Commercial Loan Agreement
Exhibit 6.1
THIS LOAN AGREEMENT
("Agreement") is made as of this 5th day of March, 2019, by and between
Fleurdelis Hospitality,
Inc., a Texas
Corporation, with an address of 000 X Xxxxxx Xxxx, #0000, Xxxxx, XX
00000, (hereinafter "Borrower"), and Red Oak Capital Fund II, LLC
together with any successors and/or its assigns, having a mailing
address of 000 Xxxxxxx Xxx
XX, Xxxxx 000, Xxxxx Xxxxxx, XX 00000 (hereinafter
"Lender"). The Lender agrees
to make, and the Borrower agrees to repay the loan described below
(the "Loan"), in accordance
with the terms and conditions set forth in this
Agreement.
1.
LOAN AND COLLATERAL.
a.
Loan. The
Lender will make available to the Borrower, and the Borrower shall
borrow from Lender, the sum of:
Five Million and
00/100__________________________________________
($5,000,000.00)
Dollars, to be evidenced by a Promissory Note ("Note") dated of even date herewith,
which Loan shall be payable in accordance with the terms stated in
the Note, a copy of which is attached hereto as Exhibit
"A."
b.
Payments.
The Loan shall be repaid in accordance with the terms and
provisions of the Note.
c.
Use of Loan
Proceeds. The proceeds of the Loan will be used by Borrower
for: Purchase and
Rehabilitation/addition of property as set forth in the
plans, specifications and complete documentation files provided to
Lender (the "Underwriting
File"), together of which with all associated asset
acquisitions and operations is known as Hampton Inn-Xxxxxxxxxx (the
"Project"). As set forth in
the Settlement Statement dated on even date herewith as executed by
Lender and Borrower, points due Lender and charges due various
other parties will be deducted from the Loan proceeds payable to
Borrower or payable at Borrower's direction on closing, including a
portion of the proceeds used for the establishment of a Capital
Reserve Account.
d.
Collateral.
i.
Security. As
security for the performance of Borrower's obligations in
connection with the Loan, whether under this Agreement, the Note,
or otherwise, Borrower has granted to the Lender certain collateral
security, including, but not limited to, the following (the
"Collateral"):
a.
First
Mortgage/First Deed of Trust/Promissory Note to the real estate
consistent with and disclosed in the Borrower’s Financing
Package;
b.
a first priority
collateral assignment of all consultant contracts, leases, rents,
reserves and profits from the Subject Property/Project and or
operation of the Subject Property/Project;
1
c.
a perfected first
security interest under the Uniform Commercial Code on all of the
furniture, fixtures and equipment now or hereafter installed in,
affixed to, placed upon or used in connection with the Subject
Property/Project other than that owned by tenants;
d.
a consent,
subordination and recognition agreement, and any other contracts
relating to the operation of the Subject Property/Project, and the
collateral assignment of any leases, permits, approvals and
warranties applicable to the Subject Property/Project or that have
signed leases to occupy space in the Project following completion
of construction;
e.
an environmental
indemnity agreement indemnifying Lender against all claims and
causes of action based on the presence, use or release of any
hazardous substances on or affecting the Subject Property or
Project;
f.
such other security
interests and instruments relating to the Subject Property as
Lender and its counsel may reasonably require in order to evidence
or perfect the liens intended to be granted pursuant to the Loan
Documents, including but not limited to customary closing
certificates and other agreements.
g.
any and all assets
and/or property under ownership, interest and/or control of the
Borrower; assets purchased, accumulated or derived from the Loan
proceeds;
h.
amounts deposited
and held in the Capital Reserve Account;
i.
the Guaranty (as
such term is hereinafter defined).
ii.
Cross-Collateralization/Cross-Default.
This
Loan and all other obligations owed to Lender by the Borrower (or
any of their principals or affiliates) or Guarantor(s) (hereinafter
defined) or any one of them, are cross-collateralized, and, also,
secured by any mortgage, security agreement, pledge, assignment, or
other agreement issued from time to time for the benefit of the
Lender by the Borrower (or any of their principals or affiliates),
or the Guarantor(s) or any one of them, and all such loans shall be
cross-defaulted
iii.
Guaranty.
The indebtedness evidenced by this Agreement or the Promissory Note
contains separate Guarantees attached to this Agreement (each, a
"Guarantor", collectively, the "Guarantors"), and are attached and
incorporated by reference.
In the
event of any material or fraudulent misrepresentation made by the
Borrower with regards to any document, exhibit, statement,
financial representation, or an exclusion of material information
of any Borrower or element of the Project, then the indebtedness
shall become full recourse and fully Guaranteed by each owner,
shareholder, Member or Key Principal, and become secured by the
assets and property owned (real or otherwise) by the Borrower
and/or Key Principal owners (defined as having an ownership
interest of 10% or greater, jointly and severally), which includes
but is not limited to any real estate and certain fixtures,
equipment and personal property of the Borrower. This exclusion is
specifically meant to include fraud, willful or negligent
misrepresentation on behalf of the Borrower or any of their
principals, agents and/or assigns.
2
e.
Borrowing
Procedure. Initial disbursements shall be funded
simultaneously with the execution hereof. Additional Capital Draws
shall be in the method and procedures as defined in the Capital
Reserve Account Management Agreement, dated of even date
herewith.
2.
REPRESENTATIONS AND
WARRANTIES. Borrower represents and warrants to the Lender,
as long as the Loan remains outstanding, as follows:
a.
Existence and
Authority. Borrower is a duly organized and validly existing
legal entity within the state of filing and registration. The
person or persons executing this Agreement have full power and
complete authority to execute this Agreement and all related
documents and, when executed, this Agreement and all related
documents will be legal, valid and binding obligations of the
Borrower, enforceable in accordance with their terms.
b.
Business
Location. The Borrowers chief executive office and primary
business is located at 000
X Xxxxxx Xxxx, #0000 Xxxxx, XX 00000. Borrower shall
notify Lender of any change in location within 15
days.
c.
No
Litigation. There are no pending or threatened suits or
proceedings before any court, governmental agency, regulatory body,
or administrative tribunal to which Borrower or any Guarantor
is/are a party or by which any of the Project or property may be
affected and which may result in any material change in the
financial condition of Borrower, any Guarantor or the
Collateral.
d.
Financial
Condition. All financial information of Borrower delivered
to Lender as of the date hereof is correct and complete and
accurately presents the financial condition of Borrower on the
dates thereof. There has been no material adverse change in the
business, property, assets or condition of the Borrower since the
date of the most recent financial information delivered to Lender,
and the Borrower is not in default under any indebtedness or
material obligation. The Borrower is solvent, able to pay its
recurring debts as they mature, has capital sufficient to carry on
its business and has assets the fair market value of which exceeds
its liabilities, and the Borrower will not be rendered insolvent,
undercapitalized or unable to pay maturing debts by the execution
or performance of this Agreement or any related documents or
agreements.
e.
Title. As
part of the Project, Borrower has or will have good and marketable
title to all property (tangible and intangible) necessary for the
proper and efficient operations of Borrower's business, free from
all liens and encumbrances, except those described in writing, and
acceptable to Lender.
f.
Utilities.
The Property and/or Project as applicable, has adequate rights of
access to public utilities and/or private water, sanitary sewer and
storm drain facilities. All utilities necessary or convenient to
the full use and enjoyment of the Property are available at the
boundaries of the Property, or available for use for the
Project.
3
g.
Roads. If
applicable, any real Property has adequate rights of access to
public ways, or will as part of the Project.
h.
Contracts.
The contracts necessary for the management and/or operation of the
Project are in full force and effect, there are no defaults under
any of the provisions thereof and all conditions to the
effectiveness or continuing effectiveness of such contracts
required to be satisfied as of the date of this Agreement, or in
the future, have been, or will be, satisfied.
i.
Taxes.
Borrower has, and each Guarantor has, filed all federal, state and
local income and other tax returns and other reports required to be
filed prior to the date of this Agreement and Borrower has, paid
all taxes, withholdings, assessments and other governmental charges
that are due and payable prior to the date of this Agreement,
unless otherwise agreed to by Lender.
j.
Governmental and
Non-Governmental Requirements. Borrower has obtained all
licenses, permits, authorizations, consents or approvals from each
governmental authority and has obtained all licenses,
authorizations, consents, approvals or franchises from each
non-governmental entity necessary for the operation of Borrower's
business and the Project, and all such licenses, permits,
authorizations, consents or approvals are in full force and effect,
unless otherwise specifically approved by Lender in writing due to
future development purposes.
k.
Compliance with
Law. Borrower has complied with all applicable laws, rules,
regulations and orders relating to it or any aspect of its business
or assets, including, without limitation, all environmental laws,
rules, regulations and orders. Borrower agrees to indemnify and
hold the Lender harmless from any and all violations by such entity
of any laws, rules, regulations and/or orders.
l.
Title.
Borrower has good and marketable title to all property (tangible
and intangible) necessary for the proper and efficient operations
of Borrower’s business and the Project, free from all liens
and encumbrances, except those disclosed and described in writing,
and acceptable to Lender.
m.
Survival.
All warranties and representations of the Borrower contained in the
Agreement shall survive the execution of this Agreement and any
advances of loan proceeds made in accordance with this
Agreement.
3.
CONDITIONS TO
LOAN. The obligation of the Lender to make the Loan is
subject to the following conditions:
a.
Loan
Documents. The Lender shall have received and recorded or
filed (as appropriate) executed copies of all documents required by
Lender which evidence, secure or govern the Loan, including,
without limitation, this Agreement, the Promissory Note, the Other
Documentation and such other documents as may be deemed necessary
by Lender (each a "Loan Document" and collectively, "Loan
Documents").
4
b.
Term Sheet /
Funding Agreement. Borrower acknowledges that all loan
terms, conditions and representations as contained or modified in
any Term Sheet or Funding Agreement, Letter of Intent, Commitment
or associated documents are hereby superseded as of date of
execution of this Agreement, and all have been satisfied and
fulfilled.
c.
Title
Insurance. For any real Property covered by this Agreement,
a commitment to issue a title insurance policy in ALTA form
acceptable to Lender, without standard exceptions, shall have been
issued and marked up in the amount of the Loan, insuring any
Mortgage as valid first lien on the Property, subject only to such
exceptions, defects, and encumbrances as the Lender shall accept,
providing affirmative coverage against construction liens, and
accompanied by such endorsements as the Lender may in its sole and
absolute discretion require.
d.
Search
Reports. Uniform Commercial Code (UCC), tax lien and
judgment and litigation search reports disclosing no adverse
information against the Borrower.
e.
Environmental
Assessment. The Lender may require an Environmental Phase I
Site Assessment of the Property, prior to closing or at a future
date, stating that any Property associated with the Project, as
applicable, is free of any environmental condition. Borrower
represents that they have made their own independent assessment
with regards to any environmental conditions, including evidencing
the condition of any Property and its compliance with applicable
law, and specifically holds Lender harmless of all liability
related to same.
f.
A.L.T.A.
Survey. A current or recent certified acceptable A.L.T.A.
survey of any real property covered by the Loan, prepared by a
registered land surveyor, certified to and satisfactory to Lender
and the title insurance company.
g.
Capital Reserve
Account Management Agreement. A Management Agreement for the
payment reserves, capital draws, contingency funds and/or incurred
Expenses for the Project shall be established during the term of
the Loan.
h.
Management
Agreement. If a management agreement for the Property or
Project exists or shall be established during the term of the loan,
the Lender shall have received a subordination and collateral
assignment of the management agreement for the Property or Project,
as the case may be, on such terms and conditions reasonably
satisfactory to Lender and its counsel.
i.
Compliance.
Upon request, Borrower shall provide satisfactory evidence to the
effect that any improvements located on the Property are in
compliance with applicable zoning ordinances, housing codes,
building codes, ordinances, rules and the like, including all
applicable parking requirements and setback provisions.
Additionally the Lender, upon request, is entitled to receive a
copy of any Certificate of Occupancy issued for the Property,
together with copies of all permits and licenses required by the
governing authorities for the operation thereof, if and/or when
applicable.
5
j.
Pre-Closing
Inspection. At its discretion, the Lender shall have
completed a pre-closing inspection of the Property satisfactory to
Lender.
k.
Organizational
Documents. The Lender shall have received certified copies
of the organizational documents of the Borrower, including
resolutions authorizing the Loan.
l.
Other Documents and
Deliveries. The Lender shall have received such other
documents, information, instruments and certificates as the Lender
deems necessary.
m.
Payment of
Taxes. The Lender shall have received satisfactory evidence
that all taxes and assessments due on any Property or associated
with the Project have been paid.
n.
Fees. All
points and other amounts due and owing to Lender delineated in the
Funding Agreement and/or Loan Commitment shall either have been
paid or be paid concurrent with Closing of the Loan.
o.
Representations and
Warranties. All representations and warranties of the
Borrower contained in this Agreement and the other Loan Documents
shall be true and correct.
4.
AFFIRMATIVE
COVENANTS. The Borrower covenants and agrees that, as long
as the Loan remains outstanding, the Borrower shall comply with the
following affirmative covenants:
a.
Contracts.
Upon request of Lender, the Borrower shall deliver to the
Lender
executed
copies of all contracts related to the Property or Project, whether
such contracts are executed before or after the date of this
Agreement, and enforce the duties and obligations of the parties
thereunder.
b.
Notice of Adverse
Events. The Borrower shall promptly notify the Lender in
writing of any Event of Default or institution of any litigation,
administrative proceeding or lien filed by governmental authorities
(or any other party) or other proceeding or occurrence which may
have a material adverse effect on the business, property or
financial condition of the Borrower or Project, including, but not
limited to any failure of Borrower to pay when due any indebtedness
(other than to Lender) or in the observance or performance of any
term, covenant or condition in any document evidencing, securing or
relating to such indebtedness.
c.
Existence and
Identity. Borrower shall continue its business as
presently
conducted.
Borrower shall neither change the legal format under which it is
organized nor sell any material portion of its property or merge
its business, in whole or in part, without the prior written
consent of the Lender. Borrower shall give the Lender written
notice within 15 days of any change in location of its chief
executive office or any other place of business.
6
d.
Books and Reports. Borrower shall maintain a proper
accounting system, and furnish the reports specified below to
Lender, in form and detail satisfactory to the Lender (in each
case, such reports shall be certified by an authorized individual
on behalf of the Borrower):
i.
If applicable, a
rent roll of the Property delineating, among other things, rental
delinquencies and receivables, certified by the Borrower dated as
of the end of each calendar month, which shall be due no later than
the fifteenth (15th) day of each
succeeding month.
ii.
Annual
CPA reviewed financial statements, prepared by an independent
certified public accountant, dated as of December 31st and which
will be due not later than March 31 of the following year (or 90
days following the end of the fiscal year if different), which
financial statements shall include a balance sheet and statement of
income and expenses.
iii.
Personal financial
statements of each Guarantor or Key Principal (herein defined as
any individual or partner with an interest of 10% or greater) in
form, substance and detail acceptable to Lender to be delivered
within thirty (30) days of the request, together with such other
information from time to time requested by Lender.
iv.
Copy of the annual
Federal Tax Return of the Borrower and each Guarantor, together
with all exhibits and schedules thereto, which shall be due no
later than fifteen (15) days of the date filed, but in any event no
later than November 1 of each year for the previous
year.
v.
If requested, any
annual budgetary financial projections (balance sheet, income
statement, cash flow statements) for the Borrower for the next
calendar year.
vi.
If requested, any
monthly or quarterly financial reports (balance sheet,
income/expense statement, cash flow statements, bank statements,
leasing activity report, aged payables or receivables) for the
Borrower for the most recent period, which shall be due no later
than fifteen (15) days after the end of such period.
e.
Applicable
Law. The Borrower shall operate the Property in accordance
with applicable ordinances, rules and regulations and requirements
of all governmental authorities having jurisdiction over the
Property including, without limitation, the Americans with
Disabilities Act of 1990 and any and all laws applicable in the
applicable jurisdiction(s).
f.
Maintain Property
and Project. Borrower shall maintain, preserve and keep the
elements of the Project (including equipment), and any real
Property, and each and every part and parcel thereof, in good
repair and working order, and in safe condition at all times and in
accordance with applicable ordinances, rules and regulations, and
requirements of all governmental authorities having jurisdiction
over the Property
7
g.
Inspection.
Upon reasonable notice, Borrower shall permit the Lender and its
agents free access to the Project or related Property and make
available for audit, inspection and/or copying all property,
equipment, books, contracts, records and other papers of Borrower
relating to the Property or Project during normal business
hours.
h.
Management of
Project and Property. Any manager of the Project or Property
will be required to enter into a collateral assignment and
subordination of its management agreement in form satisfactory to
Lender, assigning and subordinating the manager’s interest in
the Property or Project and all fees and other rights of the
manager pursuant to such management agreement to the rights of the
Lender. Upon an Event of Default, the Borrower, at Lenders request,
made at a time after such Event of Default, shall terminate the
management agreement and replace the manager with a manager
approved by Lender. No changes shall be made to the manager without
Lender’s prior written consent.
i.
Insurance.
Upon request, the Borrower shall provide Lender with the following
with respect to the Project:
i.
Evidence of a risk
hazard insurance policy for fire and extended coverage insurance as
to any Real Property improvements related to the Project. The
policy must cover the full replacement cost of the improvements,
and in no event less than one hundred percent (100%) of the
insurable value. Any policy shall contain a maximum deductible of
$10,000.00. If applicable, any insured premises must be described
by the street address of the Property. The hazard insurance policy
must contain replacement cost, inflation-guard, vandalism and
malicious mischief endorsements.
ii.
Evidence of
comprehensive general liability and property damage insurance on an
"occurrence basis" with initial limits of at least
$2,000,000/$1,000,000 for bodily injury and $1,000,000 for property
damage with evidence of excess liability insurance under an
umbrella policy in the amount of $3,000,000.00; or alternatively,
evidence of comprehensive general liability and property damage
insurance on an "occurrence basis" with initial limits of at least
$3,000,000.00 / $5,000,000.00 for bodily injury and $3,000,000.00
for property damage.
iii.
If any Real
Property is located in a designated flood plain area, evidence of
flood insurance.
8
iv.
All insurance
policies (each, a "Policy" and collectively, the "Policies") shall
be in such amounts, upon such terms and in such foam as shall be
acceptable to the Lender, and shall be carried with insurers
acceptable to the Lender. The Lender's failure to request copies of
such coverage or failure to approve such shall not be a waiver of
the Lender's future right to enforce the terms of this Section. All
insurance policies, or certified copies thereof, shall be furnished
to the Lender with proof of payment in full so that the policies
are in full force and effect for not less than one (1) year. All
policies of insurance must contain appropriate clauses that any
loss otherwise payable under such policies will be payable
notwithstanding any act or negligence of the Lender or any entity
comprising the Borrower. Where the Lender can be insured as a
mortgagee or loss payee (with a lender's loss payable endorsement)
because of its security interest, such endorsement shall be
attached to the policies. All policies shall require at least
thirty (30) days prior written notice to the Lender of cancellation
or modification. Without limitation to the foregoing, all Policies
shall be subject to the approval of Lender as to insurance
companies, amounts, deductibles, loss payees and insured. The
Policies shall be issued by financially sound, responsible and
recognized insurance companies authorized to do business where the
Property is located and having a claims paying ability rating of at
least A- and a numerical rating of at least VII, as rated by AM
BEST or its successor. Not less than ten (10) days prior to the
expiration dates of the Policies furnished to Lender, and in
connection with the closing of the Loan, ACCORD certificates of
insurance evidencing the Policies accompanied by evidence
satisfactory to Lender of payment of the premiums due thereunder
for at least one full year, shall be delivered by each entity
comprising Borrower to Lender. Borrower may be required to provide
the Lender with evidence of excess liability insurance in an amount
reasonably satisfactory to Lender.
v.
The above insurance
requirements are in addition to those contained in any other Loan
Document, and in the event of any conflict or inconsistency in the
terms, conditions and requirements of any of the Loan Documents,
the term, condition or provision more favorable to Lender, as
determined by Lender, in its sole and absolution discretion, shall
apply.
j.
Taxes.
Borrower shall promptly pay all taxes, withholdings, levies and
assessments due to all local, state and federal or governmental
agencies, and if requested by the Lender, submit to the Lender
copies of any and all federal or state or local tax returns
evidencing the computation and the payment of such taxes; provided,
however, Borrower shall not be required to pay any such taxes nor
shall it be deemed to be in default hereunder for not doing so if,
in good faith and by appropriate legal proceedings, it shall
contest either the validity thereof or the amount claimed to be
due, provided the applicable entity comprising Borrower provides
Lender with written notice of same and, if requested by Lender,
shall file such bond or provide such security as in the Lender's
reasonable discretion shall be deemed necessary or desirable and
provided that, in all events, the Borrower's failure to pay such
taxes does not have a material adverse impact on Lender or its
interests in any of the Collateral securing the Loan.
9
k.
ERISA
Compliance. If applicable, Borrower shall meet current
funding requirements for qualified employee benefit plans as
required by law or regulations.
l.
No Default
Certificate. Upon request, Borrower shall furnish to the
Lender, within ten (10) days after request by the Lender, a
certificate of the Borrower stating that no Event of Default has
occurred or, if an Event of Default has occurred, stating its
nature, how long it has existed and what action the Borrower
proposes to take with respect to the Event of Default.
m.
Other
Information. Upon request, Borrower shall promptly furnish
to the Lender such other information, documents or certificates
regarding the operations, business affairs and financial condition
of the Borrower as the Lender may reasonably request from time to
time and permit the Lender, its employees, attorneys and agents to
inspect, confirm and copy all of its books, records and properties
at any reasonable time.
n.
Advances from
Capital Reserve Account.
i.
Conditions Precedent to All Advances
or Draws from the Capital Reserve Account. No advances from
the Capital Reserve Account shall be made by Lender to Borrower at
any time unless:
a.
All conditions
precedent to that disbursement have been satisfied, including,
without limitation, performance of all of the then pending
obligations of Borrower under this Agreement and the other Loan
Documents;
b.
There will be,
after making such advance, sufficient funds remaining in the
Capital Reserve Account as required to maintain the Required
Reserves (as defined in the Capital Reserve Account Management
Agreement) and Lenders required minimum standards;
c.
Lender shall be
satisfied as to the continuing accuracy of the Project Budget, and
Borrower’s satisfactory fiscal performance
thereof;
d.
No Event of Default
has occurred under this Agreement or under any other Loan Document,
and no event, circumstance or condition has occurred or exists
which, with the passage of time or the giving of notice, would
constitute a Event of Default under this Agreement or under the
other Loan Documents;
e.
No litigation or
proceedings are pending or threatened (including proceedings under
Title 11 of the United States Code) against Borrower, any Guarantor
or the Property, which litigation or proceedings, in the sole and
exclusive judgment of Lender, is material;
10
f.
No event,
circumstance or condition exists or has occurred which, in Lender's
sole judgment, could delay or prevent the completion of the work
set forth in the Project Budget by the completion date set forth
therein;
g.
All representations
and warranties made by Borrower to Lender herein and otherwise in
connection with the Loan continue to be accurate;
h.
If requested,
Borrower shall have supplied Lender with a copy of each contract
for work to be done/materials or labor to be supplied in accordance
with the Project Budget;
i.
For each requested
advance Borrower shall supply Lender with a statement (“Sworn
Statement”), in form and substance acceptable to Lender, to
be executed by Borrower and its general contractor, setting forth
the name and address of each contractor, subcontractor, laborer or
supplier, the type of improvement furnished, the total contract
price of each such contractor, subcontractor, laborer or supplier,
amount already paid under each such contract, amount currently
owing under each such contract, the balance to complete each such
contract and such further and other information as Lender shall
require;
j.
For each requested
Capital Draw or advance Borrower shall supply Lender with a request
for advance (" Request for Advance") in form and substance
acceptable to Lender which shall (1) specify the amount of the
requested disbursement, (2) identify of each contractor,
subcontractor supplier or laborer to whom payment is to be made and
provide disbursement instructions for each such party, (3)
delineate the amounts and dates of previous payments to each such
contractor, subcontractor, supplier or laborer as set forth on any
and all prior Requests for Advance, (4) contain a certification by
Borrower that it has received no notice and has no knowledge of any
liens or claims of lien either filed or threatened against the
Property or Project, (5) certify that all amounts shown as previous
payments on the Request for Advance have been paid to the parties
entitled to such payment, (6) certify approval by Borrower of all
work and materials for which a payment is then due and for which
disbursement of the Replacement/Repair Reserve is thereby
requested, (7) certify that all work and materials theretofore
furnished for the Property in accordance with the Budget has been
done in a good and workmanlike manner on a lien free basis, (8)
there will be, after making such advance, sufficient funds
remaining in the Capital Reserve Account to complete all remaining
work set forth in the Project Budget on a lien free basis in a good
and workmanlike manner;
11
k.
If desired, Lender
or Lender's agent shall have inspected the Property or Project and
confirmed to Lender that the work for which an advance is
requested, or has previously been requested, has been completed in
a good and workmanlike manner;
l.
Waivers of lien for
all work for which an advance is requested in form and content
acceptable to Lender;
m.
At Lender's
discretion, an update to Lender's policy of title insurance shall
be obtained at Borrower's cost and expense, which update shall
disclose no adverse conditions of title to the Property, including,
but not limited to, any mechanics' or construction liens;
and
n.
Borrower shall
supply Lender and Lender's Consultant with such other schedules,
certificates, documents and other materials as Lender or Lender's
agent may request.
ii.
Other Conditions Applicable to
Advances from Capital Reserve Account.
a.
Lender,
in its discretion, may make, or cause to be made, payments of any
amounts pursuant to a Request for Advance directly to any
contractor, subcontractor, material supplier or laborer, or jointly
to Borrower and any of such parties, or to Borrower upon the
express understanding that any such advances made directly to
Borrower are made in trust by Lender and Borrower agrees to in turn
disburse any such advances to the parties entitled thereto and to
secure waivers of lien from such parties and provide same to Lender
within fifteen (15) days of such funds being made available by
Lender to Borrower; provided, further, in any and all events, if
any advance is not made directly by Lender to the party entitled
thereto, Borrower shall ensure that a waiver of lien from the
applicable contractor, subcontractor, material supplier or laborer
is obtained from such party as to the funds paid to such party and
such waiver of lien is forwarded to Lender within fifteen (15) days
of such funds being made available by lender to Borrower;
and
b.
There shall be no
more than one (1) disbursement of funds from the Capital Reserve
Account in any calendar month. Any funds remaining in the Capital
Reserve Account after completion of all items set forth on the
Capital Draw Schedule and disbursement by Lender from the Capital
Reserve Account to pay the costs of such replacements or repairs
shall be held by Lender as additional collateral security for the
Loan; provided, however, at such time as the Loan is repaid in
full, the Capital Reserve Account then being held by Lender shall
be released to Borrower.
12
c.
Should Project
include a “Construction
Period”, hereinafter defined as that period of time in
which the Property or Project is under active development, does not
have any or insufficient income in which to make its obligated
monthly payments under the Note, and has not secured a Certificate
of Occupancy or Operation as the case may be, then monthly payment
obligations of the Note may be paid from the Capital Reserves,
provided there is no previous, current or foreseeable Event of
Default by Borrower.
o.
Control of
Borrower. At all times, Borrower shall have effective voting
control over the Project affairs and shall run the day-to-day
operations and affairs of Borrower's business.
5.
NEGATIVE
COVENANTS. Borrower covenants and agrees that, as long as
the Loan remains outstanding, it shall not:
a.
Borrowings.
Borrow money in or act as a guarantor on any loan or obligation
without written permission from Lender, which shall not be
unreasonably withheld.
b.
Create
Liens. Without written permission from Lender, mortgage,
assign, hypothecate, encumber, or in any manner create, suffer or
permit liens on its property, except liens in favor of the Lender,
and except for (i) liens, if any, that have been disclosed in
writing by it to the Lender prior to the date of this Agreement and
consented to by the Lender; and (ii) liens for real estate property
taxes which are not yet due and payable.
c.
Transfer
Assets. Except in the ordinary course of business, sell,
lease, transfer, assign or otherwise dispose of any of its property
without written permission from Lender.
d.
Dividends and/or
Distributions. Change its capital structure or declare or
make any distributions to its members; provided, however, so long
as there is then no Event of Default existing hereunder, and it has
sufficient funds to service the indebtedness under the Loan, it may
make distributions to its members in amounts sufficient to
discharge their federal and state tax liability on their income
derived from it, so long as the making of such distributions shall
not result in the occurrence of any Event of Default hereunder or
any condition which with notice or the passage of time could result
in the occurrence of an Event of Default.
e.
Ownership.
Transfer, suffer or permit a change in major ownership (defined as
greater than 10%) and/or management or control without written
permission of Lender.
f.
Extension of
Credit; Investment. Make loans, advances or extensions of
credit to, or make investments in any person or entity outside the
normal course of business.
g.
Subordinated
Debt. Amend or modify any document evidencing any
subordinated debt.
13
6.
EVENTS OF
DEFAULT. The occurrence of any one of the following events
shall constitute an "Event of Default" under this Agreement and,
notwithstanding the terms of any note or other agreement given in
connection herewith or otherwise, shall be an Event of Default
under the terms of any such note or agreement:
a.
Failure by Borrower
to pay any amount owing under the Loan when due, and further
subject to the Capital Reserve Account Agreement.
b.
Any failure by
Borrower to comply with, or breach by any entity comprising
Borrower or subordinator of, any of the terms, provisions,
warranties or covenants (affirmative or negative) of this
Agreement, any of the other Loan Documents or any other agreement
or commitment between Borrower or any Guarantor or subordinator and
the Lender.
c.
The termination,
cancellation or disclaimer of liability or enforceability of any
guaranty or subordination agreement given in connection with the
Loan.
d.
Institution of
remedial proceedings or other exercise of rights and remedies by
the holder of any mortgage, security interest or other lien against
any of the Collateral or assets of Borrower.
e.
The insolvency of
Borrower or the admission in writing of Borrower's inability to pay
debts as they mature.
f.
Any statement,
representation or information made or furnished by or on behalf of
Borrower or subordinator to the Lender in connection with or to
induce the Lender to provide any loan, credit, draw or advance, or
any other financial accommodation shall prove to be false or
materially misleading when made or furnished.
g.
Institution of
bankruptcy, reorganization, arrangement, insolvency or other
similar proceedings by or against Borrower; or the appointment of a
receiver, custodian or trustee for Borrower, or any substantial
portion of Borrower's assets.
h.
Any loss, theft,
substantial damage or destruction to the Collateral, unless insured
as required by the Lender; or entry of any judgment against any
Borrower, or the issuance or filing of any judgment which, in the
reasonable opinion of Lender, may have a material adverse effect
upon the Collateral, Borrower; or attachment, levy, garnishment or
the commencement of any related proceeding or judicial process upon
or in respect to Borrower, the Project or the
Collateral.
i.
Sale or other
disposition by Borrower of any substantial portion of either's
assets or property, or death, dissolution, merger, consolidation,
termination of existence, insolvency, business failure or
assignment for the benefit of creditors of Borrower.
j.
If there is any
failure by Borrower to pay when due any indebtedness (other than to
the Lender, and excluding small routine monthly expenses) or in the
observance or performance of any term, covenant or condition in any
document evidencing, securing or relating to such
indebtedness.
14
k.
There is a
substantial change in the existing or prospective financial
condition or worth of Borrower, the Project or the Collateral,
which the Lender in good faith determines to be materially
adverse.
l.
The occurrence of
any default beyond any applicable cure or grace period under any
other document or instrument now or hereinafter executed by
Borrower (or its principals or affiliates), in connection with the
Loan or any other loan by Lender to Borrower (or its principals or
affiliates).
m.
The Lender in good
faith reasonably deems the Borrower insecure.
n.
Misappropriation,
misuse, or misrepresentation of any draw, advance, payment,
invoice, contract, valuation, or expense related to a draw,
advance, disbursement or funds associated with the Property or
Project.
7.
ACCELERATION.
Upon any Event of Default occurring, Lender may at any time declare
the Loan immediately due and payable, in each case without
presentment, demand, protest, notice of dishonor, notice of
non-payment or other notice of any kind, all of which are waived by
the Borrower.
8.
REMEDIES.
a.
General. The Lender shall have the right to apply any or all
of the Collateral held by the Lender against the amounts then due
under the Loan at any time after the occurrence of an Event of
Default. The Lender shall have all the rights and remedies provided
by law or equity or by agreement of the parties pursuant to the
Loan Documents or otherwise. The remedies of the Lender are
cumulative and not exclusive. No delay, waiver or failure on the
part of the Lender to demand strict adherence to the terms of this
Agreement or any related document shall be deemed to constitute a
course of conduct or waiver inconsistent with the rights
herein.
b.
Application of Proceeds. Any proceeds received by the Lender
from the exercise of its remedies shall be applied as
follows:
i.
First, to pay all
costs and expenses, including reasonable attorneys' fees,
incidental to the protection, leasing, foreclosure, sale or other
disposition of the Collateral.
ii.
Second,
to all sums expended by the Lender in carrying out any term,
covenant or agreement under this Agreement or any related
document.
iii.
Third,
to the payment of the Loan. If the proceeds are insufficient to
fully pay the Loan, then application shall be made first to late
charges and interest accrued and unpaid, then to any applicable
prepayment premiums, other charges and expenses, and then to the
outstanding principal balances.
15
iv.
Fourth,
any surplus remaining shall be paid to the Borrower or to any other
lawfully entitled party.
9.
OTHER
AGREEMENTS. If requested, and in the event of an Event of
Default, Borrower shall execute and deliver to the Lender such
agreements, certificates or instruments as may be reasonably
required by the Lender to evidence or secure or to otherwise
guaranty or subordinate obligations to the Loan. All such
agreements and those given in connection with any other loan,
present or future, shall also constitute security for the Loan, and
all security given to the Lender securing the Loan shall also
secure all other obligations of each entity comprising the Borrower
to the Lender.
10.
SINGLE PURPOSE
ENTITY. Borrower covenants and agrees that it has not and
shall not:
a.
engage
in any business or activity other than the acquisition, ownership,
operation and maintenance of its portion of the Project, related
Property and activities incidental thereto;
b.
acquire or own any
material asset other than the Project, Property and such incidental
personal property as may be necessary for the operation of its
portion of the Project;
c.
merge
into or consolidate with any person or entity or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise
dispose of all or substantially all of its assets or change its
legal structure, without in each case Lender's
consent;
d.
fail to
preserve its existence as an entity duly organized, validly
existing and in good standing (if applicable) under the laws of the
jurisdiction of its organization or formation, or without the prior
written consent of Lender, amend, modify, terminate or fail to
comply with the provisions of its organizational
documents;
e.
own any subsidiary
or make any investment in or acquire the obligations or securities
of any other person or entity without the consent of
Lender;
f.
commingle its
assets with the assets of any of its partner(s), members,
shareholders, affiliates, or of any other person or entity or
transfer any assets to any such person or entity;
g.
incur any debt,
secured or unsecured, direct or contingent (including guaranteeing
any obligation), other than the Loan, except unsecured trade and
operational debt incurred with trade creditors in the ordinary
course of its business of owning and operating its portion of the
Project in such amounts as are normal and reasonable under the
circumstances, provided that such debt is not evidenced by a note
and is paid when due;
h.
fail to maintain
its records, books of account and bank accounts separate and apart
from those of its members and affiliates;
16
i.
seek dissolution or
winding up, in whole or in part;
j.
fail to correct any
known misunderstandings regarding its separate
identity;
k.
fail to file its
own tax returns; or
l.
fail either to hold
itself out to the public as a legal entity separate and distinct
from any other entity or person or to conduct its business solely
in its own name in order not (i) to mislead others as to the entity
with which such other party is transacting business, or (ii) to
suggest that it is responsible for the debts of any third party
(including any shareholder, partner, member, principal or affiliate
of it, or any shareholder, partner, member, principal or affiliate
thereof).
11.
MISCELLANEOUS.
The Borrower and the Lender further agree as follows:
a.
Governing
Law. This Agreement shall be construed according to the laws
of the State of Michigan.
b.
Successors and
Assigns. This Agreement shall be binding upon the permitted
successors and assigns of Borrower, and the rights and privileges
of the Lender under this Agreement shall inure to the benefit of
its successors and assigns. Borrower shall not assign its rights,
duties and obligations under this Agreement without the Lender's
written consent, which consent may be given or withheld in the
Lender's sole discretion.
c.
Notices.
Notice from one party to another relating to this Agreement shall
be deemed effective if made in writing (including
telecommunications) and delivered to the recipient's address, telex
number or facsimile number set forth in this Agreement by any of
the following means: (i) hand delivery, (ii) registered or
certified mail, postage prepaid, (iii) express mail or other
overnight courier service, or (iv) telecopy, telex or other wire
transmission with dated confirmation of receipt in a manner typical
with respect to communications of that type. Notice made in
accordance with these provisions shall be deemed delivered on
receipt if delivered by hand or wire transmission, on the third
business day after mailing if mailed by registered or certified
mail, or on the next business day after mailing or deposit with the
postal service or an overnight courier service if delivered by
express mail or overnight courier.
d.
Amendments.
Any amendment of this Agreement shall be in writing and shall
require the signature of the Borrower and the Lender.
e.
Partial
Invalidity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of the remaining provisions of this
Agreement.
17
f.
Joint and Several
Obligations. In the event that more than one person or
entity executes this Agreement, the obligations of each person or
entity shall be joint and several.
g.
Fees and
Expenses. Borrower covenants and agrees to pay or, if
Borrower fails to pay, to reimburse, Lender upon receipt of notice
from Lender for all costs and expenses (including actual attorneys'
fees and disbursements and where applicable, travel expenses)
incurred by Lender in connection with: (i) the preparation,
negotiation, execution and delivery of this Agreement and the other
Loan Documents and the consummation of the transactions
contemplated hereby and thereby; (ii) Borrower's ongoing
performance of and compliance with Borrower's agreements and
covenants contained in this Agreement and the other Loan Documents
on its part to be performed or complied with after the date hereof,
including, without limitation, confirming compliance with all
covenants, obligations and agreements of Borrower under the Loan
Documents, including, but not limited to, all environmental,
insurance and Project or Property improvement requirements; (iii)
Lender's ongoing performance and compliance with all agreements and
conditions contained in this Agreement and the other Loan Documents
on its part to be performed or complied with after the date hereof;
(iv) the negotiation, preparation, execution, delivery and
administration of any consents, amendments, waivers or other
modifications to this Agreement and the other Loan Documents and
any other documents or matters requested by Lender; (v) Lender's
general administration of the Loan from time to time (including
consultations with legal counsel deemed necessary by Lender from
time to time); (vi) securing Borrower's compliance with any
requests made pursuant to the provisions of this Agreement; (vii)
the filing and recording fees and expenses, title insurance and
other similar expenses incurred in creating and perfecting the
security in favor of Lender pursuant to this Agreement and the
other Loan Documents; (viii) enforcing or preserving any rights,
either in response to third party claims or in prosecuting or
defending any action or proceeding or other litigation, in each
case against, under or affecting Borrower, this Agreement, the
other Loan Documents, the Property, or any other security given for
the Loan; (ix) enforcing any obligations of or collecting any
payments due from Borrower under this Agreement, the other Loan
Documents or with respect to the Project or in connection with any
refinancing or restructuring of the credit arrangements provided
under this Agreement in the nature of a "work out" or of any
insolvency or bankruptcy proceedings; and (x) any site visits by
Lender to review the condition of the Project. Any reference in
this Agreement to attorneys' fees shall mean fees, charges, costs
and expenses of both in-house and outside counsel and paralegals,
whether or not a suit or proceeding is instituted, and whether
incurred at the trial court level, on appeal, in a bankruptcy,
administrative or probate proceeding, in consultation with counsel,
or otherwise.
18
h.
Mediation of
Disputes. Except as otherwise provided in this Agreement, in
any controversy between the parties or any dispute over the
provisions of this Agreement, if the parties cannot resolve the
dispute to their mutual satisfaction, the matter shall first be
submitted to the American Arbitration Association for mediation,
then arbitration in the jurisdiction of Michigan in an attempt in
good faith to settle such dispute. The terms and procedure for
mediation shall be arranged by the Lender. If good-faith mediation
of a dispute proves impossible or if an agreed-upon mediation
outcome cannot be obtained by the parties, the dispute may be
submitted to arbitration in accordance with the rules of the
American Arbitration Association. Either party may commence
arbitration of the dispute by sending a written request for
arbitration to the other party to the dispute. The request shall
state the nature of the dispute to be resolved by arbitration, and,
if all parties to the dispute agree to arbitration, arbitration
shall be commenced as soon as practical after such parties receive
a copy of the written request. All parties shall initially share
the cost of arbitration (including but not limited to
administration fees, arbitrator fee, and the cost for use of
facilities during the hearings), but the prevailing party or
parties may be awarded attorney fees, costs and other expenses of
arbitration. All arbitration decisions shall be final, binding and
conclusive on all the parties to arbitration, and legal judgment
may be entered based upon such decision in accordance with
applicable law in any court having jurisdiction to do
so.
i.
WAIVER OF JURY
TRIAL. THE BORROWER AND THE
LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL
OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL
BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY
WAY RELATED TO, THIS AGREEMENT OR THE LOANS).
j.
Assignment by
Lender. Anything contained in this Agreement or any other
Loan Document to the contrary notwithstanding, Lender shall have
the right to transfer its interest without prior notice or consent
of Borrower to any third party, whether affiliated with Lender or
not. Further, Lender shall have the absolute right without a prior
notice to or consent of Borrower to pledge its interest in the Loan
Documents to any third party as collateral security for loans made
by any third party to Lender. In connection with any such transfer
or pledge, Borrower expressly consents to the disclosure to the
transferee or pledgee of any and all information concerning
Borrower and any of the Collateral to such third
party.
k.
Entire Agreement;
Amendment. This Agreement and the other Loan Documents
embody the final, entire agreement among the parties hereto and to
the other Loan Documents and supersede any and all prior
applications, commitments, agreements, representations, and
understandings, whether written or oral, relating to the subject
matter hereof and thereof and may not be contradicted or varied by
evidence of prior, contemporaneous, or subsequent oral agreements
of parties hereto and to the other Loan Documents.
19
l.
Usury Savings
Clause. It is the intent of the parties hereto in the
execution of the Note, this Agreement and all other instruments now
or hereafter securing the Note or executed in connection therewith
or under any other written or oral agreement by Borrower in favor
of Lender to contract in strict compliance with applicable usury
law. In furtherance thereof, the parties hereto stipulate and agree
that none of the terms and provisions contained in the Note, this
Agreement or any other instrument securing the Note or executed in
connection herewith, or in any other agreement by Borrower in favor
of Lender, are in full force and effect until initial disbursement
and shall never be construed to create a contract to pay for the
use, forbearance or detention of money, interest at a rate in
excess of the maximum interest rate permitted to be charged by
applicable law; that neither Borrower nor any guarantors, endorsers
or other parties now or hereafter becoming liable for payment of
the Note or the other indebtedness arising under any instrument
securing the Note or executed in connection therewith, or in any
other written or oral agreement by Borrower in favor of Lender,
shall be liable to pay interest at a rate in excess of the maximum
interest that may be lawfully charged under applicable law; and
that the provisions of this subsection shall control over all other
provisions of the Note, this Agreement and any instruments now or
hereafter securing the Note or executed in connection herewith or
any other agreements which may be in apparent conflict herewith. If
at any time it is determined by a court of competent jurisdiction
that interest received by Lender exceeds the applicable maximum
lawful rate, Lender shall, at its option, either refund to Borrower
the amount of such excess or credit the amount of such excess
against the principal balance of the Note then outstanding and
thereby shall render inapplicable any and all penalties of any kind
provided by applicable law as a result of such excess interest. In
the event that Lender shall contract for, charge or receive any
amount or amounts and/or any other thing of value which are
determined to constitute interest which would increase the
effective interest rate on the Note to a rate in excess of that
permitted to be charged by applicable law, an amount equal to
interest in excess of the lawful rate shall, upon such
determination, at the option of Lender, be either immediately
returned to Borrower or credited against the principal balance of
the Note then outstanding, in which event any and all penalties of
any kind under applicable law as a result of such excess interest
shall be inapplicable. All sums paid or agreed to be paid to Lender
for the use, forbearance, or detention of the sums due under the
Note, this Agreement and any instruments now or hereafter securing
the Note or executed in connection herewith, shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Note until payment in
full so that the rate or amount of interest on account of the loan
evidenced by the Note does not exceed the maximum legal rate of
interest from time to time in effect and applicable to the loan for
so long as the loan is outstanding.
(Signature Page Follows)
20
IN
WITNESS WHEREOF, this Agreement is executed and delivered on the
day and year set forth above.
BORROWER: Fleurdelis Hospitality,
Inc.
/s/ Xxxxx Xxxxx
by
Xxxxx
Xxxxx
Its:
President
State
of
|
Texas
|
)
|
|
|
|
|
)ss.
|
|
|
County
of
|
Xxxxxx
|
)
|
|
|
On this
5th day of
March in the year
2019, before me,
the undersigned notary public, personally appeared Xxxxx Xxxxx, known to me to be
the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged that he/she/they executed the named for
the purposes therein contained, and are duly authorized to act in
that capacity. In witness whereof, I hereunto set my hand and
official seal.
/s/ Xxxxx Xxxxx
(seal)
Notary ID # 129680102
Notary
Public
My
Commission Expires: _1/17/2022_
LENDER: Red Oak Capital Fund II, LLC
By:
/s/ Xxxx
Xxxxxxxx
Print
Name: Xxxx Xxxxxxxx
Its:
Authorized Agent
21