UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01. Entry into a Material Definitive Agreement.
Loan Agreement
On July 11, 2022, Zoned Arizona Properties, LLC (“Zoned Arizona”), a wholly owned subsidiary of Zoned Properties, Inc. (the “Company”), entered into a Loan Agreement (the “Loan Agreement”), dated as of July 11, 2022, by and between Zoned Arizona and East West Bank (the “Bank”). Pursuant to the terms of the Loan Agreement, subject to and upon the satisfaction of the terms and conditions of the Loan Agreement, Zoned Arizona may request advances under a multiple access loan (“MAL”) during the MAL Advance Period (as hereinafter defined) in an aggregate outstanding amount not to exceed $4.5 million. The “MAL Advance Period” means the shorter of (i) a period of one year from July 11, 2022, or (ii) a period commencing on July 11, 2022 and ending on the date that Zoned Arizona makes the Early Amortization Election (as hereinafter defined). On July 11, 2022, Zoned Arizona paid the Bank a $45,000 loan fee. Amounts borrowed under the MAL may not be re-borrowed.
The proceeds of each advance under the MAL may be used by Zoned Arizona to refinance the real property at 410 S. Madison Drive, Tempe, AZ 85251 (the “Property”) or to conduct certain acts related to the acquisition, improvement and maintenance of real property. On termination of the MAL, all unpaid principal, unpaid and accrued interest, and all other amounts due under the MAL will be immediately due and payable.
At any time before July 11, 2023, Zoned Arizona may elect to commence paying principal together with interest on the MAL in accordance with the repayment terms set forth in the variable rate note initially evidencing the MAL, executed by Zoned Arizona in favor of the Bank (the “Note”). If Zoned Arizona makes the Early Amortization Election, then (i) Zoned Arizona will not be entitled to any further advances under the MAL, and (ii) the 25-year amortization schedule referenced in the Note will be from the date Zoned Arizona makes the Early Amortization Election.
Provided that Zoned Arizona has previously drawn one or more advances equal to or greater than $1 million under the MAL, at any time during the MAL Advance Period, Zoned Arizona may elect to reset as to such advances from the variable interest rate set forth in the Note to a fixed interest rate for the remaining term of the MAL (the “Fixed Rate Option”). In the event Zoned Arizona elects the Fixed Rate Option for any advances, such advances will become subject to a new SWAP note (a “SWAP Note”) in a principal amount of at least $1 million based on an interest rate equal to the prime rate then in existence as of the effective date of the new SWAP Note plus 0.75%.
The Loan Agreement contains representations, warranties and covenants customary for a transaction of this type. Among other things, the Loan Agreement provides as follows: (a) upon the occurrence of an event of default, the outstanding principal balance of the MAL will not at any time exceed 65% of the Property’s most recent appraised value; (b) upon the occurrence of an event of default, Zoned Arizona will maintain a minimum Non-Cannabis Debt Service Coverage Ratio (as hereinafter defined) of 1.40 to 1.00; (c) Zoned Arizona will at all times maintain a minimum debt service coverage ratio of 1.50 to 1.0; and (d) Zoned Arizona and the Company, collectively, will maintain at all times, liquid assets of at least the sum of all tenant securities deposits under leases, plus $350,000 in operating reserves.
A copy of the Loan Agreement is attached as Exhibit 10.1 hereto and incorporated herein by reference. The above description of the Loan Agreement is qualified in its entirety by reference to the complete text of the Loan Agreement.
Variable Rate Note
Pursuant to the terms of the Loan Agreement, on July 11, 2022, Zoned Arizona issued the Note to the Bank. The Note has an original principal amount of up to $4.5 million. The Bank agreed to make advances to Zoned Arizona from time to time under the MAL pursuant to the terms of the Loan Agreement. In the event Zoned Arizona elects pursuant to the terms of the Loan Agreement to trigger the Fixed Rate Option as to certain advances, and on each such election by Zoned Arizona, the terms of the Note will cease to apply as to such advances upon Zoned Arizona satisfying all of the applicable conditions set forth in the Loan Agreement, including without limitation Zoned Arizona entering into a new SWAP Note for such advances. Concurrently therewith, the amount available to be advanced under the Note will immediately be reduced on a dollar for dollar basis equal to the amount of the advances which have become subject to such Swap Note.
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All advances under the MAL bear interest at a variable rate equal to the greater of (a) the prime rate plus 2%, or (b) a floor rate equal to the sum of the prime rate as of July 11, 2022 plus 2.25%. From July 11, 2022 to July 11, 2023, Zoned Arizona agreed to make interest payments on the outstanding principal balance of the MAL. From and after July 11, 2023 and continuing until July 11, 2028 (the “Maturity Date”), Zoned Arizona will pay principal together with interest on the MAL in 60 monthly installments based on the interest rate set forth in the Note and a principal amortization schedule of 25 years from July 11, 2023 (or if Zoned Arizona makes the Early Amortization Election, from the date such election is made).
Zoned Arizona may prepay the outstanding principal under the Note, at any time, subject to the provisions of the Note. If Zoned Arizona prepays all, but not less than all, of the outstanding principal balance of the MAL at any time until July 11, 2023, then Zoned Arizona will also pay a premium equal to 1% of the amount prepaid.
A copy of the Note is attached as Exhibit 10.2 hereto and incorporated herein by reference. The above description of the Note is qualified in its entirety by reference to the complete text of the Note.
Guaranty
Also on July 11, 2022 and pursuant to the terms of the Loan Agreement, the Company executed a Guaranty (the “Guaranty”) in favor of the Bank, pursuant to which the Company agreed to guarantee all indebtedness of Zoned Arizona to the Bank arising under or in connection with the MAL or any of the loan documents.
The Guaranty contains representations and warranties customary for a transaction of this type.
A copy of the Guaranty is attached as Exhibit 10.3 hereto and incorporated herein by reference. The above description of the Guaranty is qualified in its entirety by reference to the complete text of the Guaranty.
Security Agreement
Pursuant to the terms of the Loan Agreement, on July 11, 2022, Zoned Arizona entered into a Security Agreement-Deposit Account (the “Security Agreement”) by and between Zoned Arizona and the Bank. Pursuant to the terms of the Security Agreement, Zoned Arizona granted to the Bank a continuing security interest in the identified bank account maintained by Zoned Arizona.
The Security Agreement contains representations and warranties customary for a transaction of this type.
A copy of the Security Agreement is attached as Exhibit 10.4 hereto and incorporated herein by reference. The above description of the Security Agreement is qualified in its entirety by reference to the complete text of the Security Agreement.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information provided in Item 1.01 above regarding the Note is incorporated by reference into this Item 2.03.
Item 5.07 Submission of Matters to a Vote of Security Holders.
On July 8, 2022, the holders of 100% of the issued and outstanding shares of the Company’s preferred stock (i) approved Zoned Arizona’s borrowing of the MAL pursuant to the terms and conditions of the Loan Agreement and the other loan documents, (ii) approved the Guaranty, and the transactions set forth in the Guaranty, the Company’s entry into the Guaranty, and (iii) authorized the officers of the Company to cause the Company to enter into the Guaranty and to cause the Company and Zoned Arizona to enter into the Loan Agreement and the other loan documents and to consummate the transactions set forth in the Guaranty.
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Item 7.01. Regulation FD Disclosure.
On July 12, 2022, the Company issued a press release announcing that it had secured the MAL.
The information included in this Item 7.01, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. The information set forth under this Item 7.01 shall not be deemed an admission as to the materiality of any information in this Current Report on Form 8-K that is required to be disclosed solely to satisfy the requirements of Regulation FD.
Item 9.01 Financial Statement and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |
| 10.1 | Loan Agreement, dated as of July 11, 2022, by and between Zoned Arizona Properties, LLC and East West Bank. | |
| 10.2 | Variable Rate Note, dated as of July 11, 2022, issued by Zoned Arizona Properties, LLC in favor of East West Bank. | |
| 10.3 | Guaranty, dated as of July 11, 2022, executed by Zoned Arizona Properties, LLC in favor of East West Bank. | |
| 10.4 | Security Agreement – Deposit Account, dated as of July 11, 2022, by and between Zoned Arizona Properties, LLC and East West Bank. | |
| 99.1 | Press release of the registrant dated June 28, 2022. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ZONED PROPERTIES, INC. | |
| Dated: July 12, 2022 | /s/ Bryan McLaren |
| Bryan McLaren | |
| Chief Executive Officer & Chief Financial Officer |
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Exhibit 10.1
LOAN AGREEMENT
This LOAN AGREEMENT (this “Agreement”) is entered into as of July 11, 2022 (the “Effective Date”), by and between East West Bank, a California corporation (“Bank”) and Zoned Arizona Properties, LLC, an Arizona limited liability company (“Borrower”). The Parties agree as follows:
ARTICLE 1
ACCOUNTING TERMS & DEFINITIONS
1.1 Accounting Terms. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with a comprehensive basis of accounting reasonably acceptable to Bank.
1.2 Other Definitional Provisions. Definitions of certain terms are set forth in Section 15.1, as well as elsewhere in the Agreement. In addition, references to “Sections”, “subsections”, “Exhibits” and “Schedules” shall be to Sections, subsections, Exhibits and Schedules, respectively, of this Agreement unless otherwise specifically provided. Any of the terms defined in this Agreement may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Agreement, words importing any gender include the other genders; the words “including,” “includes” and “include” shall be deemed to be followed by the words “without limitation”; references to agreements and other contractual instruments (including any of the Loan Documents) shall be deemed to include subsequent amendments, assignments, and other modifications thereto, references to Persons include their respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. Terms not specifically defined herein shall have the meanings given in the UCC.
ARTICLE 2
MULTIPLE ACCESS LOAN
2.1 Multiple Access Loan. Subject to and upon the satisfaction of the terms and conditions of this Agreement, Borrower may request Advances under a multiple access loan (“MAL”) during the MAL Advance Period in an aggregate outstanding amount not to exceed Four Million Five Hundred Thousand and xx/100 Dollars ($4,500,000.00) (the “MAL Limit”). The “MAL Advance Period” means the shorter of (i) a period of one (1) year from the Effective Date, or (ii) a period commencing on the Effective Date and ending on the date that Borrower makes the Early Amortization Election. Amounts borrowed under the MAL may not be reborrowed.
2.2 Use of Proceeds. The proceeds of each Advance under the MAL may be used by Borrower to refinance that certain real property commonly known as 410 S. Madison Drive, Tempe Arizona 85281 (the “Property”), to purchase fee or equitable interests in real property and/or to conduct diligence, make deposits, hold, develop, invest in, improve, maintain, repair and other similar acts related to the acquisition, improvement and maintenance of real property. Further, Borrower will not, directly or indirectly, use any part of the proceeds of the MAL for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or to extend credit to any Person for the purpose of purchasing or carrying any such margin stock, or for any purpose which violates, or is inconsistent with, Regulation X of such Board of Governors.
2.3 Initial Promissory Note. The MAL shall initially be evidenced by that certain Variable Rate Note (the “Variable Rate Note”) executed by Borrower in favor of Bank on or about the date hereof.
2.4 Termination of MAL. The MAL shall terminate on the Termination Date. At such time, all unpaid principal, all unpaid and accrued interest, and all other amounts due under the MAL, including accrued and outstanding fees and costs of Bank, shall be immediately due and payable.
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2.5 Manner of Borrowing. Borrower may request Advances under the MAL during the MAL Advance Period. Whenever Borrower desires an Advance under the MAL, Borrower will notify Bank orally, by email, or by telephone no later than Noon Pacific Time, on the Business Day that the Advance is to be made; otherwise, the Advance will be made on the following Business Day. All oral requests shall be confirmed in writing on the day of the request. Each such notification shall be in addition to any documentation required under Article 5, together with all documentation and information regarding the use of proceeds as requested by Bank in its sole discretion. Bank is authorized to make Advances under this Section, based upon instructions received from a Responsible Officer or a designee of a Responsible Officer, or without instructions if in Bank’s reasonable commercial discretion such Advances are necessary to meet Obligations under this Agreement which have become due and remain unpaid. Bank shall be entitled to rely on any oral, email or telephonic notice given by a person who Bank reasonably believes to be a Responsible Officer or a designee thereof, and Borrower shall indemnify and hold Bank harmless for any damages or loss suffered by Bank as a result of such reliance. Bank will credit the amount of Advances made under this Section to Borrower’s deposit account at Bank on the date such Advance is made.
2.6 Early Amortization Election. At any time before the one (1) year anniversary of the Effective Date, Borrower may elect to commence paying principal together with interest on the MAL in accordance with the repayment terms set forth in the Variable Rate Note by providing Bank notice thereof (the “Early Amortization Election”). If Borrower makes the Early Amortization Election, then (i) Borrower shall not be entitled to any further Advances under the MAL, and (ii) the twenty-five (25) year amortization schedule referenced in the Variable Rate Note shall be from the date Borrower makes the Early Amortization Election.
2.7 Maximum Outstanding Balance. Notwithstanding any other provision of this Agreement, the aggregate outstanding principal amount of the Advances under the MAL shall at no time exceed the MAL Limit. If, at any time, the aggregate amount of the outstanding Advances under the MAL exceeds the MAL Limit, Borrower shall promptly, upon written demand by Bank, pay to Bank, in cash, the amount of such excess Advances.
2.8 Fixed Interest Rate Option. Provided that Borrower has previously drawn one or more Advances equal to or greater than One Million and xx/100 Dollars ($1,000,000.00) under the MAL (such amount, the “Fixed Rate Trigger Amount”), at any time during the MAL Advance Period, Borrower may elect to reset as to such Advances from the variable interest rate set forth in the Variable Rate Note to a fixed interest rate for the remaining term of the MAL (the “Fixed Rate Option”). In the event Borrower elects the Fixed Rate Option for any Advances hereunder, such Advances shall thereafter after satisfaction of the conditions precedent set forth herein cease to be subject to the Variable Rate Note and become subject to a new SWAP Note in a principal amount of at least $1,000,000.00 and a Financial Contract, which is based on an interest rate equal to the Prime Rate (as defined in the Note) then in existence as of the effective date of the new SWAP Rate Note plus three quarters of one percent (0.75%). Borrower may elect the Fixed Rate Option upon providing to Bank sixty (60) days’ written notice of Borrower’s intent to exercise the Fixed Rate Option, and Bank shall approve such election upon Borrower’s satisfaction of the following conditions precedent, as determined by Bank in its reasonable discretion, on or prior to the effective date of such reset option.
2.8.1 No Event of Default shall have occurred and is continuing.
2.8.2 No Material Adverse Change shall have occurred with respect to Borrower or any Guarantor.
2.8.3 Borrower shall execute a Financial Contract in form and substance acceptable to Bank, in its reasonable discretion.
2.8.4 Borrower shall execute a SWAP Note in form and substance acceptable to Bank, in its reasonable discretion (each such promissory note, a “SWAP Note”).
2.8.5 Borrower shall execute or cause the execution of all other documents reasonably required by Bank to exercise the Fixed Rate Option.
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ARTICLE 3
GENERAL TERMS
3.1 Interest.
3.1.1 Interest Payments. Interest payments for the MAL are set forth in the Notes.
3.1.2 Interest Computation. All interest calculations for the Notes shall be on the basis of a three hundred and sixty (360)-day year for the actual days elapsed. Interest paid for any partial month shall be prorated based on the actual number of days elapsed. Any unpaid interest shall be compounded monthly at Bank’s sole discretion.
3.1.3 Adjusted Rate. Intentionally omitted.
3.1.4 Late Charge. If a payment is more than 10 days late, Borrower will be charged 6.00% of the unpaid portion of the regularly scheduled payment or $5.00, whichever is greater
3.1.5 Interest After Default. Upon an Event of Default, the interest rate on the Notes shall, if permitted under applicable law, immediately increase by adding an additional five percent interest (5.0%) to each Note (the “Default Rate”). The Default Rate shall also apply to each succeeding interest rate change that would have applied had there been no Event of Default.
3.2 Repayment Terms; Application of Payments. The MAL shall be repaid as set forth in each Note. Each payment received by Bank shall be credited as of the date paid. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest as shown on the most recent statement or bill provided to Borrower (if no statement or bill has been provided for any reason, it shall be applied to the unpaid interest accrued since the last payment); then to principal; then to any late charges; and then to any unpaid collection costs. Borrower will pay Bank at Bank’s address set forth herein or at such other place as Bank may designate in writing. Interest shall cease upon the principal so credited.
3.3 Statements. Bank shall render to Borrower each month a statement setting forth the balance in Borrower’s loan account(s) maintained by Bank for Borrower pursuant to the provisions of this Agreement, including principal, interest, fees, costs and expenses. Each such statement shall be subject to subsequent adjustment by Bank but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrower and conclusively binding upon Borrower as an account stated except to the extent that Bank receives a written notice from Borrower of any specific exceptions of Borrower thereto within thirty (30) days after the date such statement has been mailed by Bank. Until such time as Bank shall have rendered to Borrower a written statement as provided above, the balance in Borrower’s loan account(s) shall be presumptive evidence of the amounts due and owing to Bank by Borrower.
3.4 Financial Contract as a Separate and District Obligation. Notwithstanding any contrary provisions of the Loan Documents, and without impairing Bank’s rights under the Loan Documents, the amount payable by Borrower under a Financial Contract, if any, shall be, and at all times shall remain, separate and independent debts owed by Borrower in accordance with the terms of any such Financial Contract.
ARTICLE 4
FEES AND CREDITING OF PAYMENTS
4.1 Crediting Payments. Notwithstanding anything to the contrary contained herein, any wire transfer or payment received by Bank after 4:00 p.m. California time shall be deemed to have been received by Bank as of the opening of business on the immediately following Business Day. Whenever any payment to Bank under the Loan Documents would otherwise be due (except by reason of acceleration) on a date that is not a Business Day, such payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for the period of such extension.
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4.2 Automatic Payment. Borrower authorizes Bank to automatically debit Borrower’s Deposit Account as set forth in Section 8.7 with respect to any payment due under any Note.
4.3 Loan Fee – MAL. Borrower shall pay to Bank a loan fee equal to one percent (1.00%) of the MAL Limit, on the Closing Date hereof.
4.4 Legal Fees and Expenses Debit Authorization. Borrower authorizes Bank, at its sole option, to (i) debit the amount of any Advances under the MAL on or after the Closing Date, (ii) debit any other Borrower account with Bank, or (iii) make demand upon Borrower, for payment of all attorneys’ fees and expenses incurred by Bank in connection with the negotiation and documentation of the MAL by counsel retained by Bank, which attorney’s fees and expenses become due through the Closing Date and/or after the Closing Date.
ARTICLE 5
CONDITIONS OF LOANS
5.1 Conditions Precedent to Advances. The obligation of Bank to extend any credit contemplated by this Agreement is subject to the fulfillment to Bank’s satisfaction, as of the date of such Advance, of each of the following conditions:
5.1.1 Approval of Bank Counsel. All legal matters incidental to the extension of credit by Bank shall be satisfactory to counsel of Bank.
5.1.2 Documentation. In addition to any other requirements, prior to making any Advance, Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed by the appropriate parties and in form and substance acceptable to Bank:
(a) this Agreement;
(b) the Deed of Trust executed by Borrower;
(c) the Variable Rate Note executed by Borrower;
(d) a Guaranty executed by Zoned Properties, Inc., a Nevada corporation (“Zoned Properties”);
(e) a Borrowing Resolution executed by Borrower;
(f) a Guarantor Resolution executed by Zoned Properties;
(g) a hazardous materials indemnity agreement executed by Borrower and each indemnitor under such agreement;
(h) a security agreement executed by Borrower regarding its Deposit Account;
(i) Borrower furnishing proof of insurance required under this Agreement, including lender loss payable endorsements as may be required hereunder; all in form and substance acceptable to Bank;
(j) Issuance of a lender’s loan policy in favor of Bank by a title insurance company acceptable to Bank, in form acceptable to Bank and including all endorsements thereto required by Bank in its sole determination; and excluding any exceptions to title or the priority of Bank’s encumbrance unless such exceptions are accepted by Bank in its sole discretion.
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(k) a subordination, non-disturbance and attornment agreement executed by each Tenant of the Property;
(l) an estoppel certificate, executed by each Tenant of the Property; and
(m) an assignment of lease guaranty executed by Borrower.
5.1.3 Security Interests. Bank’s security interests in the Collateral described in this Agreement must be duly perfected and in first lien position subject only to exceptions acceptable to Bank in its sole determination.
5.1.4 Financial Condition. There shall have been no Material Adverse Change, as determined by Bank, in the financial condition or business of Borrower or any Guarantor.
5.1.5 Other Documents. Bank shall have received, in form and substance reasonably satisfactory to Bank, all consents, waivers, acknowledgments and other agreements from Borrower or third persons which Bank may deem necessary or desirable in order to effectuate the provisions or purposes of this Agreement and the other Loan Documents.
5.1.6 Compliance. The representations and warranties contained herein and each of the other Loan Documents shall be true on and as of the date of the signing of this Agreement and on the date of each extension of credit by Bank pursuant hereto, with the same effect as though such representations and warranties had been made on and as of each such date, and on each such date, no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing or shall exist.
5.1.7 Payment of Fees. Borrower shall have paid any loan fees set forth in Article 4.
ARTICLE 6
CREATION OF SECURITY INTEREST
6.1 Deeds of Trust and Security Agreements. All Obligations under the MAL now or hereafter existing are secured by that certain Deed of Trust of approximately even date herewith granted by Borrower in favor of Bank with respect to the Property together with any other Collateral Agreement with respect to the MAL. Borrower grants to Bank a security interest in all of its Collateral. Borrower’s obligation under the Financial Contract, if any, shall be secured by any and all collateral described in this Section.
6.2 Delivery of Additional Documentation Required. Borrower shall from time to time execute and deliver to Bank, at the request of Bank, all documents and instruments, mortgages, financing statements and other documents that Bank may reasonably request, in form satisfactory to Bank, and perform all acts reasonably necessary and cooperate with Bank in order: (i) that Bank may take, perfect and continue to perfect Bank’s security interests in the Collateral; and (ii) to fully consummate all of the transactions contemplated under the Loan Documents.
6.3 Right to Inspect Personal Property. Bank (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time during usual business hours, to inspect, Borrower’s books and records and to make copies thereof and to check, test, and appraise the personal property Collateral in order to verify Borrower’s financial condition or the amount, condition of, or any other matter relating to, the Collateral.
6.4 Right to Inspect Real Property. Subject to the rights of any tenants and applicable law, Bank and its agents and representatives shall have the right to enter and visit any real property of Borrower which has been granted to Bank as security under this Agreement at any reasonable time, during usual business hours, upon reasonable prior notice, for the purposes of performing an inspection, at Borrower’s cost. Bank shall make reasonable efforts to avoid interfering with Borrower's use of such real property when exercising any of the rights granted in this Section.
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The Bank acknowledges that the Property is leased by a licensed, regulated cannabis facility, and any access or inspection of the Property shall be subject to applicable state and local law and regulations, as well as any reasonable security measures or procedures imposed by Tenant or Borrower.
6.5 Discharge Liens. In order to protect or perfect any security interest which Bank is granted hereunder, Bank may, in its reasonable discretion, after having given Borrower a reasonable opportunity to discharge any lien or encumbrance or bond the same and so long as such lien or encumbrance would not materially impact the Collateral as determined by Bank in its reasonable discretion, discharge any lien or encumbrance or bond the same, pay any insurance, maintain guards, warehousemen, or any personnel to protect the Collateral, pay any service bureau, or, obtain any records, and all costs for the same shall be added to the obligations of Borrower and shall be payable on demand provided Bank furnishes Borrower with an invoice which describes such costs in reasonable detail and copies of appropriate supporting documentation.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
7.1 Authority. The execution, delivery, and performance by Borrower of the Loan Documents to which it is a party will not: (a) violate any provision of any law, rule, regulation (including, without limitation, Regulations U and X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination, or award presently in effect having applicability to Borrower; (b) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease, or instrument to which Borrower is a party or by which it or its properties may be bound or affected; (c) result in, or require, the creation or imposition of any lien, upon or with respect to any of the properties now owned or hereafter acquired by Borrower; and (d) cause Borrower to be in default under any such law, rule, regulation, order, writ, judgment, injunction, decree, determination, or award or any such indenture, agreement, lease, or instrument.
7.2 Legally Enforceable Agreement. This Agreement is, and each of the other Loan Documents when delivered under this Agreement will be legal, valid, and binding obligations of Borrower, in accordance with their respective terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, and other similar laws affecting creditors’ rights generally.
7.3 Ownership and Liens. Borrower has title to, or valid leasehold interests in, all of its properties and assets, real and personal, including the properties and assets and leasehold interests reflected in the financial statements previously delivered by Borrower to Bank (other than any properties or assets disposed of in the ordinary course of business). All liens or security interests encumbering any property of Borrower have been disclosed in writing to Bank.
7.4 Other Agreements. Borrower is not a party to any indenture, loan, or credit agreement, or to any lease or other agreement or instrument or subject to any charter or corporate restriction which would have a Material Adverse Effect on the business, properties, assets, operations, or conditions, financial or otherwise, of Borrower, or the ability of Borrower to carry out its obligations under the Loan Documents to which it is a party. To Borrower’s knowledge, Borrower is not in default in any respect in the performance, observance, or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument material to its business to which it is a party.
7.5 Litigation. There are no actions or proceedings pending by or against Borrower or any Subsidiary before any court or administrative agency in which an adverse decision would have a Material Adverse Effect. Borrower does not have knowledge of any such pending or threatened actions or proceedings. Borrower has disclosed in writing to Bank all litigation to which it is a party.
7.6 No Material Adverse Change in Financial Statements. All financial statements related to Borrower that have been delivered by Borrower to Bank fairly present in all material respects Borrower’s financial condition as of the date thereof and Borrower’s results of operations for the period then ended. There has not been a Material Adverse Change in the financial condition of Borrower or any Guarantor since the date of the most recent of such financial statements submitted to Bank.
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7.7 Solvency. Borrower is solvent and able to pay its debts (including trade debts) as they mature.
7.8 Environmental Condition. Except as disclosed by Borrower to Bank in writing prior to the date hereof, or as otherwise described in any environmental report received by Bank, Borrower is in compliance in all material respects with all applicable Federal or state environmental, hazardous waste, health and safety statutes and any rules or regulations adopted pursuant thereto, which govern or affect any of Borrower’s operations and/or properties, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, the Federal Toxic Substances Control Act and the California Health and Safety Code, as any of the same may be amended, modified or supplemented from time to time. None of the operations of Borrower is the subject of any Federal or state investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. Borrower has no material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment.
7.9 Taxes. Borrower has filed all material federal, state and local tax returns required to be filed as of the Effective Date of this Agreement, and has paid all taxes, assessments, and governmental charges and levies showing thereon to be due, including interest and penalties, except for deferred payment of any taxes subject to a bona fide dispute by Borrower and reserved for by Borrower in accordance with GAAP. For avoidance of doubt, and without eliminating other types of taxes as being designated “material,” federal and state income and sales taxes, and those taxes arising under laws concerning F.I.C.A., F.U.T.A., state disability, and state or federal employee tax withholdings are deemed to be material taxes.
7.10 Subsidiaries. Except as previously disclosed to Bank in writing, Borrower does not own any stock, partnership interest, membership interest or other equity securities of any Person.
7.11 Government Consents. Borrower has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all governmental authorities that are necessary for the continued operation of Borrower’s business as currently conducted.
7.12 Beneficial Ownership Certification. The information included in the Beneficial Ownership Certification is true and correct in all respects.
7.13 Full Disclosure. No representation, warranty or other statement made by Borrower in any certificate or written statement furnished to Bank contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in such certificates or statements not misleading.
ARTICLE 8
AFFIRMATIVE COVENANTS
8.1 Good Standing. Borrower shall maintain its corporate existence and good standing in its jurisdiction of incorporation/formation and maintain qualification in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect. Borrower shall maintain to the extent consistent with prudent management of Borrower’s business, in force all licenses, approvals and agreements, the loss of which would have a Material Adverse Effect.
8.2 Government Compliance. Borrower shall meet the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA. Borrower shall comply, and shall cause each Subsidiary to comply, with all statutes, laws, ordinances and government rules and regulations to which it is subject, noncompliance with which would have a Material Adverse Effect or a material adverse effect on the Collateral or the priority of Bank’s Lien on the Collateral.
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8.3 Financial Statements and Tax Returns. Borrower shall deliver or cause to be delivered to Bank:
8.3.1 Property Operating Statement. Within forty-five (45) days after the end of each June 30 and each December 31, an operating statement for the Property, in form and substance acceptable to Bank.
8.3.2 Tenant Financial Information. Within forty-five (45) days after the end of each December 31, promptly upon receipt and at such other times as are requested by Bank, all financial information for any Tenant received by Borrower and/or any Guarantor.
8.3.3 10-Q Quarterly Report. Within forty-five (45) days after the end of each fiscal quarter, Zoned Properties’ Form 10-Q Quarterly Report for the quarter ended.
8.3.4 10-K Annual Report. Within ninety (90) days after the end of each fiscal year, Zoned Properties’ Form 10-K Annual Report, audited by independent accountants consistent with Zoned Properties’ course of business.
8.3.5 Other Financial Information. Borrower shall provide or cause to be provided other financial statements and information as Bank may reasonably request from time to time, with respect to Borrower.
8.4 Taxes. Borrower shall make due and timely payment or deposit of all material federal, state, and local taxes, assessments, or contributions required of it by law, and will execute and deliver to Bank, promptly after demand, appropriate certificates attesting to the payment or deposit thereof; and Borrower will make, and will cause each Subsidiary to make, timely payment or deposit of all material tax payments and withholding taxes required of it by applicable laws, including, but not limited to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Bank with proof satisfactory to Bank indicating that Borrower or a Subsidiary has made such payments or deposits; provided that Borrower or a Subsidiary need not make any payment if the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved against (to the extent required by GAAP) by Borrower.
8.5 Insurance.
8.5.1 Borrower, at no expense to Bank, shall keep the Collateral insured (or shall cause it to be so kept) against loss or damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts, as ordinarily insured against by other owners of similar property but not less than the amounts set forth for insurance in the Deed of Trust encumbering such property. Borrower shall also maintain or cause to be maintained insurance relating to Borrower’s ownership and use of the Collateral in amounts and of a type that are customary for properties or businesses similar to Borrower’s or as may be set forth in any Deed of Trust encumbering real property.
8.5.2 Promptly after Bank’s request, Borrower shall deliver to Bank a certificate of insurance evidencing the policies of insurance required by this Agreement and evidence of the payments of all premiums therefor through the applicable term of such policy. All certificates of insurance evidencing such policies of insurance shall be in such form, with such companies, and in such amounts as are reasonably satisfactory to Bank. All such certificates of insurance shall contain a lender’s loss payable endorsement, in a form reasonably satisfactory to Bank, showing Bank as an additional loss payee thereof and such certificates of insurance shall show the Bank as an additional insured, and shall specify that the insurer must give at least twenty (20) days’ notice to Bank before canceling its policy for any reason. All proceeds payable under any such policy shall, at the option of Bank, be payable to Bank to be applied as set forth in the Deed of Trust.
8.6 Title Insurance. As a condition of the Loan closing, the Bank shall be issued an ALTA 2006 (or as otherwise designated by Bank) extended coverage lender’s title insurance policy or policies in an amount not less than the MAL Limit and such endorsements thereto as Bank may reasonably require, issued by a title insurance company acceptable to Bank insuring the Deed of Trust as a first lien on the Property, excepting only such items as Bank approves prior to the Effective Date.
8.7 Account Requirement. Borrower shall, during the term of the MAL, maintain its primary banking relationship with Bank, including general operating and administrative deposit accounts and cash management services, and the Deposit Account shall be Borrower’s primary operating account with respect to the Property. Bank may directly charge such account, as provided for herein, for any payment or Bank Expenses from time-to-time.
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8.8 Re-Margin.
8.8.1 Loan to Value Ratio.
(a) Upon the occurrence of an Event of Default, the outstanding principal balance of the MAL will not at any time exceed sixty-five percent (65%) of the Property’s most recent appraised value, as determined by Bank from time to time. Borrower shall promptly upon demand make any necessary principal payments to Bank so that the MAL remains in compliance with this covenant, or pledge additional collateral to Bank, at Bank’s sole and absolute discretion, to satisfy this covenant in the event, at any time, the outstanding principal balance of the MAL exceeds the value of the Property (as determined in accordance with the preceding sentence) by an amount greater than permitted in this Section.
(b) If deemed necessary by Bank in its sole discretion, Bank shall have the right to order appraisals of the Property and other Collateral from time to time. Borrower agrees to pay the cost for such appraisals and review of same by Bank; however, so long as no Event of Default has occurred and is continuing, Borrower shall be required to pay for not more than one appraisal during any twelve-month period. From and after the occurrence and during the continuance of an Event of Default, Bank may conduct more frequent appraisals of the Property and other Collateral, at Borrower’s expense, in Bank’s sole but reasonable determination.
8.8.2 Non-Cannabis Debt Service Coverage Ratio. Upon the occurrence of an Event of Default, Borrower shall maintain a minimum Non-Cannabis Debt Service Coverage Ratio of 1.40 to 1.00, calculated as of the date of default as follows:
(a) “Non-Cannabis Debt Service Coverage Ratio” shall be calculated by taking the Borrower’s assumed Non-Cannabis Net Operating Income for the period of measurement and dividing it by the Debt Service of the MAL for the period of measurement, and the quotient of such calculation shall at all times be equal to or greater than 1.40 (which may also be expressed as “1.40 to 1.00” or “1.40:1.00”), where:
(1) “Debt Service” is defined in Section 8.9.1.
(2) “Non-Cannabis Net Operating Income” is defined as the gross annual rental income of the Property assuming rental income at a market rate to a non-cannabis tenant as determined by an appraisal conducted on behalf of and satisfactory to Bank as set forth herein, minus operating expenses, plus, for the period of measurement, the aggregate of (1) interest expense (to the extent included in the operating expenses), (2) non-cash charges and any charges deemed by Bank to be extraordinary in its sole discretion or as determined in accordance with GAAP, and (3) reimbursements by Tenant.
(b) In the event Borrower fails to meet the Non-Cannabis Debt Service Coverage Ratio, Borrower shall immediately upon demand make any necessary principal payments to Bank so that the Non- Cannabis Debt Service Coverage Ratio remains in compliance as set forth in this Section.
8.9 Debt Service Coverage Ratio. Borrower shall at all times maintain a minimum Debt Service Coverage Ratio of 1.50 to 1.00, to be measured annually as of December 31 of each year, and calculated as follows:
8.9.1 “Debt Service Coverage Ratio” shall be calculated by taking the Property’s Net Operating Income for the period of measurement and dividing it by the Debt Service of the MAL for the period of measurement, and the quotient of such calculation shall at all times be equal to or greater than 1.50 (which may also be expressed as “1.50 to 1.00” or “1.50:1.00”), where:
(a) “Debt Service” is defined as the sum of all principal and interest payments on the MAL required during the period of measurement.
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(b) “Net Operating Income” is defined as the gross annual rental income of the Property, minus operating expenses, plus the aggregate of (1) interest expense (to the extent included in the operating expenses), depreciation and amortization, (2) non-cash charges and any charges deemed by Bank to be extraordinary in its sole discretion, and (3) reimbursements by Tenant.
8.10 Minimum Liquid Assets – Borrower and Guarantor. Borrower and Zoned Properties, collectively, shall maintain at all times, tested as of each June 30 and each December 31, Liquid Assets of at least the sum of all Tenant security deposits under Leases plus Three Hundred Fifty Thousand and xx/100 ($350,000.00) in operating reserves, where:
8.10.1 “Liquid Assets” is defined as the sum of the aggregate amount of unrestricted and unencumbered cash or cash equivalents held at such time by Borrower and Zoned Properties, collectively.
8.11 Tenant Requirements. Borrower shall cause each tenant of the Property (including any Tenant) who is using the Property for a legalized cannabis use to maintain at all times while conducting business (i) all required cannabis licenses necessary to operate such Tenant’s business (each such license, a “Cannabis License”), and (ii) good standing with appropriate governmental agencies. By executing this Agreement, Bank acknowledges it has verified each Cannabis License prior to the Closing Date hereof, and Bank shall have the right to verify each Cannabis License on each renewal thereof in Bank’s sole determination. So long as a Tenant’s use requires a Cannabis License, if Bank is unable to verify a Cannabis License of a Tenant which is conducting business at the Property to its sole satisfaction, such failure shall constitute an immediate Event of Default.
8.12 Beneficial Ownership. Promptly following any request therefor, Borrower shall provide information and documentation reasonably requested by Bank for purposes of compliance with applicable “know your customer” requirements under the PATRIOT Act, the Beneficial Ownership Regulation or other applicable anti- money laundering laws, including but not limited to a Beneficial Ownership Certification form acceptable to Bank.
8.13 Further Assurances. At any time and from time to time Borrower shall execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect the purposes of this Agreement. The terms and conditions of any promissory note referenced herein are hereby incorporated into this Agreement.
ARTICLE 9
NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder shall be available and until payment in full of the outstanding Obligations or for so long as Bank may have any commitment to make any Advances, Borrower will not do any of the following without the prior written consent of Bank:
9.1 Sale of Assets. Sell, lease, assign, transfer, or otherwise dispose of, of its now owned or hereafter acquired assets (including, without limitation, shares of stock, accounts, and leasehold interests), other than in the ordinary course of business.
9.2 Guaranties, Etc. Assume, guarantee, endorse, or otherwise be or become directly or contingently responsible or liable (including, but not limited to, an agreement to purchase any obligation, stock, assets, goods, or services, or to supply or advance any funds, assets, goods, or services, or an agreement to maintain or cause such Person to maintain a minimum working capital or net worth or otherwise to assure the creditors of any Person against loss) for obligations of any Person, except guaranties entered into in the ordinary course of business.
9.3 Compliance. Become an “investment company” controlled by an “investment company,” within the meaning of the Investment Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of extending credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Advance for such purpose. Fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the Federal Fair Labor Standards Act or violate any law or regulation, which violation would have a Material Adverse Effect.
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9.4 Indebtedness. Create, incur, guarantee, assume or be or remain liable with respect to any indebtedness, other than indebtedness incurred in connection with this Agreement, without Bank’s prior written consent.
9.5 Mergers or Acquisitions. Merge or consolidate with or into any other business organization or acquire all or substantially all of the capital stock or property of another Person, without the Bank’s prior written consent.
9.6 Encumbrances of Property. For so long as any Obligations remain outstanding, permit or grant any encumbrances on the Property, except as approved by Bank in its sole discretion.
9.7 Distributions. Pay any dividends or make any distributions to members or other equity holders of Borrower; provided, however, that such payments or distributions shall be allowed so long as (i) no Event of Default has occurred and is continuing, (ii) no Event of Default would occur upon the making of any such payment or distribution, and (iii) the payments or distributions do not exceed Borrower’s free cash flow after debt service, as determined by Bank in its sole but reasonable discretion. Notwithstanding the foregoing, Borrower shall have the right, but not the obligation, to distribute one or more Advances to Zoned Properties or another entity which is a subsidiary of Zoned Properties for the purposes permitted herein.
9.8 Change in Control. Suffer or permit a Change in Control.
ARTICLE 10
EVENTS OF DEFAULT
Any one or more of the following events shall constitute an “Event of Default” by Borrower under this Agreement:
10.1 Payment of Obligations. (i) Borrower fails to make any regularly scheduled payment of any of the Obligations on or before the due date of such payment; (ii) Borrower fails to make any payment of any of the Obligations on or before the Termination Date; or (iii) Borrower fails to make any other payment of any of the Obligations and such failure continues for a period of ten (10) or more days thereafter.
10.2 Misrepresentation. Any financial statement or certificate furnished to Bank in connection with, or any representation or warranty made by Borrower or any other party under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made.
10.3 Default under Deed of Trust or Notes. The occurrence of any default or event of default under any Note or Deed of Trust after expiration of any applicable cure period provided therein.
10.4 Default Under Loan Documents. Any default in the payment or performance of any covenant or other obligation under this Agreement or any of the other Loan Documents and such default remains uncured after the expiration of the applicable cure period, if any, or any default in the payment or performance of any covenant or other obligation under a Financial Contract, if any, between Bank and Borrower, after the expiration of the applicable cure period.
10.5 Failure of Lien. Bank fails to have a legal, valid, binding and enforceable first lien or security interest on or in any property encumbered by a Deed of Trust, Security Agreement, or other document purporting to create such lien.
10.6 Financial Covenant Requirements. Borrower fails to reduce the outstanding principal amount of the MAL or pledge additional collateral (if permitted in Bank’s sole discretion) after being notified by Bank of a violation of any required financial ratio or financial covenant set forth in Article 8, in amounts required to comply with such financial ratio or financial covenant and in the time periods set forth in Article 8.
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10.7 Covenant Default/ Cross Default. Any material default in the performance of or compliance with any obligation, agreement or other provision contained in any other agreement between Bank and Borrower, or any documents entered into in connection with any such agreement, and such default remains uncured after expiration of the applicable cure period, if any.
10.8 Material Adverse Change.
10.8.1 Except as otherwise agreed to in writing by Bank, if there occurs a Material Adverse Change with respect to Borrower that remains uncured or remedied by Borrower for a period equal to the earlier of (i) fifteen (15) days after written notice to Borrower, or (ii) fifteen (15) days after the occurrence of the Material Adverse Change.
10.8.2 Except as otherwise agreed to in writing by Bank, if there occurs a Material Adverse Change with respect to Guarantor that remains uncured or remedied by Guarantor for a period equal to the earlier of (i) forty-five (45) days after written notice to Borrower and/or Guarantor, or (ii) forty-five (45) days after the occurrence of the Material Adverse Change.
10.9 Attachment. If any material portion of Borrower’s assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within thirty (30) days, or if Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon any material portion of Borrower’s assets, or if a notice of lien, levy, or assessment is filed of record with respect to any of Borrower’s assets by the United States Government, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, and the same is not paid within thirty (30) days after Borrower receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest by Borrower (provided that no Advances will be required to be made during such cure period).
10.10 Insolvency. If Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced against Borrower and is not dismissed or stayed within sixty
(60) days.
10.11 Other Agreements. Any material default in the payment or performance of any Obligation and such default remains uncured after the expiration of the applicable cure period, if any, or any defined event of default, under the terms of any contract or instrument (other than any of the Loan Documents) pursuant to which Borrower has incurred any debt or other liability to any person or entity.
10.12 Judgments. The filing of a notice of judgment lien against Borrower; or the recording of any abstract of judgment against Borrower in any county in which Borrower has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against the assets of Borrower; or the entry of a judgment against Borrower; and with respect to any of the foregoing, the amount in dispute is in excess of
$100,000.00.
10.13 Termination of Lease. If a Lease is terminated, cancelled, or voided for any reason, unless a replacement Lease in form and substance acceptable to Bank is entered into on or prior to the occurrence of such event.
10.14 Change in Law. If the business conducted by Tenant on the Property becomes illegal under Arizona law or impracticable to conduct, as determined by Bank in its reasonable discretion.
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10.15 Guaranty. Any guaranty (if any have been executed in connection with the MAL) of all or a portion of the Obligations ceases for any reason to be in full force and effect, or any Guarantor fails to perform any obligation under any guaranty of all or a portion of the Obligations, or any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth in any guaranty of all or a portion of the Obligations or in any certificate delivered to Bank in connection with such guaranty.
ARTICLE 11
BANK’S RIGHTS AND REMEDIES
11.1 Rights and Remedies. If an Event of Default shall occur and be continuing, (a) any Obligations of Borrower under any of the Loan Documents, any term thereof to the contrary notwithstanding, shall at Bank’s option and without notice become immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are hereby expressly waived by Borrower (except for obligations in respect of Financial Contracts, if any, which shall be terminated only in accordance with the related Interest Rate Derivative Documentation, if any); (b) the obligation, if any, of Bank to permit further borrowings hereunder during the continuance of such Event of Default shall immediately cease and terminate; and (c) Bank shall have all rights, powers and remedies available under each of the Loan Documents including any Deed of Trust or security agreement, or accorded by law, including without limitation the right to resort to any or all security for any credit accommodation from Bank subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and remedies of Bank in connection with each of the Loan Documents may be exercised at any time by Bank and from time to time after the occurrence and during the continuance of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity. Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrower:
11.1.1 Settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Bank reasonably considers advisable;
11.1.2 Without notice to or demand upon Borrower, make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral. Borrower agrees to assemble the Collateral if Bank so requires, and to make the Collateral available to Bank as Bank may designate. Borrower authorizes Bank (if at the time such action may be lawful and always subject to compliance with mandatory legal requirements) to enter the premises where the Collateral is located, after reasonable notice, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Bank’s determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any of Borrower’s owned premises, Borrower hereby grants Bank a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of Bank’s rights or remedies provided herein, at law, in equity, or otherwise, provided that such license is subject to all legal requirements and the rights of any Tenant under any subordination, non-disturbance and attornment agreement entered into between Tenant and Bank; or
11.1.3 Without notice to Borrower set off and apply to the Obligations any and all (a) balances and deposits of Borrower held by Bank or (b) indebtedness then due and owing to or for the credit or the account of Borrower held by Bank.
11.2 Bank Expenses. If Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under the terms of this Agreement, then Bank may make payment of the same or any part thereof. Any amounts so paid or deposited by Bank shall constitute Bank Expenses, shall be due and payable promptly by Borrower.
11.3 Bank’s Liability for Collateral. So long as Bank complies with reasonable banking practices and acts in a commercially reasonable manner, Bank shall not in any way or manner be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other person whomsoever. So long as Bank complies with reasonable banking practices and acts in a commercially reasonable manner, risk of loss, damage or destruction of the Collateral shall be borne by Borrower.
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11.4 Remedies Cumulative. Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative. Bank shall have all other rights and remedies not inconsistent herewith as provided under the UCC, by law, or in equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on Borrower’s part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be effective unless made in a written document signed on behalf of Bank and then shall be effective only in the specific instance and for the specific purpose for which it was given.
11.5 Demand; Protest. Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees at any time held by Bank on which Borrower may in any way be liable.
11.6 Proceeds of Collateral. During the continuance of an Event of Default, Bank may, at its sole discretion, (a) proceed simultaneously or in any order of its choosing against any Collateral at its sole discretion and
(b) apply the proceeds of Collateral to the discharge of or payment upon any Obligation in its sole and absolute discretion, whether to principal, interest, fees, or costs, including reasonable attorneys’ fees and costs.
11.7 Borrower Liability. Borrower waives (a) any right to require Bank to: (i) proceed against any Borrower or any other Person; or (ii) pursue any specific remedy. Bank may exercise or not exercise any right or remedy it has against Borrower (including the right to foreclose by judicial or non-judicial sale in the event Bank holds collateral) without affecting any Borrower’s liability. Notwithstanding any other provision of this Agreement or other related document, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to the rights of Bank under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section shall be null and void. If any payment is made to a Borrower in contravention of this Section, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured.
ARTICLE 12
NOTICES
Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid, or by electronic mail; provided, however, if sent by electronic mail, such items shall not be deemed provided until receipt is acknowledged by the recipient) shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage prepaid, return receipt requested, to Borrower or to Bank, as the case may be, at its addresses set forth below:
| If to Borrower: | Zoned Arizona Properties, LLC 8360 E. Raintree Dr, Ste. 230 | |
| Scottsdale, AZ 85260 | ||
| Attention: Zoned Properties, Inc. | ||
| If to Bank: | East West Bank | |
| 2350 Mission College Blvd., Ste. 988 Santa Clara, CA 95054 | ||
| Attention: Zoned Arizona Properties, LLC – Relationship Manager |
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The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other.
ARTICLE 13
CHOICE OF LAW; VENUE; JURY TRIAL WAIVER AND REFERENCE AGREEMENT
13.1 Choice of Law: Venue and Jury Trial Waiver. This Agreement and all transactions contemplated hereunder and/or evidenced hereby shall be governed by, construed under, and enforced in accordance with the internal laws of the State of California, without regard to principles of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive jurisdiction of the state and Federal courts located in the County of Santa Clara, State of California. TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL PARTIES TO THIS AGREEMENT HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
13.2 Judicial Reference. If the waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, who shall be a retired state or federal court judge, mutually selected by the parties or, if they cannot agree, then any party may seek to have a private judge appointed in accordance with California Code of Civil Procedure §§ 638 and 640 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts). The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
The parties agree that time is of the essence in conducting the referenced proceedings. The parties shall promptly and diligently cooperate with one another and the referee, and shall perform such acts as may be necessary to obtain prompt and expeditious resolution of the dispute or controversy in accordance with the terms hereof. The costs shall be borne equally by the parties.
ARTICLE 14
GENERAL PROVISIONS
14.1 Successors and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties; provided, however, that neither this Agreement nor any rights hereunder may be assigned by Borrower without Bank’s prior written consent, which consent may be granted or withheld in Bank’s sole discretion. Bank shall have the right without the consent of Borrower to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights and benefits hereunder, under the Notes and other Loan Documents.
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14.2 Term. This Agreement shall become effective on the Effective Date and, subject to Section 14.10, shall continue in full force and effect for a term ending on the Termination Date. Notwithstanding the foregoing, Bank shall have the right to terminate its obligation to make Advances under this Agreement immediately and without notice upon the occurrence and during the continuance of an Event of Default. Notwithstanding the termination of such obligation, Bank’s Lien on the Collateral shall remain in effect for so long as any Obligations are outstanding.
14.3 Indemnification. Borrower shall defend, indemnify and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement; and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a result of or in any way arising out of, following, or consequential to transactions between Bank and Borrower whether under this Agreement, or otherwise (including without limitation reasonable attorneys’ fees and expenses), except for losses caused by or arising from Bank’s gross negligence or willful misconduct or Bank’s breach of any of its obligations under this Agreement.
14.4 Time of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement.
14.5 Severability of Provisions. In the event any one or more of the provisions contained in this Agreement is held to be invalid, illegal or unenforceable in any respect, then such provision shall be ineffective only to the extent of such prohibition or invalidity, and the validity, legality, and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.
14.6 Amendments. Neither this Agreement nor any provisions hereof may be changed, waived, discharged or terminated, nor may any consent to the departure from the terms hereof be given, orally (even if supported by new consideration), but only by an instrument in writing signed by all parties to this Agreement. Any waiver or consent so given shall be effective only in the specific instance and for the specific purpose for which given.
14.7 Entire Agreement. This Agreement, together with the Loan Documents embodies the entire agreement and understanding among and between the parties hereto, and supersedes all prior or contemporaneous agreements and understandings between said parties, verbal or written, express or implied, relating to the subject matter hereof. No promises of any kind have been made by Bank or any third party to induce Borrower to execute this Agreement. No course of dealing, course of performance or trade usage, and no parole evidence of any nature, shall be used to supplement or modify any terms of this Agreement.
14.8 Waiver. No failure to exercise and no delay in exercising any right, power, or remedy hereunder shall impair any right, power, or remedy which Bank may have, nor shall any such delay be construed to be a waiver of any of such rights, powers, or remedies, or any acquiescence in any breach or default hereunder; nor shall any waiver by Bank of any breach or default by Borrower hereunder be deemed a waiver of any default or breach subsequently occurring. All rights and remedies granted to Bank hereunder shall remain in full force and effect notwithstanding any single or partial exercise of, or any discontinuance of action begun to enforce, any such right or remedy. The rights and remedies specified herein are cumulative and not exclusive of each other or of any rights or remedies which Bank would otherwise have. Any waiver, permit, consent or approval by Bank of any breach or default hereunder must be in writing and shall be effective only to the extent set forth in such writing and only as to that specific instance.
14.9 Interpretation. This Agreement and all agreements relating to the subject matter hereof are the product of negotiation and preparation by and among each party and its respective attorneys, and shall be construed accordingly. The parties waive the provisions of California Civil Code §1654.
14.10 Survival. All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Obligations remain outstanding. The obligations of Borrower to pay and/or indemnify Bank with respect to the expenses, damages, losses, costs and liabilities shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Bank have run, provided that so long as the obligations set forth in the first sentence of this Section 14.10 have been satisfied, and Bank has no commitment to make any Advances, or to make any other loans to Borrower under this Agreement, Bank shall release all security interests granted hereunder and redeliver all Collateral held by it in accordance with applicable law.
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14.11 Loan Information. Borrower agrees that Bank may provide information relating to this Agreement or Borrower, to Bank’s parent, Affiliates, subsidiaries and service providers.
14.12 Costs and Expenses. Borrower agrees to pay within ten (10) days of demand all Bank Expenses including all reasonable costs and expenses incurred by Bank in connection with the preparation, execution, delivery and filing of the Loan Documents, and of any amendment, modification, or supplement to the Loan Documents requested by Borrower, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Bank, incurred in connection with advising the Bank as to its rights and responsibilities hereunder upon the occurrence and during the continuance of an Event of Default. Borrower also agrees to pay all such costs and expenses, including court costs, incurred in connection with enforcement of the Loan Documents following the occurrence and during the continuance of an Event of Default, or any amendment, modification or supplement thereto requested by Borrower, whether by negotiation, legal proceedings, or otherwise. This provision shall survive the termination of this Agreement.
14.13 Patriot Act Notice. Bank hereby notifies Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow Bank to identify Borrower in accordance with the Act. Borrower shall, promptly following a request by Bank, provide all documentation and other information that Bank requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act. For legal entity borrowers, Bank will require the legal entity to provide identifying information about each beneficial owner and/or individuals who have significant responsibility to control, manage or direct the legal entity.
14.14 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same agreement. Delivery of an executed signature page of this Agreement and all other documents executed in connection with the MAL by facsimile or other electronic mail transmission shall be effective as delivery of a manually executed counterpart hereof.
ARTICLE 15
DEFINITIONS
15.1 Definitions. Certain defined terms may appear in the Agreement but not be enumerated in this Section 15.1. As used in this Agreement, the following terms shall have the following definitions:
“Advance” or “Advances” means an extension of credit by Bank to Borrower.
“Affiliate” means any Person, including any Person who is a director, officer, partner or manager of such Person: (a) which directly or indirectly controls, or is controlled by, or is under common control with, the Borrower or a Subsidiary; (b) which directly or indirectly beneficially owns or holds fifty-one percent (51%) or more of any class of voting stock of the Borrower or any Subsidiary; or (c) fifty-one percent (51%) or more of the voting stock of which is directly or indirectly beneficially owned or held by the Borrower or a Subsidiary. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Agreement” is defined in the preamble hereto.
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“Bank” is defined in the preamble of this Agreement.
“Bank Expenses” means (a) all reasonable third-party costs and expenses (including, without limitation, taxes and insurance premiums, if any) required to be paid by Borrower under this Agreement or under any of the other Loan Documents or are paid or advanced by Bank; (b) reasonable filing, recording, publication, and search fees paid or incurred by Bank in connection with Bank’s transactions with Borrower; (c) all reasonable third-party costs and expenses incurred by Bank in connection with the preparation, execution, delivery and filing of the Loan Documents, and of any amendment, modification, or supplement to the Loan Documents requested by Borrower or required by Bank, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Bank; (d) reasonable third-party costs and expenses incurred by Bank to correct any default or enforce any provision of the Loan Documents irrespective of whether suit is brought together with the reasonable fees and out-of-pocket expenses of counsel for the Bank incurred in connection with any default or Event of Default, or exercise or enforcement of any Bank remedies under this Agreement or any Note irrespective of whether suit is brought.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership required by the Beneficial Ownership Regulation, which certification shall be substantially in form and substance satisfactory to Bank.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230. “Borrower” is defined in the preamble of this Agreement.
“Business Day” means any day other than a Saturday or a Sunday or any day on which commercial banks in Los Angeles, California, are authorized or required to close.
"Change in Control" shall mean (i) a transaction in which any "person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, in the aggregate of 25% or more of the ordinary voting power of the Borrower; or (ii) any removal of Zoned Properties from ownership or management of Borrower.
“Closing Date” means the date on which Borrower has executed this Agreement.
“Collateral” means the property subject to the encumbrance of the Collateral Agreement, and any other property and assets granted as collateral security for the MAL, whether real or personal, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest or Financial Contract whatsoever, whether created by law, contract, or otherwise.
"Collateral Agreement" means the Deed of Trust granted by the Borrower, and any other agreement regarding collateral or assignment required by Bank as provided in this Agreement, in form and substance satisfactory to Bank, including without limitation a UCC-1 Financing Statement related to personal property of the Borrower.
“Deed of Trust” means that certain the Deed of Trust, Financing Statement, Security Agreement and Fixture Filing (with Assignment of Rents and Leases) dated on or about equal date herewith executed by Borrower as trustor thereunder in favor of Bank with respect to the Property.
“Default Rate” is defined in Section 3.1.5.
“Deposit Account” means that certain deposit account with Bank in Borrower’s name and maintained by Borrower with respect to the Property.
“Early Amortization Election” is defined in Section 2.6.
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“Effective Date” means the date first set forth above.
“ERISA” means the Employment Retirement Income Security Act of 1974, as amended, and the regulations thereunder.
“Event of Default” has the meaning set forth in Article 10.
“Financial Contract” means (1) an agreement (including terms and conditions incorporated by reference therein) which is a rate swap agreement, basis swap, forward rate agreement, commodity swap, commodity option, equity or equity index swap, bond option, interest rate option, foreign exchange agreement, rate cap agreement, rate floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option, any other similar agreement (including any option to enter into any of the foregoing); or (2) any combination of the foregoing.
“Fixed Rate Option” is defined in Section 2.8.
“GAAP” means generally accepted accounting principles as in effect from time to time in the United States of America, applied on a consistent basis over the time period in question as to classification of items and amounts.
“Guarantor” means any party that has provided a guaranty to Bank in connection with this Agreement.
“Insolvency Proceeding” means any proceeding commenced by or against any person or entity under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
"Interest Rate Derivative Documentation” means each trade confirmation, and the international swaps and derivative association master and schedule agreement executed in connection with the Obligations, if any.
“Lease” means that certain commercial lease for a portion of the Property between Borrower and a tenant of the Property.
“Lien” means any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, collateral assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction to evidence any of the foregoing).
“Loan Documents” means, collectively, this Agreement, the Notes, the Deed of Trust, any Interest Rate Derivative Documentation, any guarantees executed by any Guarantor, any other agreement previously entered into between Borrower and Bank not otherwise terminated, any other agreement entered into between Borrower and Bank in connection with this Agreement including any assignment, control agreement or related documents from Borrower securing Obligations under this Agreement, and any third party pledge agreement or subordination agreement, all as amended or extended from time to time.
“MAL” is defined in Section 2.1.
“MAL Advance Period” is defined in Section 2.1.
“MAL Limit” is defined in Section 2.1.
“Material Adverse Change” means a material adverse change in (a) the business operations or condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole; (b) the condition (financial or otherwise) of any Guarantor; or (c) the ability of Borrower to repay the Obligations or otherwise perform its obligations under the Loan Documents.
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“Material Adverse Effect” means an event or occurrence having a material adverse effect on (a) the business operations or condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole or (b) the ability of Borrower to repay the Obligations or otherwise perform its obligations under the Loan Documents.
“Notes” means all promissory note entered into by Borrower in favor of Bank from time to time in connection with the Obligations, including without limitation the Variable Rate Note and any SWAP Note. The term “Note” means any one such promissory note.
“Obligations” means (a) the performance of all obligations of Borrower under this Agreement and all of the other Loan Documents, including any obligations related to any Financial Contract; (b) all extensions, renewals, modifications, amendments, and refinancings of any of the foregoing; (c) all Bank Expenses; (d) all loans, advances, indebtedness, and other obligations owed by a Borrower to Bank of every description whether now existing or hereafter arising (including those owed by Borrower to others and acquired by Bank by purchase, assignment, or otherwise) and whether or not for the payment of money, whether or not evidenced by any note or other instrument, whether direct or indirect, absolute or contingent, due or to become due, joint or several, primary or secondary, liquidated or unliquidated, secured or unsecured, original or renewed or extended, whether arising before, during or after the commencement of any Insolvency Proceeding in which Borrower is a debtor, any obligations arising pursuant to any transactions and any other financial accommodations, obligations to perform or forbear from performing acts, and all overdrafts on accounts (as such term is defined in Section 4104 of the UCC) maintained with Bank.
“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.
“Property” is defined in Section 2.1.
“Responsible Officer” means Bryan McLaren.
“Security Agreement” means the security agreement contained in the Deed of Trust granting Bank a security interest in all or part of the personal property, or in any other goods, property or rights of Borrower.
“Subsidiary” means, with reference to a particular entity (the “Parent Entity”), any corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership, company or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Parent Entity. Unless the context otherwise requires, a reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower in which, at the time any determination is being made, more than 50% of the stock or other interest therein is held by Parent Entity or any Affiliate thereof, which by the terms thereof Parent Entity or its Affiliates hold ordinary voting power to elect the Board of Directors, managers or trustees of the entity.
“SWAP Note” has the meaning set forth in Section 2.8.4.
“Tenant” means a tenant of the Property subject to a Lease.
“Variable Rate Note” is defined in Section 2.3.
“Termination Date” means the earlier of (a) acceleration of the Obligations in accordance with Section 11.1 of this Agreement; or (b) the date on which all Obligations of Borrower under this Agreement have been paid in full and Bank has no further obligation to make any Advances to Borrower.
“UCC” means the Uniform Commercial Code as in effect in the State of California, as the same may be amended from time to time.
“Zoned Properties” is defined in Section 5.1.2
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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be executed as of the date first above written.
| Borrower: | |||
| ZONED ARIZONA PROPERTIES, LLC | |||
| By: | Zoned Properties, Inc. | ||
| Its: | Member | ||
| By: | /s/ Bryan McLaren | |||
| Bryan McLaren | ||||
| Its: | Chief Executive Officer | |||
Bank:
EAST WEST BANK
| By: | /s/ | |
| Name: | ||
| Title: |
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Exhibit 10.2
PROMISSORY
NOTE
VARIABLE RATE NOTE
| Original Principal Amount: Up to $4,500,000.00 | July 11, 2022 (“Effective Date”) |
Borrower: Zoned Arizona Properties, LLC
1. Promise to Pay. For value received, Zoned Arizona Properties, LLC, an Arizona limited liability company (“Borrower”) promises to pay to the order of East West Bank, a California corporation (“Bank”), at 2350 Mission College, Santa Clara, CA 95054 or at such other address or at such other place as Bank may from time to time designate in writing, in lawful money of the United States and in immediately available funds, the principal amount of up to Four Million Five Hundred Thousand and xx/100 Dollars ($4,500,000.00) (the “MAL Limit”) together with interest as set forth herein from the date of disbursement on the principal balance hereof that is outstanding from time to time. This Variable Rate Note (referred to herein as a “Note”) is made subject to the terms and conditions of a Loan Agreement dated approximately even date herewith, and entered into by Borrower on the one hand, and Bank on the other hand, as may be amended from time to time (the “Loan Agreement”). The terms and conditions of the Loan Agreement are incorporated herein in their entirety. In the event of any conflict or inconsistency between this Note and the Loan Agreement, the Loan Agreement governs and controls.
2. Advances.
(a) Bank shall make Advances from time to time to Borrower under the MAL in accordance with the terms, conditions and procedures set forth in the Loan Agreement and other Loan Documents, subject to Borrower satisfying all conditions precedent thereto as set forth in the Loan Agreement. Amounts borrowed under the MAL may not be reborrowed, and in no event shall the outstanding principal amount hereunder at any time exceed the MAL Limit.
(b) Notwithstanding any other language herein, in the event Borrower elects pursuant to the terms of the Loan Agreement to trigger the Fixed Rate Option as to certain Advances, and on each such election by Borrower, the terms of this Note shall cease to apply as to such Advances upon Borrower satisfying all of the conditions set forth in Section 2.8 of the Loan Agreement, including without limitation Borrower entering into a new SWAP Note for such Advances. Concurrently therewith, the amount available to be Advanced under this Note shall immediately be reduced on a dollar for dollar basis equal to the amount of the Advances which have become subject to such Swap Note.
3. Required Payments. Principal and interest hereunder shall be paid as follows:
(a) Interest Rate. All advances under the MAL shall bear interest at a variable rate per annum equal to the greater of (A) the Prime Rate (defined below) plus two percent (2.00%), or (B) a floor rate equal to the sum of the Prime Rate as of the Effective Date plus two and one-quarter percent (2.25%). The “Prime Rate” means the variable rate of interest, per annum, that appears in The Wall Street Journal from time to time, whether or not such announced rate is the lowest rate available from Bank; provided, however, that if such rate of interest becomes unavailable for any reason as determined by Bank, the “Prime Rate” shall mean the rate of interest per annum announced by Bank as its prime rate. Notwithstanding the foregoing, Borrower may elect to reset the interest rate to a fixed rate option on the terms and conditions set forth in the Loan Agreement.
(b) First Repayment Period. From the Effective Date of this Note to the date that is twelve (12) months after the Effective Date (the “First Repayment Period”), Borrower shall make interest payments on the outstanding principal balance of the MAL based on the interest rate set forth in Section 3(a) above, with the initial payment commencing on the tenth (10th) day of the month immediately following receipt of the initial Advance under the MAL and thereafter on the tenth (10th) day of each subsequent calendar month up to the final day of the First Repayment Period.
(c) Second Repayment Period. From and after the day immediately following the end of the First Repayment Period and continuing until the Maturity Date (the “Second Repayment Period”), Borrower shall pay principal together with interest on the MAL in sixty (60) monthly installments based on the interest rate set forth in Section 3(a) above and a principal amortization schedule of twenty-five (25) years from the first day of the Second Repayment Period (or if Borrower makes the Early Amortization Election, from the date such election is made), commencing on the first tenth (10th) day of the month occurring after the beginning of the Second Repayment Period and continuing on the tenth (10th) day of each subsequent calendar month up to the Maturity Date.
(d) Early Amortization Election. Notwithstanding the foregoing provisions of Sections 3(b) and 3(c) above, Borrower may elect to commence paying principal together with interest on the MAL in accordance with the terms of Section 3(c) at any time during the First Repayment Period and before the beginning of the Second Repayment Period by providing Bank notice thereof and such other information and documentation as may be required in the Loan Agreement (the “Early Amortization Election”). If Borrower makes the Early Amortization Election, then (i) Borrower shall not be entitled to any further Advances under the MAL, and (ii) the twenty-five (25) year amortization schedule referenced in Section 3(c) above shall be from the date Borrower makes the Early Amortization Election.
(e) Payment Date and Payment Computations. If the tenth (10th) day is not a business day, then payment shall be due on the first business day following such tenth (10th) day of such month. Interest shall be computed as set forth above and in the Loan Agreement. Bank’s calculations of the interest rate and of monthly payments due under this Note shall be deemed conclusive absent error.
(f) Maturity. If not earlier paid, all unpaid principal, accrued but unpaid interest and other amounts payable under the provisions of this Note, including amounts related to this Note as set forth in the Loan Agreement and/or any other Loan Document, become due and payable in full on the tenth (10th) day of the month first occurring after the date that is seventy-two (72) months after the Effective Date of this Note (the “Maturity Date”).
4. Application of Payments. All payments and other credits shall be applied by Bank as set forth in the Loan Agreement. No prepayments shall reduce or constitute a credit against the next scheduled monthly installments under this Note but instead shall be applied to the balance due on the Maturity Date unless otherwise consented to by the Bank in writing.
5. Collection Costs. Borrower shall be liable for all of Bank’s reasonable fees and costs of collection on this Note, whether or not a legal action is commenced. If suit or other legal proceeding or any foreclosure proceeding is instituted or any other action is taken by Bank to collect all or any part of the indebtedness evidenced hereby or to proceed against any collateral for any portion of such indebtedness or against any Guarantor of the payment of any portion of the indebtedness, Borrower promises to pay Bank’s out-of-pocket reasonable attorneys’ fees and other costs (to be determined by the court and not by jury in the case of litigation) incurred thereby. Such fees and costs shall be included in any judgment award obtained by Bank, and whether or not a legal action has been filed, shall be secured by the Loan Documents, shall, if not paid in a timely manner as required by the Loan Agreement, bear interest at the Default Rate (defined in the Loan Agreement), and shall be guaranteed by any Guaranty relating to any portion of the indebtedness evidenced hereby.
6. Prepayments. Borrower may prepay the outstanding principal under this Note, at any time, subject to the provisions of this Section 6. If Borrower prepays all, but not less than all, of the outstanding principal balance of the MAL at any time during the First Repayment Period, then Borrower shall also pay a premium equal to one percent (1.00%) of the amount prepaid. Borrower shall not be obligated to pay any premium (i) if such prepayment (including any prepayment made during the First Repayment Period) is for less than all of the outstanding principal balance of the MAL, or (ii) if such prepayment (including any prepayment for all of the outstanding principal balance of the MAL) is made at any time during the Second Payment Period.
This Note does not revolve; any principal amount paid to Bank, whether a voluntary prepayment by Borrower or a required principal payment under this Note or any Loan Document, shall not be re-advanced by Bank.
7. Waivers and Acknowledgments. Except as is expressly provided in the Loan Documents to the contrary, Borrower and all sureties, endorsers and Guarantors of all or any portion of the indebtedness evidenced by this Note waive: (a) demand, notice, diligence, protest, presentment for payment, and notice of extension, dishonor, protest, demand and nonpayment of this Note; and (b) any release or discharge by reason of (i) any release or substitution of, or other change in (A) the Loan Agreement or any other security given for the indebtedness evidenced by this Note, (B) the obligation of any other person or entity who or which is now or may become directly or indirectly liable for all or any portion of the indebtedness evidenced by this Note, or (ii) any extension or other modification of the time or terms of payment of all or any portion of the indebtedness evidenced by this Note or any other note referenced in the Loan Agreement.
8. Default Interest/ Late Fees. Default Interest may be charged as set forth in the Loan Agreement. Late fees may be assessed as set forth in the Loan Agreement.
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9. Acceleration/ Remedies/ Right of Setoff. The Events of Default hereunder are set forth in the Loan Agreement. Upon the occurrence and continuance of any Event of Default, at the option of Bank in its sole discretion, Bank may declare all unpaid principal, interest, fees and costs evidenced by or due under this Note to be immediately due and payable. The indebtedness evidenced by this Note is secured by one or more security interests set forth in the Loan Agreement or other security agreement executed by Borrower and/or one or more deeds of trust or security interests granted by Borrower (or any affiliate of Borrower). Upon the occurrence and during the continuance of any Event of Default, Bank may exercise rights and remedies as set forth in this Note, the Loan Agreement or other Loan Documents, which may include proceeding against the property encumbered by the security interests/deeds of trust granted by Borrower (or any affiliate of Borrower).
10. No Waiver by Bank. Failure of Bank to exercise any option hereunder shall not constitute a waiver of the right to exercise the same in the event of any subsequent default or in the event of continuance of any existing default after demand for strict performance hereof.
11. Capitalized Terms and Definitions. Capitalized terms used but not otherwise defined herein have the meanings attributed to them in the Loan Agreement.
12. Time of Essence. Time is of the essence of this Note.
13. Notices. All notices required or permitted in connection with this Note shall be given at the place and in the manner provided in the Loan Agreement.
14. Governing Law and Venue. This Note is delivered in and shall be governed by and construed according to the substantive laws and judicial decisions of the State of California (regardless of the place of business, residence, location or domicile of Borrower or any principal thereof or any guarantor of any portion of the indebtedness evidenced by this Note) and applicable federal laws, rules and regulations. Any action brought to enforce this Note may be commenced and maintained, at Bank’s option, in any state or federal district court located in Santa Clara County, California. Borrower irrevocably consents to jurisdiction and venue in such court for such purposes and agrees not to seek transfer or removal of any action commenced with respect to this Note.
15. Waiver of Jury Trial/ Agreement Regarding Judicial Reference.
(a) Choice of Law: Venue and Jury Trial Waiver. This Note and all transactions contemplated hereunder and/or evidenced hereby shall be governed by, construed under, and enforced in accordance with the internal laws of the State of California, without regard to principles of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive jurisdiction of the state and Federal courts located in the County of Santa Clara, State of California. TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL PARTIES TO THIS NOTE HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS NOTE. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
(b) Judicial Reference. If the waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, who shall be a retired state or federal court judge, mutually selected by the parties or, if they cannot agree, then any party may seek to have a private judge appointed in accordance with California Code of Civil Procedure §§ 638 and 640 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts). The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
The parties agree that time is of the essence in conducting the referenced proceedings. The parties shall promptly and diligently cooperate with one another and the referee, and shall perform such acts as may be necessary to obtain prompt and expeditious resolution of the dispute or controversy in accordance with the terms hereof. The costs shall be borne equally by the parties.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Note has been executed as of the date first written above.
ZONED ARIZONA PROPERTIES, LLC
By: Zoned Properties, Inc.
Its: Member
| By: | /s/ Bryan McLaren | |
| Bryan McLaren | ||
| Its: Chief Executive Officer |
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Exhibit 10.3
GUARANTY
THIS GUARANTY (“Guaranty”) is made as of July 11, 2022, by ZONED PROPERTIES, INC., a Nevada corporation (“Guarantor”), whose address is set forth below, in favor of EAST WEST BANK, a California corporation (“Lender”), whose address is set forth below.
RECITALS
A. Guarantor is executing this Guaranty to induce Lender to make a Loan (as defined below) to Zoned Arizona Properties, LLC, an Arizona limited liability company (“Borrower”), pursuant to the loan agreement, any note and other Loan Documents (as defined below) between Lender and Borrower.
B. This Guaranty, the loan agreement executed by Borrower on approximately even date herewith, all other guaranties and all other security agreements, instruments, agreements and documents, whether now or hereafter existing that evidence, secure, or otherwise pertain to the Loan are collectively referred to as the “Loan Documents.”
GUARANTY
1. Guaranteed Obligations.
(a) In order to induce Lender to extend the Loan or Loans to Borrower, Guarantor hereby unconditionally and irrevocably, jointly and severally, guarantees to Lender and to its successors, endorsees and/or assigns, the full and prompt payment and performance of the Guaranteed Obligations. The term “Guaranteed Obligations”, as used herein means: all Indebtedness of Borrower to Lender, now existing or hereafter arising under or in connection with the Loan or any of the Loan Documents, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, and all extensions, renewals, and modifications thereof, and shall include, without limitation, any and all post-petition interest and expenses (including attorneys’ fees) whether or not allowed under any bankruptcy, insolvency, or other similar law. The Guaranteed Obligations shall include, without limitation, any costs or expenses incurred by Lender in connection with collecting or enforcing this Guaranty. Guarantor acknowledges that fluctuations may occur in the aggregate amount of the Guaranteed Obligations and Guarantor agrees that reductions in the amount of the Guaranteed Obligations, even to zero dollars, shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantor’s successors and assigns so long as any of the Guaranteed Obligations remain unpaid and even though the Guaranteed Obligations may from time to time be zero dollars.
(b) The term “Loan” or “loan” means extensions of credit by Lender to Borrower including extensions of credit evidenced by the Loan Documents. Unless otherwise limited, the term “loan” or “Loan” includes all loans from Lender to Borrower.
(c) The term "Indebtedness" as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, attorneys' fees, arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender. "Indebtedness" includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether: voluntarily or involuntarily incurred; due or to become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated; determined or undetermined; direct or indirect; primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by a negotiable or non-negotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reason whatsoever; for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and originated then reduced or extinguished and then afterwards increased or reinstated.
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(d) In addition to the definition of “Indebtedness” stated above in this Guaranty, the word "Indebtedness" as used in this Guaranty shall also include Financial Contract (as defined herein) obligations. “Financial Contract” means (1) an agreement (including terms and conditions incorporated by reference therein) which is a rate swap agreement, basis swap, forward rate agreement, commodity swap, commodity option, equity or equity index swap, bond option, interest rate option, foreign exchange agreement, rate cap agreement, rate floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option, any other similar agreement (including any option to enter into any of the foregoing); or (2) any combination of the foregoing. However, "Indebtedness" shall not include any Excluded Financial Contract Obligation (as defined herein). “Excluded Financial Contract Obligation” means, with respect to any Guarantor, any Financial Contract obligation if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Financial Contract obligation (or any Guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor's failure for any reason to constitute an "eligible contract participant" as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guaranty of such Guarantor or the grant of such security interest becomes effective with respect to such Financial Contract obligation. If a Financial Contract obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Financial Contract obligation that is attributable to swaps for which such Guaranty or security interest is or becomes illegal.
2. Guarantor’s Liability. Guarantor agrees, represents and warrants to Lender as follows:
(a) Guarantor shall continue to be liable under this Guaranty and the provisions hereof shall remain in full force and effect notwithstanding (i) any modification, agreement or stipulation between Borrower and Lender, or their respective successors and assigns, with respect to the Loan Documents or the obligations encompassed thereby, including, without limitation, the Guaranteed Obligations; or (ii) Lender’s waiver of or failure to enforce any of the terms, covenants or conditions contained in the Loan Documents or in any modification thereof; or (iii) any release of Borrower or any other guarantor from any liability with respect to the Guaranteed Obligations; (iv) any release or subordination of any real or personal property then held by Lender as security for the performance of the Guaranteed Obligations; (v) any disability of Borrower, or the dissolution, insolvency, or bankruptcy of Borrower, Guarantor, or any other party at any time liable for the payment of any or all of the Guaranteed Obligations; (vi) the unenforceability or invalidity of any or all of the Guaranteed Obligations or any of the Loan Documents; (vii) any payment by Borrower or any other party to Lender is held to constitute a preference under applicable bankruptcy or insolvency law or if for any other reason Lender is required to refund any payment or pay the amount thereof to someone else; (viii) the settlement or compromise of any of the Guaranteed Obligations; (ix) the non-perfection of any security interest or lien securing any or all of the Guaranteed Obligations; or (x) any impairment of any collateral securing any or all of the Guaranteed Obligations.
(b) Guarantor’s liability under this Guaranty shall continue until all sums due under the Loan Documents have been paid in full and all of Borrower’s other obligations to Lender have been paid and performed in full, and shall not be reduced by virtue of any payment by Borrower of any amount due under the Loan Documents, or by Lender’s recourse to any collateral or security. Guarantor acknowledges that Lender may apply any payment made by Borrower to Lender to any obligation of Borrower to Lender under the terms of any Loan Documents in such amounts and such manner as Lender may elect, regardless of whether such application complies with any instruction or designation given or made by Borrower with respect to such payment and agrees that any such application shall not in any manner reduce, extinguish or otherwise affect the liability of Guarantor hereunder.
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(c) Guarantor acknowledges that it has and will continue to have full and complete access to any and all information concerning the transactions contemplated by the Loan Documents or referred to therein, the value of the assets owned or to be acquired by Borrower, Borrower’s financial status and its ability to pay and perform its obligations under the Loan Documents. Guarantor further warrants and represents that it has reviewed and approved copies of the Loan Documents and is fully informed of the remedies Lender may pursue, with or without notice to Borrower, in the event of default under the loan agreement, note or other Loan Documents. So long as any of the Guaranteed Obligations remains unsatisfied or owing to Lender, Guarantor shall keep itself fully informed as to all aspects of Borrower’s financial condition and the performance of Borrower’s obligations under the Loan Documents.
(d) If acceleration of the time for payment of any amount payable by Borrower under the Loan Documents is stayed upon the insolvency, bankruptcy, or reorganization of Borrower, all such amounts otherwise subject to acceleration under the terms of the Loan Documents shall nonetheless be payable by Guarantor hereunder forthwith on demand by Lender.
(e) Lender is not required to inquire into the powers of Borrower or Guarantor or of the officers, directors, or other agents acting or purporting to act on their behalf, and any indebtedness or obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.
3. Fair Consideration; Solvency
(a) Guarantor represents and warrants to Lender that: (i) Guarantor is receiving fair consideration and reasonably equivalent value for its execution of this Guaranty; (ii) Guarantor is not now insolvent, nor will the execution of this Guaranty render Guarantor insolvent; (iii) the execution of this Guaranty will not leave Guarantor with unreasonably small capital or assets in order to conduct the business of Guarantor as it is currently conducted; (iv) the obligations incurred under this Guaranty have not been incurred with the intent to hinder, delay, or defraud present or future creditors; and (v) the execution of this Guaranty is not intended or believed by Guarantor to be an incurrence of an obligation or debt of Guarantor beyond Guarantor’s ability to pay such obligation or debt as it becomes due.
(b) Guarantor acknowledges that: (i) the execution of this Guaranty by Guarantor is a necessary condition for the extension of a loan by Lender to Borrower; and (ii) the loan by Lender to Borrower are of substantial economic benefit to Borrower and, therefore, beneficial to Guarantor.
4. Fraudulent Transfer. In the event that, notwithstanding the representations, warranties and acknowledgements of Guarantor contained in Section 3 above, the incurring of the obligations under this Guaranty is found, by a final, non-appealable judgment or order of a court, to constitute a fraudulent transfer under the Uniform Fraudulent Transfer Act (California Civil Code (“CCC”) Section 3439 et seq. as amended, and any successor statute), the Bankruptcy Code (Title 11 of the United States Code), or any similar statutes, then the amount of the Guaranteed Obligations of Guarantor pursuant to this Guaranty shall be reduced to $1.00 less than the amount that would otherwise make this Guaranty a fraudulent conveyance. The limitation on the liability of Guarantor contained in this Section 4 shall not limit any right of Lender against Guarantor available at law or in equity, including, without limitation, rights of Lender against Guarantor based upon any inaccuracy of, or the failure of Guarantor to comply with, the provisions of Section 3 above.
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5. Independent Obligation. The obligations of Guarantor hereunder are separate and independent of the obligations of Borrower and of every other guarantor, and a separate action or actions may be brought and prosecuted against Guarantor regardless of whether an action is brought against Borrower or any other guarantor or whether Borrower or any other guarantor is joined in any such action or actions, or whether Lender forecloses upon, sells or otherwise disposes of or collects any collateral securing the Loan. This Guaranty may be enforced against Guarantor regardless of whether a judicial or non-judicial foreclosure sale is held under any security agreement, deed of trust, mortgage, or other security instrument securing all or any part of the Loan.
6. Nature of Guaranty. The liability of Guarantor under this Guaranty is a guaranty of payment and performance and not of collection, and is not conditioned or contingent upon the genuineness, validity, regularity or enforceability of the Loan Documents or other instruments relating to the creation or performance of the Guaranteed Obligations or the pursuit by Lender of any remedies which it now has or may hereafter have with respect thereto under the Loan Documents, at law, in equity or otherwise.
7. Guarantor Waivers.
a. Guarantor hereby fully and completely waives, releases and relinquishes: (i) all notices to Guarantor, to Borrower, or to any other person, including, but not limited to, notices of the acceptance of this Guaranty, or the creation, renewal, extension, modification or accrual of any of the Guaranteed Obligations owed to Lender and, except to the extent set forth herein, enforcement of any right or remedy with respect thereto, and notice of any other matters relating thereto; (ii) diligence and demand of payment, presentment, protest, dishonor and notice of dishonor; (iii) any statute of limitations affecting Guarantor’s liability hereunder or the enforcement thereof; (iv) any defense to the recovery by Lender against Guarantor of any deficiency or otherwise to the enforcement of this Guaranty based upon Lender’s election of any remedy against Guarantor or Borrower, including the defense to enforcement of this Guaranty (the so-called “Gradsky” defense) which, absent this waiver, Guarantor would have by virtue of an election by Lender to conduct a non-judicial foreclosure sale (also known as a “trustee’s sale”) of any real property security for the Loan, it being understood by Guarantor that any such non-judicial foreclosure sale will destroy, by operation of California Code of Civil Procedure (“CCP”) Section 580d, all rights of any party to a deficiency judgment against Borrower and, as a consequence, will destroy all rights that Guarantor would otherwise have (including the right of subrogation, the right of reimbursement, and the right of contribution) to proceed against Borrower; (v) any defense or benefits that may be derived from CCP Sections 580a, 580b, 580d or 726, or comparable provisions of the laws of any other jurisdiction and all other anti-deficiency and one form of action defenses under the laws of California and any other jurisdiction; and (vi) any right to a fair value hearing under CCP Section 580a, or any other similar law, to determine the size of any deficiency owing (for which Guarantor would be liable hereunder) following a non-judicial foreclosure sale. Notwithstanding any foreclosure of the lien of any security agreement, deed of trust, mortgage, or other security instrument with respect to any or all of any real or personal property secured thereby, whether by the exercise of the power of sale, by an action for judicial foreclosure or by an acceptance of a deed in lieu of foreclosure, Guarantor shall remain bound under this Guaranty. Guarantor further agrees that Lender may enforce this Guaranty upon the occurrence and during the continuation of an event of default under the loan agreement, note or any of the other Loan Documents, notwithstanding the existence of any dispute between Borrower and Lender with respect to the existence of the event of default or performance of any of Borrower’s obligations under the Loan Documents, or any counterclaim, set-off or other claim which Borrower may allege against Lender with respect thereto. Moreover, Guarantor agrees that its obligations shall not be affected by any circumstances which constitute a legal or equitable discharge of a guarantor or surety.
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b. Without limiting any other provision of this Guaranty, Guarantor waives all rights and defenses that Guarantor may have because the Guaranteed Obligations are secured by real property. This means, among other things:
i. That Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower; and
ii. If Lender forecloses on any real property collateral pledged by Borrower: (A) the amount of the Guaranteed Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and (B) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses that Guarantor may have because the Guaranteed Obligations are secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon CCP Sections 580a, 580b, 580d, or 726.
c. Guarantor waives all rights and defenses arising out of an election of remedies by Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for the Guaranteed Obligations, has destroyed Guarantor’s rights of subrogation and reimbursement against Borrower by operation of CCP Section 580d or otherwise.
d. Guarantor waives Guarantor’s rights of subrogation and reimbursement, including (i) any defenses Guarantor may have by reason of an election of remedies by Lender, and (ii) any rights or defenses Guarantor may have by reason of protection afforded to Borrower with respect to the Guaranteed Obligations pursuant to the anti-deficiency or other laws of California limiting or discharging Borrower’s obligations, including CCP Sections 580a, 580b, 580d or 726.
e. Guarantor waives notice of acceptance of this Guaranty, any rights, defenses and benefits that may be derived from Sections 2787 to 2855, inclusive, of the CCC or comparable provisions of the laws of any other jurisdiction, and all other suretyship defenses Guarantor would otherwise have under the laws of California or any other jurisdiction.
No provision or waiver in this Guaranty shall be construed as limiting the generality of any other provision or waiver contained in this Guaranty. All of the waivers contained herein are irrevocable and unconditional and are intentionally and freely made by Guarantor.
8. No Duty To Pursue Others. Guarantor agrees that Lender may enforce this Guaranty without the necessity of resorting to or exhausting any security or collateral and without the necessity of proceeding against Borrower or any other guarantor, including, without limitation, any other Guarantor named herein. Guarantor hereby waives the right to require Lender to proceed against Borrower, to proceed against any other guarantor, including, without limitation, any other Guarantor named herein, to foreclose any lien on any real or personal property, to exercise any right or remedy under the Loan Documents, to pursue any other remedy or to enforce any other right.
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9. Authorization of Lender. Guarantor authorizes Lender, without notice or demand, and without affecting Guarantor’s liability hereunder, from time to time to: (a) amend, modify, or restate any instrument, document or agreement evidencing or relating to all or any portion of the Guaranteed Obligations; (b) renew, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of Borrower’s obligations under the Loan Documents or any part thereof, including, without limitation, any increase or decrease of the rate of interest thereon or any late charge; (c) take and hold collateral as security for the payment of this Guaranty or Borrower’s obligations under the Loan Documents, and exchange, substitute, subordinate, enforce, waive and release any such collateral; (d) apply any and all payments from Borrower, Guarantor or any other guarantor, or recoveries from any collateral securing all or any portion of the Loan, in such order or manner as Lender in its sole and absolute discretion may determine; (e) direct the order or manner of sale of any collateral securing any part of Borrower’s obligations under the Loan Documents as Lender in its sole and absolute discretion may determine; (f) release or substitute any one or more of the Borrower, Guarantor or any other guarantor, or acquire additional guarantors; and (g) assign its rights under this Guaranty in whole or in part.
10. Waivers of Subrogation and Other Rights and Defenses.
(a) Guarantor agrees that nothing contained herein shall prevent Lender from suing on the loan agreement or any note or from exercising any rights available to it thereunder or under any of the Loan Documents and that the exercise of any of the aforesaid rights shall not constitute a legal or equitable discharge of any Guarantor. Guarantor understands that the exercise by Lender of certain rights and remedies contained in the Loan Documents may affect or eliminate Guarantor’s right of subrogation against Borrower and that Guarantor may therefore incur a partially or totally non-reimbursable liability hereunder; nevertheless, Guarantor hereby authorizes and empowers Lender to exercise, in its sole discretion, any rights and remedies, or any combination thereof, which may then be available to Lender, because it is the intent and purpose of Guarantor that the obligations hereunder shall be absolute, independent and unconditional under any and all circumstances.
(b) Guarantor hereby waives, releases, and relinquishes any and all rights of reimbursement, contribution, and subrogation, which Guarantor may now or hereafter have against Borrower. Guarantor further agrees that, to the extent the waiver of its rights of subrogation as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation Guarantor may have against Borrower or against any collateral or security shall be junior and subordinate to any right Lender may have against Borrower and to all right, title and interest Lender may have in any collateral or security. Lender may use, sell or dispose of any item of collateral or security as it sees fit without regard to any subrogation right Guarantor may have, and upon disposition or sale, any right of subrogation Guarantor may have shall terminate. With respect to the enforced collection of Borrower’s obligations under the Loan Documents or the foreclosure of any security interest in any personal property collateral then securing any of Borrower’s obligations under the Loan Documents, Lender agrees to give Guarantor five (5) days’ prior written notice, in the manner set forth in Section 13 hereof, of any sale or disposition of any such personal property collateral, other than collateral which is perishable, threatens to decline speedily in value, is of a type customarily sold on a recognized market, or is cash, cash equivalents, certificates of deposit or the like.
(c) Guarantor’s sole right with respect to any such foreclosure of real or personal property collateral shall be to bid at such sale in accordance with applicable law. Guarantor acknowledges and agrees that Lender may also bid at any such sale and in the event such collateral is sold to Lender in whole or in partial satisfaction of the Guaranteed Obligations, Guarantor shall have no further right or interest with respect thereto. Notwithstanding anything to the contrary contained herein, no provision of this Guaranty shall be deemed to limit, decrease, or in any way to diminish any rights of set-off Lender may have with respect to any cash, cash equivalents, certificates of deposit or the like which may now or hereafter be put on deposit with Lender by Borrower.
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(d) To the extent any dispute exists at any time between or among any of the guarantors as to Guarantor’s right to contribution or otherwise, Guarantor agrees to indemnify, defend and hold Lender harmless for, from and against any loss, damage, claim, demand, cost or any other liability (including reasonable attorneys’ fees and costs) Lender may suffer as a result of such dispute.
(e) If from time to time Borrower shall have liabilities or obligations to Guarantor (collectively the “Subordinate Obligations”), such Subordinate Obligations shall be subject to the following terms:
(i) The Subordinate Obligations and any and all assignments as security, grants in trust, liens, mortgages, security interests, other encumbrances, and other interests and rights securing such liabilities and obligations shall at all times be fully subordinate with respect to (1) assignment as security, grant in trust, lien, mortgage, security interest, other encumbrance, and other interest and right (if any), (2) time and right of payment and performance, and (3) rights against any collateral therefor (if any), to payment and performance in full of the Guaranteed Obligations and the right of Lender to realize upon any or all security for such obligations.
(ii) Guarantor agrees that the Subordinate Obligations shall not be secured by any assignment as security, grant in trust, lien, mortgage, security interest, other encumbrance or other interest or right in any property, interests in property, or rights to property of Borrower.
(iii) Guarantor agrees that all promissory notes, accounts receivable, ledgers, records, or any other evidence of Subordinated Indebtedness shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under the terms of this Guaranty.
(iv) Guarantor agrees that after the occurrence and during the continuance of an event of default under the Loan Documents, no payments of principal or interest may be made or given, directly or indirectly, by or on behalf of the Borrower or received, accepted, retained or applied by Guarantor unless and until the Guaranteed Obligations shall have been paid and performed in full. Prior to the occurrence and continuance of a default or event of default under the Loan Documents, Guarantor shall have the right to receive payments on the Subordinated Indebtedness made in the ordinary course of business.
(v) If Guarantor receives any payment from Borrower or any other party on account of the Subordinated Obligations when such payment is not permitted hereunder, such payment shall be held in trust by Guarantor for the benefit of Lender, shall be segregated from the other funds of Guarantor, and shall forthwith be paid by Guarantor to Lender, without affecting the liability of Guarantor under this Guaranty, and applied to payment of the Guaranteed Obligations, whether or not then due.
(vi) Without the prior written consent of Lender, Guarantor shall not (1) file suit against Borrower or exercise or enforce any other creditor’s right it may have against Borrower, or (2) foreclose, repossess, sequester, appoint a receiver or otherwise take steps or institute any action or proceedings (judicial or otherwise, including, without limitation, the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any liens, security interests, collateral rights, judgments or other encumbrances held by Guarantor on assets of Borrower.
(vii) In the event of any receivership, bankruptcy, reorganization, rearrangement, debtor’s relief, or other insolvency proceeding involving Borrower as debtor, Lender shall have the right to prove and vote any claim under the Subordinated Indebtedness and to receive directly from the receiver, trustee or other court custodian all dividends, distributions, and payments made in respect of the Subordinated Indebtedness. Lender may apply any such dividends, distributions, and payments against the Guaranteed Obligations in such order and manner as Lender may determine in its sole discretion.
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11. Guarantor’s Representations and Warranties. As an inducement to Lender to make the Loan and disburse the proceeds of the Loan to Borrower, Guarantor represents and warrants to Lender that the following statements are true, correct and complete as of the date hereof and will be true, correct and complete as of the closing date of the Loan and as of the date that each advance of Loan proceeds is made under the Loan.
(a) Each Guarantor that is not an individual is duly organized, validly existing and in good standing under the laws of the state of its organization. Guarantor’s correct legal name is set forth above. Guarantor has all requisite power, authority, rights and franchises to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, and to enter into and perform this Guaranty and the other Loan Documents to which it is a party or signatory.
(b) Each Guarantor that is not an individual has made all filings in the state of its organization and has made all filings as a foreign organization and is in good standing in each other jurisdiction in which the character of the property it owns or the nature of the business it transacts makes such filings necessary or where the failure to make such filings could have a materially adverse effect on the business, operations, assets or condition (financial or otherwise) of such Guarantor.
(c) Guarantor’s execution, delivery and performance of this Guaranty and any of the other Loan Documents to which Guarantor is a party or signatory have been duly authorized by all necessary action by Guarantor.
(d) The execution, delivery and performance of the Loan Documents by Guarantor will not violate (i) Guarantor’s organizational documents or any other formation document, as applicable; (ii) any legal requirement affecting Guarantor or any of its property; or (iii) any agreement to which Guarantor is a party or by which it or any of its property is bound and will not result in or require the creation of any lien upon any of its property.
(e) No approvals, authorizations or consents of any trustee or holder of any indebtedness or obligation of Guarantor are required for the due execution, delivery and performance by Guarantor of this Guaranty or any of the other Loan Documents to which Guarantor is a party.
(f) This Guaranty and any other Loan Documents to which Guarantor is a party have been duly executed by Guarantor, and are legally valid and binding obligations of Guarantor, enforceable against Guarantor in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.
(g) To Guarantor’s knowledge, there exists no material violation of or material default by Guarantor and no event has occurred which, upon the giving of notice or the passage of time, or both, would constitute a material default with respect to (i) the terms of any instrument evidencing or securing any obligations of Guarantor, (ii) any lease or other agreement to which Guarantor is a party, (iii) any license, permit, statute, ordinance, law, judgment, order, writ, injunction, decree, rule or regulation of any governmental authority, or any determination or award of any arbitrator to or by which Guarantor or Guarantor’s property may be subject or bound, or (iv) any deed of trust, mortgage, security agreement, instrument, or other agreement by which Guarantor or any of its property is bound which might (1) materially and adversely affect the ability of Guarantor to perform its obligations under this Guaranty or any other material instrument, agreement or document to which it is a party, or (2) adversely affect the priority of the liens and security interests created by this Guaranty or any of the other Loan Documents.
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(h) There is no action, suit, investigation, proceeding or arbitration (whether or not purportedly on behalf of Guarantor) at law or in equity or before or by any foreign or domestic court or other governmental entity (a “Legal Action”), pending or, to the knowledge of Guarantor, threatened against or affecting Guarantor or any of its assets which could reasonably be expected to result in any material adverse change in the business, operations, assets or condition (financial or otherwise) of Guarantor or would materially and adversely affect Guarantor’s ability to perform its obligations under this Guaranty and any of the other Loan Documents to which it is a party. There is no basis known to Guarantor for any such Legal Action. Guarantor is not (i) in violation of any applicable law which violation materially and adversely affects or may materially and adversely affect Guarantor or Guarantor’s business, operations, assets or condition (financial or otherwise), (ii) subject to, or in default with respect to, any other legal requirement that would have a materially adverse effect on Guarantor or Guarantor’s business, operations, assets or condition (financial or otherwise), or (iii) in default with respect to any agreement to which it is a party or by which it is bound. There is no Legal Action pending or, to the knowledge of Guarantor, threatened against or affecting Guarantor questioning the validity or the enforceability of this Guaranty or any of the other Loan Documents.
(i) Guarantor has good, sufficient and legal title to all properties and assets reflected in its most recent balance sheet or personal financial statement, as applicable, delivered to Lender.
(j) There is no fact known to Guarantor that materially and adversely affects the business, operations, assets or condition (financial or otherwise) of Guarantor which has not been disclosed in this Guaranty or in other documents, certificates and written statements furnished to Lender in connection herewith.
(k) All tax returns, extension filings, and reports of Guarantor required to be filed by it have been timely filed, and all taxes, assessments, fees and other governmental charges upon Guarantor or upon its properties, assets, income and franchises which are due and payable have been paid when due and payable. Guarantor does not know of any proposed tax assessment against it or its property that would be material to its condition (financial or otherwise), and Guarantor has not contracted with any government entity in connection with such taxes.
(l) The financial statements and all financial data previously delivered to Lender in connection with the Loan and/or relating to Guarantor are true, correct and complete in all material respects. Such financial statements fairly present the financial position of the subject thereof as of the date thereof. No material adverse change has occurred in such financial position and, except for this Loan, no borrowings have been made by Guarantor since the date thereof which are secured by, or might give rise to, a lien or claim against the proceeds of the Loan or any collateral that secures the Loan.
12. Financial Covenants; No Transfers.
(a) Guarantor covenants and agrees to provide to Lender the financial statements and tax returns required with respect to guarantors as provided in the Loan Agreement.
(b) Guarantor covenants and agrees to promptly notify Lender of any material adverse change in Guarantor’s financial status.
(c) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or substantially all of Guarantor’s assets or its interest in such assets, other than in the ordinary course of Guarantor’s business. Guarantor further covenants and agrees that no assets belonging to Guarantor (whether or not disclosed in a financial statement or loan application to Lender) have been transferred into an asset protection trust or an irrevocable trust within two (2) years prior to the date of this Guaranty, and Guarantor will not transfer any assets into an asset protection trust or an irrevocable trust while this Guaranty is outstanding without Lender’s written permission.
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13. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission) and shall be given to such party at its address set forth below. Each such notice, request or other communication shall be effective (a) if given by mail, three (3) days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (b) if given by reputable overnight delivery service, when delivered, or (c) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified below.
| To Lender: | EAST WEST BANK |
2350 Mission College Blvd., Ste. 988
Santa Clara, CA 95054
Attention: Relationship Manager – Zoned Arizona Properties, LLC
| To Guarantor: | ZONED PROPERTIES, INC. |
8360 E. Raintree Dr., Ste 230
Scottsdale, AZ 85260
Attention: Legal
14. Successors and Assigns. This Guaranty shall be binding upon Guarantor, its successors and assigns and shall inure to the benefit of and shall be enforceable by Lender, its successors, endorsees and assigns.
15. Community Property. Any married person executing this Guaranty agrees that recourse may be had against community assets and against his or her separate property for the satisfaction of all Guaranteed Obligations. As used herein, the singular shall include the plural, and the masculine shall include the feminine and neuter and vice versa, if the context so requires.
16. Costs of Enforcement. If any or all of the Guaranteed Obligations are not paid when due, Guarantor agrees to pay all costs of enforcement and collection and preparation therefore (including, without limitation, reasonable attorneys’ fees and any amounts disbursed by Lender in connection with enforcing Lender’s remedies under the Loan Documents) whether or not any action or proceeding is brought (including, without limitation, all such costs incurred in connection with any bankruptcy, receivership, or other court proceedings (whether at the trial or appellate level)) together with interest thereon from the date of demand at the default rate applicable to the loan agreement or any note.
17. WAIVER OF DEFENSES AND RELEASE OF CLAIMS. The undersigned hereby (a) represents that neither the undersigned nor any affiliate or principal of the undersigned has any defenses to or setoffs against any indebtedness or other obligations owing by the undersigned, or by the undersigned’s affiliates or principals, to Lender or Lender’s affiliates (the “Obligations”), nor any claims against Lender or Lender’s affiliates for any matter whatsoever, related or unrelated to the Obligations, and (b) releases Lender and Lender’s affiliates, officers, directors, employees and agents from all claims, causes of action, and costs, in law or equity, known or unknown, whether or not matured or contingent, existing as of the date hereof that the undersigned has or may have by reason of any matter of any conceivable kind or character whatsoever, related or unrelated to the Obligations, including, without limitation, the subject matter of this Guaranty. The foregoing release does not apply, however, to claims for future performance of express contractual obligations that mature after the date hereof that are owing to the undersigned by Lender or Lender’s affiliates. The undersigned acknowledges that Lender has been induced to enter into or continue the Obligations by, among other things, the waivers and releases in this paragraph.
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18. JURY WAIVER; JUDICIAL REFERENCE. TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL PARTIES TO THIS AGREEMENT HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
(a) Judicial Reference. If the waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, who shall be a retired state or federal court judge, mutually selected by the parties or, if they cannot agree, then any party may seek to have a private judge appointed in accordance with California Code of Civil Procedure §§ 638 and 640 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts). The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
The parties agree that time is of the essence in conducting the referenced proceedings. The parties shall promptly and diligently cooperate with one another and the referee, and shall perform such acts as may be necessary to obtain prompt and expeditious resolution of the dispute or controversy in accordance with the terms hereof. The costs shall be borne equally by the parties.
19. Right of Setoff. In addition to all liens upon, and rights of setoff against, the monies, instruments, certificates of deposit, securities or other property of Guarantor given to Lender by law, Lender shall have a lien and a right of setoff against, and Guarantor hereby grants to Lender a security interest in, all monies, instruments, certificates of deposit, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Lender, whether held in a general or special account or deposit including any account or deposit held jointly by Guarantor with any other person or entity, or for safekeeping or otherwise, together with any payments or termination amounts associated with Financial Contracts between Grantor and Lender, except to the extent specifically prohibited by law. Every such lien, right of setoff and security interest may be exercised without demand upon or notice to Guarantor. No lien, right of setoff, or security interest shall be deemed to have been waived by any act or conduct on the part of Lender, by any neglect to exercise such right of setoff or to enforce such lien or security interest, or by any delay in so doing. The rights and remedies of Lender hereunder are in addition to other rights and remedies (including, without limitation, other rights of setoff) which Lender may have.
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20. GOVERNING LAW; JURISDICTION. THIS GUARANTY HAS BEEN DELIVERED IN CALIFORNIA, AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES. THE COURTS OF CALIFORNIA, FEDERAL OR STATE, SHALL HAVE EXCLUSIVE JURISDICTION OF ALL LEGAL ACTIONS ARISING OUT OF THIS GUARANTY. BY EXECUTING THIS GUARANTY, GUARANTOR CONSENTS AND SUBMITS TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS OF CALIFORNIA.
21. No Third Party Beneficiaries. This Guaranty is solely for the benefit of Lender, its successors, endorsees and assigns, and is not intended to nor shall it be deemed to be for the benefit of any third party, including Borrower.
22. Severability. If any provision of this Guaranty is unenforceable, the enforceability of the other provisions shall not be affected and they shall remain in full force and effect.
23. Counterparts. This Guaranty may be executed in counterparts, all of which executed counterparts shall together constitute a single document.
24. Counsel. Guarantor acknowledges that Guarantor has had adequate opportunity to carefully read this Guaranty and to consult with an attorney of Guarantor’s choice prior to signing it.
25. Amendments. No amendment or waiver of any provision of this Guaranty or consent to any departure by Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by Lender.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the day and year first above written.
| GUARANTOR: | ||
| ZONED PROPERTIES, INC. | ||
| By: | /s/ Bryan McLaren | |
| Bryan McLaren | ||
| Its: Chief Executive Officer | ||
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Exhibit 10.4
SECURITY AGREEMENT – DEPOSIT ACCOUNT
THIS SECURITY AGREEMENT – DEPOSIT ACCOUNT (this “Agreement” or “Security Agreement”), dated July 11, 2022, is entered into by and between ZONED ARIZONA PROPERTIES LLC, an Arizona limited liability company (“Grantor” or “Borrower”), with an address of 8360 E. Raintree Dr, Ste. 230, Scottsdale, AZ 85260 and EAST WEST BANK, a California corporation (the “Secured Party” or “Lender”), as follows:
Recitals
A. Secured Party has agreed to make certain advances of money and to extend certain financial accommodations (the “Loan”) to Borrower in the amounts and manner set forth in that certain Loan Agreement by and among Borrower and Secured Party dated approximately even date herewith (as the same may be amended, modified or supplemented from time to time, the "Loan Agreement.").
B. Secured Party is willing to make the Loan to Borrower, but only upon the condition, among others, that Grantor grant to Secured Party a continuing security interest in the collateral set forth below.
Agreement
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound, as collateral security for the prompt and complete payment when due of its obligations under the Loan Agreement, Grantor hereby represents, warrants, covenants and agrees as follows:
| 1. | SECURITY INTEREST. |
1.1. Grant of Security. As security for the prompt and complete payment and performance in full by Borrower, together with all fees and other charges for which Borrower may be responsible or liable pursuant to the Loan Agreement, including any Obligations (as such term is defined in the Loan Agreement), and any of its remedies of Secured Party under the Loan Agreement (the “Secured Obligations”), Grantor hereby grants, assigns, conveys, mortgages, pledges, hypothecates and transfers to the Secured Party a lien on and security interest in its Collateral.
1.2. “Collateral” shall mean the following described account (“Account”): account number 8420010178 maintained with Secured Party, together with (a) all interest whether now accrued or hereafter accruing; (b) all additional deposits hereafter made to the Account, (c) any and all proceeds from the Account, and
(d) all renewals, replacements, and substitutions for any of the foregoing.
1.3. Continuing Agreement. This Security Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until the performance in full of the Secured Obligations.
1.4. Termination. Upon the satisfaction of the Secured Obligations, this Agreement shall automatically be null and void and have no further force and effect without any action on the part of any party.
1.5. Other Obligations of Grantor. The obligations secured hereunder are separate and apart from any other obligations Grantor may have to Lender in its capacity from time to time as a direct borrower.
| 2. | PERFECTION OF SECURITY INTEREST. |
2.1. Authorization to File Financing Statements. Grantor authorizes Secured Party to file all such financing statements pursuant to the Uniform Commercial Code or similar filings as in effect from time to time in Arizona (the “UCC”), or other notices appropriate under applicable law.
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2.2. Collateral Covenants. To further insure the attachment, perfection and priority of, and the ability of the Secured Party to enforce the Secured Party’s security interest in the Collateral, Grantor agrees to take any and all other actions as the Secured Party may determine to be necessary or useful for the attachment, perfection, and priority of, and the ability of the Secured Party to enforce, the Secured Party’s security interest in the Collateral, including, without limitation, (a) authorizing and, where appropriate, filing financing statements and amendments relating thereto under the UCC, (b) complying with any provision of any statute, regulation or treaty of the United States, perfection or priority of, or ability of the Secured Party to enforce, the Secured Party’s security interest in such Collateral, (c) obtaining governmental and other third party waivers, consents, and approvals in form and substance satisfactory to the Secured Party, and (d) taking all actions under any other law, as reasonably determined by the Secured Party to be applicable.
| 3. | REPRESENTATIONS AND WARRANTIES. |
3.1. Validity. The security interest in the Collateral granted to the Secured Party hereunder constitutes and shall continue to constitute a legal and valid security interest in the Collateral. The execution and delivery of this Agreement will not violate any law or agreement governing Grantor, and Grantor’s articles of organization and operating agreement do not prohibit any term or condition of this Agreement.
3.2. Other Liens. Grantor is the sole owner of the Collateral, is in possession and control of the Collateral and except for the liens granted hereunder or previously granted to the Secured Party, Grantor has granted no other liens on the Collateral.
3.3. Due Authorization; No Conflict. The execution, delivery, and performance of this Agreement is within Grantor’s powers, has been duly authorized, and is not in conflict with nor constitutes a breach of any provision contained in Grantor’s articles of organization or operating agreement, nor will it constitute an event of default under any material agreement to which Grantor is a party or by which Grantor is bound. Except as previously disclosed to Lender in writing, Grantor is not in default under any material agreement to which it is a party or by which it is bound.
3.4. Representations. Grantor has duly executed and delivered this Security Agreement, and this Security Agreement constitutes the legal, valid and binding obligation of Grantor.
3.5. Full Disclosure. No representation, warranty or other statement made by Grantor in any certificate or written statement furnished to Lender contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in such certificates or statements not misleading.
4. COVENANTS. At any time and from time to time Grantor shall execute and deliver such further instruments and take such further action as may reasonably be requested by Lender to effect the purposes of this Agreement.
| 5. | EVENTS OF DEFAULT. |
5.1. Event of Default. Each of the following shall constitute an event of default under this Agreement:
a) The occurrence or continuance of any act or event that gives Secured Party a right to make demand for payment or performance under the Loan Agreement, subject to any notice or cure periods provided for in the Loan Agreement.
b) Any breach or violation of the Representations and Warranties set forth herein.
c) The granting of any other lien on the Collateral granted herein (excepting any lien in favor of Secured Party).
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d) Any statement made or furnished to Secured Party by Grantor or on Grantor’s behalf that is materially false or misleading in any material respect.
e) The failure of this Agreement or any related document to create a valid and perfected security interest or lien in the Collateral at any time.
| 6. | MISCELLANEOUS. |
6.1. Definitions. Capitalized terms used herein and not otherwise defined are used as defined in the Loan Agreement.
6.2. Waiver. No course of dealing or usage of trade, and no oral or written representations or agreement, between Grantor and the Secured Party, whether or not relied on or acted upon, and no act, delay or omission by Secured in exercising any right or remedy hereunder or with respect to any Obligations shall operate as a waiver thereof or of any other right or remedy, and no single or partial exercise thereof shall preclude any other or further exercise thereof or the exercise of any other right or remedy. The giving of notice or a demand by the Secured Party at any time shall not operate as a waiver in the future of the Secured Party’s right to exercise any right or remedy without notice or demand. The Secured Party may remedy any default by Grantor in any reasonable manner, without waiving the default remedied, and without waiving any other prior or subsequent default by Grantor.
6.3. Amendment. This Agreement may be amended or modified only by a writing signed by the parties hereto and any provision hereof may be waived only by a writing signed by the Secured Party.
6.4. Severability. The provisions of this Security Agreement are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Security Agreement in any jurisdiction.
6.5. Assignment. The benefits of this Security Agreement shall inure to the benefit of the successors and assigns of the Secured Party. The rights and obligations of Grantor under this Security Agreement shall not be assigned or delegated, by operation of law or otherwise, without the prior consent of the Secured Party, and any such assignment or attempted assignment shall be void, of no force or effect, and shall constitute a material default by Grantor.
6.6. Headings. The headings contained herein shall be for convenience of reference only and shall not have any bearing in the meaning of the provisions contained herein.
6.7. Notice. Any notice, instruction, or communication required or permitted to be given under this Security Agreement shall be in writing (which may include telex, telegram, telecopier, electronic mail or other similar form of reproduction followed by a mailed hard copy) and shall be deemed given when actually received at the party’s address listed in the first paragraph of this Security Agreement. Each party shall make an ordinary, good faith effort to ensure that the person to be given notice actually receives such notice. Either Party may change its address by providing written notice to the other Party. Notwithstanding the foregoing, any notice by Lender given in the manner set forth in the Loan Agreement shall be deemed an effective notice hereunder.
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| 7. | CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER. |
7.1 Choice of Law, Venue and Jury Trial Waiver. This Agreement and all transactions contemplated hereunder and/or evidenced hereby shall be governed by, construed under, and enforced in accordance with the internal laws of the State of California, without regard to principles of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive jurisdiction of the state and Federal courts located in the County of Santa Clara, State of California. TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL PARTIES TO THIS AGREEMENT HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
7.2 Judicial Reference. If the waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, who shall be a retired state or federal court judge, mutually selected by the parties or, if they cannot agree, then any party may seek to have a private judge appointed in accordance with California Code of Civil Procedure §§ 638 and 640 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts). The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
The parties agree that time is of the essence in conducting the referenced proceedings. The parties shall promptly and diligently cooperate with one another and the referee, and shall perform such acts as may be necessary to obtain prompt and expeditious resolution of the dispute or controversy in accordance with the terms hereof. The costs shall be borne equally by the parties.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned have executed this Security Agreement on the date first set forth above.
| SECURED PARTY: | ||
| EAST WEST BANK | ||
| By: | /s/ | |
| Name: | ||
| Title: | ||
| GRANTOR: | ||
| ZONED ARIZONA PROPERTIES, LLC | ||
| By: | Zoned Properties, Inc. | |
| Its: Member | ||
| By: | /s/ Bryan McLaren | |
| Bryan McLaren | ||
| Its: Chief Executive Officer | ||
5
Exhibit 99.1
Zoned Properties Secures Initial $4.5 Million Debt Facility for Cannabis Real Estate
$4.5 Million Debt Facility Secured against Tempe Property as a 50% Loan-to-Value
Tempe Property Represents 33% of Current Property Rental Revenue
Plans to Use Capital for New Property Investments and Acquisitions to Expand Portfolio
SCOTTSDALE, Ariz., July 12, 2022 /BusinessWire/ -- Zoned Properties®, Inc. (the “Company”) (OTCQB: ZDPY), a leading real estate development firm for emerging and highly regulated industries including legalized cannabis, today announced the Company has secured an initial debt facility of up to $4.5 million.
Debt Facility Overview & Highlights
| ● | Up to $4.5 million initial debt facility | |
| ● | Secured as a 50% loan-to-value collateralized against the Company’s Tempe property | |
| ● | 6-year loan term on a 25-year amortization with balloon payable at 72 months | |
| ● | Variable interest rate option of prime + 2.00%; currently a 7.00% annualized interest rate | |
| ● | Fixed interest rate option of prime + 2.25%; currently a 7.25% annualized interest rate | |
| ● | Interest only payment for first 12 months | |
| ● | Relationship with new banking partner opens door for expansion of debt facility in future |
“We have spent years positioning and building Zoned Properties to become a top of class commercial real estate acquisition vehicle for complex and highly regulated industries such as legalized cannabis,” said Bryan McLaren, Chief Executive Officer for Zoned Properties. “Not only does this debt facility allow us to pursue Zoned Properties’ pipeline of exciting property acquisition candidates across the country, we believe it is also a major signal that sophisticated and trusted companies servicing the cannabis industry are starting to see more access to capital at more competitive rates. We are very excited about the banking relationships that have helped bring this new capital into Zoned Properties. We believe this debt facility, combined with the opportunity to utilize our public vehicle for future equity capital raises, positions Zoned Property to grow its property portfolio to add meaningful value for our shareholders and provide a much needed full-spectrum of real estate services for industry stakeholders.”
“We plan to utilize raised capital to invest in and acquire projects, which we are already in the underwriting and review stages,” said Dan Gauthier, Chief Legal Officer for Zoned Properties. “The Company’s newly formed Zoned Investment Committee has recruited underwriting expertise that we believe can help accelerate and improve our acquisition process. The Company has a growing pipeline of prospective property investment projects across the country. As we focus in on national expansion for our commercial real estate model, we believe the acquisition of new property investments into our portfolio will continue to fortify the Company for many future years of growth.”
About Zoned Properties, Inc. (OTCQB: ZDPY):
Zoned Properties is a leading real estate development firm for emerging and highly regulated industries, including regulated cannabis. The company is redefining the approach to commercial real estate investment through its integrated growth services.
Headquartered in Scottsdale, Arizona, Zoned Properties has developed a full spectrum of integrated growth services to support its real estate development model; the Company’s Property Technology, Advisory Services, Commercial Brokerage, and Investment Portfolio collectively cross-pollinate within the model to drive project value associated with complex real estate projects. With national experience and a team of experts devoted to the emerging cannabis industry, Zoned Properties is addressing the specific needs of a modern market in highly regulated industries.
Zoned Properties is an accredited member of the Better Business Bureau, the U.S. Green Building Council, and the Forbes Real Estate Council. Zoned Properties does not grow, harvest, sell or distribute cannabis or any substances regulated under United States law such as the Controlled Substance Act of 1970, as amended (the “CSA”). Zoned Properties corporate headquarters are located at 8360 E. Raintree Dr., Suite 230, Scottsdale, Arizona. For more information, call 877-360-8839 or visit www.ZonedProperties.com.
Twitter: @ZonedProperties
LinkedIn: @ZonedProperties
Safe Harbor Statement
This press release contains forward-looking statements. All statements other than statements of historical facts included in this press release are forward-looking statements. In some cases, forward-looking statements can be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar expressions. Such forward-looking statements include risks and uncertainties, and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties are discussed in the Company’s filings with the Securities and Exchange Commission. Investors should not place any undue reliance on forward-looking statements since they involve known and unknown, uncertainties and other factors which are, in some cases, beyond the Company’s control which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects the Company’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to operations, results of operations, growth strategy and liquidity. The Company assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Media Relations
Proven Media
Neko Catanzaro
Tel (401) 484-4980
neko@provenmediaservices.com
Investor Relations
Zoned Properties, Inc.
Bryan McLaren
Tel (877) 360-8839
Investors@zonedproperties.com
www.zonedproperties.com
Cover |
Jul. 11, 2022 |
|---|---|
| Cover [Abstract] | |
| Document Type | 8-K |
| Amendment Flag | false |
| Document Period End Date | Jul. 11, 2022 |
| Entity File Number | 000-51640 |
| Entity Registrant Name | Zoned Properties, Inc. |
| Entity Central Index Key | 0001279620 |
| Entity Tax Identification Number | 46-5198242 |
| Entity Incorporation, State or Country Code | NV |
| Entity Address, Address Line One | 8360 E. Raintree Drive |
| Entity Address, Address Line Two | #230 |
| Entity Address, City or Town | Scottsdale |
| Entity Address, State or Province | AZ |
| Entity Address, Postal Zip Code | 85260 |
| City Area Code | 877 |
| Local Phone Number | 360-8839 |
| Written Communications | false |
| Soliciting Material | false |
| Pre-commencement Tender Offer | false |
| Pre-commencement Issuer Tender Offer | false |
| Entity Emerging Growth Company | false |
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