Exhibit 10.2
LOAN
AGREEMENT
BETWEEN
GREEN
BANK, N.A.
as
Lender
and
AQUA
METALS RENO, INC.
as
Borrower
November
3, 2015
LOAN
AGREEMENT
This
Loan Agreement (“Agreement”) is made and entered into this 3
rd
day of November, 2015, by and between Green
Bank, N.A. (“Lender”) and AQUA METALS RENO, INC, a Delaware corporation (“Borrower”), with the approval
of AQUA METALS OPERATIONS, INC., a Delaware corporation, and AQUA METALS, INC., a Delaware corporation (“Guarantor”,
whether one or more).
Article
1
Definitions
1.1
Certain
Defined Terms
.
Unless
a particular term, word or phrase is otherwise defined or the context otherwise requires, capitalized terms, words and phrases
used herein or in the other Loan Documents (as hereinafter defined) have the following meanings (all definitions that are defined
in this Agreement in the singular to have the same meanings when used in the plural and
vice versa
):
Advance
means a disbursement by Lender of any proceeds of the Loan or Escrow.
Affiliate
means any Person controlling, controlled by or under common control with any other Person. For purposes of this definition,
“
control
” (including “
controlled by
” and “
under common control with
”)
means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or otherwise.
Agreement
means this Loan Agreement, as it may from time to time be amended, modified, restated or supplemented.
Annual
Audited Financial Statements
shall mean the annual audited financial statements of a Person, including all notes and supporting
schedules thereto, for a fiscal year of such Person, which statements shall include, at a minimum, a balance sheet as of the end
of such fiscal year, an income statement, a statement of cash flows, a profit and loss statement showing the result of operations
for such fiscal year, and a reconciliation of surplus, each for such fiscal year, all setting forth in comparative form the corresponding
figures from the previous fiscal year, all prepared in conformity with GAAP, accompanied by the auditor’s notes and audited
with no qualifications and reported upon by a firm of independent certified public accountants acceptable to Lender which shall
state, in writing, that such financial statements, in the opinion of such accountants present fairly the financial position of
such Person as of the date thereof and the results of its operations for the period covered thereby in conformity with GAAP. Such
statements shall include a statement by such accountants that in making the appropriate audit and/or investigation in connection
with such report and opinion, such accountants did not become aware of any Event of Default relating to the financial tests set
forth in Section 4.2 hereof or, if in the opinion of such accountant any such Event of Default exists, a description of the nature
and status thereof.
Assignment
of CD
means that certain Assignment of Certificate of Deposit, dated as of the Closing Date, in Proper Form, executed
by Borrower for the benefit of Lender covering and affecting a certificate of deposit held and controlled by Lender in the amount
of $1,000,000.00, as same may be amended, modified, restated or supplemented from time to time.
Assignment
of Rents
means that certain Assignment of Leases and Rents, dated as of the Closing Date, in Proper Form, executed by
Borrower for the benefit of Lender covering and affecting the Commercial Land and Improvements, as same may be amended, modified,
restated or supplemented from time to time.
Bankruptcy
Code
means the United States Bankruptcy Code, as amended, and any successor statute.
Borrower’s
Equity Account
means the restricted collateral account held and controlled by Lender, into which the Borrower will deposit
the required Equity Injection on or before the Closing Date.
Business
Day
means any day other than a Saturday or Sunday or a legal holiday on which commercial banks are required to close in
Houston, Texas or Reno, Nevada.
Closing
Date
means the date of this Agreement, as set forth above
.
Collateral
means all Property now or hereafter subject to the Security Documents, as generally described in
Exhibit “A”
attached hereto and incorporated by reference herein.
Commercial
Land
means that certain tract of land situated in Storey County, Nevada consisting of approximately 11.73 acres of land,
more particularly described on
Exhibit A-1
attached hereto and incorporated by reference herein.
Conditional
Commitment
means the Form 4279-3 Conditional Commitment (with attachment), dated August 5, 2015, issued by the United
States of America acting through the USDA in connection with this Loan, a true and correct copy of which is attached hereto and
incorporated by reference herein as
Exhibit “C”
.
Construction
Rider
means the “Construction Rider To Loan Agreement”, which is attached hereto and incorporated by reference
herein as
Exhibit “E”
.
Current
Ratio
means the “current ratio” as defined by GAAP.
Debt
Service Coverage Ratio
means [the net income of the Borrower
plus
interest, taxes, depreciation, and amortization
(“EBITDA”)]
divided by
the sum of all scheduled payments of principal and interest on all business debt during
the period of measurement, as determined by Lender.
Deed
of Trust
means that certain Deed of Trust, Security Agreement and Fixture Filing dated as of the Closing Date, in Proper
Form, executed by Borrower for the benefit of Lender covering and affecting the Commercial Land, Improvements, and other Property
described therein, as same may be amended, modified, restated or supplemented from time to time.
Equity
Injection
means $4,158,630.00 of Borrower funds, which will be deposited into the Borrower’s Equity Account.
Environmental
Claim
means any third party (including Governmental Authorities and employees) action, lawsuit, claim or proceeding (including
claims or proceedings at common law or under the Occupational Safety and Health Act or similar laws relating to safety of employees)
which seeks to impose liability for (i) noise; (ii) pollution or contamination of the air, surface water, ground water or land
or the cleanup of such pollution or contamination; (iii) solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Materials; (v) the safety or health of employees; or (vi) the manufacture,
processing, distribution in commerce or use of Hazardous Materials. An “
Environmental Claim
” includes, but
is not limited to, a common law action, as well as a proceeding to issue, modify or terminate an Environmental Permit, or to adopt
or amend a regulation to the extent that such a proceeding attempts to redress violations of an applicable permit, license, or
regulation as alleged by any Governmental Authority.
Environmental
Liabilities
includes all liabilities arising from any Environmental Claim, Environmental Permit or Requirements of Environmental
Law under any theory of recovery, at law or in equity, and whether based on negligence, strict liability or otherwise, including
but not limited to: remedial, removal, response, abatement, investigative, monitoring, personal injury and damage to property
or injuries to persons, and any other related costs, expenses, losses, damages, penalties, fines, liabilities and obligations,
and all costs and expenses necessary to cause the issuance, reissuance or renewal of any Environmental Permit including attorneys’
fees and court costs.
Environmental
Permit
means any permit, license, approval or other authorization under any applicable Legal Requirement relating to pollution
or protection of health or the environment, including laws, regulations or other requirements relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants or Hazardous Materials or toxic materials or wastes into ambient air,
surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or Hazardous Materials.
Escrow
means any funds placed on deposit with Lender or Lender’s Representative and to be disbursed pursuant to this Agreement
or any other agreement including, collectively, the Borrower’s Equity Account and the Loan Proceeds Account.
Event
of Default
shall have the meaning assigned to it in
Section 7.1
of this Agreement.
Financing
Statements
means all such UCC-1 financing statements as Lender shall require, in Proper Form, to give notice of and to
perfect or continue perfection of Lender’s Liens in all, or a portion, of the Collateral.
GAAP
means, as to a particular Person, such accounting practice as, in the opinion of independent certified public accountants
of recognized national standing, conforms at the time to generally accepted accounting principles, consistently applied. In addition,
GAAP means those principles and practices (a) which are recognized as such by the Financial Accounting Standards Board; and (b)
which are consistently applied for all periods after the Closing Date so as to reflect properly the financial condition, and results
of operations and changes in financial position, of such Person. If any change in any accounting principle or practice is required
by the Financial Accounting Standards Board in order for such principle or practice to continue as GAAP, all reports and financial
statements required hereunder may be prepared in accordance with such change. Notwithstanding the foregoing, as to individuals
only, GAAP means such accounting principles and practices as, in the opinion of such accountants, conform at the time to such
individual’s federal income tax basis of accounting, consistently applied.
Governmental
Authority
means any foreign governmental authority, the United States of America, any State of the United States and any
political subdivision of any of the foregoing, and any central bank, agency, department, tribal government, commission, board,
bureau, court or other tribunal having jurisdiction over Lender, Borrower, any Party or their respective Property.
Hazardous
Materials
means and includes gasoline, petroleum, asbestos containing materials, lead, explosives, radioactive materials
or any hazardous or toxic material, substance or waste which is defined by those or similar terms or is regulated as such under
any Law of any Governmental Authority having jurisdiction over the Commercial Land or any portion thereof or its use, including:
(i) any “hazardous substance” defined as such in (or for purposes of) the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C.A. § 9601(14) as may be amended from time to time, or any so-called “superfund” or
“superlien” Law, including the judicial interpretation thereof; (ii) any “pollutant or contaminant” as
defined in 42 U.S.C.A. § 9601(33); (iii) any material now defined as “hazardous waste” pursuant to 40 C.F.R.
Part 260; (iv) any petroleum, including crude oil or any fraction thereof; (v) natural gas, natural gas liquids, liquefied natural
gas, or synthetic gas usable for fuel; (vi) any “hazardous chemical” as defined pursuant to 29 C.F.R. Part 1910; and
(vii) any other toxic substance or contaminant that is subject to any other Legal Requirement or other past or present requirement
of any Governmental Authority.
Improvements
means all buildings and other improvements now or hereafter placed on the Commercial Land, as well as all appurtenances,
betterments and additions thereto; all and singular the rights, privileges, hereditaments, and appurtenances in any wise incident
or appertaining to said Commercial Land and improvements, including, without limitation, any and all rights to the present or
future use of waste water, waste water capacity, drainage, streams, rivers, water or other utility facilities to the extent same
pertain to or benefit said Commercial Land or the improvements located thereon, including, without limitation, all reservations
of or commitments or letters covering any such use in the future whether now owned or hereafter acquired.
Indebtedness
means and include, without duplication, (a) all items which in accordance with GAAP would be included on the liability
side of a balance sheet on the date as of which Indebtedness is to be determined (excluding capital stock, surplus, surplus reserves
and deferred credits); (b) all guaranties, letters of credit, contingent reimbursement obligations, and other contingent obligations
in respect of, or any obligations to purchase or otherwise acquire, Indebtedness of others, and (c) all indebtedness secured by
any Lien existing on any interest of the Person with respect to which Indebtedness is being determined in Property owned subject
to such Lien whether or not the Indebtedness secured thereby shall have been assumed;
provided
, that the term “Indebtedness”
shall not mean or include any indebtedness in respect of which monies sufficient to pay and discharge the same in full (either
on the expressed date of maturity thereof or on such earlier date as such Indebtedness may be duly called for redemption and payment)
shall be deposited with a depository, agency or trustee acceptable to Lender in trust for the payment thereof.
Key
Agreements
means all contracts, permits, licenses and other rights acquired by a person or to which such Person is a party
or by which such Person is bound and from time to time material to the ownership of assets or the operations of such Person.
Legal
Requirement(s)
means any law, statute, ordinance, decree, requirement, order, judgment, rule, or regulation (or interpretation
of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority, whether presently existing
or arising in the future, including, without limitation, any Requirements of Environmental Law.
Lender’s
Representative
means any agent, employee, attorney, or other Person authorized to act on behalf of Lender.
Lien
means any mortgage, pledge, charge, encumbrance, security interest, collateral assignment or other lien whether based
on common law, constitutional provision, statute or contract.
Loan
means the loan described in
Section 2.1
hereof.
Loan
Documents
means, collectively, the Note, this Agreement, the Security Documents, the authorization agreement for automatic
drafts (if required by Lender), and all other documents now or hereafter prepared and/or executed in connection with the Loan,
and all instruments, certificates and agreements now or hereafter executed or delivered to Lender pursuant to any of the foregoing
or in connection with the Obligations or any commitment regarding the Obligations, and all amendments, modifications, renewals,
extensions, increases and rearrangements of, and substitutions for, any of the foregoing.
Loan
Proceeds Account
means the restricted collateral account held and controlled by Lender, into which the proceeds of the
Loan will be disbursed on or about the Closing Date.
Material
Adverse Effect
means any event, change or effect that is materially adverse to (a) the financial condition, business,
operations, assets or prospects of any Borrower or Guarantor, (b) the ability of Borrower or any other Party to perform its respective
obligations under the Loan Documents, and/or (c) the ability of Lender to enforce the Loan Documents against Borrower or any other
Party.
Maximum
Rate
shall have the same meaning as defined in the Note.
Note
means that certain adjustable rate promissory note dated as of the Closing Date, the form of which is attached hereto
and incorporated by reference herein as
Exhibit “B”
, made and executed by Borrower and payable to the order
of Lender in the aggregate original principal amount of Ten Million and 00/100 Dollars ($10,000,000.00), and all modifications,
renewals, extensions, increases and rearrangements of, and substitutions for, such promissory note.
Officer’s
Statement
means the Officer’s Statement in the form of
Exhibit ”D”
, attached hereto and
incorporated by reference herein, signed by the duly-elected Chief Financial Officer of Borrower (or other officer acceptable
to Lender).
Obligations
means, as at any date of determination thereof, the sum of the following: (i) any and all sums, including principal, interest,
expenses, Prepayment Consideration, court costs and attorneys’ fees called for in the Note,
plus
(ii) all other agreements,
covenants, conditions, warranties, representations, liabilities, obligations and indebtedness of any Party now or hereafter created
or incurred, in whole or in part, under this Agreement or any other Loan Document, and whether they were heretofore or are hereafter
purchased or acquired and any and all amendments, modifications, renewals, extensions, increases, or rearrangements in whole or
in part of any of the above.
Organizational
Documents
means, with respect to a corporation, the articles of incorporation (or certificate of formation), and bylaws
of such corporation; with respect to a limited liability company, the articles of organization, the limited liability company
operating agreement and the regulations of such limited liability company; with respect to a partnership, the partnership agreement
establishing such partnership and the certificate of limited partnership as to any limited partnership; with respect to a joint
venture, the joint venture agreement establishing such joint venture; and, with respect to a trust, the instrument establishing
such trust; in each case including any and all modifications and amendments thereof as of the date of the Loan Document referring
to such Organizational Document and any and all future modifications and amendments thereof.
Parties
means Borrower, Guarantor, and any other party (other than Lender) executing any Loan Document.
Person
means any individual, corporation, limited liability company, partnership, joint venture, joint stock association, business
trust, other business entity, trust, unincorporated organization, Governmental Authority or any other form of entity.
Prepayment
Consideration
shall have the meaning set forth in the Note.
Proper
Form
means in form and substance satisfactory to Lender.
Property
means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.
Quarterly
Financial Statements
means the quarterly company-prepared financial statements of a Person, including all notes and supporting
schedules thereto, , which statements shall include, at a minimum, a balance sheet as of the end of such fiscal quarter, an income
statement, a statement of cash flows, a profit and loss statement showing the result of operations for such fiscal quarter and
for the calendar year to date, all setting forth in comparative form the corresponding figures for the corresponding fiscal quarter
of the preceding year, prepared in accordance with GAAP and certified as fairly reflecting the financial condition of such Person
as of the date thereof and for the period covered thereby, subject to normal quarter-end adjustments, by the Chief Financial Officer
or other executive officer (as approved by Lender) of such Person. Each submitted Quarterly Financial Statement must be signed
by the Person, and contain a certification that (a) such financial statement is true and correct and fairly presents such Person’s
financial condition as of the date of each such statement, and (b) there has been no Material Adverse Affect occurring subsequent
to the date of the most recent previous financial statement supplied to Lender.
Related
Person
means any individual, corporation, organization or other entity that is an officer, director, owner, stockholder,
partner or employee of Borrower.
Remedial
Action
means any action necessary to ensure compliance with the Requirements of Environmental Law including (i) the removal
and disposal or containment (if containment is practical under the circumstances and is permissible within Requirements of Environmental
Law) or monitoring of any and all Hazardous Materials at the Property; (ii) the taking of necessary precautions to protect against
the release or threatened release of Hazardous Materials at, on, in, about, under, within or near the air, soil, surface water,
groundwater or soil vapor at the Property or any public domain affected by the Property or any surrounding areas thereof; (iii)
any action necessary to mitigate the usurpation of wetlands, pinelands or other protected land or reclaim the same or to protect
and preserve wildlife species; (iv) any action necessary to meet the requirements of an Environmental Permit or (v) any other
action required to satisfy Requirements of Environmental Law imposed upon Borrower, the Property and/or any operation thereon.
Required
Insurance
means all insurance required by the USDA and/or by Lender, including but not limited to flood, fire, comprehensive
property damage, public liability, life, disability, worker’s compensation, and malpractice, with the Lender named as an
additional insured, mortgagee, assignee, or lender’s loss payable, as applicable. All Required Insurance shall be issued
and maintained in such form, amounts, and by companies satisfactory to Lender, in its sole discretion.
Requirements
of Environmental Law
means all requirements imposed by any law (including for example and without limitation The Resource
Conservation and Recovery Act and The Comprehensive Environmental Response, Compensation, and Liability Act), rule, regulation,
or order of any Governmental Authority in effect at the applicable time which relate to (i) noise; (ii) pollution, protection
or cleanup of the air, surface water, ground water or land; (iii) solid, gaseous or liquid waste generation, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Materials; (v) the safety or health of employees or (vi) regulation of
the manufacture, processing, distribution in commerce, use, discharge or storage of Hazardous Materials.
Rural
Area
means all territory of a State that is not within the outer boundary of any city having a population of fifty thousand
or more and its immediately adjacent urbanized and urbanizing area with a population density of more than one hundred persons
per square mile, as determined by the Secretary of Agriculture according to the latest decennial census of the United States.
Secretary’s
Certificate
means a certificate, in Proper Form, of the Secretary or an Assistant Secretary or other authorized officer
of a Person as to (a) the resolutions of the Board of Directors or other governing body of such Person authorizing the execution,
delivery and performance of the documents to be executed by such Person; (b) the incumbency and signature of the officer of such
Person executing such documents on behalf of such Person, and (c) the Organizational Documents of such Person.
Security
Agreement
means that certain Security Agreement dated as of the Closing Date executed by Borrower in favor of Lender covering,
among other Property, the personal property Collateral described in Exhibit “A” hereto, together with any and all
security agreements hereafter executed in favor of Lender in connection with, or as security for, the Obligations, as any of them
may be amended, modified, restated or supplemented from time to time.
Security
Documents
means this Agreement, the Security Agreement, the Deed of Trust, Assignment of Rents, Assignment of CD, the
Financing Statements and any and all other agreements, deeds of trust, mortgages, chattel mortgages, security agreements, pledges,
assignments, guaranties, undertakings, subordination agreements and other instruments and financing statements now or hereafter
executed and delivered by any Person (other than solely by Lender), as the same may be amended, modified, restated or supplemented
from time to time as security for the payment of, the Obligations.
Survey
means an ALTA survey of the Commercial Land in Proper Form, performed by a registered public land surveyor duly licensed
as such in the state in which the Commercial Land is located, acceptable to the Lender (and, in each instance that the Lender
shall so require, to the title company). Each Survey shall be evidenced by a survey plat with north arrow showing the length and
direction of the perimeter boundaries of the Commercial Land, the location and dimensions of all improvements in place as of the
date of such survey, names of adjacent and nearby streets and roads, setback lines, encroachments, easements, rights-of-way and
railroads, if any, affecting the Commercial Land, a legal description of the Commercial Land, and the date of the survey. The
print of each Survey shall contain the duly executed and sealed certification of the surveyor certifying to the Lender (and, in
each instance that the Lender shall so require, to the title company issuing the Title Insurance).
Title
Insurance
means a loan policy or policies of title insurance in amount of Ten Million and 00/100 Dollars ($10,000,000.00),
issued in favor of Lender by an underwriter satisfactory to Lender and insuring the Lien of the Deed of Trust as a first and prior
lien on the Commercial Land, subject only to such encumbrances as are approved in writing by Lender.
UCC
means the Uniform Commercial Code of the State of Texas.
USDA
means the United States Department of Agriculture Rural Development, an agency and instrumentality of the United States
of America.
USDA
Documents
means all of the following duly executed by or on behalf of the parties thereto and in Proper Form:
Loan
Note Guarantee (Form 4279-5)
Certificate
of Incumbency (Form 4279-7)
Lender’s
Agreement (Form 4279-4)
Unconditional
Guarantee (Form 4279-14)
Assurance
Regarding Felony Conviction or Tax Delinquent Status for Corporate Applicants (Form AD-3031)
and
all amendments, modifications, renewals, extensions, increases and rearrangements of, and substitutions for, any of the foregoing.
USDA
Guarantee
means that certain Loan Note Guarantee of the United States of America acting through the USDA in the amount
of ninety percent (90%) of the amount of the Note.
USDA
Guarantee Fee
means that certain fee imposed by the USDA in the amount of three percent (3%) of the amount of the USDA
Guarantee in connection with this Loan, being Two Hundred Seventy Thousand and 00/100 Dollars ($270,000.00).
USDA
Regulations
means, collectively, those various, rules, requirements, conditions, matters, and regulations governing and/or
relating to the Loan, Conditional Commitment, and /or the USDA Guarantee including, without limitation, those contained in USDA
Rural Development Instructions 4279-A, 4279-B, 7 C.F.R. Section 4279.161(b)(11), and 4287-B, and USDA Form 4279-4.
1.2
Miscellaneous
.
The words “
hereof
,” “
herein
,” and “
hereunder
” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
Article
2
The
Loan
2.1
The
Loan
. Subject to the terms and conditions of this Agreement, Lender agrees to make a loan to Borrower in an amount not to
exceed Ten Million and 00/100 Dollars ($10,000,000.00).
2.2
Use of Proceeds
. The proceeds of the Loan shall be used by Borrower as follows:
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(a)
|
approximately
Nine Million Four Hundred Six Thousand Four Hundred and 00/100 Dollars ($9,406,400.00)
to construct a 125,000 square foot industrial building on the Commercial Land.
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(b)
|
approximately
Five Hundred Ninety-Three Thousand Six Hundred and No/100 Dollars ($593,600.00) for fees
and costs associated with the Loan.
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2.3
Note
.
The Loan made by Lender to Borrower shall be evidenced by the Note to be executed and delivered by Borrower to Lender on the Closing
Date. The Loan shall bear interest from time to time, and be due and payable on the terms and conditions set forth in the Note
and in this Agreement.
2.4
Security
.
The Obligations will be secured by the Security Documents which cover, without limitation, the Collateral.
Article
3
Conditions
for Making the Loan
3.1
Conditions
Precedent to Loan Advance
. The obligation of Lender to make an Advance of proceeds of the Loan is conditioned upon and subject
to all legal matters incident to the transactions hereby contemplated being satisfactory to Lender and Lender’s legal counsel,
and is further conditioned upon Lender’s receipt of the following in Proper Form or the following conditions precedent having
been otherwise fulfilled or waived in writing:
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(a)
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the
Loan Documents and all other agreements, documents and instruments required by Lender
to be executed and/or delivered at or prior to Closing, each duly executed where appropriate.
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(b)
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a
duly executed Secretary’s Certificate with respect to Borrower and any Party which
is not a natural person.
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(c)
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a
duly executed Officer’s Statement dated as of the later of the Closing Date or
the date of the initial Advance.
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(d)
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payment
in full of all taxes, assessments, and other charges relating to the Commercial Land.
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(e)
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a
list and summary of all pending or threatened litigation against Borrower certified to
by the President of Borrower.
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(f)
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evidence
satisfactory to Lender that there has been no material deterioration in the Borrower’s
or Guarantor’s financial condition since the issuance of the Conditional Commitment.
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(g)
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evidence
satisfactory to Lender that Borrower has tangible balance sheet equity of at least sixty
percent (60.0%), which must be met in the form of either cash or tangible earning assets
contributed to the business and reflected on the Borrower’s balance sheet. Tangible
balance sheet equity will be determined from financial statements prepared in accordance
with GAAP, and will not include subordinated debt or appraisal surplus.
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(h)
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Borrower
shall have paid the USDA Guarantee Fee.
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(k)
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each
Borrower and Guarantor, if applicable, shall have submitted to Lender evidence that Borrower
and/or Guarantor, as the case may be, has obtained all Required Insurance.
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(l)
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at
Lender’s request, invoices and/or statements of bills owed or incurred or other
evidence that each Advance will be, or has been, used for purposes authorized under this
Agreement.
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(m)
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current
Annual Audited Financial Statements of Borrower dated no earlier than ninety (90) days
prior to the Closing Date (if required by Lender).
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(n)
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an
environmental assessment of the Commercial Land in Proper Form, approved by Lender on
or prior to the Closing Date.
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(o)
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a
current certificate from the appropriate official of the state of organization of Borrower
as to the existence and good standing of Borrower.
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(p)
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a
current certificate from the appropriate public official of each jurisdiction other than
Borrower’s state of organization as to the due qualification to do business and
good standing of Borrower where such qualification is necessary to conduct Borrower’s
business in such jurisdiction.
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(r)
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receipt
of payment of all costs, fees, and expenses associated with the Loan owing as of the
Closing Date.
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(s)
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a
current (less than 12 months old) appraisal of the Commercial Land (and Improvements
thereon), acceptable to Lender and USDA and completed in accordance with USPAP and FIRREA
indicating a fair market value of at least $13,500,000.00, excluding any value attributable
to business valuation. The appraiser must determine the appraised market value in accordance
with RD Instruction 4279-B, Section 4279.144. In addition, the discounted collateral
value of the Commercial Land (and Improvements thereon) must be at least equal to the
amount of the Loan.
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(t)
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a
pedestrian archeological survey of the Commercial Land, as requested by the Nevada State
Historic Preservation Office. A copy of this survey must also be provided to the USDA.
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(u)
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provide
Lender and USDA with a copy of all documentation required to be submitted to the State
Department of Environmental Protection for hazardous material compliance.
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(w)
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deposit
of the Equity Injection by Borrower into Borrower’s Equity Account.
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3.2
Initial
Advance of Loan Proceeds
. On or about the Closing Date, and subject to full compliance with the conditions set forth in Section
3.1, above, and Section 3.2, below, Lender will Advance the full amount of the Loan. Any Loan proceeds not paid directly to Borrower
or third parties on the Closing Date will be placed into the Loan Proceeds Account, and disbursed thereafter in accordance with
the terms, conditions, and requirements contained in this Agreement and the Construction Rider. Interest shall begin to accrue
on the full amount of the Loan from the date advanced, whether the Advance is to Borrower, third party(ies), or into the Loan
Proceeds Account.
3.3
Conditions to Each Advance
. As conditions precedent to each Advance
from Escrow, including the initial Advance, in addition to all other requirements herein, Borrower must satisfy the following
requirements and, if required by Lender, deliver to Lender evidence of such satisfaction:
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(a)
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All
conditions precedent to the initial Advance or stated elsewhere herein shall have been
satisfied. The failure, whether intentional or not, of Lender to insist upon full compliance
with any requirement stated in Section 3.1, above, shall not constitute a waiver of such
requirement(s), and Lender may, in its sole discretion, insist upon full compliance with
any such requirement at any time.
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(b)
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There
shall then exist no Event of Default nor shall there have occurred any event which with
the giving of notice or the lapse of time, or both, could become an Event of Default.
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(c)
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The
representations and warranties made in the Loan Documents shall be true and correct on
and as of the date of each Advance, and the request for an Advance shall constitute the
representation and warranty by each Borrower and Guarantor that such representations
and warranties are true and correct at such time.
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(d)
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The
following statements shall be true (and each of the giving of the applicable request
for Advance and the acceptance by Borrower of the proceeds of such Advance shall constitute
a representation and warranty by Borrower that on the date of such Advance such statements
are true):
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(i)
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The
representations and warranties contained in
Article 6
of this Agreement are correct
in all material respects on and as of the date of such Advance, before and after giving
effect to such Advance, and to the application of the proceeds therefrom, as though made
on and as of such date;
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(ii)
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No
event has occurred and is continuing, or would result from such Advance or the application
of the proceeds therefrom, which would constitute an Event of Default;
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(iii)
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No
law, regulation, order, judgment or decree of any Governmental Authority shall enjoin,
prohibit or restrain, or impose or result in the imposition of any Material Adverse Effect,
upon Lender’s making the requested Advance; and
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(iv)
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No
law, regulation, order, judgment or decree of any Governmental Authority shall enjoin,
prohibit or restrain, or impose or result in the imposition of any Material Adverse Effect,
upon Lender’s making the requested Advance.
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(e)
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If
the requested Advance includes any amount related to construction costs or expenses,
Borrower must also comply with all terms, conditions, and requirements set out in the
Construction Rider.
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(f)
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Borrower
will provide Lender with evidence, in Proper Form, that there has not been any unremedied
adverse change in the financial or any other condition of the Borrower since the date
of application or since any preceding Advance which would warrant, in Lender’s
sole discretion, withholding or not making further Advances.
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3.4
Borrowing
Procedures
. Within ten (10) Business Days after satisfaction of all of the conditions set forth above, and a written request
by Borrower, Lender will make an Advance for the purposes set forth in Section 2.2 (b), above. Advances under Section 2.2(a),
above, will be made in accordance with the terms, conditions, and requirements set forth in the Construction Rider.
3.5
Order
of Advances
. Borrower understands and agrees that Advances from the Escrow will initially be made exclusively out of the Borrower’s
Equity Account, until those funds are depleted, and then from the Loan Proceeds Account. Borrower understands and agrees it shall
have no right to withdraw any funds from Escrow, and that such funds will be utilized and disbursed in accordance with this Agreement
and the Construction Rider. Any amounts remaining in Escrow after completion of the Improvements (as that term is used in the
Construction Rider), will, at Lender’s option, be applied to reduce the balance due under the Loan or held by Lender as
additional Collateral.
Article
4
Affirmative
Covenants
Until
payment in full of and satisfaction of all Obligations (unless full compliance with any of the following provisions has been waived
in writing, signed by both Lender and Borrower), Borrower will do and, if necessary, cause to be done, each and all of the following:
4.1
Financial
Statements and Information
. Without request by Lender (unless otherwise indicated), furnish Lender with true, correct and
complete copies of the following documents and instruments, in Proper Form:
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(c)
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Within
ninety (90) days after the end of each fiscal year of Borrower, Borrower’s Annual
Audited Financial Statements. Borrower’s Annual Audited Financial Statements must
contain a statement that Borrower is in compliance with all Loan covenants.
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(b)
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Within
forty-five (45) days after the end of each fiscal quarter of Borrower, Borrower’s
Quarterly Financial Statements.
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(c)
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Within
ninety (90) days after the end of each fiscal year of Borrower, Borrower will furnish
an annual Compliance Certificate (herein so called), executed by a responsible and authorized
officer or representative of Borrower, and stating that a review of the activities of
Borrower during the time period covered by such certificate has been made under his or
her supervision and that to the best of his or her knowledge and belief after reasonable
investigation, (i) Borrower has observed, performed and fulfilled each and every obligation
and covenant contained herein and in each of the other Loan Documents or, if there is
any exception to the foregoing, specifying the nature and status thereof, (ii) there
exists no Event of Default as of the date of such certificate or, if any such event shall
have occurred, specifying the nature and status thereof, and (iii) all information and
calculations delivered to Lender with respect to compliance with the Financial Tests
(set out in Section 4.2, below) are true, accurate and complete, which information and
calculations must be submitted as an attachment to the Compliance Certificate;
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(d)
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Within
ninety (90) days after the end of each fiscal year of each Guarantor, Guarantor’s
Annual Audited Financial Statements.
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(e)
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Within forty-five (45) days after the end of each fiscal quarter of each Guarantor, Guarantor’s
Quarterly Financial Statements.
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(f)
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Such other financial and other information concerning Borrower or Guarantor as may be requested
by USDA and/or Lender from time to time, including without limitation, updated appraisals on real estate, equipment or other Collateral
within sixty (60) days from the date Lender or USDA requests such information or appraisals.
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(g)
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Upon request of Lender, evidence of payment and discharge of all taxes, assessments and governmental
charges or levies imposed on Borrower, its income or profits or any of its Property prior to the date on which penalties or liens
attach thereto, provided, however, Borrower shall not be required to pay any such tax, assessment, charge, levy or claim the payment
of which is being contested in good faith and by proper proceedings and against which adequate reserves have been set up in accordance
with GAAP.
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(h)
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Prompt written notice of all claims, actions or litigation, including, without limitation, all
proceedings before any Governmental Authority affecting Borrower or the Property, except litigation or proceedings not materially
affecting the financial condition of Borrower.
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(i)
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Prompt written notice of the occurrence of any Event of Default hereunder or any other event or
occurrence which has had or can be expected to have a Material Adverse Effect.
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4.2
Financial
Tests
. Borrower shall have and maintain at all times:
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(a)
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a minimum Debt Service Coverage Ratio of 1.25 to 1.0, as determined by Lender in accordance with
GAAP. This financial test will be tested quarterly, and measured on the previous trailing 12-month period, beginning with the period
ending on March 31, 2017;
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(b)
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a maximum debt-to-net worth ratio of 1.0 to 1.0, as determined by Lender in accordance with GAAP.
This financial test will be tested annually, beginning with the period ending on December 31, 2015; and
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(c)
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a minimum Current Ratio of 1.5 to 1.0. This financial test will be tested annually, beginning with
the period ending on December 31, 2015.
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4.3
Taxes,
Existence, Property, Etc.
At all times (a) pay when due all taxes and governmental charges of every kind upon Borrower or
against its income, profits or Property, unless and only to the extent that the same shall be contested diligently in good faith
and by proper proceedings and against which Borrower has set up adequate reserves in accordance with GAAP and have in operation
a depository plan for payment of future withholding taxes when required by GAAP; (b) do all things necessary to preserve its existence,
qualifications, rights and franchises in all jurisdictions where its Property or the nature of its business makes such licensing
or qualification necessary; and (c) cause the Collateral and its Property necessary or appropriate to the conduct of its business
to be protected, maintained and kept in good repair, ordinary wear and tear excepted, and make all replacements and additions
to its Property as may be necessary to conduct its business properly and efficiently.
4.4
Legal Requirements
.
Comply with all applicable Legal Requirements in respect of the conduct of its business and the ownership of its Property, including,
without limitation, the following:
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(a)
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Requirements of Environmental Law.
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(b)
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all equal opportunity and nondiscrimination requirements as more fully set out in USDA Rural Development
Instructions 4279A, 4279B and 4287B.
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(c)
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all requirements under Clean Air Act and Water Pollution Control Act as more fully set out in USDA
Rural Development Instructions 4279A, 4279B and 4287B.
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(d)
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all special laws and regulations as required by USDA Rural Development Instructions 4279A, 4279B
and 4287B.
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(e)
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the Americans with Disabilities Act.
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4.5
Inspection
.
Upon three(3) Business Days’ prior notice, permit Lender and/or USDA to (a) enter upon and inspect its Property, (b) complete
an inventory accounting of all Collateral, (c) examine its files, books and records (except privileged communication with legal
counsel and classified governmental material), and (d) discuss its affairs with its officers and accountants, all during normal
business hours.
4.6
Further Assurances
.
Promptly execute and deliver, at Borrower’s expense, any and all other and further instruments which may be reasonably requested
by Lender to cure any defect in the execution and delivery of any Loan Document in order to effectuate the transactions contemplated
by the Loan Documents and the Conditional Commitment, and in order to grant, preserve protect and perfect the validity and priority
of the Liens created by the Security Documents.
4.7
Books and
Records
. Maintain books of record and account in such detail, form and scope as Lender and/or USDA shall reasonably require
in connection with the administration of the Loan, and in accordance with GAAP.
4.8
Insurance
.
Borrower will purchase and maintain at Borrower’s sole expense insurance with such insurers, on such of its Property, with
responsible companies in such amounts, with such deductibles, and against such risks as may be reasonably required by Lender (including,
without limitation, all Required Insurance), and naming the Lender as mortgagee and/or loss payee, as applicable, and will furnish
Lender reasonably satisfactory evidence thereof promptly upon request. Without limiting the generality of the foregoing, Borrower
will maintain hazard (fire, windstorm, lightning, hail, explosion, riot, civil commotion, smoke and property damage), public liability,
business interruption, environmental, key man life, and worker’s compensation insurance in compliance with all Legal Requirements.
4.9
Protection
of Collateral
. Lender may at any time after notice to Borrower take such steps as Lender deems necessary to protect Lender’s
interest in and to preserve the Collateral. Borrower agrees to cooperate fully with all of Lender’s efforts to preserve the
Collateral and will take such actions to preserve the Collateral as Lender may reasonably require. All of Lender’s expenses
of preserving the Collateral shall be charged to Borrower’s account and added to the Note. Upon the occurrence and continuation
of an Event of Default, Lender may use any of Borrower’s owned or leased lifts, hoists, trucks or other facilities or equipment
for handling or removing the Collateral and Lender shall have, and is hereby granted, a right of ingress or egress to and through
any of Borrower’s owned or leased Property including, without limitation, the Commercial Land.
4.10
Rural Areas
.
Borrower will utilize all Loan proceeds in improving, developing or financing business, industry and employment and improving the
economic or environmental climate in a Rural Area.
4.11
Additional
Conditions and Requirements
. All the provisions of the Conditional Commitment are incorporated into this Agreement with the
binding effect as if recited in their entirety here. Borrower certifies and represents that it understands, accepts, and will comply
with all of the terms, conditions, requirements, and other matters contained in the Conditional Commitment, as same may be modified
or waived in writing by the USDA.
4.12
Escrow Fund.
At the option of Lender upon an Event of Default which continues beyond any applicable cure period, Lender may require Borrower
to establish an Escrow Fund (defined below) sufficient to discharge its obligations for the payment of taxes, insurance premiums,
and maintenance as required by the Deed of Trust. The initial deposits together with the amounts set forth in this subsection shall
be called the “Escrow Fund”). Initial deposits for taxes, premiums, and maintenance shall be made by Borrower to Lender
in amounts determined by Lender in its sole and exclusive discretion on the date hereof to be held in Lender’s Escrow Fund.
Additionally, Borrower shall pay to Lender or its designee on the first day of each calendar month: (a) one twelfth of an amount
which would be sufficient to pay the taxes payable, or estimated by Lender to be payable, upon the due dates established by the
appropriate taxing authority during the ensuing twelve (12) months; (b) one-twelfth of an amount which would be sufficient to pay
the insurance premiums due for the renewal of the coverage afforded by the policies upon the expiration thereof; and (c) one-twelfth
of an amount which would be sufficient to pay all costs associated with assessments and other amounts, if any, owing toTRI Owners
Association pursuant to the Declaration of Covenants, Conditions and Restrictions For Tahoe-Reno Industrial Center, recorded at
Book No. 123, Page 945 of the Official Records of Storey County, Nevada (“CAM”). Borrower shall notify Lender immediately
of any changes to the amounts, schedules and instructions for payment of taxes, insurance premiums, and CAM of which it has obtained
knowledge and expressly authorizes Lender or its designee to obtain the bills for taxes and other charges directly from the appropriate
authority. The Escrow Fund and the payments of interest or principal, or both, payable pursuant to the Note, shall be added together
and shall be paid as the aggregate sum by Borrower to Lender. Provided there are sufficient amounts in the Escrow Fund and no Event
of Default exists, Lender shall be obligated to pay on behalf of Borrower the taxes, insurance premiums and CAM as they become
due on their respective due dates by applying the Escrow Fund to the payment of such taxes, insurance premiums, and CAM required
to be made by Borrower hereunder. If the amount of the Escrow Fund shall not be sufficient to pay the amounts due for taxes, insurance
premiums, and CAM herein, Borrower shall promptly pay top Lender, upon demand, an amount which Lender shall estimate to make up
the deficiency. The Escrow Fund shall constitute a separate fund and shall not be commingled with other monies held by Lender.
No interest or earnings shall be payable to Borrower on the Escrow Fund.
4.13
[Intentionally
Deleted]
4.14
Conform
to USDA Regulations
. As a result of USDA’s agreement to guarantee a portion of the Loan, USDA requires that all Loan
Documents be consistent and compliant with, the USDA Regulations. Therefore, Borrower and Guarantor agree and acknowledge that
the Note, Security Documents, and all other Loan Documents shall be consistent and compliant with the USDA Regulations. Borrower
and Guarantor affirmatively represent that it is their unqualified intention and agreement to comply with all of the USDA Regulations
in connection with the Loan. Borrower and Guarantor agree that in the event Lender or USDA determine that any portion(s) of the
Loan Documents are in conflict with, or fail to include, any of the requirements set forth in the USDA Regulations, then the provisions
of the USDA Regulations shall control and be binding. Borrower and Guarantor agree to execute such other documentation as may be
required by Lender to amend or add any additional requirement, term, condition, or agreement in order to comply with the USDA Regulations.
Notwithstanding anything to the contrary herein, in no case shall Borrower or Guarantor be required to increase their obligations
under the Loan Documents in any material way.
4.15
Loan Payments
.
Borrower agrees that all payments due under the loan will be debited from Borrower’s account by way of an ACH (Automated
Clearing House) payment. Borrower agrees to such ACH Payments, and will execute an authorization in favor of Lender, in Proper
Form, to allow such ACH payments.
4.16
Loans by
Affiliates
. Any loans or advances to Borrower by any owner, officer, director, shareholder, or Affiliate of Borrower will not
be repaid, in whole or in part unless the Loan is current and in good standing. All such loans, and the security therefor (if any),
will be subordinate to the Loan, and Lender’s lien on the Collateral.
4.17
Compliance
with Licensing Requirements
. Borrower will obtain, and maintain in good standing, all licenses and permits required by any
Governmental Authority. Borrower will notify Lender immediately, but in no event later than thirty (30) Business Days after Borrower’s
receipt of notice of any material adverse finding made by any Governmental Authority relative to any applicable license, or otherwise
related to the operation of Borrower’s business, unless the adverse finding is resolved to the satisfaction of the applicable
Governmental Authority within that 30-day time period.
4.18
USDA Renewal
Fees
. Borrower will pay the annual renewal fee required by the USDA. At this time, it is estimated that the annual renewal
fee will be .50% of the guaranteed portion of the outstanding principal balance of the Loan as of December 31st of each year.
4.19
Storage
of Hazardous Materials
. Borrower will comply with all Legal Requirements relative to the storage and handling of any Hazardous
Materials.
Article 5
Negative Covenants
Until payment in full
of and satisfaction of all Obligations, Borrower shall not, without the prior express written consent of Lender and USDA (if deemed
necessary by Lender):
5.1
Indebtedness
.
Create, incur or assume, directly or indirectly, or become or remain liable with respect to any debt whether direct, indirect,
contingent or otherwise, other than the Loan and trade payables incurred in the regular course of Borrower’s business.
5.2
Contingent
Liabilities
. Directly or indirectly co-sign, assume, guarantee, endorse or otherwise become liable upon, or agree to purchase
or otherwise furnish funds for the payment of, any liability or obligation, including contingent liabilities or obligations, of
any Person other than Borrower.
5.3
Liens
.
Create, incur, assume or suffer to exist any Lien upon any of its Property now owned or hereafter acquired, except (i) liens securing
payment of the Note; and (ii) mechanics’, carriers’, workmen’s, repairmen’s or other like Liens incurred
in the ordinary course of business in respect of obligations which are not overdue or are being contested in good faith by appropriate
proceedings, if (a) approved in writing by Lender, and (b) adequate reserves with respect thereto are maintained in accordance
with GAAP.
5.4
Nature of
Business
. Engage in any business other than Borrower’s principal business activity or a business activity which is directly
related thereto, or change the nature or method of operation or its manner of conducting business in any material respect.
5.5
Loans to
Affiliates
. Make any outside investment(s) and/or any loan(s) or advance(s) to any owner, officer, director, shareholder, or
Affiliate of Borrower. Any existing loans from any owner, officer, director, shareholder, or Affiliate of Borrower must be subordinated
to the Loan or converted to equity. No payments are to be made on these debts without Lender’s prior written approval.
5.6
Mergers,
Consolidations, Dispositions, Acquisitions, Investments
. Liquidate or dissolve; form any new subsidiary or merge or consolidate
with any corporation or other entity, or sell, lease, assign, transfer or otherwise dispose of (whether in one transaction or
a series of transactions) all or substantially all of its assets, whether now owned or hereafter acquired; or acquire by purchase
in any acquisitive corporate transaction or otherwise, all or substantially all of the assets of any corporation or other entity
or make any investment in the assets of any corporation or other entity or business venture or allow any changes in the current
equity ownership of any Borrower, without the prior written consent of Lender and the USDA.
5.7
Capital Expenditures
.
During any twelve month time period, make or incur any expenditures for acquiring or improving any real property, machinery, equipment,
furniture or fixtures by purchase, lease purchase agreement or option, the aggregate cost or annual rental of which is in excess
of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00).
5.8
Disposition
of Assets
. During any calendar year, sell, lease, transfer, encumber, or dispose of (whether in one or more transactions) in
any manner any real property, machinery, equipment, furniture or fixtures not constituting Collateral except in the normal course
of business to the extent such items no longer have a useful life in connection with Borrower’s business or to the extent
such items are being replaced, and shall not sell or dispose of any Collateral except in accordance with
Section 5.13
hereof.
5.9
Redemptions,
Dividends, Distributions
. Purchase or retire any ownership interest in Borrower, or consolidate or merge with any other company,
or give any preferential treatment, make any advance, directly or indirectly, by way of loan, gift, bonus or otherwise, to any
company directly or indirectly controlling or affiliated with or controlled by the Borrower, or any other company, to any officer,
director or employee of the Borrower, except for the payment of normal employee salaries and bonuses, without the prior written
concurrence of the Lender (and USDA, where required), or make any other distribution of any Property or cash to owners of an equity
interest in Borrower (in their capacity as such), or declare or pay any dividend, or make any distribution upon Borrower’s
capital stock or other equity interest, declare or pay any dividend unless:
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a.
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After-tax profit was made in the preceding fiscal year,
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b.
|
Borrower is and will remain in compliance with the terms, conditions, covenants, and agreements
contained in the Loan Documents and the Conditional Commitment,
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c.
|
All of Borrower’s debts are paid to a current status, and
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d.
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Prior written approval of Lender is obtained.
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Lender’s prior written
approval is not required for dividend payments to cover personal tax liability resulting from profitability of the business. However,
notwithstanding satisfaction of all of the above requirements, dividend payments and/or distributions will never be in an amount
that, when made, could create a Material Adverse Effect.
5.10
New Management
Practices
. Implement any new management practices without the prior written consent of Lender.
5.11
Change of
Name or Location
. Change its name, or the location (a) of its chief executive office, (b) principal place of business, (c)
where it keeps its books and records, or (d) of the personal property Collateral. Borrower has never changed its name, whether
by amendment of its organizational documents or otherwise, except as previously disclosed to Lender in writing.
5.12
Organizational
Documents
. Amend, modify, restate or supplement any of its Organizational Documents if such action could be expected to materially
and adversely affect the Loan or any Obligation or the abilities of any of the Parties to perform their respective Obligations
under any Loan Document.
5.13
Collateral
.
Sell, lease, transfer, encumber, or dispose of (whether in one or more transactions) in any manner any of the Collateral*, or use
the Collateral, permit the same to be used, for any unlawful purpose or in any manner inconsistent with the provisions or requirements
of any insurance policy required in the Loan Documents, or allow any tangible Collateral to be moved from its current location,
without the prior written consent of Lender. Borrower further agrees that all payments of any kind from any sale, lease, or disposal
of any Collateral including but not limited to public or private sale, of any of the Collateral by Borrower, will be made jointly
payable to the Lender and the Borrower and shall be kept separate and distinct from other Property of the Borrower. If the Collateral
is evidenced by promissory notes or other instruments for the payment of money, Borrower, will, at the request of Lender, immediately
deliver them to Lender, appropriately endorsed to Lender’s order and regardless of the form of endorsement, Borrower waives
presentment, demand, notice of dishonor, protest and notice of protest. (*The prior written approval of both Lender and USDA is
required prior to any sale, lease, transfer, encumbrance, or disposition of any of the Collateral).
5.14
Compensation
.
Advance any monetary compensation, whether bonus, salary, dividends or any other compensation to officers and/or owners of Borrower
if payment of same will impair the Borrower’s ability to repay the Loan or otherwise create a Material Adverse Effect. In
addition, compensation will not be increased year-to-year unless:
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a.
|
After-tax profit was made in the preceding fiscal year,
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|
b.
|
Borrower is and will remain in compliance with the terms, conditions, covenants, and agreements
contained in the Loan Documents and the Conditional Commitment,
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c.
|
All of Borrower’s debts are paid to a current status, and
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d.
|
Lender has consented, in writing, to such increase.
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5.15
Key Agreements
.
Amend, modify or grant a waiver of any provision of any of the Key Agreements if such amendment, modification or waiver could
have a Material Adverse Effect.
5.16
Related
Parties
. Engage in any transactions with any Related Person except upon terms equally available in like transactions with other
parties.
Article 6
Representations and Warranties
To induce Lender to
extend the credit and financial accommodations evidenced by the Loan Documents, Borrower represents and warrants to Lender that:
6.1
Organization
.
Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority, corporate or otherwise, necessary in order to conduct its business and own the Collateral. Borrower
is also in good standing under the laws of all other jurisdictions in which qualification is necessary in order for it to conduct
its business and own its Property as conducted and owned in such jurisdictions, if any.
6.2
Financial
Statements
. The financial statements of Borrower dated September 30, 2015 previously delivered to Lender fairly present the
financial condition of the Borrower as at such date and the results of the operations of Borrower for the period ended on such
date all in accordance with GAAP, and since the date of such financial statements, no event has occurred which has had or is likely
to have a Material Adverse Effect.
6.3
Enforceable
Obligations; Authorization
. The execution, delivery and performance of the Loan Documents to which Borrower is a party are
within its company powers and have been duly authorized by all necessary company action of Borrower. Neither execution nor delivery
of any Loan Documents, nor the fulfillment of or compliance with its terms, will contravene or violate (i) Borrower’s Organizational
Documents, (ii) any Legal Requirement binding on or affecting Borrower or (iii) any mortgage, indenture, contract, agreement or
other instrument, or any judgment, order or decree binding upon Borrower. No authorization or approval or other action by, and
no notice to or filing with, any franchisor, licensor, distributor, Governmental Authority, regulatory body, or other Person is
required for the due execution, delivery and performance by Borrower of the Loan Documents to which it is a party. The Loan Documents
have been duly executed and delivered and are legal, valid and binding obligations of Borrower and Guarantor, enforceable against
each in accordance with their respective terms. The Improvements and the use of the Commercial Land and Improvements complies in
all respects with applicable Legal Requirements.
6.4
Contractual
Obligations
. Neither Borrower nor Guarantor have received notice, nor they have any actual knowledge that (i) either is in
default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any contractual
obligation, including, without limitation, franchise and distribution contracts, applicable to it/them, or (ii) any condition exists
which, with the giving of notice or the lapse of time or both, would constitute such a default under such contractual obligations,
in each case, except where such default or defaults, if any, will not have or is not likely to have a Material Adverse Effect.
6.5
Litigation
.
There is no pending or, to the knowledge of Borrower or Guarantor, threatened action or proceeding affecting any Borrower or Guarantor
before any court (or other Governmental Authority) or arbitrator, which has had or is likely to have an adverse effect on the financial
position of any Borrower or Guarantor or the operations of Borrower or any of its businesses or the ability of any Borrower or
Guarantor to perform their respective obligations under the Loan Documents, or would subject any Borrower or Guarantor to any liability
not fully covered by insurance, or would be required to be disclosed in the notes to any financial statements of any Borrower or
Guarantor prepared in accordance with GAAP.
6.6
Title; Permits
.
Borrower possesses adequate assets, licenses, permits, patents, patent applications, copyrights, trademarks, trademark applications,
trade names, technology, processes, and franchise and distribution rights to continue to conduct its business as heretofore conducted
by it. Borrower has and will continue to have good and indefeasible title to its Property free and clear of all Liens other than
as permitted by
Section 5.3
. No Liens exist as of the Closing Date upon or with respect to any Property of Borrower other
than Liens permitted under
Section 5.3
.
6.7
Indebtedness
.
Except for trade payables arising and endorsements of negotiable instruments for collection, in each case, in the ordinary course
of its business, and except as permitted under
Section 5.1
of this Agreement, Borrower will not have, as of the Closing
Date, (i) any Indebtedness for borrowed money other than the Obligations, or (ii) any obligation to guarantee the obligations of
any other Person. As of the Closing Date, Borrower will not have any obligation or liability (including, without limitation, contingent
liabilities) which would have a Material Adverse Effect.
6.8
Regulations
G, U and X
. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulations G, U or X issued by the Board of Governors of the Federal Reserve System), and no proceeds of
any Loan will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock or for any purpose which would be inconsistent with the provisions of Regulations G, U or X.
6.9
Company Structure
.
The outstanding shares of Borrower have been duly authorized, validly issued, and fully paid and are non-assessable. One hundred
percent (100%) of the outstanding equity interests in Borrower are owned by a corporation formed under the laws of the State of
Delaware.
6.10
No Untrue
or Misleading Statements
. The representations and warranties of each Borrower and Guarantor in the Loan Documents or other
document submitted to Lender in connection with the Loan, and all certificates and other documents delivered pursuant to the terms
thereof do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under which they were made, not misleading. Neither Borrower
nor Guarantor has intentionally withheld any material fact from Lender in regard to any matter relating to the Loan and/or which
will have or is likely to have a Material Adverse Effect.
6.11
Ability
to Incur Indebtedness
. Borrower is not subject to any regulation or other Legal Requirements which limit the ability of Borrower
to incur indebtedness or its ability to consummate the transactions contemplated hereby or by the other Loan Documents.
6.12
Solvency
.
After giving effect to the consummation of the transactions evidenced by the Loan Documents, Borrower has capital sufficient to
carry on its respective business and transactions and all businesses and transactions in which it is about to engage and is solvent
and able to pay its respective debts as they mature; and Borrower owns Property having a value, both at fair valuation and at present
fair salable value, greater than the amount required to pay its respective debts.
6.13
Legal Requirements
.
Borrower is in compliance with all Legal Requirements applicable to it or its business, the violation of which might have a Material
Adverse Effect.
6.14
Environmental
Matters
. To the best of Borrower’s knowledge, the operations of Borrower are in compliance with all applicable Requirements
of Environmental Law. None of the Properties of Borrower require any Remedial Action. To the best of Borrower’s knowledge,
there is not now on or in the Properties of Borrower (a) any asbestos containing materials; (b) any underground or aboveground
storage tanks (except as disclosed to Lender by Borrower in writing and/or in an environmental assessment report ordered and received
by the Lender in connection with the Loan); or (c) any polychlorinated biphenyls (PCBs) used in hydraulic oils, electrical transformers
or other equipment. Borrower has not received, or is otherwise aware of, any notice or claim to the effect that Borrower is or
may be liable in any respect to any Person as a result of the release or threatened release of Hazardous Materials into the environment.
Neither Borrower, nor any of its past or present Properties or operations, are subject to any investigation, judicial or administrative
proceeding, order, judgment, decree, settlement or other agreement respecting (i) any Requirements of Environmental Law, (ii) any
Remedial Action, or (iii) any Environmental Claim or Environmental Liabilities arising from the release or threatened release of
Hazardous Materials into the environment.
6.15
Taxes
.
Each Borrower and Guarantor has filed (or has obtained a currently effective extension of time for the filing of) all federal and
all state, local and other tax returns and other reports which each is required by any Legal Requirement to file, and all taxes,
assessments, fees and other governmental charges thereupon and upon its Property, assets, income and franchises which are shown
in such returns or reports to be due and payable have been paid other than those taxes, fees, assessments and charges which are
being contested pursuant to
Section 4.3
hereof and such returns properly reflect the United States income, foreign taxes
and/or state taxes of Borrower for the periods covered thereby. Neither Borrower nor Guarantor has any knowledge of any proposed
tax assessment against Borrower that will have or is likely to have a Material Adverse Effect.
6.16
Use of Proceeds
.
Borrower’s uses of the proceeds of the Loan are and will continue to be, legal and proper corporate uses (duly authorized
by Borrower’s Board of Directors, partners or members or managers, as applicable) in connection with Borrower’s business
and are consistent with this Agreement, the Conditional Commitment, and all applicable Legal Requirements in effect from time to
time. None of the proceeds of the Loan will be disbursed to the owner(s), partners, stockholders or beneficiaries of Borrower or
any members of their families.
6.17
Security
Interests
. The Liens of Lender attaching to the Collateral will at all times constitute valid and enforceable first priority
Liens in favor of Lender, subject to no prior Lien except as noted in Exhibit “A” of this Agreement. Before any funding
under the Note, Borrower will have taken or will have participated with Lender in taking, all necessary action and make all necessary
filings to provide Lender with perfected, first priority Liens in the Collateral, except as noted in Exhibit “A” to
this Agreement, under the laws of all applicable jurisdictions. The Collateral is free from damage caused by fire or other casualty.
Borrower has good and marketable title to and enjoy peaceful and undisturbed possession of all of the Collateral.
6.18
Business
Loan
. The Loan evidenced by the Note is and shall be for business, commercial, investment or other similar purposes and not
primarily for personal, family, household or agricultural use, as such terms are used in the UCC.
6.19
Principal
Place of Business & Collateral
. Borrower’s principal place of business and chief executive office is 1010 Atlantic
Avenue, Alameda, California 94501.
6.20
Certificate
of Title
. No part of the Collateral is covered by a certificate of title or subject to any certificate of title law.
6.21
Commercial
Land
. The Commercial Land is all of the real estate owned by Borrower.
6.22
ADA Compliance
.
All of Borrower’s facilities that are accessible to the public must be in compliance with the Americans With Disabilities
Act (ADA) which became effective January 26, 1992, and all other Legal Requirements applicable to such facilities.
6.23
Commercial
Land and Improvements
. To Borrower’s knowledge, Borrower’s premises and Improvements located on the Commercial
Land, and the use thereof, complies with all Legal Requirements including, without limitation, all laws, ordinances, zoning, rules
and regulations of all Governmental Authorities having jurisdiction. Borrower will provide Lender with any notification of any
material non-compliance received by Borrower, and will immediately proceed to remedy the defect. Further, the improvements located
on the Commercial Land have an adequate and approved supply of all needed utilities including, without limitation, water, electrical
and sewer, and all such utilities are functional.
6.24
Intentionally
Omitted
.
6.25
No Leased
Equipment
. Except as previously disclosed to Lender, Borrower does not currently lease any equipment, machinery, or vehicles.
In the event any additional such property is leased in the future, Borrower will advise Lender in writing, and grant Lender a security
interest in Borrower’s rights under such lease(s), free and clear of all liens, rights, interests, and encumbrances, to the
extent such leased equipment, machines, or vehicles are material to Borrower’s business at the Property.
6.26
USDA Regulations
.
Borrower certifies that it has received a copy of the USDA Regulations.
6.27
No
Default on Federal Debt
. Borrower certifies that it is not delinquent, or otherwise in default, on debt owed to the United
States of America, or any agency or instrumentality thereof (including, without limitation, all tax debt), or any debt which is
guaranteed, in whole or in part, by the United States of America, or any agency or instrumentality thereof.
Article 7
Events of Default and Remedies
7.1
Events of
Default
. If any of the following events (each, an
“Event of Default”
) shall occur, then the Lender may do
any or all of the following without any notice to the Borrower (except as hereinafter expressly provided): (i) declare the Note
to be, and thereupon such Note shall forthwith become, immediately due and payable, together with all accrued interest thereon
and all fees and other amounts payable hereunder and under the other Loan Documents, without notice of any kind; (ii) exercise
its rights of offset against each account and all other Property of any Borrower or Guarantor in the possession of the Lender,
which right is hereby granted by Borrower and Guarantor to Lender; (iii) terminate Lender’s obligation to make any further
Advances under the Loan and (iv) exercise any and all other rights available to Lender under the Loan Documents, at law or in equity.
Borrower and Guarantor hereby knowingly, voluntarily, and expressly waive notice of any kind, including, without limitation, (i)
notice of acceleration, (ii) notice of intention to accelerate, (iii) presentment, (iv) demand, and (v) protest, except to the
extent set forth below:
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(a)
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Borrower fails to make any payment of principal of or interest on the Note, or any Borrower or
Guarantor fails to make any payment in respect of any other Obligation under any of the Loan Document as and when due, or within
five (5) days thereafter; or
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(b)
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Borrower or Guarantor fails to pay when due, any principal of, or interest on, any other Indebtedness
secured by any of the Collateral; or if the holder of such other Indebtedness declares, or may declare, such Indebtedness due prior
to its stated maturity because of Borrower’s or Guarantor’s default thereunder; or
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(c)
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Any representation or warranty made by any Borrower or Guarantor or other authorized representative
of Borrower in any of the Loan Documents, or in any certificate, financial statement or other written statement furnished to Lender
(including, without limitation, the Officer’s Statement) proves to have been incorrect, false or misleading in any material
respect when made; or
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(d)
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Any Borrower or Guarantor violates any covenant, agreement or condition or otherwise fails to perform
any obligation (other than the obligation to pay principal of, or interest on, the Note) contained in this Agreement or any of
the other Loan Documents; or
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(e)
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Final judgment for the payment of money is rendered against the any Borrower or Guarantor and the
same is not immediately paid or sufficiently bonded or escrowed; or
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(f)
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Borrower or any other Party claims, or any court finds or rules, that the Lender does not have
a valid Lien on any Collateral under any Security Document or that Lender’s Lien on any Collateral is not in the priority
required; or
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(g)
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Borrower or any other Party sells, encumbers, or abandons (except as otherwise expressly permitted
by the Loan Documents) any of the Property now or hereafter subject to any of the Security Documents; or any levy, seizure or attachment
is made on any material portion thereof or thereon and same is not dismissed within 30 days; or any material portion of such Property
is lost, stolen, substantially damaged or destroyed unless such loss, damage or destruction is in Lender’s reasonable judgment
adequately covered by insurance; or
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(h)
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Any Borrower or Guarantor makes a general assignment for the benefit of creditors or becomes insolvent
or fails generally to pay its debts as they become due, or petitions or applies to any Governmental Authority for the appointment
of a trustee, custodian, receiver, (or other similar official) of all or any substantial part of the assets of the any Borrower
or Guarantor, or commences a voluntary case or any other proceeding relating to any Borrower or Guarantor under any bankruptcy,
reorganization, compromise arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law (herein called
the “bankruptcy law”) of any jurisdiction; or
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(i)
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Any such petition or application is filed, or any such proceeding is commenced, against any Borrower
or Guarantor and the Borrower or Guarantor, as applicable, by any act or omission indicates its approval, consent, or acquiescence
thereto, or an order for relief is entered in an involuntary case under the federal bankruptcy laws as now or hereafter constituted,
or an order, judgment or decree is entered appointing any such trustee, custodian, receiver, liquidator, or similar official or
adjudicating any Borrower or Guarantor bankrupt or insolvent, or approving the petition in any such proceedings, and such order,
judgment, or decree remains in effect for 30 days; or
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(j)
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Any Borrower or Guarantor conceals, removes, or permits to be concealed or removed, any part of
its Property, with intent to hinder, delay or defraud its creditors or any of them, or makes or suffers a transfer of any of its
Property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or shall have made any transfer of
its Property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or
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(k)
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Any event shall occur or condition exist which results in a Material Adverse Effect; or
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(l)
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Any litigation commences which hinders or delays the collection of any part of the Obligations
or the exercise of any right or option of Lender under the Loan Documents; or
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(m)
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Dissolution, business failure, merger, or similar event, which has a Material Adverse Effect on
Borrower; or
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(n)
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Borrower uses the Loan proceeds or Collateral in any manner different from the manner contemplated
in the Loan Documents; or
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(o)
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Failure of any Borrower or Guarantor to comply with the terms of the Conditional Commitment or
any of the Loan Documents.
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Nothing contained in this Agreement
shall be construed to limit the events of default contained in any of the other Loan Documents or any other document executed in
connection with the Loan and all such events of default shall be cumulative.
Notwithstanding anything contained
in this Section 7.1 to the contrary, Lender shall give Borrower five (5) days written notice of an Event of Default under Section
7.1(a), above, and thirty (30) days written notice of any other Event of Default which is capable of being cured, and Borrower
shall have an opportunity to cure any such Event of Default within the applicable notice period. Provided, however, if an Event
of Default is of a nature that it cannot be reasonably cured within such thirty (30) day period and (i) Borrower has commenced
reasonable efforts to cure such default within such thirty (30) day period, and (ii) diligently pursues such cure efforts to completion,
the cure period shall be extended to sixty (60) days from the original notification. The notice and cure period specified herein
will begin to run on the date said notice is deemed received by Borrower under Section 8.2 of this Agreement. However, Borrower
shall not be entitled to more than two (2) such notices of an Event of Default and opportunities to cure within any twelve (12)
month time period.
7.2
Other Remedies
.
In addition to and cumulative of any rights or remedies provided for in
Section 7.1
hereof, if any one or more Events of
Default shall have occurred, the Lender may proceed to protect and enforce its rights hereunder, by any appropriate proceedings,
and the Liens evidenced by the Security Documents shall be subject to foreclosure in any manner provided for therein or provided
for by law as the Lender may elect. The Lender may also proceed either by the specific performance of any covenant or agreement
contained in this Agreement or the other Loan Documents or to enforce the payment of the Note or to enforce any other legal or
equitable right provided under this Agreement or the other Loan Documents, or otherwise existing under any law in favor of the
holders of Indebtedness of the Borrower.
Article 8
Miscellaneous
8.1
Not an Agent
.
Nothing contained herein shall be construed to constitute Borrower as Lender’s agent for any purpose whatsoever and Lender
shall not be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever
same may be located and regardless of the cause thereof. Lender does not, by anything herein or in any assignment or otherwise,
assume any of Borrower’s obligations under any contract or agreement assigned to Lender and Lender shall not be responsible
in any way for the performance by Borrower of any of the terms and conditions hereof.
8.2
Notices
.
Any notice or other communications provided for in this Agreement, or in any of the other Loan Documents, shall be in writing and
shall be given to the party to whom addressed at the address specified adjacent to their signature on the signature page(s) of
this Agreement, or any such other address as such party shall request in a written notice made in compliance herewith. Except as
otherwise provided herein, any notice required or permitted hereunder or under applicable law shall be in writing and shall be
deemed effective if either (1) hand delivered, (2) sent by certified mail, return receipt requested, postage prepaid, or (3) sent
by overnight courier. All notices sent by U.S. mail must be addressed as required above and shall be deemed received on the earlier
of (i) the third Business Day immediately following the date of deposit in the U.S. mail or (ii) the date of actual receipt. All
notices which are hand delivered or sent by overnight courier shall be deemed received on the day of delivery to the address required
above. The address for notice may be changed by any party by giving notice as provided above.
8.3
Waiver; Remedies
Cumulative
. No failure to exercise and no delay in exercising on the part of Lender of any right, power or privilege under
any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege
under any Loan Document preclude any other right, power or privilege. The rights and remedies provided in the Loan Documents are
cumulative of, and not exclusive of, any rights or remedies provided by law, in equity, or in any other agreement or Loan Document,
all of which Lender may pursue at any time and from time to time.
8.4
Assignment
.
This Agreement shall be binding upon Borrower, Guarantor, and Lender and their respective successors and permitted assigns; provided,
however, neither Borrower nor Guarantor may not assign or transfer any of their rights or obligations hereunder without the prior
written consent of Lender, and any such assignment or transfer without such consent shall be null and void. Borrower and Guarantor
acknowledge and agree that Lender may sell one or more participations or assign its interest in all or any part of the Loan to
others.
8.5
Severability
.
If a court of competent jurisdiction finds any provision of this Agreement, the Note, or any other Loan Document to be invalid
or unenforceable as to any Person or circumstance, such finding shall not render that provision invalid or unenforceable as to
any other Person or circumstance. If feasible, any such unenforceable or invalid provision shall be deemed to be modified to be
within the limits of enforceability or validity; however, if such provision cannot be so modified, it shall be stricken and all
of the remaining provisions of the Loan Documents in all other respects shall remain valid and enforceable and in no way affected
thereby.
8.6
Expenses,
Etc.
Borrower shall pay or reimburse Lender on demand: (a) the reasonable fees and expenses of legal counsel to Lender, in
connection with the preparation, negotiation, execution and delivery of this Agreement (including the
Exhibits
and schedules
hereto), and the other Loan Documents and the making of the Loan, and any modification, supplement or waiver of any of the terms
of this Agreement, or any other Loan Document; (b) reasonable out-of-pocket expenses incurred by Lender in connection with the
preparation, documentation and administration of the Loan or any of the Loan Documents; and (c) all amounts expended, advanced
or incurred by Lender to satisfy any obligation of Borrower or any Party under this Agreement or any other Loan Document to collect
the Obligations or to enforce, protect, preserve or defend the rights of Lender under this Agreement or any other Loan Document,
including, without limitation, fees and expenses incurred in connection with Lender’s participation as a member of a creditor’s
committee in a case commenced under the Bankruptcy Code or other similar law, fees and expenses incurred in connection with lifting
the automatic stay prescribed in Section 362 of the Bankruptcy Code, fees and expenses incurred in connection with any action pursuant
to Section 1129 of the Bankruptcy Code and all other customary out-of-pocket expenses incurred by Lender in connection with such
matters, together with interest thereon at the Maximum Rate on each such amount until the date of reimbursement to Lender.
8.7
Indemnification
.
Borrower and Guarantor shall indemnify the Lender and its directors, officers, attorneys, employees and agents from, and hold each
of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject,
REGARDLESS
OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY INDEMNIFIED PARTIES,
insofar as such losses, liabilities, claims
or damages arise out of or result from any (i) actual or proposed use by Borrower of the proceeds of any extension of credit by
Lender hereunder; (ii) breach by any Borrower or Guarantor of this Agreement or any other Loan Document or the breach by any Party
(except Lender) of any Loan Document; (iii) violation by any Borrower or Guarantor of any Legal Requirement; (iv) investigation,
litigation or other proceeding relating to any of the foregoing, and Borrower and Guarantor shall reimburse Lender and its directors,
officers, attorneys, employees and agents, upon demand for any expenses (including reasonable legal fees) incurred in connection
with any such investigation or proceeding; or (v) taxes (excluding income taxes and franchise taxes) payable or ruled payable by
any Governmental Authority in respect of the Obligations or any Loan Document, together with interest and penalties, if any.
8.8
Amendments,
Etc.
No amendment or modification of this Agreement, the Note or any other Loan Document shall in any event be effective against
any Party unless the same shall be agreed or consented to in writing by such Party. No amendment, modification or waiver of any
provision of this Agreement, the Note or any other Loan Document, nor any consent to any departure by Borrower or Guarantor therefrom,
shall in any event be effective against the Lender unless the same shall be agreed or consented to in writing by Lender, and each
such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
8.9
Limitation
of Interest
. Borrower and Lender intend to comply with the applicable law governing the Maximum Rate. Interest contracted for,
charged, or received shall not exceed the Maximum Rate, and, if in any contingency whatsoever, Lender shall receive anything of
value deemed interest under applicable law which would cause the interest contracted for, charged, or received by the holder thereof
to exceed the maximum amount of interest permissible under applicable law, the excessive interest shall be applied to the reduction
of the unpaid principal balance hereof and not to the payment of interest, or if such excessive interest exceeds the unpaid principal
balance hereof such excess shall be refunded to Borrower, and the provisions of this Note and any demand on Borrower shall immediately
be deemed reformed and the amounts thereafter collectible hereunder shall be reduced, without the necessity of the execution of
any new documents, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called
for hereunder. All interest paid or agreed to be paid to the holder hereof shall, to the extent permitted by applicable law, shall
be amortized, prorated, allocated, and spread throughout the full term of such indebtedness until payment in full (including the
period of any renewal or extension hereof) so that the rate or amount of interest on account of such indebtedness does not exceed
the Maximum Rate.
8.10
Survival
.
The obligations of Borrower and Guarantor under each Loan Document to which each is a party shall survive the repayment of the
Loan.
8.11
Captions
.
Captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
8.12
Counterparts
.
This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement
and any of the parties hereto may execute this Agreement by signing any such counterpart.
8.13
Governing
Law
. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas and the laws of the
United States applicable to transactions within the State of Texas.
8.14
Venue
.
Borrower hereby irrevocably (a) agrees that any legal proceeding against Lender arising out of or in connection with the Loan Documents
shall be brought in the district courts of Harris County, Texas, or in the United States District Court for the Southern District
of Texas, or elsewhere (collectively, the “
Courts
”); (b) submits to the nonexclusive jurisdiction of
the Courts; (c) agrees and consents that service of process may be made upon it in any proceeding arising out of the Loan Documents
or any transaction contemplated thereby by service of process as provided by Texas law; (d) WAIVES, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of
any Loan Document or the transactions contemplated thereby in the Courts; and (e) WAIVES any claim that any such suit, action or
proceeding in any Court has been brought in an inconvenient forum. Nothing herein shall affect the right of Lender to commence
legal proceedings or otherwise proceed against Borrower in any jurisdiction or to serve process in any manner permitted by applicable
law. Borrower agrees that a final and nonappealable judgment in any such action or proceeding may be enforced in other jurisdictions
in any manner provided by law.
8.15
Conflicts
Between This Agreement and the Other Loan Documents
. In the event of any irreconcilable conflict between the terms of this
Agreement and the terms of any of the other Loan Documents, Lender will have the right, in its sole discretion, to determine which
of the conflicting provisions control, and such determination will be final.
8.16
Release
of Certificate of Deposit
. The Assignment of CD will be released as collateral for the Loan subject to (a) Borrower achieving
three (3) consecutive months of positive cash flow, as determined by Lender, and (b) there being no Event of Default.
8.17
Construction
Rider
. The Construction Rider to Loan Agreement, attached hereto as Exhibit “E”, is incorporated by reference
herein and forms a part of this Agreement.
8.18
No
Oral Agreements
.
THIS AGREEMENT AND ALL OTHER DOCUMENTS RELATING TO THE LOAN CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENT BETWEEN THE PARTIES
8.19.
Waivers
.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND GUARANTOR HEREBY JOINTLY, SEVERALLY
AND UNCONDITIONALLY WAIVE (A) ALL RIGHTS, REMEDIES, CLAIMS AND DEFENSES BASED UPON OR RELATED TO SECTIONS 51.003, 51.004, AND
51.005 (AS MAY BE AMENDED) OF THE TEXAS PROPERTY CODE (TO THE EXTENT DEEMED APPLICABLE TO THIS TRANSACTION); AND (B) ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM THAT RELATES TO OR ARISES OUT OF ANY OF THE LOAN DOCUMENTS OR
THE ACTS OR FAILURE TO ACT OF OR BY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF ANY OF THE LOAN DOCUMENTS.
TO
THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH GUARANTOR KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY WAIVES THE BENEFITS AND
PROTECTIONS AFFORDED BY SECTION 107.095 OF THE NEVADA REVISED STATUTES INCLUDING, WITHOUT LIMITATION, ALL REQUIRED NOTICES THEREUNDER
(TO THE EXTENT DEEMED APPLICABLE TO THIS TRANSACTION).
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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LENDER:
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Green Bank, N.A.
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By:
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[signature
illegible]
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Name:
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Title:
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Address for Notice:
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Attn:
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4000 Greenbriar
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Houston, Texas 77098
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BORROWER:
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AQUA METALS RENO, INC, a Delaware corporation
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By:
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/s/ Thomas Murphy
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Thomas Murphy
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Chief Financial Officer
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Address for Notice:
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Attn: Thomas Murphy
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1010 Atlantic Avenue
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Oakland, California 94501-1147
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GUARANTOR:
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AQUA METALS OPERATIONS, INC., a Delaware corporation
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By:
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/s/ Thomas Murphy
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Thomas Murphy
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Chief Financial Officer
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Address for Notice:
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Attn: Thomas Murphy
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1010 Atlantic Avenue
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Oakland, California 94501-1147
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AQUA METALS, INC., a Delaware corporation
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By:
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/s/ Thomas Murphy
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Thomas Murphy
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Chief Financial Officer
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Address for Notice:
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Attn: Thomas Murphy
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1010 Atlantic Avenue
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Oakland, California 94501-1147
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STATE OF NEVADA
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§
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§
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COUNTY OF STOREY
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§
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BEFORE
ME, the undersigned, a Notary Public in and for the said County and State, on this day personally appeared Thomas Murphy, Chief
Financial Officer of
AQUA METALS RENO, INC.,
a Delaware corporation, known to me to be the person whose name is subscribed
to the foregoing document and acknowledged to me that he executed the same in the capacity therein stated and for the purposes
and consideration therein expressed.
GIVEN
UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of __________________________, 2015.
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NOTARY PUBLIC,
State of Nevada
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STATE OF NEVADA
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§
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§
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COUNTY OF STOREY
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§
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BEFORE
ME, the undersigned, a Notary Public in and for the said County and State, on this day personally appeared Thomas Murphy, Chief
Financial Officer of
AQUA METALS, INC.,
a Delaware corporation, known to me to be the person whose name is subscribed to
the foregoing document and acknowledged to me that he executed the same in the capacity therein stated and for the purposes and
consideration therein expressed.
GIVEN
UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of __________________________, 2015.
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NOTARY PUBLIC,
State of Nevada
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STATE OF NEVADA
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§
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§
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COUNTY OF STOREY
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§
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BEFORE
ME, the undersigned, a Notary Public in and for the said County and State, on this day personally appeared Thomas Murphy, Chief
Financial Officer of
AQUA METALS OPERATIONS, INC.,
a Delaware corporation, known to me to be the person whose name is subscribed
to the foregoing document and acknowledged to me that he executed the same in the capacity therein stated and for the purposes
and consideration therein expressed.
GIVEN
UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of __________________________, 2015.
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NOTARY PUBLIC,
State of Nevada
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EXHIBIT
A
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A.
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First
Deed of Trust lien in and on the Commercial Land and Improvements.
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B.
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A
first and prior assignment of all leases, rents, and revenue in any way relating to the
Commercial Land and Improvements.
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C.
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A
first and prior lien and security interest in the following personal property of Borrower,
wherever located, and whether now owned or hereafter acquired or arising, including Proceeds
and Supporting Obligations (Any term relating to a Collateral definition used below,
shall have the meaning accorded thereto in the UCC):
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1.
Accounts
;
and
2.
Goods
,
including Equipment, Fixtures, Inventory, and Accessions.
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D.
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Collateral
assignment of a $1,000,000.00 certificate of deposit to be held and controlled by Lender,
subject to Section 8.16 of this Agreement.
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E.
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A
first and prior lien and security interest in the Loan Proceeds Account, held and controlled
by Lender.
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F.
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A
first and prior lien and security interest in the Borrower’s Equity Account, held
and controlled by Lender.
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EXHIBIT
“A-1”
Commercial
Land
EXHIBIT
“B”
[Attach
copy of Note]
EXHIBIT
“C”
[ATTACH
COPY OF CONDITIONAL COMMITMENT]
EXHIBIT
“D”
OFFICER’S
STATEMENT
This
Officer’s Statement is made by Thomas Murphy, Chief Financial Officer of AQUA METALS RENO, INC., a Delaware corporation
(the “Borrower”) and the Borrower itself, to induce GREEN BANK (“Lender”) to extend credit to the Borrower.
All capitalized terms herein and not otherwise defined shall have the meanings assigned to them in the Agreement to which this
is attached. This Statement is being provided with the understanding that the individual executing this Statement shall have no
personal liability in any manner whatsoever herein or otherwise related to the transactions contemplated hereby.
The
following statements are true and correct to the best of the undersigned’s knowledge, information, and belief:
Thomas
Murphy is the Chief Financial Officer of the Borrower. Borrower is a corporation duly organized under the la, validly existing
and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority, corporate
or otherwise, necessary in order for it to conduct its business and own its Property(ies). Borrower is in good standing under
the laws of all other jurisdictions in which qualification is necessary in order for it to conduct its business and own its Property(ies)
as conducted and owned in such jurisdictions. Without limiting the generality of the foregoing, Borrower has all requisite power
and authority, corporate or otherwise, necessary in order for it to conduct its business and own its Property(ies) in the State
of Nevada.
The
financial statement of Borrower dated September 30, 2015, previously delivered to Lender, fairly present the financial condition
of the Borrower as of such dates and the results of the operations of Borrower for the periods ended on such dates all in accordance
with GAAP, and since the dates of such financial statements, no event has occurred which has had or is likely to have a Material
Adverse Effect.
The
execution, delivery and performance of the Loan Documents to which Borrower is a party are within its company powers and have
been duly authorized by all necessary company action of Borrower. Neither execution nor delivery of any Loan Documents, nor the
fulfillment of or compliance with its terms, will contravene or violate (i) Borrower’s Organizational Documents, (ii) any
Legal Requirement binding on or affecting Borrower, or (iii) any mortgage, indenture, contract, agreement or other instrument,
or any judgment, order or decree binding upon Borrower. No authorization or approval or other action by, and no notice to or filing
with, any franchisor, licensor, distributor, Governmental Authority, regulatory body, or other Person is required for the due
execution, delivery and/or performance by Borrower of the Loan Documents to which it is a party. The Loan Documents to which it
is a party have been duly executed and delivered and are legal, valid and binding obligations of Borrower, enforceable against
Borrower in accordance with their respective terms.
Borrower
has not received notice nor does Borrower have any actual knowledge that (i) it is in default in the performance, observance or
fulfillment of any of the obligations, covenants, requirements, or conditions contained in any permit, license, or contract applicable
to it, or (ii) any condition exists which, with the giving of notice or the lapse of time or both, would constitute such a default
under such any such permit, license, or contract, in each case, except where such default or defaults, if any, will not have or
is not likely to have a Material Adverse Effect.
Currently,
there is no pending or, to the knowledge of Borrower, threatened action or proceeding affecting Borrower before any court (or
other Governmental Authority) or arbitrator, which has had or is likely to have a Material Adverse Effect, or would subject Borrower
to any liability not fully covered by insurance, or would be required to be disclosed in the notes to any financial statements
of Borrower prepared in accordance with GAAP.
Borrower
possesses adequate assets, licenses, permits, patents, patent applications, copyrights, trademarks, trademark applications, trade
names, technology, processes, and franchise and distribution rights to continue to conduct its business as heretofore conducted
by it, and as contemplated by the Loan to be conducted on the Commercial Land. Borrower has and will continue to have good and
indefeasible title to its Property, free and clear of all Liens other than as permitted by Section 5.3 of the Agreement. No Liens
exist as of the Closing Date upon or with respect to any Property of Borrower other than (a) Liens permitted under Section 5.3
of the Agreement, and (b) Liens to be released on the Closing Date.
Except
for trade payables arising, and endorsements of negotiable instruments for collection, in each case, in the ordinary course of
its business, Borrower will not have, as of the Closing Date, (i) any obligation or liability (including, without limitation,
contingent liabilities) which would have a Material Adverse Effect, (ii) any Indebtedness for borrowed money other than the debt
evidenced by the Note, or (iii) any obligation to guarantee the obligation(s) of any other Person.
Borrower
is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning
of Regulations G, U or X issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Loan will be
used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin
stock or for any purpose which would be inconsistent with the provisions of Regulations G, U or X.
The
outstanding membership interests of Borrower are duly authorized, validly issued, fully paid and nonassessable. One hundred percent
(100%) of the outstanding equity interests in Borrower are owned by a corporation duly formed under the laws of the State of Delaware.
The
representations and warranties of Borrower contained in the Loan Documents, and all certificates and other documents delivered
to Lender pursuant to the terms thereof do not contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made,
not misleading. Borrower has not intentionally withheld any material fact from Lender in regard to any matter.
Borrower
is not subject to any regulation or other Legal Requirements which limit the ability of Borrower to incur indebtedness or its
ability to consummate the transactions contemplated by the Agreement or by the other Loan Documents.
After
giving effect to the consummation of the transactions evidenced by the Loan Documents, Borrower has capital sufficient to carry
on its business and transactions and all businesses and transactions in which it is about to engage and is solvent and able to
pay its debts as they mature; and Borrower owns Property having a value, both at fair valuation and at present fair salable value,
greater than the amount required to pay its respective debts.
Borrower
is in compliance with all Legal Requirements applicable to it and its business, the violation of which would possibly have a Material
Adverse Effect.
The
operations of Borrower are in compliance with all applicable Requirements of Environmental Law. No Property of Borrower requires
any Remedial Action. To the best of my knowledge, there is not now on or in any Property of Borrower (a) any asbestos containing
materials; (b) any underground or aboveground storage tanks; (c) any polychlorinated biphenyls (PCBs) used in hydraulic oils,
electrical transformers or other equipment; or any other Hazardous Materials. Borrower has not received, or is otherwise aware
of, any notice or claim to the effect that Borrower is or may be liable in any respect to any Person as a result of the release
or threatened release of Hazardous Materials into the environment. Neither Borrower, nor any of its past or present Property(ies)
or operations, are subject to any investigation, judicial or administrative proceeding, order, judgment, decree, settlement or
other agreement respecting (i) any Requirements of Environmental Law, (ii) any Remedial Action, or (iii) any Environmental Claim
or Environmental Liabilities arising from the release or threatened release of Hazardous Materials into the environment.
Borrower
has filed (or has obtained a currently effective extension of time for the filing of) all federal and all state, local and other
tax returns and other reports which each is required by any Legal Requirement to file, and all taxes, assessments, fees and other
governmental charges thereupon and upon their respective Property, assets, income and franchises which are shown in such returns
or reports to be due and payable have been paid other than those taxes, fees, assessments and charges which are being contested
pursuant to Section 4.3 of the Agreement and such returns properly reflect the United States income, foreign taxes and/or state
taxes of Borrower for the periods covered thereby. Borrower does not have any knowledge of any proposed tax assessment against
Borrower that will have or is likely to have a Material Adverse Effect.
Borrower’s
uses of the proceeds of the Loan are and will continue to be, legal and proper company uses (duly authorized by Borrower’s
Directors and shareholders, as applicable, and are consistent with the Agreement and all applicable Legal Requirements in effect
from time to time.
The
Liens of Lender attaching to the Collateral will at all times constitute valid and enforceable first priority Liens in favor of
Lender, subject to no prior Lien, unless otherwise noted in Exhibit “A” of the Agreement. Before any funding under
the Note, Borrower will have taken or will have participated with Lender in taking, all necessary action and make all necessary
filings to provide Lender with perfected, first priority Liens in the Collateral (unless a lesser priority Lien is noted in Exhibit
“A” to the Agreement), under the laws of all applicable jurisdictions.
The
Loan is and shall be for business, commercial, investment or other similar purposes and not primarily for personal, family, household
or agricultural use, as such terms are used in the UCC.
Borrower’s
chief executive office is 1010 Atlantic Avenue, Oakland, California 94501-1147 (“Office Address”), and its principal
place of business is (or will be, upon completion of construction of the 125,000 square foot industrial building on the Commercial
Land) 2500 Peru Drive, McCarran Nevada 89434, which is the address of the Commercial Land. The personal property Collateral is
located at the Office Address and/or on the Commercial Land.
Borrower
has performed or complied with all of its covenants and agreements required under the Loan Documents.
No
Event of Default has occurred.
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Thomas Murphy,
Chief Financial Officer
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AQUA
METALS RENO, INC, a Delaware corporation
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By:
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Thomas
Murphy, Chief Financial Officer
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EXHIBIT
“E”
CONSTRUCTION
RIDER TO LOAN AGREEMENT
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Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
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Page
45
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EXHIBIT
“E”
CONSTRUCTION
RIDER TO LOAN AGREEMENT
This
Construction Rider To Loan Agreement (this “Construction Rider”) is made and entered as of the Closing Date, by and
among Lender and Borrower, with the approval of Guarantor, and shall be a part of the Loan Agreement (the “Agreement”)
to which this is attached. In the event the terms and provisions of this Construction Rider are in conflict with the terms and
provisions of any of the other Loan Documents, the terms and provisions of this Construction Rider will control. However, the
terms, conditions, requirements, and agreements contained herein are intended to be in addition to, and not a replacement of,
the terms, conditions, requirements, and agreements contained in the other Loan Documents.
ARTICLE
CR-I
DEFINITIONS
AND USE OF TERMS
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CR-1.1
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Definitions.
Unless a particular term, word or phrase is otherwise defined or the context otherwise
requires, capitalized terms, words and phrases used herein have the meanings set forth
in Article 1 of the Agreement:
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“
Affidavit
of Borrower
”
means a sworn affidavit of Borrower (and such other parties as Lender may require) to the effect that
all statements, invoices, bills, and other expenses incident to the acquisition of any Commercial Land, if applicable, and/or
the construction of the Improvements incurred to a specified date, whether or not specified in the Approved Budget, have been
paid in full, except for (a) Retainage, and (b) items to be paid from the proceeds of an Advance then being requested or in another
manner satisfactory to Lender.
“
Application
for Advance
”
means a written application by Borrower (and such other parties as Lender may require) to Lender, in
Proper Form, specifying by name, current address, and amount all parties to whom Borrower is obligated for labor, materials, or
services supplied for the construction of the Improvements and all other expenses incident to the Loan, the Commercial Land, and
the construction of the Improvements, whether or not specified in the Approved Budget, requesting an Advance for the payment of
such items, containing, if requested by Lender, an Affidavit of Borrower, accompanied by such schedules, affidavits, releases
waivers, statements, invoices, bills, and other documents as Lender may request. Unless the Lender specifies a different form,
the Application for Advance will be AIA Document G702 and G703.
“
Approved
Budget
”
means a budget and cost itemization prepared by Borrower, in Proper Form, and approved in writing by Lender,
specifying the cost by item of (a) acquisition of the Commercial Land (if applicable); (b) all labor, materials, and services
necessary for the construction of the Improvements in accordance with the Plans and all Legal Requirements; and (c) all other
expenses anticipated by Borrower incident to the Loan, the Commercial Land, and the construction of the Improvements.
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Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
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Page
46
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“
Architect
”
means the architect who prepared the Plans.
“
Architectural
Contract
”
means a written agreement, in Proper Form, between Borrower and Architect, if any, for architectural services
pertaining to construction of the Improvements.
“
Completion
Date
”
means the date of substantial completion set forth in the Construction Contract. If the date of substantial
completion cannot be determined by reviewing the Construction Contract, the Completion Date will be thirty (30) days prior to
the date on which the first principal and interest payment is due on the Loan, as set forth in the Note.
“
Construction
Contract
”
means each agreement, in Proper Form, made by and between Borrower and Contractor for construction of
the Improvements.
“
Contractor
”
means each Person with whom Borrower makes a Construction Contract.
“
Contractor’s
Agreement
”
means a written agreement, in Proper Form, duly executed by Contractor in favor of Lender (a) consenting
to the assignment and encumbrance of the Construction Contract; (b) agreeing to continue performance under the Construction Contract
at the request and for the benefit of Lender or its designee; (c) subordinating all liens, security interests and claims of Contractor
against the Commercial Land and Borrower, to those of Lender under the Loan Documents; and (d) respecting such other matters as
Lender may require.
“
Fees
”means
all fees, costs, and expenses due in connection with the Loan including, without limitation, all fees, costs, and expenses generally
described in
Exhibit “1”
hereto.
“
Improvements
”
,
as used in this Construction Rider, means the improvements to be constructed, installed, equipped and/or altered on the Commercial
Land, as generally described in the Conditional Commitment, and more specifically described in the Construction Contract, Plans,
and Approved Budget. The Improvements are generally described as follows: Construction of a 125,000 square foot industrial building
per the plans and specifications approved by Lender.
“
Inspecting
Architect/Engineer
”
means any architect, engineer, or other qualified professional (as determined by Lender), if
any, retained or directed by Lender from time to time to inspect all or any portion of the Commercial Land and Improvements.
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Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
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Page
47
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“
Plans
”
means the final working drawings and specifications for the construction of the Improvements (including soil reports and engineering
calculations) and as modified or supplemented from time to time, which Plans must be approved in writing by (a) Lender, (b) Borrower,
(c) Inspecting Architect/Engineer, (d) any lessee of the Commercial Land, if applicable, (d) any architectural review committee,
owner’s association, or other Person, if required, and, (e) to the extent necessary, by each Governmental Authority.
“
Required
Insurance
”
– The definition of “Required Insurance” in Article 1 of the Agreement is hereby revised
to also include (a) contractor’s policies of comprehensive general public liability insurance, including worker’s
compensation insurance; (b) hazard insurance against all risks of loss, including collapse, in an amount not less than the full
replacement cost of all Improvements, including the cost of debris removal, with annual agreed amount endorsement and sufficient
at all times to prevent Borrower from becoming a co-insurer, (c) such insurance prior to completion of the Improvements to be
in builder’s risk form on a non-reporting basis, (d) coverage for all materials and equipment, wherever located, intended
to be installed in or utilized in the construction of the Improvements, and (e) any other type of insurance Lender may require,
all in Proper Form.
“
Retainage
”
means the amount withheld from any approved Advance. The amount of any Retainage will typically be a percentage of the approved
Advance, as determined by the Construction Contract or otherwise required by Lender.
ARTICLE
CR-II
ADVANCES
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CR-2.1
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Procedure
for Construction Advances
.
Lender shall not be required to make Advances more
frequently than monthly. Each Application for Advance shall be submitted by Borrower
to Lender at least ten (10) Business Days prior to the requested date (which must be
a Business Day) of the Advance. Except as Lender may otherwise determine from time to
time, each Advance will be made at Lender’s principal office. All progress payments
will be made in accordance with the procedures provided by Lender and the Inspecting
Architect/Engineer, if any.
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CR-2.2
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Amount
of Advances
.
Advances for construction of the Improvements shall be made only
for costs and expenses specified in the Approved Budget, and then only for work performed,
services rendered, or materials furnished; invoices for same must be provided to Lender.
Advances shall be based upon the percent of completion of the Improvements, and shall
not exceed the aggregate of:
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(a)
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the
costs of labor, materials, and services incorporated into the Improvements in a manner
acceptable to Lender,
plus
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Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
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Page
48
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(b)
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if
approved by Lender, the purchase price of all uninstalled materials to be utilized in
the construction of the Improvements, which materials must be stored on the Commercial
Land, or elsewhere with the written consent of, and in a manner acceptable to, Lender,
less
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(c)
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the
Retainage applicable to such Advance, and
less
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(d)
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all
prior Advances for payment of costs of labor, materials, and services for the construction
of the Improvements, and the Retainage relating thereto.
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CR-2.3
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Conditions
to the Initial Construction Advance
.
In addition to the conditions set forth
in the Agreement as to Advances, as a condition precedent to the initial Advance for
labor, materials, or construction services (whether or not it is the initial Advance),
Borrower and each Contractor shall have jointly executed and recorded with the county
clerk of the county in which the Commercial Land is situated, an affidavit or notice
of commencement of work, in Proper Form (if required by applicable law). Borrower’s
acceptance of the initial Advance for labor, materials, or construction services shall
constitute a representation by Borrower that an affidavit/notice of commencement has
been properly recorded as required or permitted by applicable law, if at all. In addition
to the requirements above, as a condition precedent to the initial Advance for labor,
materials, or construction services (whether or not it is the initial Advance), Borrower
must satisfy the conditions required herein, pay to Lender, in cash, all Fees, and execute
and deliver to, procure for and deposit with, Lender, and if appropriate, record in the
proper records, the documents, certificates, and other items referred to in Exhibit “1”,
hereto, in Proper Form, together with such other documents, certificates and items as
Lender may require from time to time.
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CR-2.4
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Conditions
to Each Construction Advance
.
In addition to the matters set forth in the Agreement,
as conditions precedent to each Advance relating to the construction of the Improvements,
including the initial Advance, and in addition to the Conditions to the Initial Construction
Advance, set forth above, each of the following requirements must be satisfied and evidence
of such satisfaction, in Proper Form, delivered to Lender:
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(a)
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The
Title Insurance shall be endorsed and extended, if required by Lender, to cover each
Advance with no additional title exceptions objectionable to Lender.
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(b)
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Borrower
shall procure and deliver to Lender, if required by Lender, releases or waivers of mechanic’s
liens and receipted bills showing payment of all amounts due to all parties who have
furnished materials or services or performed labor of any kind in connection with the
construction of any of the Improvements or otherwise with respect to the Commercial Land.
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Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
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Page
49
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(c)
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An
inspection of and acceptable report on the Improvements by the Inspecting Architect/Engineer,
if required by Lender.
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(d)
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If
the work to be performed under the Construction Contract is for a new structure or an
addition to an existing structure, a batter-board/form survey, if required by Lender,
shall have been furnished to Lender for review and approval prior to the pouring of each
foundation of the Improvements showing no encroachment of the Improvements on any boundary
line, easement, building set back line, or other restricted area.
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(e)
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The
amount of the requested Advance shall not be in excess of the amount then available under
the Loan and/or Escrow, excluding Retainage.
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(f)
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No
material changes in the approved Plans will be or have been ordered or permitted without
the prior written consent of the Lender and the surety company issuing the surety bond,
if any.
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(g)
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Borrower
shall procure and deliver to Lender, if required by Lender, agreements from the Architect,
Contractor, subcontractors, and all other persons furnishing labor, materials or services
in connection with the design and/or construction of the Improvements, releasing or waiving
any lien, claim, charge, or right they may have against Borrower, the Commercial Land,
and/or the Improvements, and/or subordinating any such lien, claim, charge, or right
to the lien of the Deed of Trust and the rights of Lender thereunder.
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CR-2.5
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Final
Advance
.
Without limitation of other conditions applicable thereto, the final
Advance, including all Retainage, will not be made until Lender has received all of the
following, in Proper Form:
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(a)
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A
completion certificate from the Contractor and from any Inspecting Architect/Engineer,
all in Proper Form.
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1)
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Evidence
satisfactory to Lender that all Legal Requirements, and all requirements of any restrictive
covenants or other matter affecting the Commercial Land have been satisfied, including,
but not limited to, delivery to Lender of final/permanent certificates of occupancy permitting
the Improvements to be legally occupied.
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(b)
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Evidence
that no mechanic’s or materialmen’s liens or other encumbrances have been
filed and remain in effect against the Commercial Land.
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(c)
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Final
lien releases or waivers by Contractor, Architect (if any), subcontractors, materialmen
and all other parties who have supplied labor, materials or services relating to the
Improvements, or who otherwise might be entitled to claim any type or kind of Lien against
the Commercial Land.
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Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
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Page
50
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(d)
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An
“as-built” Survey showing, at a minimum, that the Improvements as completed
do not encroach on any boundary line, easement, building set back line, or other restricted
area.
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(e)
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In
addition, the final Advance hereunder, including Retainage, shall, at Lender’s
option, be withheld until thirty (30) days (or such other period of time within which
parties who have supplied labor, materials or services relating to the Improvements are
permitted to file a claim of Lien against the Commercial Land) after (i) the “completion”
of the Improvements (as determined by Lender and the Inspecting Architect/Engineer, if
any), (ii) a notice of completion has been recorded in the real property records of the
county in which the Commercial Land is located, if required by applicable law, and (iii)
possession of the Improvements shall be delivered to Borrower after final/permanent certificate
of occupancy has been issued, and written punch list has been developed, agreed to, and
signed and dated by the Borrower and Contractor.
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CR-2.6
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Approved
Budget Allocations
.
Lender shall not be obligated to make an Advance relating
to an item allocated in the Approved Budget to the extent that the amount of the Advance
relating to such item, when added to the amount of prior Advance relating to such item,
would exceed the amount allocated to such item in the Approved Budget. Lender reserves
the right to make Advances which are allocated to any of the items in the Approved Budget
for such other items therein or in such different proportions as Lender may, in its sole
discretion, deem necessary or advisable. Borrower may not reallocate items of cost in,
or change, the Approved Budget without the prior written consent of Lender.
|
ARTICLE
CR-III
REPRESENTATIONS
AND WARRANTIES OF BORROWER
Borrower
hereby represents and warrants as follows:
|
|
CR-3.1
|
Intentionally
Deleted
.
|
|
|
CR-3.2
|
System
Compliance
.
To the best of Borrower’s knowledge, the storm and sanitary
sewer system, water system, all mechanical systems of the Commercial Land and other parts
of the Improvements do (or when constructed will) comply with all Legal Requirements
including, without limitation, applicable environmental, pollution control and ecological
laws, ordinances, rules and regulations, and Borrower has been issued all necessary permits,
licenses or other authorizations for the construction, occupancy, operation, and use
of the Improvements.
|
|
|
CR-3.3
|
Submittals
.
The Loan Documents and all Financial Statements, Plans, budgets, schedules, opinions,
certificates, confirmations, Contractor’s statements, application, rent rolls,
affidavits, agreements, Construction Contract, Architectural Contract, and other materials
submitted to the Lender in connection with or in furtherance of the Loan by or on behalf
of the Borrower or any Guarantor fully and fairly state the matters with which they purport
to deal, and neither misstate any material fact, nor, separately or in the aggregate,
fail to state any material fact necessary to make the statements made not misleading.
|
|
Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
|
Page
51
|
|
|
CR-3.4
|
Utility
Availability
.
To the best of Borrower’s knowledge, subject only to payment
of fees to be paid from the Approved Budget, all utility and municipal services required
for the construction, occupancy and operation of the Improvements, including but not
limited to, water supply, storm and sanitary sewer systems, gas electric and telephone
facilities, are available for use and tap-on at the boundaries of the Commercial Land
and will be available in sufficient amounts for the normal and intended use of the Improvements,
and written permission has been or will be obtained from the applicable utility companies
or municipalities to connect the Improvements into each of said services.
|
|
|
CR
-
3.5
|
Inducement
to Lender
.
The representations, covenants, and warranties contained in the Loan Documents and the funding of the Escrow,
if any, are made by Borrower as an inducement to Lender to make the Loan, and Borrower understands that Lender is relying on such
representations, covenants, and warranties and that such representations, covenants, and warranties shall survive any (a) bankruptcy
proceedings involving Borrower, Guarantor, or the Commercial Land, or (b) foreclosure of the Deed of Trust, or (c) conveyance
of title to the Commercial Land in lieu of foreclosure of the Deed of Trust. Acceptance of each Advance constitutes reaffirmation,
as of the date of such acceptance, of the representations, covenants, and warranties of each Borrower and Guarantor in the Loan
Documents, on which Lender shall rely in making such Advance.
|
ARTICLE
CR-IV
COVENANTS
AND AGREEMENTS OF BORROWER
Borrower
hereby covenants and agrees as follows:
|
|
CR-4.1
|
Compliance
with Legal Requirements
.
All Legal Requirements shall be timely complied with
and evidence thereof delivered to Lender. Borrower assumes full responsibility for the
compliance of the Plans, the Commercial Land and Improvements with all Legal Requirements
and with sound building and engineering practices and, notwithstanding any approvals
by Lender and/or any Inspecting Architect/Engineer, Lender and/or any Inspecting Architect/Engineer
shall have no obligation or responsibility for the Plans or any other matter incident
to the Commercial Land or the construction of the Improvements.
|
|
Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
|
Page
52
|
|
|
CR-4.2
|
Construction
Contract
.
Borrower shall become party to no contract, including any Construction
Contract, for the performance of any work on the Commercial Land or for the supplying
of any labor, materials, or services for the construction of the Improvements except
upon such terms and with such parties as shall be approved in writing by Lender. Each
Construction Contract shall provide that all liens, claims and charges of the Contractor
are subordinate to the Deed of Trust and the rights of Lender thereunder and shall require
all subcontracts to contain a provision subordinating the subcontractors’ liens,
claims and charges to the Deed of Trust and the rights of Lender thereunder. Each Construction
Contract shall also provide that no change orders shall be effective without the prior
written approval of Lender. No approval by Lender of any Construction Contract or change
order shall make Lender responsible for the adequacy, form, or content of any Construction
Contract or change order.
|
|
|
CR-4.3
|
Utilities;
Access
.
Borrower shall take all steps necessary to provide that (a) all utility
services necessary for the construction of the Improvements and the operation thereof
for their intended purposes are available for connection to the Improvements, including
water supply, storm and sanitary sewer facilities, and gas, electric, and telephone facilities;
and (b) either all roads necessary for vehicular and pedestrian access to and from the
Commercial Land have been completed or the necessary rights-of-way therefor have been
acquired by the appropriate Governmental Authority or dedicated to the public use and
accepted by such Governmental Authority and all necessary steps have been taken by the
Borrower and such Governmental Authority to assure the complete construction and installation
thereof prior to the Completion Date.
|
|
|
CR-4.4
|
Construction
of the Improvements
.
The construction of the Improvements shall be prosecuted
with diligence and continuity, in a good and workmanlike manner and in accordance with
sound building and engineering practices, all applicable Legal Requirements, the Plans,
and the requirements of any lease, if applicable. Borrower shall not permit cessation
of work for a period in excess of 10 days, except cessation, for not more than 30 days
in the aggregate, caused by acts of God or other causes not within the control of Borrower,
without the prior written consent of Lender, and shall complete construction of the Improvements
on or before the Completion Date, free and clear of all Liens on the Commercial Land,
except the lien of the Deed of Trust.
|
|
|
CR-4.5
|
Correction
of Defects
.
Borrower shall correct or cause to be corrected (a) any defect in
the Improvements; (b) any material departure in the construction of the Improvements
from the Plans, sound building and engineering practices, Legal Requirements, or the
requirements of any lease, if applicable; or (c) any encroachment by any part of the
Improvements or any structure located on the Commercial Land over any building line,
easement, property line, or restricted area.
|
|
|
CR-4.6
|
Storage
of Materials
.
Borrower shall cause all materials supplied for, or intended to
be utilized in, the construction of the Improvements, but not affixed to or incorporated
into the Improvements or the Commercial Land, to be stored on the Commercial Land or
at such other location as may be approved by Lender in writing, with adequate safeguards,
as required by Lender, to prevent and insure against loss, theft, damage, or commingling
with other materials or projects.
|
|
Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
|
Page
53
|
|
|
CR-4.7
|
Inspection
of the Commercial Land
.
Borrower shall permit Lender, USDA, the Inspecting Architect/Engineer
(if any), any Governmental Authority, and their agents and representatives, to enter
upon the Commercial Land and Improvements, and any location where materials intended
to be utilized in the construction of the Improvements are stored, for the purpose of
inspection of the Commercial Land and Improvements and such materials at all reasonable
times, to the extent provided in Section 4.5 of the Agreement.
|
|
|
CR-4.8
|
Application
of Advances
.
Borrower shall disburse all Advances for payment of costs and expenses
specified in the Approved Budget, and for no other purpose unless approved in writing
by Lender.
|
|
|
CR-4.9
|
The
Borrower’s Deposit
.
If from time to time Lender reasonably determines
that the unadvanced portion of the Loan and/or Escrow will be insufficient for payment
in full of: (a) costs of labor, materials, and services required for the construction
of the Improvements; (b) other costs and expenses specified in the Approved Budget; and
(c) other costs and expenses required to be paid in connection with the completion of
the Improvements in accordance with the Plans, sound building and engineering practices,
any Legal Requirements, or the requirements of any lease, if applicable, then Borrower
shall, on request of Lender, make a deposit with Lender, which deposit will become part
of the Escrow. Lender may advance all or a portion of the Escrow prior to any portion
of the Loan proceeds, at Lender’s sole discretion. Borrower shall promptly notify
Lender in writing if and when the cost of the construction of the Improvements exceeds,
or appears likely to exceed, the amount of the unadvanced portion of the Loan and Escrow.
|
|
|
CR-4.10
|
Direct
Disbursement and Application by Lender
.
Upon an Event of Default which continues
beyond any applicable cure period, Lender shall have the right, but not the obligation,
to disburse and directly apply the proceeds of the Loan and/or Escrow, including any
Advance, to the satisfaction of any of Borrower’s obligations under the Loan Documents,
the Construction Contract, and/or the Architectural Contract. Borrower hereby authorizes
Lender to hold, use, disburse and apply the Escrow to satisfy any of Borrower’s
obligations under the Loan Documents, the Construction Contract, and/or the Architectural
Contract. Borrower hereby assigns and pledges the proceeds of the Escrow and grants therein
a security interest to Lender for such purposes. Lender may advance and incur such expenses
as Lender reasonably deems necessary to preserve the Commercial Land and Improvements,
and any other Collateral, and such expenses shall be proper expenses available to be
paid out of the Loan and Escrow. Lender may disburse any portion of any Advance at anytime,
and from time to time, to persons other than Borrower for the purposes specified in this
Section irrespective of any other provision hereof, and the amount of Advances to which
Borrower shall thereafter be entitled shall be correspondingly reduced.
|
|
Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
|
Page
54
|
|
|
CR-4.11
|
Inspection
of Books and Records
.
Borrower shall permit Lender and USDA, upon request, to
examine and copy all contracts, statements, invoices, bills, and claims for labor, materials
and services supplied for the construction of the Improvements, in accordance with Section
4.5 of the Agreement.
|
|
|
CR-4.12
|
No
Liability of Lender
.
Lender, Lender’s Representative, and Inspecting Architect/Engineer
shall have no liability, obligation or responsibility with respect to the construction
of the Improvements. Lender shall not be obligated to inspect the Commercial Land, Plans,
or the construction of the Improvements, nor be liable for the performance or default
of Borrower, Architect, the Inspecting Architect/Engineer, Contractor, or any other party,
or for any failure to construct, complete, protect or insure the Improvements, or for
the payment of costs of labor, materials or services supplied for the construction of
the Improvements, or for the performance of any obligation of Borrower. Nothing, including
without limitation any Advance or acceptance of any document or instrument, shall be
construed as a representation or warranty, express or implied, to any party by Lender.
Further, Lender shall not have, has not assumed, and by its execution and acceptance
of the Agreement hereby expressly disclaims, any liability or responsibility for the
payment or performance of any indebtedness or obligation of Borrower or of any Guarantor,
and no term or condition herein, or in any of the other Loan Documents, shall be construed
otherwise. Borrower hereby expressly acknowledges and agrees that no term or condition
herein, or in any of the Loan Documents, shall be construed so as to deem the relationship
between Borrower, any Guarantor, and Lender to be other than that of borrower, guarantor
and lender, and Borrower shall at all times represent that the relationship between Borrower,
any Guarantor and Lender is solely that of borrower, guarantor and lender. Borrower hereby
indemnifies and agrees to hold Lender harmless from and against any liability, loss,
cost or expense incurred or suffered by Lender as a result of any assertion or claim
of any liability or responsibility of Lender for (i) the Plans, or the construction of
the Improvements, and/or (ii) the payment or performance of any indebtedness or obligation
of any Borrower or Guarantor.
|
|
|
CR-4.13
|
No
Conditional Sale Contracts, Etc
.
Except to the extent permitted by the Agreement,
no materials, equipment or fixtures shall be supplied, purchased or installed for the
construction or operation of the Improvements pursuant to security agreements, conditional
sale contracts, lease agreements or other arrangements or understandings whereby a security
interest or title is retained by any party or the right is reserved or accrues to any
party to remove or repossess any materials, equipment or fixtures intended to be utilized
in the construction or operation of the Improvements.
|
|
|
CR-4.14
|
Assignment
of Construction Contracts
.
As additional security for the payment of the Loan,
Borrower hereby transfers and assigns to Lender all of Borrower’s rights and interest,
but not its obligations in, under, and to each Construction Contract upon the following
terms and conditions:
|
|
Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
|
Page
55
|
|
|
(a)
|
Borrower
represents and warrants that the copy of each Construction Contract it will furnish to
Lender is a true and complete copy thereof, including all amendments thereto, if any,
and that Borrower’s interest therein is not subject to any claim, set-off or encumbrance.
|
|
|
(b)
|
Neither
this assignment nor any action by Lender shall constitute an assumption by Lender of
any obligations under any Construction Contract, and Borrower shall continue to be solely
liable for all obligations of Borrower thereunder, Borrower hereby agreeing to perform
all of its obligations under each Construction Contract. Borrower agrees to indemnify
and hold Lender harmless against and from any loss, cost, liability or expense (including
but not limited to, reasonable attorney’s fees) resulting from any failure of Borrower
to so perform.
|
|
|
(c)
|
Upon
an Event of Default which continues beyond any applicable cure period, Lender shall have
the right at any time (but shall have no obligation) to take in its name or in the name
of Borrower such action as Lender may at any time determine to be necessary or advisable
to cure any default under any Construction Contract or to protect the rights of Borrower
or Lender thereunder. Lender shall incur no liability if any action so taken by it or
in its behalf shall prove to be inadequate or invalid, and Borrower agrees to indemnify
and hold Lender harmless against and from any loss, cost, liability or expense (including
but not limited to, reasonable attorneys’ fees) incurred in connection with any
such action, or any inaction.
|
|
|
(d)
|
Borrower
hereby irrevocably constitutes and appoints Lender as Borrower’s attorney-in-fact,
in Borrower’s or Lender’s name, to enforce all rights of Borrower under each
Construction Contract.
|
|
|
(e)
|
Prior
to the occurrence of a Event of Default, Borrower shall have the right to exercise its
rights under each Construction Contract, provided that Borrower shall not cancel or amend
any Construction Contract or do or suffer to be done any act which impairs the security
constituted by this assignment without the prior written consent of Lender.
|
|
|
(f)
|
This
assignment shall inure to the benefit of Lender and its successors and assigns, any purchaser
upon foreclosure of the Deed of Trust, any receiver in possession of the Commercial Land
and/or Improvements, and any Entity formed by or on behalf of Lender which assumes Lender’s
rights and obligations under the Agreement.
|
|
|
CR-4.15
|
Assignment
of Plans
.
As additional security for the Loan, Borrower hereby transfers and
assigns to Lender all of Borrower’s right, title and interest in and to the Plans
and hereby represents and warrants to and agrees with Lender as follows:
|
|
|
(a)
|
Each
schedule of the Plans delivered or to be delivered to Lender is and shall be a complete
and accurate description of the Plans.
|
|
Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
|
Page
56
|
|
|
(b)
|
The
Plans are for the construction of the Improvements and there have been no modifications
thereof except as described in such schedule. The Plans shall not be modified without
the prior written consent of Lender.
|
|
|
(c)
|
Lender
may use the Plans for any purpose relating to the Improvements, including but not limited
to inspections of construction and the completion of the Improvements.
|
|
|
(d)
|
Lender’s
acceptance of this assignment shall not constitute approval of the Plans by Lender. Lender
has no liability or obligation in connection with the Plans and no responsibility for
the adequacy thereof or for the construction of the Improvements contemplated by the
Plans. Lender has no duty to inspect the Improvements, and if Lender should inspect the
Improvements, Lender shall have no liability or obligation to Borrower or any other party
arising out of such inspection. No such inspection, nor any failure by Lender to make
objections after any such inspection, shall constitute a representation or belief by
Lender that the Improvements are constructed in accordance with the Plans or any other
requirement, or constitute a waiver of Lender’s right thereafter to insist that
the Improvements be constructed in accordance with the Plans or any other requirement.
|
|
|
(e)
|
This
assignment shall inure to the benefit of Lender and its successors and assigns, any purchaser
upon foreclosure of the Deed of Trust, any receiver in possession of the Commercial Land
and/or Improvements, and any Entity formed by or on behalf of Lender which assumes Lender’s
rights and obligations under the Agreement.
|
|
|
CR-4.16
|
Prohibition
on Assignment
.
Borrower shall not assign or encumber any interest of Borrower
hereunder without the prior written consent of Lender.
|
|
|
CR-4.17
|
Payment
of Claims
.
Borrower shall promptly pay or cause to be paid when due all costs
and expenses incurred in connection with the construction of the Improvements. In the
event Borrower refuses to pay any such amount due to a dispute with any Architect, Contractor,
subcontractor, and/or any other person furnishing labor, materials or services in connection
with the design and/or construction of the Improvements, Borrower will purchase a bond
(in Proper Form), or provide such additional security, in such amounts as are required
by Lender and the Title Company, the purpose of such bond or other security being to
ensure that no claim of Lien or other encumbrance (a) will be superior to Lender’s
Lien on the Commercial Land and Improvements, and (b) will remain on the Commercial Land
in the event of an adverse determination or resolution of Borrower’s dispute.
|
|
|
CR-4.18
|
Advertising
by Lender
.
Lender may erect and maintain on the Commercial Land one or more advertising
signs indicating that the construction financing for the Commercial Land has been provided
by Lender.
|
|
Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
|
Page
57
|
|
|
CR-4.19
|
No
Occupancy Contrary to Builder’s Risk Policy
.
The Improvements shall not
be occupied until Borrower has obtained and furnished to Lender a “permission to
occupy” endorsement to the builder’s risk insurance policy, which endorsement
is satisfactory to Lender, or Borrower has obtained replacement coverage in the form
of an all-risk insurance policy upon the completed Improvements, which policy will not
be impaired by the occupancy of the Improvements and is satisfactory to Lender.
|
|
|
CR-4.20
|
Compliance
With Lender’s Construction Requirements
.
Borrower will comply with Lender’s
construction requirements, regardless of whether such requirements are specifically set
out in the Agreement or this Construction Rider, and will ensure that Contractor also
complies with Lender’s construction requirements. Borrower further agrees to pay
all costs, fees and other charges associated with Borrower’s and/or Contractor’s
compliance with Lender’s construction requirements.
|
|
|
CR-4.21
|
Cultural
Materials
. If cultural materials are encountered during any construction or other
activity, work will immediately cease in the area of discovery. Work may continue in
the project area where no cultural materials are present, with the written approval from
the USDA. Upon discovery of any cultural materials, the Borrower and the Contractor must
immediately notify the Lender, Inspecting Architect/Engineer, and the USDA Rural Development
State Environmental Coordinator at (775) 857-8500.
|
|
|
CR-4.22
|
Compliance
With Conditional Commitment
. To the extent not otherwise required by the Agreement
and/or this Construction Rider, Borrower agrees(a) to ensure that all Improvements are
designed and completed in accordance with accepted architectural and engineering practices
and conform to (1) the Construction Contract, (2) the Architectural Contract, (3) the
Plans, and (4) all Legal Requirements, (b) to ensure that all Improvements will be completed
with available funds, (c) that Borrower will be responsible for, and will immediately
pay, all cost overruns, (d) the Improvements will be used only for the purpose as approved
in writing by Lender, (e) Borrower will produce the quality and quantity of products
proposed in its loan application to the USDA, and (f) ensure compliance with all terms,
conditions and requirements contained in the Conditional Commitment. To the extent any
the terms, conditions and/or requirements in the Conditional Commitment impose any obligation(s)
and/or responsibility(ies) on Lender and/or Contractor, Borrower agrees that Borrower
will be fully, independently, and solely responsible to ensure compliance with each such
term, condition and/or requirement, and will indemnify and hold Lender and/or Contractor,
as applicable, harmless for its failure to comply with same.
|
|
|
CR-4.23
|
No
Profit on Construction
. In the event that Borrower, or any Affiliate of Borrower,
constructs, or performs any construction services in connection with the Improvements
(including, without limitation, acting as a contractor). Borrower agrees that it shall
not be paid, nor receive, a profit for such work. Borrower will submit all documentation
and other information requested by Lender, in Proper Form, to satisfy Lender that Borrower
has complied with this restriction including, without limitation, a cost breakdown of
all work performed.
|
|
Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
|
Page
58
|
|
|
CR-4.24
|
Storm
Run-Off
. Borrower will mitigate potential storm run-off during construction of
the Improvements using best management practices.
|
|
|
CR-4.25
|
Compliance
with Federal Law
. Without limiting the generality of any other affirmative covenant
or other agreement contained in the Agreement and/or this Construction Rider, Borrower
agrees that it will ensure that (1) the Contractor complies with (i) the Americans with
Disabilities Act, which became effective on January 26, 1992, and all supplements and
amendments thereto, and (ii) Executive Order 11246, entitled “Equal Employment
Opportunity,” as amended by Executive Order 11375 and supplemented by Department
of Labor regulations (41 C.F.R., part 60); (2) all project facilities are designed utilizing
accepted architectural and engineering practices, and conform to applicable Federal,
state, and local codes and requirements including, without limitation, the Americans
With Disabilities Act; (3) the project will be completed using the available funds and,
once completed, will be used for its intended purpose and produce products in the quality
and quantity proposed in the completed application approved by the USDA; (4) construction
conforms with all applicable Legal Requirements; (5) proceeds of the Loan are used in
accordance with the approved Plans, and other contract documents; and (6) Loan and Escrow
funds are used only for eligible project costs.
|
ARTICLE
CR-V
RIGHTS
AND REMEDIES OF LENDER
|
|
CR-5.1
|
Rights
of Lender
.
Upon the occurrence of an Event of Default which continues beyond
any applicable cure period, Lender shall have the right, in addition to any other Right
of Lender set forth elsewhere in the Agreement, this Construction Rider, and/or other
Loan Documents, but not the obligation, in its own name or in the name of Borrower to
enter into possession of the Commercial Land; to perform all work necessary to complete
the construction of the Improvements, and/or to employ security guards and employ other
safeguards to protect the Commercial Land, Improvements and other Collateral. Borrower
hereby appoints Lender as its attorney-in-fact, with full power of substitution, and
in the name of Borrower, if Lender elects to do so, upon the occurrence of an Event of
Default which continues beyond any applicable cure period, to (a) use such sums as necessary,
including any of the Escrow, make such changes or corrections in the Plans, and employ
such architects, engineers, and contractors as may be required for the purpose of completing
the construction of the Improvements, (b) execute all applications, certificates, and
other documents in the name of Borrower which may be required for completion of construction
of the Improvements, (c) endorse the name of Borrower on any checks or drafts representing
proceeds of any insurance policy, or other checks or instruments payable to Borrower
with respect to the Commercial Land, Improvements and/or other property, (d) do every
act with respect to the construction of the Improvements which Borrower may do, (e) prosecute
or defend any action or proceeding incident to the Commercial Land, Improvements, and
other Collateral, and (f) apply the remaining balance of the Loan and/or Escrow held
to the unpaid principal balance of the Note. The power of attorney granted hereby is
a power coupled with an interest and is irrevocable. Lender shall have no obligation
to undertake any of the forgoing actions, and, if Lender should do so, it shall have
no liability to Borrower or any other Person for the sufficiency or adequacy of any such
actions taken by Lender.
|
|
Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
|
Page
59
|
|
|
CR-5.2
|
No
Waiver or Exhaustion
.
No waiver by Lender of any of its rights or remedies hereunder,
in the other Loan Documents, or otherwise, shall be considered a waiver of any or other
subsequent right or remedy of Lender; no delay or omission in the exercise or enforcement
by Lender of any rights or remedies shall ever be construed as a waiver of any right
or remedy of Lender; and no exercise or enforcement of any such rights or remedies shall
ever be held to exhaust any right or remedy of Lender.
|
ARTICLE
CR-VI
DEFAULT
|
|
CR-6.1
|
Default
.
The term “Event of Default”, as used in the Agreement, shall also include
the occurrence of any one or more of the following events:
|
|
|
(a)
|
The
cessation of the construction of the Improvements for more than 30 days without the written
consent of Lender, except cessation, for not more than 30 days in the aggregate, caused
by acts of God or other causes not within the control of Borrower.
|
|
|
(b)
|
A
failure of the construction of any part of the Improvements, or of any of the materials,
articles or fixtures supplied for incorporation into the construction of the Improvements,
to comply with the Plans, sound building and engineering practices, any Legal Requirement,
or the requirements of any lease, if applicable, to the extent that any of the foregoing
has a Material Adverse Effect.
|
|
|
(c)
|
A
determination by Lender that construction of the Improvements will not be completed on
or before the Completion Date, to the extent the foregoing is reasonably believed by
Lender to have a Material Adverse Effect.
|
|
|
(d)
|
Any
material dispute with any Contractor or Architect that remains unresolved to the satisfaction
of Lender by written agreement of Borrower and Contractor or Architect, as applicable,
within thirty (30) days.
|
|
|
(e)
|
Any
material misrepresentation, or any breach of, or failure to perform, any covenant, condition,
or agreement contained in this Construction Rider in any material respect.
|
|
Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
|
Page
60
|
EXHIBIT
“1”
TO
CONSTRUCTION
RIDER TO LOAN AGREEMENT
Fees
:
Fees
for the Inspecting Architect/Engineer.
All
fees, costs, and other charges relating to any and all of the documents, certificates, and other items generally described below
and/or required or incurred in connection with, or relating to, the design, construction, or protection of the Improvements.
Documents,
certificates, and other items
:
An
appraisal of the Commercial Land upon completion of the Improvements, made by a qualified MAI appraiser approved by Lender, in
form, scope and substance satisfactory to Lender.
The
Construction Contract, Contractor’s Agreement, Contractor’s Qualification Statement (AIA A305), Architectural Contract
(if in writing), and the Plans.
Project
schedule and Schedule of Values (AIA G703)
100
percent payment and performance bond, in Proper Form, from a Treasury-rated insurer satisfactory to Lender.
Evidence
of Contractor’s builder’s risk and liability insurance satisfactory to Lender.
Evidence
of Contractor’s worker’s compensation insurance, with a waiver of subrogation in favor of Lender.
Building
permit and all other permits required by any Governmental Authority with respect to the construction and development of the Commercial
Land.
Evidence
satisfactory to Lender of Borrower’s compliance with or satisfaction of all conditions applicable to any leases affecting
the Commercial Land.
Evidence
satisfactory to Lender that all zoning ordinances or restrictive covenants affecting the Commercial Land permit the present and
intended uses of the Commercial Land and have been and will be complied with. Zoning evidence shall include a letter or certificate
from an authorized representative of the zoning authority, addressed to Lender, adequately identifying the Commercial Land on
an attached photocopy of the applicable zoning map, stating the zoning classification applicable to the Commercial Land and the
uses permitted by that classification, and specifying all applicable height restrictions, off street parking requirements and
building set-back requirements. If required by Lender, certified copies of the applicable portions of the zoning ordinance shall
be provided.
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Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
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Page
61
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Evidence
satisfactory to Lender of compliance with all Legal Requirements.
Evidence
satisfactory to Lender that there are no restrictions on the use and enjoyment of the streets providing access to the Commercial
Land that adversely affect, limit, or impair Borrower’s ability to develop and construct the Improvements.
Breakdown
of all costs and expenses required to complete development and construction of the Improvements, in detail and in amounts acceptable
to Lender.
Application
for Advance.
List
of true full names and addresses, then available to Borrower, of all contractors, subcontractors and materialmen who are to provide
labor, materials or services in the construction of the Improvements.
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Exhibit “E” – CONSTRUCTION RIDER TO LOAN AGREEMENT
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Exhibit 10.3
APN: 005-071-55
RECORDING REQUESTED BY,
AND AFTER RECORDING, MAIL TO:
Green Bank, N.A.
4000 Greenbriar
Houston, Texas 77098
Affirmation Statement
: Per NRS 239B.030,
the undersigned hereby affirms that this document, including any exhibit, hereby submitted for recording does not contain the social
security number of any person or persons.
DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE
FILING
from
AQUA METALS RENO, INC
,
a Delaware corporation
(“
Grantor
”)
to
FIRST AMERICAN TITLE INSURANCE COMPANY,
a Nebraska corporation
(“
Trustee
”)
for the benefit of
GREEN BANK, N.A.
(“
Beneficiary
”)
Dated: November 3, 2015
THIS DEED OF TRUST SECURES FUTURE ADVANCES
DEED OF TRUST, SECURITY AGREEMENT AND
FIXTURE FILING
|
STATE OF NEVADA
|
§
|
|
|
§ KNOW ALL MEN BY THESE PRESENTS:
|
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COUNTY OF STOREY
|
§
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THIS DEED OF TRUST is made
this 3
rd
day of November, 2015 between
AQUA METALS OF RENO, INC., a Delaware corporation
(“Grantor”),
whose mailing address is
1010 Atlantic Avenue, Oakland, California 94501-1147; and
First American Title Insurance Company
,
a Nebraska corporation whose mailing address is 5310 Kietzke Lane, Suite 100, Reno, Nevada 89511 (hereinafter called “Trustee”);
for the benefit of
Green Bank, N.A.
(“Beneficiary”) whose address is 400 Greenbriar, Houston, Texas 77098; Grantor
and Beneficiary covenant and agree to as follows:
In consideration of the
debt and trust hereinafter mentioned, Grantor does hereby
GRANT, BARGAIN, SELL, TRANSFER, ASSIGN,
and
CONVEY
unto
Trustee, in trust, with power of sale for the benefit of Beneficiary, all of Grantor’s right, title, and interest in and to
the following described property:
1.
Real Property
.
The real estate situated in Storey County, Nevada, which is more particularly described in Exhibit “A” attached hereto
and made a part hereof by reference for all purposes, together with all buildings, structures, and other improvements (such buildings,
structures, and other improvements being hereinafter sometimes called the “Improvements”) now or hereafter situated thereon
(such real estate, and Improvements being hereinafter sometimes called the “Land”). The Land or its address is commonly
known as 2500 Peru Drive, Reno, Nevada 89434.
2.
Fixtures and Personal
Property
.
All fixtures, equipment, and personal property in which Grantor now has, or at any time hereafter acquires,
an interest, and which are now, or at any time hereafter, either a part of the Land or situated in, on, or about the Land and
utilized in connection with the operation of the Land, or acquired or delivered to the Land for use or incorporation in construction
of any improvements on the Land, including, but not limited to, building and construction materials and equipment; all plans and
specifications for improvements to be placed on the Land; all contracts and subcontracts relating to the Land; all deposits (including
tenant’s security deposits), funds, accounts, contract rights, instruments, documents, general intangibles; all permits, licenses,
franchises, certificates, and other rights and privileges obtained in connection with the Land; all proceeds arising from or by
virtue of the sale, lease, or other disposition of any of the real or personal property described herein; and all renewals, replacements,
and substitutions thereof and additions thereto (all property described or referred to in this paragraph sometimes called “Accessories”).
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3. As-Extracted Collateral.
To the extent now owned and/or hereafter acquired by Grantor: all As-Extracted Collateral (as defined in the Code) and other substances
which may be extracted from the Land, including without limitation, oil and gas, all Hydrocarbon Property (as defined below), including
all General Intangibles, Accounts, and all other rights to payment arising from the foregoing and all rights to payment arising
therefrom, including but not limited to, royalties, rentals, and other rights to payment from sale of any of the foregoing.
4.
Other Property
.
To the extent now owned and/or hereafter acquired by Grantor: all rights, titles, interests and estates in and to the oil
gas and other minerals in and under the Land and the oil and gas leases and/or oil, gas and other mineral leases relating to the
Land or the lands spaced, pooled or unitized therewith and including all wellbore interests and other interests and estates and
the lands and premises covered or affected thereby (collectively called the “Hydrocarbon Property”). All other interest
of every kind and character which Grantor now has or at any time hereafter acquires in and to the property described or referred
to in paragraphs 1, 2, and 3 preceding, including but not limited to (a) proceeds from the condemnation or threatened condemnation
of the Land, (b) proceeds of any and all insurance covering the Land, (c) property which is used in connection with the operation
of the Land and Accessories, (d) all water, water allocations, and water rights appurtenant to or used in connection with the
Land (including tributary, nontributary, and not nontributary), now owned or hereafter acquired, decreed or adjudicated, and (e)
all other interest of Grantor in water, such as ditch and ditch rights, reservoir or reservoir rights and storage rights, water
stock, wells, well permits, decrees and leased used or to be used in connection with the Land.
All properties, rights,
and interests described or referred to in paragraphs 1, 2, 3, and 4 preceding are sometimes referred to collectively as the “Property”.
5.
Leasehold Estates
.
In the event the estate of the Grantor in and to any of the Property is a leasehold estate, this conveyance shall include, and
the lien, security interest, and assignment created hereby shall encumber and extend to all other further or additional title,
estates, interest, or rights which may exist now or at any time be acquired by Grantor in or to the Property demised under the
lease creating such leasehold estate and including Grantor’s rights, if any, to the Property demised under such lease and, if fee
simple title to any of such Property shall ever become vested in the Grantor such fee simple interest shall be encumbered by this
Deed of Trust in the same manner as if Grantor had fee simple title to said Property as of the date of execution hereof.
TO HAVE AND TO HOLD
the above-described Property, together with all improvements thereon and all the rights, hereditaments, and appurtenances in anywise
appertaining or belonging thereto, unto Trustee, and his successors or substitutes in this trust, and his and their assigns, against
the claim or claims of all persons claiming or to claim the same or any part thereof.
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Grantor, for Grantor and
Grantor’s successors, hereby agrees to warrant and forever defend, all and singular, the Property unto Trustee, and his successors
or substitutes in this trust, and his and their assigns, in trust and for the uses and purposes hereinafter set forth, forever.
Grantor hereby grants to
Beneficiary and its successors and assigns, a security interest in the Property, and each and every part thereof, and in all proceeds
from the sale, lease, or other disposition thereof and in all sums, proceeds, funds, and reserves described or referred to in Section
5.7, 5.8, and 5.9 hereof; provided that the grant of a security interest in proceeds shall not be deemed to authorize any action
otherwise prohibited herein.
ARTICLE I.
The Obligation
Section 1.1
Beneficiary
and Obligation
.
This Deed of Trust [as used herein, the expression “this Deed of Trust” shall mean this Deed
of Trust, Security Agreement and Fixture Filing] and all rights, title, interest, liens, security interest, powers, and privileges
created hereto or arising by virtue hereof, are given to secure payment and performance of the following indebtedness, obligations,
and liabilities:
(a)
the indebtedness(es) evidenced by that certain promissory note of even date herewith (the “Note”)
executed by Grantor,
payable to the order of Beneficiary in the principal amount of
TEN MILLION AND NO/100 DOLLARS ($10,000,000.00)
bearing interest as therein specified, containing an attorney’s fee clause, interest and principal being payable as therein specified,
and finally maturing twenty one (21) years from the date of the Note;
(b)
all indebtedness, obligations, and liabilities
arising pursuant to the provisions of this Deed of Trust, the Note, that certain Loan Agreement between Borrower and Beneficiary
of even date herewith (the “Loan Agreement”; capitalized terms in this Deed of Trust not otherwise defined herein shall
have the same meanings ascribed to such terms in the Loan Agreement), any guaranty or such other documents evidencing, securing
or pertaining to the indebtedness(es) referred to in subsection (a) of this Section 1.1, as shall from time to time be executed
and delivered to Beneficiary by Grantor, any guarantor or any other party (collectively, the “Loan Documents”); and
(c)
any and all renewals, modifications, rearrangements, amendments, or extensions of all or any part of the indebtedness, obligations,
and liabilities described or referred to in Subsections 1.1(a), and 1.1(b). The word “Obligation”, as used herein, shall
mean all of the indebtedness, obligations, and liabilities described or referred to in Subsections 1.1(a) and 1.1(b) preceding
and as described and referred to in this subsection 1.1(c). The word “Beneficiary”, as used herein, shall mean the Beneficiary
named in the initial paragraph on Page 2 of this Deed of Trust and all subsequent Beneficiaries of the Obligation at the time in
question.
Notice to Grantor: The Note contains a variable interest rate.
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ARTICLE II.
Certain Representations;
Warranties, and Covenants of Grantor
Section 2.1
Warranties
and Representations
.
Grantor represents, warrants, and undertakes that
(a)
Grantor has full right and authority
to execute and deliver this Deed of Trust; and
(b)
Grantor has in its own right good and indefeasible title in fee simple
to the Property free from any encumbrance superior to the indebtedness hereby secured.
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Section 2.2
Covenants
.
Grantor, for Grantor and Grantor’s successors and permitted assigns hereunder, covenants, agrees, and undertakes to:
(a)
except as permitted under the Loan Agreement, pay, or cause to be paid, before delinquent, all taxes and assessments of every kind
or character in respect to the Property, or any part thereof, from time to time, and, upon request of Beneficiary, to furnish to
Beneficiary evidence satisfactory to Beneficiary of the timely payment of such taxes and assessments and governmental charges (including,
but not limited to, any general or special taxes or ditch or water assessments levied or accruing against the Property);
(b)
purchase policies of insurance with respect to the Property with such insurers, in such amounts and covering such risks as shall
be satisfactory to Beneficiary, including, but not limited to,
(1)
owner’s and contractors’ policies of comprehensive general
public liability insurance;
(2)
hazard insurance against all risks of loss, including collapse, in an amount not less than
the full replacement cost of all Improvements, including the cost of debris removal, with annual agreed amount endorsement and
sufficient at all times to prevent Grantor from becoming a co-insurer, such insurance prior to completion of the Improvements to
be in builder’s risk form on a non-reporting basis and including coverage for all materials and equipment, wherever located, intended
to be installed in or utilized in the construction of the Improvements;
(3)
if the Property is in a “Flood Hazard Area”,
a flood insurance policy, or binder therefor, in an amount equal to the principal amount of the Note or the maximum amount available
under the Flood Disaster Protection Act of 1973, and regulations issued pursuant thereto, as amended from time to time, whichever
is less, in form complying with the “insurance purchase requirements” of that act;
(4)
such policies of mortgagee’s
title insurance insuring the validity and priority of this Deed of Trust and any future renewals or extensions of this Deed of
Trust, including any such mortgagee’s title insurance which the Beneficiary may require during the term of the Obligation to supplement
or replace any mortgagee’s title policy earlier provided to Beneficiary insuring the validity and priority of the Deed of Trust;
and
(5)
such other insurance, if any, as Beneficiary may require from time to time, or which is required by the Loan Documents;
(c)
cause all insurance carried in accordance with Section 2.2(b) to be payable to Beneficiary as a mortgagee, to deliver
the original policies of insurance carried by each Lessee (as that term is hereinafter defined) for the benefit of Grantor, and
to cause all such policies to be payable to Beneficiary as its interest may appear;
(d)
pay, or cause to be paid, all premiums
for such insurance at least ten (10) days before such premiums become due, furnish to Beneficiary satisfactory proof of the timeliness
of such payments and deliver all renewal policies to Beneficiary before the expiration date of each expiring policy;
(e)
comply with all federal, state, or municipal laws, rules, ordinances, and regulations applicable to the Property and its ownership,
use and operation, including but not limited to maintenance of the Property in compliance with the Americans with Disabilities
Act of 1990, and comply with all, and not violate any, easements, restrictions, agreements, covenants, and conditions with respect
to or affecting the Property or any part thereof;
(f)
at all times maintain, preserve, and keep the Property in good repair
and condition and presenting a first-class appearance, and from time to time make all necessary and proper repairs, replacements,
and renewals, and not commit or permit any waste on or of the Property, and not do anything to the Property that may impair its
value;
(g)
except as permitted by the Loan Agreement, promptly pay all bills for labor and materials incurred in connection
with the Property and never permit to be created or to exist in respect to the Property or any part thereof any lien or security
interest even though inferior to the liens and security interest hereof for any such bill, and in any event never permit to be
created or exist in respect to the Property or any part thereof any other or additional lien or security interest on a parity with
or superior to any of the liens or security interest hereof;
(h)
at any time, and from time to time, upon request of Beneficiary,
forthwith, execute and deliver to Beneficiary any and all additional instruments and further assurances, and do all other acts
and things, as may be reasonably necessary or proper, in Beneficiary’s opinion, to effect the intent of these presents, more fully
evidence and perfect the rights, titles, liens, and security interests herein created or intended to be created and to protect
the rights, remedies, powers, and privileges of Beneficiary hereunder;
(i)
from time to time, upon request of Beneficiary,
promptly furnish to Beneficiary financial statements and reports relating to the Grantor and the Property as required in the Loan
Documents;
(j)
continuously maintain Grantor’s existence and its right to do business in every state in which it transacts
business;
(k)
pay and perform all of the Obligation in accordance with the terms thereof or of this Deed of Trust;
(l)
at any time any law shall be enacted imposing or authorizing the imposition of any tax upon this Deed of Trust, or upon any rights,
titles, liens, or security interests created hereby, or upon the Obligation, or any part thereof, pay all such taxes on or prior
to when due; provided that, in the alternative, Grantor may, in the event of the enactment of such a law, and must, if it is unlawful
for Grantor to pay such taxes, prepay the Obligation in full within sixty (60) days after demand therefor by Beneficiary;
(m)
at any time and from time to time, furnish promptly upon request of Beneficiary a written statement or affidavit, in such form
as shall be satisfactory to Beneficiary, stating the unpaid balance of the Obligation and that there are no offsets or defenses
against full payment of the Obligation and the terms hereof, or, if there are any such offsets or defenses, specifying them;
(n)
punctually and properly perform all of Grantor’s covenants, duties, and liabilities under any other security agreement, mortgage,
deed of trust, collateral pledge agreement, contract, or assignment of any kind now or hereafter existing as security for or in
connection with payment of the Obligation, or any part thereof (each such security agreement being herein called “other security
instrument”;
(o)
in accordance with the provisions of the Loan Agreement, allow Beneficiary from time to time to inspect
the Property and all records relating thereto or to the Obligation, and to make and take away copies of such records;
(p)
not cause or permit the Accessories, or any part thereof, without the prior written consent of the Lender, to be removed from the
county and state where the Land is located, except items of the Accessories which are not material to the business of Borrower,
or have become obsolete or worn beyond practical use and which have been replaced by adequate substitutes having a value equal
to or greater than the replaced items when new;
(q)
not without the prior written consent of Beneficiary sell, trade, transfer,
assign, or exchange or otherwise dispose of (or suffer or permit any of the same to occur with respect to)
(1)
any capital
stock of Grantor if Grantor is a corporation,
(2)
any partnership interest either general or limited if Grantor is a partnership,
or (
3
) any membership interest in Grantor, if Grantor is a limited liability company, except by devise, descent, or operation
of law upon the death of a shareholder, partner, joint venturer, or member, as the case may be; and
(r)
pay, or cause to
be paid, any and all reasonable attorneys’ fees, filing fees and expenses incurred by Beneficiary for the preparation and recordation
of any and all legal instruments which the Beneficiary may require at the time of the creation of this Obligation (including this
Deed of Trust and/or any and all other instruments which Beneficiary may require in connection herewith) or which Beneficiary may
require during the term of the Obligation.
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Section 2.3
Nevada
Covenants
. The following covenants, Nos. 1, 2, 3, 4, 5, 6, 7, 8, and 9 of NRS 107.030 are hereby adopted and made a part
of this Deed of Trust (the “Covenants”). To the extent possible, the Covenants will be construed so as to augment, and
be compatible with, but not replace, the other agreements contained in this Deed of Trust and the other Loan Documents. However,
to the extent that any of the Covenants are determined to be in conflict with any of the other agreements and covenants contained
in this Deed of Trust and/or the other Loan Documents, or in conflict with any other right or procedure allowed by applicable law,
the agreement, covenant, right, or procedure which are set forth in the Loan Documents shall control and be enforceable by Beneficiary.
With respect to Covenant No. 2, the amount of required insurance shall be the full replacement value of all buildings and improvements
now and/or hereafter located on the Land. With respect to Covenant No. 4, the rate of interest shall be the Maximum Rate (hereafter
defined). With respect to Covenant No. 7, in lieu of the percentage to be allowed, the “expenses of the trust”, as referenced
therein, shall mean reasonable counsel fees and costs actually incurred.
ARTICLE III.
Respecting Defaults and Remedies of
Beneficiary
Section 3.1
Beneficiary’s
Remedies Upon Default
.
Upon an Event of Default which continues beyond any applicable cure period, Beneficiary may, at
its option, do any one or more of the following:
(a)
If
Grantor has failed to keep or perform any covenant whatsoever contained in this Deed of Trust, Beneficiary may, but shall not be
obligated to any person to do so, perform or attempt to perform said covenant, and any payment made or expense incurred in the
performance or attempted performance of any such covenant shall be a part of the Obligation, and Grantor promises, upon demand,
to pay to Beneficiary, at the place where the Note is payable, or at such other place as Beneficiary may direct by written notice,
all sums so advanced or paid by Beneficiary, with interest from the date when paid or incurred by Beneficiary at the rate provided
in the Note. No such payment by Beneficiary shall constitute a waiver of any default. In addition to the liens and security interest
hereof, Beneficiary shall be subrogated to all rights, titles, liens, and security interest securing the payment of any debt, claim,
tax, or assessment for the payment of which Beneficiary may make an advance, or which Beneficiary may pay.
(b)
Unless
otherwise modified herein, Beneficiary may, without notice, demand, or presentment, which are hereby waived by Grantor and all
other parties obligated in any manner whatsoever on the Obligation, declare the entire unpaid balance of the Obligation immediately
due and payable, and upon such declaration, the entire unpaid balance of the Obligation shall be immediately due and payable (hereinafter
called “Acceleration”). Grantor hereby waives all notices allowed by law, including without limitation, demand, presentment,
notice of dishonor, protest, notice of intent to accelerate maturity and notice of acceleration.
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(c)
Beneficiary
may request Trustee to proceed with foreclosure, and in such event Trustee is hereby authorized and empowered, and it shall be
his special duty, upon such request of Beneficiary, to sell the Property, or any part thereof, to the highest bidder or bidders
for cash, in the manner prescribed or allowed by law. After such sale, Trustee shall make good and sufficient deeds and assignments
to the purchaser or purchasers thereunder in the name of Grantor, conveying the Property, or any part thereof, so sold to the purchaser
or purchasers with general warranty of title by Grantor. Sale of a part of the Property shall not exhaust the power of sale, but
sales may be made from time to time until the Obligation is paid and performed in full. It shall not be necessary to have present
or to exhibit at any such sale any of the Accessories. In addition to the rights and powers of sale granted under the preceding
provisions of this Subsection 3.1(c), if default is made in the payment of any installment of the Obligation, Beneficiary may,
at its option, at once or at any time thereafter while any matured installment remains unpaid, without declaring the entire Obligation
to be due and payable, orally or in writing direct Trustee to enforce this trust and to sell the Property subject to such unmatured
indebtedness and the liens and security interest securing its payment, in the same manner, all as provided in the preceding provisions
of this Subsection 3.1(c). After such sale, Trustee shall make due conveyance to the purchaser or purchasers. Sales made without
maturing the Obligation may be made hereunder whenever there is a default in the payment of any installment of the Obligation,
without exhausting the power of sale granted hereby, and without affecting in any way the power of sale granted under this Subsection
3.1(c), the unmatured balance of the Obligation (except as to any proceeds of any sale which Beneficiary may apply as prepayment
of the Obligation) or the liens and security interests securing payment of the Obligation. It is intended by each of the foregoing
provisions of this Subsection 3.1(c) that Trustee may, after any request or direction by Beneficiary, sell, not only the Land but
also the Accessories and other interests constituting a part of the Property, or any part thereof, along with the Land, or any
part thereof, as a unit and as a part of a single sale, or may sell any part of the Property separately from the remainder of the
Property. It is agreed that, in any deed or deeds given by Trustee, any and all statements of fact or other recitals therein made
as to the identity of Beneficiary, or as to the occurrence or existence of any default, or as to the acceleration of the maturity
of the Obligation, or as to the request to sell, notice of sale, time, place, terms, and manner of sale, and receipt, distribution,
and application of the money realized therefrom, or as to the due and proper appointment of a substitute trustee, and, without
being limited by the foregoing, as to any other act or thing having been duly done by Beneficiary or by Trustee, shall be taken
by all courts of law and equity as prima facie evidence that the said statements or recitals state facts and are without further
question to be so accepted, and Grantor does hereby ratify and confirm any and all acts that Trustee may lawfully do in the premises
by virtue hereof. In the event of the resignation or death of Trustee, or his removal from his county of residence stated on the
first page hereof, or his failure, refusal, or inability, for any reason, to make any such sale or to perform any of the trusts
herein declared, or, at the option of Beneficiary, with or without cause, then Beneficiary may appoint, in writing, but without
the necessity of recordation, notice or any other formality (unless required by applicable law), a substitute trustee, who shall
thereupon succeed to all the estates, titles, rights, powers, and trusts herein granted to and vested in Trustee. If Beneficiary
is a corporation or an association, such appointment may be made on behalf of such Beneficiary by any person who is then the president,
or a vice-president, or the cashier or secretary, or any other authorized officer or agent of Beneficiary. In the event of the
resignation or death of any such substitute trustee, or his failure, refusal, or inability to make any such sale or perform such
trusts, or, at the option of Beneficiary, without cause, successive substitute trustees may thereafter, from time to time, be appointed
in the same manner. Wherever herein the word “Trustee” is used, the same shall mean the person who is the duly appointed
trustee or substitute trustee hereunder at the time in question.
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(d)
Beneficiary
may, or Trustee may upon written request of Beneficiary, proceed by suit or suits, at law or in equity, to enforce the payment
and performance of the Obligation in accordance with the terms hereof and of the Note or other instruments evidencing it, to foreclose
the liens, security interest and this Deed of Trust as against all or any part of the Property, and to have all or any part of
the Property sold under the judgment or decree of a court of competent jurisdiction.
(e)
Beneficiary,
as a matter of right and without regard to the sufficiency of the security, and without any showing of insolvency, fraud, or mismanagement
on the part of Grantor, and without the necessity of filing any judicial or other proceeding other than the proceeding for appointment
of a receiver, shall be entitled to the appointment of a receiver or receivers of the Property, or any part thereof, and of the
income, rents, issues, and profits thereof.
(f)
Beneficiary
may enter upon the Land, take possession of the Property and remove the Accessories, or any part thereof, with or without judicial
process, and, in connection therewith, without any responsibility or liability on the part of Beneficiary, take possession of any
property located on or in the Property which is not a part of the Property and hold or store such property at Grantor’s expense.
(g)
Beneficiary
may require Grantor to assemble the Accessories, or any part thereof, and make them available to Beneficiary at a place to be designated
by Beneficiary which is reasonably convenient to Grantor and Beneficiary.
(h)
After
notification, if any, hereafter provided in this Subsection 3.1(h), Beneficiary may sell, lease, or otherwise dispose of, at the
office of Beneficiary, or on the Land, or elsewhere, as chosen by Beneficiary, all or any part of the Accessories, in their then
condition, or following any commercially reasonable preparation or processing, and each Sale (as used in this Subsection, the term
“Sale” means any such sale, lease, or other disposition made pursuant to this Subsection 3.1(h)) may be as a unit or
in parcels, by public or private proceedings, and by way of one or more contracts, and at any Sale, it shall not be necessary to
exhibit the Accessories, or part thereof, being sold. The Sale of any part of the Accessories shall not exhaust Beneficiary’s power
of Sale, but Sales may be made from time to time until the Obligation is paid and performed in full. Reasonable notification of
the time and place of any public Sale pursuant to this Subsection 3.1(h), or reasonable notification of the time after which any
private Sale is to made pursuant to this Subsection 3.1(h), shall be sent to Grantor and to any other person entitled to notice
under the Uniform Commercial Code in effect under the laws of the state of Texas (the “Code”); provided that if the Accessories
or part thereof being sold are perishable, or threaten to decline rapidly in value, or are of a type customarily sold on a recognized
market, Beneficiary may sell, lease, or otherwise dispose of the Accessories, or part thereof, without notification, advertisement,
or other notice of any kind. It is agreed that notice sent or given not less than ten (10) calendar days prior to the taking of
the action to which the notice relates is reasonable notification and notice for the purposes of this Subsection 3.1(h).
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(i)
Beneficiary
may surrender the insurance policies maintained pursuant to Subsection 2.2(b) hereof, or any part thereof, and receive and apply
the unearned premiums as a credit on the Obligation, and in connection therewith, Grantor hereby appoints Beneficiary as the agent
and attorney-in-fact for Grantor to collect such premiums.
(j)
Beneficiary
may retain the Accessories in satisfaction of the Obligation whenever the circumstances are such that Beneficiary is entitled to
do so under the Code.
(k)
Beneficiary
may buy the Property, or any part thereof, at any public or judicial sale.
(l)
Beneficiary
may buy the Accessories, or any part thereof, at any private sale if the Accessories, or part thereof, being sold are a type customarily
sold in a recognized market or are a type which is the subject of widely distributed standard price quotations.
(m)
Beneficiary
shall have and may exercise any and all other rights and remedies which Beneficiary may have at law or in equity, or by virtue
of any other security instrument, or under the Code, or otherwise.
(n)
Beneficiary
may apply the reserves, if any, required by Section 5.9 hereof, toward payment of the Obligation.
Section 3.2
Beneficiary
as Purchaser
.
If Beneficiary is the purchaser of the Property, or any part thereof, at any sale thereof, whether such sale
be under the power of sale hereinabove vested in Trustee, or upon any other foreclosure of the liens and security interest hereof,
or otherwise, Beneficiary shall, upon any such purchase, acquire good title to the Property so purchased, free of the liens and
security interest of these presents.
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Section 3.3
Other
Rights of Beneficiary
.
Should any part of the Property come into the possession of Beneficiary, whether before or after
default, Beneficiary may use or operate the Property for the purpose of preserving it or its value, pursuant to the order of a
court of appropriate jurisdiction, or in accordance with any other rights held by Beneficiary in respect to the Property. Grantor
covenants to promptly reimburse and pay to Beneficiary, at the place where the Note is payable, the amount of all reasonable expenses
(including the cost of any insurance, taxes, or other charges), incurred by Beneficiary in connection with its custody, preservation,
use, or operation of the Property, together with interest thereon from the date incurred by Beneficiary at the rate provided in
the Note, and all such expenses, costs, taxes, interest, and other charges shall be a part of the Obligation. It is agreed, however,
that the risk of loss or damage to the Property is on Grantor, and Beneficiary shall have no liability whatsoever for decline in
value of the Property, or for failure to obtain or maintain insurance, or for failure to determine whether insurance in force is
adequate as to amount or as to the risks insured.
Section 3.4
Possession
After Foreclosure
.
In case the liens or security interest hereof shall be foreclosed by Trustee’s sale or by judicial action,
the purchaser at any such sale shall receive, as an incident to his ownership, immediate possession of the property purchased,
and if Grantor or Grantor’s successors shall hold possession of said Property, or any part thereof, subsequent to foreclosure,
Grantor and Grantor’s successors shall be considered as tenants at sufferance of the purchaser at foreclosure sale, and anyone
occupying the Property after demand is made for possession thereof. shall be guilty of forcible detainer and shall be subject to
eviction and removal, forcible or otherwise, with or without process of law, and all damages by reason thereof are hereby expressly
waived.
Section 3.5
Application
of Sales Proceeds Upon Foreclosure
.
The proceeds from any sale, lease, or other disposition made pursuant to this Article
III, or the proceeds from surrendering any insurance policies pursuant to Subsection 3.1(i) hereof, or the reserves required by
Section 5.9 hereof, or sums received pursuant to Section 5.7 hereof, or proceeds from insurance which Beneficiary elects to apply
to the Obligation pursuant to Section 5.8 hereof, shall be applied by Trustee, or by Beneficiary, as the case may be, as follows:
First, to the payment of all expenses of advertising, preserving, selling, and conveying the Property, or part thereof, including
reasonable attorney’s fees, and including a reasonable commission to Trustee; second, to interest on the Obligation; third, to
principal on the matured portion of the Obligation; fourth, to prepayment of the unmatured portion, if any, of the Obligation applied
to installments of principal in inverse order of maturity; and fifth, the balance, if any, remaining after the full and final payment
and performance of the Obligation, to the person or persons legally entitled thereto.
Section 3.6
Abandonment
of Sale
.
In the event a foreclosure hereunder should be commenced by Trustee in accordance with Subsection 3.1(c) hereof,
Beneficiary may at any time before the sale, direct Trustee to abandon the sale, and may then institute suit for the collection
of the Note, and for the foreclosure of the liens and security interest hereof. If Beneficiary should institute a suit for the
collection of the Note, and for a foreclosure of the liens and security interest hereof, it may at any time before the entry of
a final judgment in said suit dismiss the same, and require Trustee to sell the Property, or any part thereof, in accordance with
the provisions of this Deed of Trust.
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ARTICLE IV
Miscellaneous
Section 4.1
Release
.
If the Obligation is paid in full in accordance with the terms of this Deed of Trust and the Note and other instruments evidencing
or securing such Obligation, and if Grantor shall well and truly perform all of Grantor’s covenants contained herein and in the
other Loan Documents, then this conveyance shall become null and void and be released at Grantor’s request and expense.
Section 4.2
Rights
Cumulative
.
All rights, remedies, powers, and privileges and all liens, titles, and security interests herein expressly
conferred are cumulative, and shall not be deemed to deprive Beneficiary or Trustee of any other legal or equitable rights, remedies,
powers, privileges, liens, titles, or security interests by or through judicial proceedings or otherwise appropriate to enforce
the conditions, covenants, and terms of this Deed of Trust, the Note, and other and other Loan Documents.
Section 4.3
Waiver
.
Any and all covenants in this Deed of Trust may from time to time, by instrument in writing signed by Beneficiary and delivered
to Grantor, be waived to such extent and in such manner as Beneficiary may desire, but no such waiver shall ever affect or impair
Beneficiary’s rights, remedies, powers, privileges, liens, titles, and security interest hereunder, except to the extent so specifically
stated in such written agreement. Neither the exercise of, nor the failure to exercise any option or remedy under the terms of
this Deed of Trust shall be considered as a waiver of the right to exercise same, or any other option or remedy given herein.
Section 4.4
Maximum
Rate of Interest
.
Grantor and Beneficiary intend to comply with the applicable law governing the Maximum Rate (hereafter
defined). All agreements between Grantor and Beneficiary, whether now existing or hereafter arising and whether written or oral,
are expressly limited so that in no event whatsoever, whether by reason of acceleration of the maturity of the Obligation or otherwise,
shall the interest contracted for, charged, or received by Beneficiary hereunder or otherwise exceed the Maximum Rate. If, in any
contingency whatsoever, Beneficiary shall receive anything of value deemed interest under applicable law which would cause the
interest contracted for, charged, or received by the Beneficiary to exceed the Maximum Rate, the excessive interest shall be applied
to the reduction of the unpaid principal balance of the Obligation and not to the payment of interest, or if such excessive interest
exceeds the unpaid principal balance of the Obligation, such excess shall be refunded to Grantor, and the provisions herein and
any demand on Grantor shall immediately be deemed reformed, and the amounts thereafter collectible hereunder shall be reduced,
without the necessity of the execution of any new documents, so as to comply with the applicable law, but so as to permit the recovery
of the fullest amount otherwise called for hereunder. All interest paid or agreed to be paid to the Beneficiary, to the extent
permitted by applicable law, shall be amortized, prorated, allocated, and spread throughout the full term of such indebtedness
until payment in full (including the period of any renewal or extension hereof) so that the rate or amount of interest on account
of such indebtedness does not exceed the Maximum Rate.
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The term “Maximum
Rate,” as used herein, shall mean the maximum nonusurious interest rate, if any, that at any time, or from time to time, may
under applicable law be contracted for, taken, reserved, charged or received on the Obligation, or any portion thereof, under the
laws which are presently in effect of the United States and the State of Texas applicable to such Beneficiary and such indebtedness
or, to the extent allowed by law under such applicable laws of the United States of America and the State of Texas which may hereafter
be in effect, which allow a higher maximum non-usurious interest rate than applicable laws now allow; provided, that in determining
the Maximum Rate, due regard shall be given, to the extent required by applicable law, to any and all relevant payments, fees,
charges, deposits, balances, agreements and calculations which may constitute or be deemed to constitute interest, or be deducted
from principal to calculate the interest rate or otherwise affect interest rate determinations, so that in no event shall the Beneficiary
contract for, charge, receive, take, collect, reserve or apply, on the Obligation, or any portion thereof, any amount in excess
of the maximum non-usurious rate of interest permitted by applicable law.
Section 4.5
Effect
of Transfer on Grantor’s Liability
.
If the ownership of the Property or any part thereof becomes vested in a person other
than Grantor or in the event of a change in ownership of any Grantor other than an individual, Beneficiary may, without notice
to Grantor or Grantor’s successors, deal with such successor or successors in interest with reference to this Deed of Trust and
the Obligation, either by way of forbearance on the part of Beneficiary, or extension of time of payment of the Obligation, or
release of all or any part of the Property or any other property securing payment of the Obligation, or otherwise, without in any
way modifying or affecting Beneficiary’s rights and liens hereunder or the liability of Grantor or any other party liable for payment
of the Obligation, in whole or in part.
Section 4.6
Waiver
of Right to Marshal
.
Grantor hereby waives all rights of marshaling in event of any foreclosure of the liens and security
interests hereby created.
Section 4.7
Condemnation
Proceeds
.
Beneficiary shall be entitled to receive any and all sums which may be awarded or become payable to Grantor for
the condemnation of the Property, or any part thereof, for public or quasi-public use, or by virtue of private sale in lieu thereof,
and any sums which may be awarded or become payable to Grantor for damages caused by public works or construction on or near the
Property. All such sums are hereby assigned to Beneficiary, and Grantor shall, upon request of Beneficiary, make, execute, acknowledge,
and deliver any and all additional assignments and documents as may be necessary from time to time to enable Beneficiary to collect
and receipt for any such sums. Beneficiary shall not be, under any circumstances, liable or responsible for failure to collect
or exercise diligence in the collection of any of such sums. Any sums received by Beneficiary in the event of condemnation shall
be applied to installments on the Obligation in inverse order of maturity. Notwithstanding anything to the contrary herein, and
subject to Beneficiary’s prior written consent, which will not be unreasonably withheld or delayed, and so long as there is no
Event of Default and Beneficiary reasonably determines that the Property can be fully restored or repaired to its original value
with available funds, the proceeds of any award shall be disbursed to Grantor for use to restore or repair the Property, subject
to Beneficiary’s standard construction disbursement procedures.
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Section 4.8
Insurance
Proceeds
.
The proceeds of any and all insurance upon the Property shall be collected by Beneficiary. However, subject to
Beneficiary’s prior written consent, which will not be unreasonably withheld or delayed, and so long as there is no Event of Default
and Beneficiary reasonably determines that the Property can be fully restored or repaired to its original value with available
funds, the proceeds of any award shall be disbursed to Grantor for use to restore or repair the Property, subject to Beneficiary’s
standard construction disbursement procedures.
Section 4.9
Reserve
for Taxes and Insurance Premiums
.
At the request of Beneficiary upon an Event of Default which continues beyond any applicable
cure period, Grantor shall create a fund or reserve for the payment of all insurance premiums, taxes, and assessments against or
affecting the Property in accordance with the Loan Agreement. Any excess reserve shall, at the discretion of Beneficiary, be credited
by Beneficiary on subsequent reserve payments or subsequent payments to be made on the Note by the maker thereof, and all deficiency
shall be paid by Grantor to Beneficiary on or before the date when such premiums, taxes, and assessments shall become delinquent.
In the event there exists a deficiency in such fund or reserve at any time when taxes, assessments, or insurance premiums are due
and payable, Beneficiary may, but shall not be obligated to, advance the amount of such deficiency on behalf of the Grantor, and
such amounts so advanced shall become a part of the Obligation, shall be immediately due and payable and shall bear interest at
the rate provided in the Note from the date of such advance through and including the date of repayment. Transfer of legal title
to the Property shall automatically transfer the interest of Grantor in all sums deposited with Beneficiary under the provisions
hereof or otherwise. In the event that Beneficiary does not request that such a fund be established, Grantor hereby agrees that
he will promptly pay all premiums, taxes, and assessments when due, and will furnish to Beneficiary proof of payment within 45
days of the due date by submitting cancelled checks along with the statement concerning such taxes, premiums, or assessments.
Section 4.10
Right
to Accelerate Upon Transfer
.
If Grantor shall sell, convey, assign, or transfer all or any part of the Property or any
interest therein or any beneficial interest in the Grantor in violation of the Loan Documents, Beneficiary may at Beneficiary’s
option, declare the Obligation to be immediately due and payable, which option may be exercised at any time following such sale,
conveyance, assignment, or transfer. Beneficiary may in its sole discretion and at Grantor’s request decide not to exercise said
option in which event Beneficiary’s forbearance may be predicated on such terms and conditions as Beneficiary may in its sole discretion
require, including but not limited to Beneficiary’s approval of the transferee’s credit worthiness and management ability, and
the execution and delivery to Beneficiary by transferee, prior to the sale, transfer, assignment, or conveyance of a written assumption
agreement containing such terms as Beneficiary may require, including but not limited to, a payment of a part of the principal
amount of the Obligation, the payment of an assumption fee, a modification of the term of the Obligation, and such other terms
as Beneficiary may require. Should the Property be sold, traded, transferred, assigned, exchanged, or otherwise disposed of without
the prior written consent of Beneficiary and payment of any portion of the Obligation is thereafter accepted by the Beneficiary
such acceptance shall not be deemed a waiver of the requirement of Beneficiary’s consent in writing thereto or with respect to
any other sale, trade, transfer, assignment, exchange, or other disposition.
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Section 4.11
Prohibition
Against Subordinate Financing
.
If Grantor without the prior written consent of Beneficiary, executes or delivers any pledge,
security agreement, mortgage, or deed of trust covering all or any portion of the Property (hereafter called “Subordinate
Mortgage”) Beneficiary may, at Beneficiary’s option, which option may be exercised at any time following such pledge, security
agreement, mortgage, or deed of trust, declare the Obligation to be immediately due and payable. In the event of consent by Beneficiary
to the foregoing or in the event the foregoing prohibition is determined by a court of competent jurisdiction to be unenforceable
under the provisions of any applicable law, Grantor will not execute or deliver any Subordinate Mortgage unless there shall have
been delivered to Beneficiary not less than ten (10) days prior to the date thereof a copy thereof which shall contain express
covenants to the effect:
(a)
that the Subordinate Mortgage is in all respects unconditionally subject and subordinate to
the lien, security interest, and assignment evidenced by this Deed of Trust and each term and provision hereof;
(b)
that
if any action or proceeding shall be instituted to foreclose the Subordinate Mortgage (regardless of whether the same is a judicial
proceeding or pursuant to a power of sale contained therein), no tenant of any portion of the Property will be named as a party
defendant, or will any action be taken with respect to the Property which would terminate any occupancy or tenancy of the Property
without the prior written consent of Beneficiary;
(c)
that the rents and profits, if collected through a receiver or by
the Beneficiary of the Subordinate Mortgage, shall be applied first to the Obligations, including principal and interest due and
owing on or to become due and owing on the Note and the other indebtedness secured hereby and then to the payment of maintenance,
operating charges, taxes, assessments, and disbursements incurred in connection with the ownership, operation, and maintenance
of the Property; and
(d)
that if any action or proceeding shall be brought to foreclose the Subordinate Mortgage, (regardless
of whether the same is a judicial proceeding or pursuant to a power of sale contained therein), written notice of the commencement
thereof will be given to Beneficiary contemporaneously with the commencement of such action or proceeding.
Section 4.12
Subrogation
.
It is understood and agreed that the proceeds of the Note, to the extent the same are utilized to renew or extend any indebtedness
or take up any outstanding liens against the Property, or any portion thereof, have been advanced by Beneficiary at Grantor’s request
and upon Grantor’s representation that such amounts are due and payable. Beneficiary shall be subrogated to any and all rights,
remedies, powers, privileges, liens, titles, and security interests owned or claimed by any owner or Beneficiary of said outstanding
indebtedness or lien, however remote, regardless of whether said indebtedness or lien is acquired by assignment or is released
by the Beneficiary thereof upon payment.
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Section 4.13
Covenant
to Perform
.
Grantor and each and every subsequent owner of the Property, or any part thereof, covenants and agrees that
Grantor will perform or cause to be performed, each and every condition, term, provision, and covenant of this Deed of Trust, except
that Grantor shall have no duty to pay the indebtedness evidenced by the Note except in accordance with the terms of the Note and
all renewals and extensions thereof, and this Deed of Trust or in accordance with the terms of the transfer to Grantor.
Section 4.14
Notice
.
Any notice or other written communication required or permitted hereunder shall be made in accordance with Section 8.2 of the Loan
Agreement.
Section 4.15
Enforceability
.
If the rights and liens created by this Deed of Trust shall be held by a court of competent jurisdiction to be invalid or unenforceable
as to any part of the Obligation, the unsecured portion of the Obligation shall be completely paid prior to the payment of the
remaining and secured portion of the Obligation, and all payments made on the Obligation shall be considered to have been paid
on and applied first to the complete payment of the unsecured portion of the Obligation.
Section 4.16
Successors
and Assigns
.
This Deed of Trust is binding upon Grantor and Grantor’s successors, and shall inure to the benefit of Beneficiary,
and its successors and assigns, and the provisions hereof shall be covenants running with the Land. The duties, covenants, conditions,
obligations, and warranties of Grantor in this Deed of Trust shall be joint and several obligations of Grantor and Grantor’s successors.
Section 4.17
Counterparts
.
This Deed of Trust may be executed in a number of identical counterparts, each of which, for all purposes, shall be deemed an original.
If any Grantor is a corporation, this instrument is executed, sealed, and attested by Grantor’s officers hereunto duly authorized.
Section 4.18
Financing
Statement
.
This Deed of Trust is intended to be a financing statement filed as a fixture filing with respect to the Accessories
and the goods described at the beginning of this Deed of Trust which are or are to become fixtures relating to he Land. The address
of Grantor (Debtor) is set forth on the first page hereof and the address of Beneficiary (Secured Party) is set forth in Section
1.1 hereof. This Deed of Trust is to be filed for record in the real property records of the county clerk of the county or counties
where the Land is located. Grantor is the record owner of the Land. A carbon, photographic, or other reproduction of this Deed
of Trust or of a financing statement pursuant hereto is sufficient as a financing statement.
Section 4.19
Partial
Invalidity
.
If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is
invalid or unenforceable as to any part of the Land, the unsecured or partially secured portion of the debt shall be completely
paid prior to the payment of the remaining and secured or partially secured portion of the debt, and all payments made on the debt,
whether voluntary or under foreclosure or other enforcement action or procedure, shall be considered to have been first paid on
and applied to the full payment of that portion of the debt which is not secured or fully secured by the lien of this Deed of Trust.
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Section 4.20
Appraisal
.
Beneficiary may from time to time obtain, or require Grantor to obtain for Beneficiary, an appraisal performed by a licensed or
certified appraiser acceptable to Beneficiary of any real property securing any extension of credit by Beneficiary to Grantor.
Grantor shall insure that such appraiser has free and full access to the subject real property for the purpose of making an appraisal.
Grantor consents to such access by appraiser. If Grantor is not in possession of the real property at the time of the appraisal,
Grantor shall obtain any consent and cooperation of any person in possession of the real property at the time of the appraisal.
Unless prohibited by applicable law, Grantor shall pay to Beneficiary, on demand, any fees incurred by Beneficiary in obtaining
any appraisal required under a regulation or policy of any applicable governmental authority or required under Beneficiary’s
loan policy. Grantor’s obligation under this paragraph shall be secured by Beneficiary’s lien upon the subject real
property unless the real property is the homestead of the Grantor. However, notwithstanding the foregoing, Beneficiary will not
require more than one (1) such appraisal in any calendar year unless there is an Event of Default which continues beyond any applicable
cure period
Section 4.21
Attorneys’
Fees
.
If this Deed of Trust or any document related to it is given by Beneficiary to an attorney for enforcement, or if
suit is brought for collection or enforcement, or if this Deed of Trust or any document related to it is collected or enforced
through probate, bankruptcy or other judicial proceeding (or Beneficiary takes action to protect its interests through probate,
bankruptcy or other judicial proceedings), Grantor shall pay Beneficiary reasonable attorneys’ fees, court costs and expenses
in addition to other amounts due hereunder.
Section 4.22
Severability
.
Except as expressly provided to the contrary herein, each section, part, term, or provision of this Deed of Trust shall be considered
severable, and if for any reason any article, section, part, term, or provision herein is determined to be invalid and contrary
to or in conflict with any existing or future law or regulation by a court or governmental agency having valid jurisdiction, such
determination shall not impair the operation of or have any other effect on other sections, parts, terms, or provisions of this
Deed of Trust as may remain otherwise intelligible, and the latter shall continue to be given full force and effect and bind the
parties hereto, and said invalid sections, parts, terms, or provisions shall not be deemed to be a part of this Deed of Trust.
Section 4.23
No
Agency, Partnership or Joint Venture
. Nothing contained herein nor any acts of the parties hereto shall be deemed or construed
by the Beneficiary or by any other party as creating the relationship between them of (i) principal and agent, (ii) a partnership,
or (iii) a joint venture.
Section 4.24
Cross-Default
Provision
. It is expressly understood and agreed that should Grantor, fail to pay any other indebtedness or any part thereof,
principal or interest, as the same shall become due and payable, which may be secured by a lien or liens on the Property herein
described, the Obligation hereby secured, at the option of the Beneficiary, shall become due and payable. Grantor hereby assigns
to Beneficiary any right Grantor may have by reason of any prior encumbrance on the Property or by law or otherwise to cure any
default under said prior encumbrance.
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Section 4.25
Nevada-Specific
Provisions
.
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(a)
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Principles of Construction
. In the event of any inconsistencies between the terms and conditions
of this Section 4.25 and other terms and conditions of this Deed of trust, the terms and conditions of this Section 4.25 shall
control and be binding.
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(b)
|
Fixture Filing
. Supplementing the provisions of Section 4.18 of this Deed of Trust, this
Deed of Trust shall constitute a fixture filing pursuant to NRS 104.9402, as amended from time to time. Some or all of the collateral
may be or become a fixture in which Beneficiary has a security interest under the security agreement provided for in Section 4.18
above (the “Security Agreement”). The rights, remedies and interests of Beneficiary are independent and cumulative, and
there shall be no merger of any lien hereunder with any security interest created by the Security Agreement.
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(c)
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Future Advances
. This Deed of Trust secures future advances, as defined in NRS 106.320,
and is to be governed by NRS 106.300 to 106.400, inclusive. The maximum principal amount to be secured hereby is $15,000,000. The
maximum amount of advances of principal to be secured by this Deed of Trust may increase or decrease from time to time by amendment
of this Deed of Trust.
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(d)
|
Cure Period
. The time period for curing a default under the loan evidenced by the Note,
if any, shall run concurrently with the 35 day statutory cure period under NRS 107.080(2)(a)(2).
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(e)
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Subject to NRS 107.080 Foreclosure Procedures
. Beneficiary’s rights and remedies under this
Deed of Trust shall be subject to NRS 107.080
et seq
.
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(f)
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Power to Enter for Environmental Issues
. Without limiting any rights or remedies of Beneficiary
under any of the Loan Documents, Grantor agrees that Beneficiary shall have, at a minimum, the same right, power and authority
to enter and inspect the Property as is granted to a secured lender under NRS 40.507, and that Beneficiary will have the right
to appoint a receiver to enforce the right to enter and inspect the Property to the extent such authority is provided under the
Loan Documents and/or Nevada law, including, without limitation, the authority granted to a secured lender under NRS 32.015.
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(g)
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Ability to Waive Lien for Environmental Issues
. In the event that any portion of the Property
is determined to be “environmentally impaired” (as “environmentally impaired” is defined in NRS 40.503, then,
without otherwise limiting or in any way affecting Beneficiary’s or Trustee’s rights or remedies under this Deed of Trust, Beneficiary
may elect to exercise its right under NRS 40.501 through 40.512, inclusive, to (i) waive its lien on such environmentally impaired
or affected portion of the Property, and (ii) exercise the rights and remedies of an unsecured creditor, including the reduction
of its claim against Grantor to judgment and any other rights and remedies permitted by applicable laws. Grantor shall be deemed
to have willfully permitted or acquiesced in a release or threatened release of hazardous materials, within the meaning of NRS
40.505, if the release or threatened release of hazardous materials was knowingly or negligently caused or contributed to by any
lessee, occupant or user of any portion of the Property and Grantor knew or should have known of the activity by such lessee, occupant
or user which caused or contributed to the release or threatened release. Beneficiary shall have the right under this Deed of Trust
to allocate amounts recovered on the Obligation first to those portions thereof other than damages and other amounts recoverable
under NRS 40.509, and thereafter to damages and other amounts recoverable under said statute.
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(h)
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Personal Property May Be Sold as a Single Parcel by Election of Beneficiary
. Any sale of
personal property may be held as a part of and in conjunction with any foreclosure sale of the other properties and rights constituting
the Property in order that the Property, including the personal property, may be sold as a single parcel if the Beneficiary elects,
as permitted by NRS 104.9604, and grantor agrees that such sale of personal property together with real property constitutes a
commercially reasonable sale of the personal property.
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(i)
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Conflicts with Nevada Gaming Laws
. All rights, remedies and powers provided in this Deed
of Trust may be exercise don to the extent that the exercise thereof does not violate any applicable provision of the Nevada Gaming
Laws, and all provisions of this Deed of trust are intended to be subject to all applicable mandatory provisions of the Nevada
Gaming Laws which may be controlling and to be limited to the extent necessary so that they will not render this Deed of Trust
invalid or unenforceable, in whole or in part.
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(j)
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Waiver of Condemnation Proceeds
. Grantor hereby specifically, unconditionally and irrevocably
waives all rights of a property owner granted under applicable law which provide for allocation of condemnation proceeds between
a property owner and a lienholder, including the provisions of NRS 37.115.
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(k)
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WAIVER OF CHAPTER 40 PROTECTIONS
. GRANTOR DOES HEREBY RELINQUISH AND SHALL CAUSE THE
GUARANTOR, IF ANY, TO WAIVE AND RELINQUISH ALL RIGHTS AND REMEDIES ACCORDED BY APPLICABLE LAW TO GRANTORS AND GUARANTORS GENERALLY
AND AGREES NOT TO ASSERT OR TAKE ADVANTAGE OF ANY SUCH RIGHTS OR REMEDIES, INCLUDING, WITHOUT LIMITATION: ANY RIGHT PROVIDED BY
NRS 40.430 AND JUDICIAL DECISIONS RELATING THERETO, AND NRS 40.451 THROUGH 40.4639, INCLUSIVE. AND JUDICIAL DECISIONS RELATING
THERETO, OR ANY OTHER STATUTE OR DECISION, TO REQUIRE BENEFICIARY TO PROCEED AGAINST GRANTOR OR ANY OTHER PERSON OR TO PROCEED
AGAINST OR EXHAUST ANY SECURITY HELD AT ANY TIME OR TO PURSUE ANY OTHER REMEDY IN BENEFICIARY’S POWER BEFORE PROCEEDING AGAINST
THE GRANTOR, GRANTOR SPECIFICALLY AGREEING THAT SUCH WAIVERS ARE INTENDED TO TAKE ADVANTAGE OF THE WAIVERS PERMITTED BY NRS 40.495(2)
TO THE MAXIMUM EXTENT PERMITTED.
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EXECUTED and SEALED
as of the date first above written.
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AQUA METALS RENO, INC., a
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Delaware corporation
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By:
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/s/ Thomas Murphy
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Thomas Murphy
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Chief Financial Officer
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STATE OF NEVADA
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§
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§
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COUNTY OF STOREY
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§
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THE FOREGOING INSTRUMENT
was acknowledged before me on this _______ day of November, 2015, by
Thomas Murphy, Chief Financial Officer of AQUA METALS RENO,
INC.
WITNESS MY HAND AND OFFICIAL SEAL.
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My Commission Expires:______________________
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Notary Public, State of Nevada
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LEGAL DESCRIPTION
A TRACT OR PARCEL OF LAND CONTAINING 0.8205 ACRES OF LAND, (35,742
SQUARE FEET), BEING A PORTION OF UNRESTRICTED RESERVE “B”, NOTTINGHAM COUNTRY, SECTION 7, A SUBDIVISION IN HARRIS COUNTY,
TEXAS, ACCORDING TO THE MAP OR PLAT THEREOF RECORDED IN VOLUME 265, PAGE 1, OF THE MAP RECORDS OF HARRIS COUNTY, TEXAS, SAID 0.8205
ACRE TRACT OF LAND BEING THAT CERTAIN CALLED 0.8205 ACRE TRACT OF LAND AS CONVEYED TO JAMES D. SAWYER AND LAWRENCE D. FIEGLEIN
GENERAL PARTNERSHIP BY INSTRUMENT RECORDED IN DOCUMENT CF NO. V507351 OF THE OFFICIAL PUBLIC RECORDS OF HARRIS COUNTY, TEXAS, AND
BEING MORE PARTICULARLY DESCRIBED BY METES AND BOUNDS AS FOLLOWS: (BEARING BASIS: VOLLUME 265, PAGE 1, OF THE MAP RECORDS OF HARRIS
COUNTY, TEXAS).
BEGINNING at a calculated point for the most southeasterly cutback
corner at the intersection of the south right-of-way line of Kingsland Boulevard, (100.00 Foot Right-of-Way), with the west right-of-way
line of Shillington Drive, (60.00 Foot Right-of-Way), same being the most easterly northeast corner of said Reserve “B”
same being the most easterly northeast corner and POINT OF BEGINNING of the herein described tract;
Thence, S 01°47’36” E, with the west right-of-way
line of Shillington Drive, a distance of 163.66 feet to a 5/8” iron rod found for the northeast corner of that certain called
1.4320 acre tract of land as conveyed to KOA Group, Inc., by instrument recorded in Document CF No. 20130518899 of the Official
Public Records of Harris County, Texas, same being the southeast corner of the herein described tract;
Thence, N 82°55’25” W, with the common line of said
1.4320 Acre Tract, a distance of 229.54 feet to a calculated point on the common line of that certain called 1.3652 acre tract
of land as conveyed to Mustang Kingsland, L.P., by instrument recorded in Document CF No. X237326 of the Official Public Records
of Harris County, Texas, for the northwest corner of said 1.4320 Acre Tract, same being the southwest corner of the herein described
tract;
Thence, N 07°04’35” E, with the common line of said
1.3652 Acre Tract, a distance of 162.00 feet to a capped, (Precision), iron rod set on the south right-of-way line of Kingsland
Boulevard, on the arc of a curve to the left, for the northeast corner of said 1.3652 Acre Tract, same being the northwest corner
of the herein described tract;
Thence, Southeasterly, with the south right-of-way line of Kingsland
Boulevard, along the arc of said curve to the left, having an included angle of 05°08’42”, a radius of 2150.00
feet, a chord that bears, S 85°29’48” E, a chord distance of 193.00 feet, for an arc distance of 193.06 feet to
a calculated point for the most northwesterly cutback corner at the intersection of the south right-of-way line of Kingsland Boulevard
with the west right-of-way line of Shillington Drive, same being the most northwesterly northeast corner of the herein described
tract;
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Thence, S 44°59’50” E, with the south right-of-way
line of Kingsland Boulevard, a distance of 14.58 feet to the POINT OF BEGINNING and containing 0.8205 acres of land, (35,742 square
feet), more or less.
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