures, such that its execution does not render Debtor insolvent.

 

 

C.  Financial Statements. All financial statements and other information relating to Debtor, its business, or the Collateral delivered or to be delivered by Debtor to Secured Party in connection with the Obligations or the execution and delivery of this Security Agreement are true, accurate, representative, and complete, and the financial statements have been prepared in accordance with generally accepted accounting principles consistently applied, and there has been no adverse change in the financial condition of Debtor indicated thereby since their submission to Secured Party.

 

D.  Threatened or Pending Proceedings. There are no known actions or proceedings that are threatened or pending against Debtor or any of its assets that might result in any adverse change in Debtor’s financial condition or that might adversely affect the collateral.

 

E.  Title. Debtor is the sole owner of the Collateral and has good and marketable title to it free and clear of any and all liens, encumbrances, and interests of others.

 

4.              Covenants. Debtor covenants that, until all of the Obligations are fully satisfied:

 

A.  Further Documentation; Pledge of Instruments. At the request of Secured Party, and at the sole expense of Debtor, Debtor will promptly execute and deliver any and all such further documents and take such further actions as Secured Party may deem desirable in obtaining the full benefits of this Security Agreement and of the rights and powers it grants, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the liens and security interests granted by this Agreement and transferring any Collateral to Secured Party’s possession. Debtor also authorizes Secured Party to file any financing or continuation statements without the signature of Debtor to the extent permitted by applicable law. If any amount payable under or in connection with any Collateral shall be or become evidenced by any promissory note or other instrument (other than an instrument that constitutes chattel paper), that note or instrument shall be immediately pledged to Secured Party and shall be endorsed in a manner satisfactory to Secured Party and delivered to Secured Party.

 

B.  Maintenance of Books. Debtor will keep and maintain, at its own cost and expense, satisfactory and complete Books, including, without limitation, a record of all payments received and all credits granted with respect to the Collateral and all other dealings with the Collateral.

 

C.  Indemnification. In any suit, proceeding, or action arising out of this agreement, brought by Secured Party relating to the Collateral, Debtor will indemnify, defend, and keep Secured Party harmless from and against any and all expense, loss, or damage suffered by reason of any and all defenses, setoffs, counterclaims, recoupments, or reductions of liability whatsoever of the obligee

 

 

arising out of a breach by Debtor of any obligation or arising out of any other agreement, indebtedness, or liability at any time owing to or in favor of such obligee or its successors from Debtor, and all such obligations of Debtor shall be and remain enforceable against and only against Debtor and shall not be enforceable against Secured Party.

 

D.  Limitation on Liens on Collateral. Debtor will not create, permit, or suffer to exist, and will defend the Collateral against and take other action as necessary to remove any lien, mortgage, pledge, assignment, security interest, charge, or encumbrance of any kind and any agreement to give or refrain from giving any of the foregoing on the Collateral, and will defend the right, title, and interest of Secured Party in and to any of the Collateral and in and to the proceeds and products of it against the claims and demands of any person or party.

 

E.  Limitation on Disposition. Debtor will not voluntarily or involuntarily sell, transfer, lease, or otherwise dispose of the Collateral (except Inventory sold in the ordinary course of its business), or attempt to offer or contract to do so without the prior written consent of Secured Party. Debtor may transfer ownership to any wholly owned affiliate or subsidiary.

 

F.  Further Identification of Collateral. Debtor will furnish to Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Secured Party may request, in whatever detail the Secured Party may require.

 

G.  Notices. Debtor will advise Secured Party promptly, in as much detail as Secured Party may require, (i) of any lien, mortgage, pledge, assignment, security interest, charge, or encumbrance of any kind and any agreement to give or refrain from giving any of the foregoing or material claims made or asserted against any of the Collateral, (ii) of any material change in the composition of the Collateral, and (iii) of the occurrence of any other event that might have an effect on the aggregate value of the Collateral or on the security interests created under this Agreement.

 

H.  Changes in Debtor’s Name. Debtor will not change its name, identity, or any organizational structure or composition in any manner unless Debtor has given Secured Party at least 30 days’ prior written notice and has taken all action (or made arrangements to take action substantially simultaneously with the change if it is impossible to take action in advance) necessary or reasonably requested by Secured Party to amend any financing statements, continuation statements, or other documents so that the statements or documents are not seriously misleading.

 

I.  Notice of Material Events. Debtor will promptly notify Secured Party in writing of the occurrence of any Event of Default or the commencement of any litigation against, by, or affecting the Debtor that may impact the collateral.

 

 

5.              Performance by Secured Party of Debtor’s Obligations. If Debtor fails to perform or comply with any of these agreements and this continues after notice of Secured Party’s intention to do so, and Secured Party, as provided for by the terms of this Security Agreement, itself performs or complies or otherwise causes performance or compliance with the agreement, all fees and expenses of Secured Party incurred in connection with such performance or compliance, together with interest at the default rate of interest provided for in the Obligations secured thereby (and if no default rate of interest is stated, the rate of interest specified in the Obligation), shall be payable by Debtor to Secured Party on demand and shall constitute Obligations secured hereby.

 

6.              Events of Default. Default may occur under this Security Agreement on the occurrence of any of the following events (each of which may be referred to as an “Event of Default”):

 

A.  Any failure to make a payment under or with respect to the Note or under or with respect to any of the other Obligations when due, and only a good faith effort to cure has occurred.

 

B.  The occurrence of a default or an event of default under the Note.

 

C.  Debtor’s failure to observe or perform any of the terms and conditions of this Security Agreement or a breach of any covenant or default or event of default, as provided in it, under the Obligations or any instrument executed by Debtor in connection therewith or with the Note.

 

D.  Any warranty, representation, or statement made or furnished to Secured Party by Debtor is or becomes materially untrue in any respect.

 

E.  The placement or issuance of any levy, lien, writ of attachment, writ of garnishment, writ of execution, or similar process against Debtor or any of Debtor’s property, provided that it is not removed or satisfied within 30 days or on Debtor depositing a sum with Secured Party in a sufficient amount to satisfy the claim.

 

F.  Debtor becomes insolvent or bankrupt, makes an assignment for the benefit of creditors, or is unable to pay or meet its obligations as they mature, or applies for or consents to the appointment of a custodian, trustee, or receiver for all or any portion of the properties, assets, or the Collateral, or if any such custodian, trustee, or receiver is not discharged forthwith; or any proceedings commenced by or against Secured Party under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, or liquidation law or a statute of the United States or any State is not dismissed within 60 calendar days.

 

 

G.  Secured Party believes at any time the prospect of payment or performance of all or any of the Obligations or all or any of the Collateral is or might be impaired, or Secured Party otherwise deems itself unsecure.

 

7.              Rights on Default. In addition to any other rights given to Secured Party under this Agreement and applicable law, if any Event of Default occurs and continues, all payments and/or distributions received by Debtor under or in connection with any of the Collateral shall be held by Debtor in trust for Secured Party, shall be segregated from other funds of Debtor and shall immediately on receipt by Debtor be turned over to Secured Party in the same form as received by Debtor (endorsed by Debtor to Secured Party, if required), including all original checks, drafts, acceptances, notes, and other evidence of payment related thereto.

 

8.              Remedies on Default. If any Event of Default occurs and continues, Secured Party may declare any and all of the Obligations to be immediately due and payable without notice and shall have and may exercise, in addition to all other rights and remedies granted to it in this Security Agreement and in any other instrument or agreement securing, evidencing, or relating to the Obligations, any one or more of the following rights and remedies:

 

A.  All the rights and remedies on default, in forfeiture, and otherwise available to secured parties under the Uniform Commercial Code and other applicable law.

 

B.  Sell, dispose of, or cause to be sold or disposed of all or any part of the Collateral at one or more public or private sales or other dispositions, in places and times and on terms and conditions Secured Party in its sole and complete discretion determines to be in its own best interest without any previous demand or advertisement.

 

C.  To the extent permitted by applicable law, Debtor waives all claims, damages, and demands against Secured Party arising out of the repossession, retention, sale, or other disposition of the Collateral. Debtor agrees that Secured Party need not give more than seven days’ notice of the time and place of any public sale or of the time after which a private sale may take place and that such notice is reasonable notification of such matters. No notification need be given to Debtor, if Debtor, after the occurrence of an Event of Default, has signed a statement renouncing or modifying any right to notification of sale or other intended disposition.

 

D.  Debtor agrees to pay all costs of Secured Party, including actual attorney fees and expenses, incurred with respect to the collection of any of the Obligations and the enforcement of any of their respective rights hereunder. Debtor waives presentment, demand, protest, or any notice (to the extent permitted by applicable law) of any kind in connection with this Security Agreement or the Collateral.

 

 

9.              Termination. This agreement terminates upon: (i) agreement of the both parties; or (ii) complete performance of the terms under the promissory note creating the debt secured by this agreement.

 

10.       Disclaimer of Any Liability. Secured Party shall not have any liability as a limited partner of Lodging Opportunity Fund, LLLP as a result of the assignment of Debtor’s partnership interest in Lodging Opportunity Fund, LLLP is made by this Security Agreement.

 

11.       Venue; Jurisdiction; Waiver of Jury Trial; Release of Secured Party.

 

A.  Venue; Jurisdiction. The parties agree that all actions or proceedings arising in connection with this Security Agreement shall be tried and litigated only in Federal Court and the courts of Cass County, North Dakota. Debtor irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction and venue of these courts. Nothing herein shall affect the right of Secured Party to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against Debtor in any other jurisdiction. Debtor irrevocably waives any right it may have to assert the doctrine of forum non conveniens or to object to venue to the extent any proceeding is brought in accordance with this Section.

 

B.  Waiver of Jury Trial. Secured Party and Debtor acknowledge and agree that there may be a constitutional right to a jury trial in connection with any claim, dispute, or lawsuit arising between them, but that such right may be waived. Accordingly, the parties agree that, notwithstanding such constitutional right, in this commercial matter the parties believe and agree that it shall be in their best interest to waive such right, and, accordingly, waive such right to a jury trial, and further agree that the best forum for hearing any claim, dispute, or lawsuit, if any, arising in connection with this Agreement or the relationship between Secured Party and Debtor, shall be a court of competent jurisdiction sitting without a jury.

 

C.  Waivers Voluntary. The waivers contained in this Agreement are freely, knowingly, and voluntarily given by each party, without any duress or coercion, after each party has consulted with its counsel and has carefully and completely read all of the terms and provisions of this Agreement, specifically including the waivers contained in this Section.

 

12.       Notices. To be effective, all notices, requests, and demands to or on the parties shall be in writing and, unless otherwise expressly provided, shall be deemed to have been given or made when delivered by hand, or by next day delivery or three days after being deposited in the U.S. mail, postage prepaid, or in the case of telegraphic notices, when delivered to the telegraphic company.

 

 

13.       Severability. Any provision of this Security Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of the prohibition or unenforceability without invalidating the remaining provisions, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable the provisions in any other jurisdiction.

 

14.       No Waiver, Cumulative Remedies. Secured Party shall not by any act, delay, omission, or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by Secured Party, and then only to the extent therein set forth. A waiver by Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that Secured Party would otherwise have had on any future occasion. No failure to exercise, nor any delay in exercising, on the part of Secured Party, any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any other or future exercise thereof or the exercise of any other right, power, or privilege. These rights and remedies are cumulative and may be exercised singly or concurrently and are not exclusive of any rights and remedies provided by law. None of the terms or provisions of this Security Agreement may be waived, altered, modified, or amended except by an instrument in writing, executed by Secured Party or Debtor.

 

15.       Successors and Assigns. This Security Agreement and all Obligations of Debtor shall be binding on the successors and assigns of Debtor and shall, together with the rights and remedies of Secured Party, inure to the benefit of Secured Party and its successors and assigns; provided, however, that Debtor may not assign any of its rights or Obligations without the prior written consent of Secured Party.

 

16.       Counterparts. This Security Agreement may be executed by the parties on any number of separate counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

 

17.       Survival of Agreements, Representations, and Warranties. All agreements, representations, warranties, and indemnities made herein shall survive the execution and delivery of this Security Agreement and incurring the Obligations secured hereby.

 

18.       Construction. Neither this Security Agreement nor any uncertainty or ambiguity in it shall be construed or resolved against Secured Party, whether under any rule of construction or otherwise. On the contrary, this Security Agreement has been reviewed by each of the parties and their counsel and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties.

 

 

19.       Choice of Law. The validity of this Security Agreement, its construction, interpretation, and enforcement, and the rights of the parties shall be determined under, governed by, and construed in accordance with the laws of the State of North Dakota, without regard to principles of conflicts of law

 

20.       Complete Agreement. This Security Agreement, together with any exhibits to this Security Agreement, the Notes, and the Collateral Documents, and the other agreements referred to herein or by their terms referring hereto, is intended by the parties as a final expression of their agreement and is intended as a complete statement of the terms and conditions of their agreement.

 

[Signatures to follow]

 

 

Each of the parties has executed and delivered this Security Agreement on the date listed on the first page.

 

 

	
LOF   REIT III OP, LP
    	
 
    
	
a   Delaware limited partnership
    	
 
    
	
 
    	
 
    
	
By:   Lodging Fund REIT III, Inc. 
    	
 
    
	
Agent   of Logding Fund REIT III OP, LP
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/ Corey Maple
    	
 
    
	
By:   
    	
Corey   Maple
    	
 
    
	
Its:
    	
Chief   Executive OfficerExhibit 10.6

 

BUSINESS LOAN AGREEMENT

 

	
Principal
    	
 
    	
Loan Date
    	
 
    	
Maturity
    	
 
    	
Loan No
    	
 
    	
Call / Coll
    	
 
    	
Account
    	
 
    	
Officer
    	
 
    	
Initials
    	
 
    
	
$
    	
5,858,134.26
    	
 
    	
03-05-2019
    	
 
    	
03-01-2024
    	
 
    	
4011782
    	
 
    	
8100
    	
 
    	
 
    	
 
    	
403
    	
 
    	
 
    	
 
    
																	

 

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

An item above containing “-*” has been omitted due to text length limitations.

 

	
Borrower:
    	
LF3 Cedar Rapids, LLC
    	
Lender:
    	
Western State Bank 
    
	
 
    	
LF3 Cedar Rapids TRS, LLC
    	
 
    	
West Fargo
    
	
 
    	
1635 43rd Street South,   Suite 205
    	
 
    	
P.O. Box 617 
    
	
 
    	
Fargo, ND 58103
    	
 
    	
755 13th Ave E
    
	
 
    	
 
    	
 
    	
West Fargo, ND 58078
    

 

THIS BUSINESS LOAN AGREEMENT dated June 19, 2019, ls made and executed between LF3 Cedar Rapids, LLC; and LF3 Cedar Rapids TRS, LLC (“Borrower”) and Western State Bank (“Lender”) on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender Is relying upon Borrower’s representations, warranties, and agreements as set forth in this Agreement (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender’s solo judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement

 

TERM. This Agreement shall be effective as of June 19, 2019, and shall continue in full force and effect until such time as all of Borrower’s Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.

 

LINE OF CREDIT. The Indebtedness contemplates multiple loan advances. Advances under the Indebtedness, as well as directions for payment from Borrower’s accounts, may be requested only in writing by Borrower. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person as described in the “Advance Authority” section below or (8) credited to any of Borrower’s accounts with Lender.

 

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender’s satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.

 

Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3) financing statements and all other documents perfecting Lender’s Security Interests; (4) evidence of insurance as required below; (5) guaranties; (6) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender’s counsel.

 

Borrower’s Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.

 

Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document.

 

Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct

 

No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.

 

MULTIPLE BORROWERS. This Agreement has been executed by multiple obligors who are referred to in this Agreement individually, collectively and interchangeably as “Borrower.” Unless specifically stated to the contrary, the word “Borrower” as used in this Agreement, including without limitation all representations, warranties and covenants, shall include all Borrowers. Borrower understands and agrees that, with or without notice to any one Borrower, Lender may (A) make one or more additional secured or unsecured loans or otherwise extend additional credit with respect to any other Borrower; (B) with respect to any other Borrower alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of any indebtedness, including increases and decreases of the rate of interest on the indebtedness; (C) exchange, enforce, waive, subordinate, fail or decide not to perfect. and release any security, with or without the substitution of new collateral; (D) release, substitute, agree not to sue, or deal with any one or more of Borrower’s or any other Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) determine how, when and what application of payments and credits shall be made on any indebtedness; (F) apply such security and direct the order or manner of sale of any Collateral, including without limitation, any non-judicial sale permitted by the terms of the controlling security agreement or deed of trust as Lender in its discretion may determine; (G) sell, transfer, assign or grant participations in all or any part of the Loan; (H) exercise or refrain from exercising any rights against Borrower or others, or otherwise act or refrain from acting; (I) settle or compromise any indebtedness; and (J) subordinate the payment of all or any part of any of Borrower’s indebtedness to Lender to the payment of any liabilities which may be due Lender or others.

 

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:

 

Organization. LF3 Cedar Rapids, LLC is a limited liability company which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Delaware. LF3 Cedar Rapids, LLC is duly authorized to transact business in all other states in which LF3 Cedar Rapids, LLC is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which LF3 Cedar Rapids, LLC is doing business. Specifically, LF3 Cedar Rapids, LLC is, and at all times shall be, duly qualified as a foreign limited liability company in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. LF3 Cedar Rapids, LLC has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. LF3 Cedar Rapids, LLC maintains an office at 1635 43rd Street South, Suite 205, Fargo, ND 58103. Unless LF3 Cedar Rapids, LLC has designated otherwise in writing, the principal office is the office at which LF3 Cedar Rapids, LLC keeps its books and records including its records concerning the Collateral. LF3 Cedar Rapids, LLC will notify Lender prior to any change in the location of LF3 Cedar Rapids, LLC’s state of organization or any change in LF3 Cedar Rapids, LLC’s name. LF3 Cedar Rapids, LLC shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to LF3 Cedar Rapids, LLC and LF3 Cedar Rapids, LLC’s business activities.

 

LF3 Cedar Rapids TRS, LLC is a limited liability company which is, and at all times shall be, duly organized, validly existing, and in good

 

 

standing under and by virtue of the laws of the State of Delaware. LF3 Cedar Rapids TRS, LLC is duly authorized to transact business in all other states in which LF3 Cedar Rapids TRS, LLC is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which LF3 Cedar Rapids TRS, LLC is doing business. Specifically, LF3 Cedar Rapids TRS, LLC is, and at all times shall be, duly qualified as a foreign limited liability company in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. LF3 Cedar Rapids TRS, LLC has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. LF3 Cedar Rapids TRS, LLC maintains an office at 1635 43rd Street South, Suite 205, Fargo, ND 58103. Unless LF3 Cedar Rapids TRS, LLC has designated otherwise in writing, the principal office is the office at which LF3 Cedar Rapids TRS, LLC keeps its books and records including its records concerning the Collateral. LF3 Cedar Rapids TRS, LLC will notify Lender prior to any change in the location of LF3 Cedar Rapids TRS, LLC’s state of organization or any change in LF3 Cedar Rapids TRS, LLC’s name. LF3 Cedar Rapids TRS, LLC shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to LF3 Cedar Rapids TRS, LLC and LF3 Cedar Rapids TRS, LLC’s business activities.

 

Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None.

 

Authorization. Borrower’s execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower’s articles of organization or membership agreements, or {b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties.

 

Financial Information. Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s financial condition as of the date of the statement. and there has been no material adverse change in Borrower’s financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.

 

Legal Effect This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.

 

Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower’s properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower’s properties are titled in Borrower’s legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.

 

Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During the period of Borrower’s ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment. disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant. contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s expense and for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower’s due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.

 

Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing.

 

Taxes. To the best of Borrower’s knowledge, all of Borrower’s tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.

 

Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s Security Interests and rights in and to such Collateral.

 

Binding Effect This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.

 

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:

 

Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.

 

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Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower’s books and records at all reasonable times.

 

Financial Statements. Furnish Lender with the following:

 

Interim Statements. As soon as available, but in no event later than sixty (60) days after the end of each fiscal quarter, Borrower’s balance sheet and profit and loss statement for the period ended, compiled by a certified public accountant satisfactory to Lender.

 

Tax Returns. As soon as available, but in no event later than sixty (60) days after the applicable filing date for the tax reporting period ended, Borrower’s Federal and other governmental tax returns, prepared by a certified public accountant satisfactory to Lender.

 

Additional Requirements. Borrower will be required to submit Annual Consolidated Audited Financial Statements of Lodging Fund REIT Ill, Inc.

 

Borrower will be required to submit Annual Consolidated Debt Schedule of Lodging Fund REIT Ill, Inc. (if not included in audited statements).

 

Borrower will be required to submit Annual Tax Returns, including all K-1 Schedules, of Lodging Fund REIT Ill OP, LP and Lodging Fund REIT Ill TRS, Inc.

 

Borrower will be required to submit Quarterly Smith Travel Accommodations Report (STAR) for LF3 Cedar Rapids TRS, LLC.

 

All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.

 

Additional Information. Furnish such additional information and statements, as Lender may request from time to time.

 

Additional Requirements. Monthly draw requests including invoices to be paid will be submitted with each draw. Lien waivers will be required on all draws and must be obtained prior to any additional loan advances. The lien waiver and disbursement process will be handled by the Bank. The Bank will have three (3) business days to review and approve the monthly draw request and will make payment of the draw request within such three (3) business day period.

 

Construction progress inspections will be completed by a third party and completed no more than once per month.

 

Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower’s properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender’s loss payable or other endorsements as Lender may require.

 

Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.

 

Guaranties. Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantors named below, on Lender’s forms, and in the amounts and under the conditions set forth in those guaranties.

 

	
Names of Guarantors
    	
 
    	
Amounts
    
	
Lodging Fund REIT III OP, LP
    	
 
    	
Unlimited
    
	
Lodging Fund REIT Ill TRS, Inc.
    	
 
    	
Unlimited
    

 

Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.

 

Loan Proceeds. Use all Loan proceeds solely for Borrower’s business operations, unless specifically consented to the contrary by Lender in writing.

 

Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower’s properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment. tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.

 

Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement in the Related Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of any default in connection with any agreement.

 

Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner.

 

Environmental Studies. Promptly conduct and complete, at Borrower’s expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower.

 

Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower’s properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so tong as, in Lender’s sole opinion, Lender’s interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender’s interest.

 

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Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s other properties and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower’s expense.

 

Compliance Certificates. Unless waived in writing by Lender, provide Lender at least annually, with a certificate executed by Borrower’s chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement.

 

Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower’s part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, Hen, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower’s part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.

 

Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests.

 

LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents. including but not limited to Borrower’s failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents. Lender on Borrower’s behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity

 

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender:

 

Indebtedness and Liens. (1} Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower’s assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower’s accounts, except to Lender.

 

Continuity of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged, or (2) cease operations, liquidate. merge or restructure as a legal entity (whether by division or otherwise), consolidate with or acquire any other entity, change its name, convert to another type of entity or redomesticate, dissolve or transfer or sell Collateral out of the ordinary course of business.

 

Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2) purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor other than in the ordinary course of business.

 

Agreements. Enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower’s obligations under this Agreement or in connection herewith.

 

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement. Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if; (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, fries a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender; or (E} Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.

 

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

 

DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default 

 

Borrower fails to make any payment when due under the Loan.

 

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

 

Default in Favor of Third Parties. Borrower or any Granter defaults under any loan, extension of credit. security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s or any Grantor’s property or Borrower’s or any Grantor’s ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents.

 

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this 

 

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Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

 

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

 

Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.

 

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

 

Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent. or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.

 

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

 

Insecurity. Lender in good faith believes itself insecure.

 

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender’s option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the “Insolvency” subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Granter shall not affect Lender’s right to declare a default and to exercise its rights and remedies.

 

JUNIOR OR SUBORDINATE LIENS. LF3 Cedar Rapids. LLC and LF3 Cedar Rapids TRS. LLC will not be permitted to place any junior or subordinate liens on the subject property without the prior written approval of the Bank.

 

PRIMARY CHECKING ACCOUNT. LF3 Cedar Rapids, LLC and LF3 Cedar Rapids TRS, LLC will be required to maintain its primary checking account at the Bank.

 

DEBT SERVICE COVERAGE RATIO. LF3 Cedar Rapids, LLC and LF3 Cedar Rapids TRS, LLC will maintain a minimum annual post-net cash distribution Debt Service Coverage Ratio (DSCR) of 1.25x as measured at each fiscal year end. DSCR is defined as the combined Net Operating Income (NOI) of divided by the combined Annual Debt Service Requirements for both LF3 Cedar Rapids, LLC and LF3 Cedar Rapids TRS, LLC.

 

NOI is defined as Net Income, plus any current fiscal year’s Depreciation, Amortization, Interest Expense, One-Time Acquisition I Partnership Expense and any other non-cash expenses. Distribution is defined as any cash dividends or owner withdrawals .

 

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

 

ADDITIONAL REPORTING REQUIREMENTS PROVISION. Borrower will be required to submit any other information deemed necessary by the Bank.

 

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:

 

Amendments. This Agreement. together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

 

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

 

Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

 

Consent to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower’s obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or

 

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defenses that Borrower may have against Lender.

 

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

 

Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Cass County, State of North Dakota.

 

Joint and Several Liability. All obligations of Borrower under this Agreement shall be joint and several, and all references to Borrower shall mean each and every Borrower. This means that each Borrower signing below is responsible for all obligations in this Agreement. Where any one or more of the parties is a corporation, partnership, limited liability company or similar entity, it is not necessary for Lender to inquire into the powers of any of the officers, directors, partners, members, or other agents acting or purporting to act on the entity’s behalf, and any obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Agreement

 

No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Granter, shall constitute a waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

 

Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.

 

Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any person or circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other person or circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement.

 

Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word “Borrower” as used in this Agreement shall include all of Borrower’s subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower’s subsidiaries or affiliates.

 

Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower’s successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower’s rights under this Agreement or any interest therein, without the prior written consent of Lender.

 

Survival of Representations and Warranties. Borrower understands and agrees that in making the Loan, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the making of the Loan and delivery to Lender of the Related Documents, shall be continuing in nature, and shall remain in full force and effect until such time as Borrower’s Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.

 

Time Is of the Essence. Time is of the essence in the performance of this Agreement.

 

Waive Jury. AJI parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party.

 

DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement:

 

Advance. The word “Advance” means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement.

 

Agreement. The word “Agreement” means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with an exhibits and schedules attached to this Business Loan Agreement from time to time.

 

Borrower. The word “Borrower’’ means LF3 Cedar Rapids, LLC; and LF3 Cedar Rapids TRS, LLC and includes all co-signers and co-makers signing the Note and all their successors and assigns.

 

Collateral. The word “Collateral” means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust. conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.

 

Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments and 

 

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Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.

 

Event of Default. The words “Event of Default” mean any of the events of default set forth in this Agreement in the default section of this Agreement.

 

GAAP. The word “GAAP” means generally accepted accounting principles.

 

Grantor. The word “Granter” means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest.

 

Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan.

 

Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.

 

Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous Substances” are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.

 

Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.

 

Lender. The word “Lender” means Western State Bank, its successors and assigns.

 

Loan. The word “Loan” means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.

 

Note. The word “Note” means the Note dated March 5, 2019 and executed by LF3 Cedar Rapids, LLC; and LF3 Cedar Rapids TRS, LLC in the principal amount of $5,858, 134.26, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement.

 

Permitted Liens. The words “Permitted Liens” mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled “Indebtedness and Liens”; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower’s assets.

 

Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan.

 

Security Agreement The words “Security Agreement’ mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest.

 

Security Interest. The words “Security Interest” mean, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.

 

7

 

BORROWER ACKNOWLEDGES HAVING REAO ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED JUNE 19, 2019

 

	
BORROWER
    	
 
    
	
 
    	
 
    
	
LF3 CEDAR RAPIDS, LLC
    	
 
    
	
 
    	
 
    
	
LODGING FUND REIT III OP, LP,   Sole Member of LF3 Cedar Rapids, LLC
    	
 
    
	
 
    	
 
    
	
LODGING FUND REIT III, INC., General   Partner of Lodging Fund REIT III OP, LP
    	
 
    
	
 
    	
 
    	
 
    
	
By: 
    	
/s/ Corey R. Maple
    	
 
    
	
Corey R. Maple, Chief Executive   Officer and
    	
 
    
	
Secretary of Lodging Fund REIT   III, Inc.
    	
 
    
	
 
    	
 
    
	
LF3 CEDAR RAPIDS TRS, LLC
    	
 
    
	
 
    	
 
    
	
LODGING FUND REIT III TRS, INC., Sole   Member of LF3 Cedar Rapids TRS, LLC
    	
 
    
	
 
    	
 
    	
 
    
	
By: 
    	
/s/ Corey R. Maple
    	
 
    
	
Corey R. Maple, Chief Executive Officer and
    	
 
    
	
Secretary of Lodging Fund REIT III   TRS, Inc.
    	
 
    
	
 
    	
 
    
	
LENDER:
    	
 
    
	
 
    	
 
    
	
WESTERN STATE BANK
    	
 
    
	
 
    	
 
    	
 
    
	
By: 
    	
/s/ Ryan Rued
    	
 
    
	
Ryan Rued, VP/Business Banking Officer
    	
 
    

 

8

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