3.15. SR 06-14-1999
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**Item #3.15**
River
MEMORANDUM
TO:
Mayor & City Council
Pat K1aers, City ~~~or
June 14, 1999 ~
FROM:
DATE:
SUBJECT: Boys and Girls Club Mortgagee
Agreement
The city has entered into a lease with the Boys and Girls Club. This lease
allows the Boys and Girls Club to use part of Lions Park for their
construction and operation of a facility in this park. Consistent with the
lease, the attached Mortgagee Agreement as prepared by Doherty Rumble &
Butler finalizes some terms of our understanding. All of the terms in this
Agreement are consistent with the previously approved lease. The city, First
National Bank, and the Boys and Girls Club are all signees of the Mortgagee
. Agreement.
Recommendation
It is recommended that the City Council approve the attached Mortgagee
Agreement and authorize its execution.
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13065 Orono Parkway · P.O. Box 490. Elk River, MN 55330. TDD & Phone: (612) 441-7420. Fax: (612) 441-7425
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MORTGAGEE AGREEMENT
This Agreement is made as of the day of , 1999 by and among the
City of Elk River, a public body corporate under the laws of the State of Minnesota (the "City"), the
First National Bank of Elk River, a national banking association (the "Mortgagee"), and the Boys and
Girls Club of Elk River, Inc., a Minnesota nonprofit corporation (the "Mortgagor").
RECIT ALS
The City and the Mortgagor have entered into a Ground Lease dated March 16, 1999 for real
property described in Exhibit A attached hereto and incorporated herein by reference pursuant to
which the City, as lessor thereunder, agreed to consider entering into a form of mortgagee agreement
with the lessee's lender for purposes of financing construction of the improvement contemplated
pursuant to said Ground Lease.
The Mortgagor and the Mortgagee have entered into that certain Combination Mortgage,
Security Agreement and Fixture Financing Statement dated to secure a debt in the
maximum principal amount of Four Hundred Forty Thousand Dollars ($440,000) evidenced by a
Note of even date with said Mortgage, and related security documents (the "Mortgage") for the
purpose of financing the construction of the improvements contemplated pursuant to the Ground
Lease.
The Mortgagee has requested that the City consent to the Mortgage and enter into this
Mortgagee Agreement.
The terms used in this Agreement shall have the meanings defined in the Ground Lease unless
otherwise defined herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and
covenants set forth herein, the parties hereto agree as follows:
1. The City hereby consents to the Mortgage.
2. In the event that Mortgagee institutes foreclosure proceedings pursuant to the
Mortgage, the City will, upon the expiration of the applicable Mortgagor's right of redemption
pursuant to the Mortgage, either (i) cure any default by Mortgagor pursuant to the Mortgage and
assume Mortgagor's obligations thereunder~ or (ii) pay the unpaid principal balance and interest
payable thereon pursuant to the Mortgage in full.
3. The choice of whether to cure a default under the Mortgage or pay the Mortgage in
full as described in Section 1 above shall be at the City's sole discretion, and the Mortgagee and
Mortgagor hereby agree to accept any decision by the City to cure and assume the Mortgage in lieu
of payment in full.
I3URN1S 592193.2
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4. The City's agreement with the Mortgagor and Mortgagee hereunder is not intended
to constitute a present or future guarantee of the Mortgage, and the Mortgagee and Mortgagor
hereby acknewledge and agree that neither of them shall have any rights or claims against the City
except as may a?t's~ pursuant to this Mortgagee Agreement.
5. The City may, at its sole reasonable discretion, elect to sublet the mortgaged property
to a sublessee of its choice, provided that such sublessee meets the Mortgagee's reasonable credit
requirements and agrees to assume the obligations of the Mortgagor pursuant to the Mortgage.
Mortgagee agrees that it will not unreasonably withhold its approval of such a proposed sublease.
6. The Mortgagor hereby consents to the terms of this Agreement and hereby waives and
holds harmless the City as to any claims, actions or rights Mortgagor may have in connection with
this Agreement, the Mortgage, or the City's potential cure and assumption or repayment of the
Mortgage pursuant to the terms of this Agreement. The Mortgagor hereby represents and warrants
that it has obtained the advice oflegal counsel regarding the effect of this Agreement on Mortgagor's
rights and obligations pursuant to the Mortgage and the Ground Lease.
7. The lien of the Mortgage is subordinate to the rights and interests of the City as fee
owner of the mortgaged property and as lessor under the Ground Lease. Nothing herein shall be
intended or construed as a subordination of the City's interests in the mortgaged property to the lien
of the Mortgage, including, without limitation, the City's option to reenter and sublet the mortgaged
property pursuant to Section 12.2 of the Ground Lease and all of the City's rights relating to remedies
set forth in Article 12 of the Ground Lease.
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8. This Agreement shall expire automatically upon the earlier of the following
occurrences: (i) the Mortgagor's repayment in full of the Mortgage; (ii) modification or amendment
of the terms of the Mortgage without the City's prior written consent~ (iii) the sum of all amounts
necessary to pay in full (including without limitation principal, accrued interest, taxes, and insurance)
the Mortgage shall exceed Four Hundred Forty-seven Thousand Five Hundred Dollars ($447,500);
(iv) the mortgaged property or any part thereof shall have been taken in condemnation proceedings
or by exercise of any right of eminent domain or by agreement; ( v) the Mortgagee or the Mortgagor
shall have assigned all or any part its interests in the Mortgage or the mortgaged property without
the City's prior written consent~ (vi) the maturity date stated on the note evidencing the debt secured
by the Mortgage; or (vii) the expiration of the term of the Ground Lease.
9. The Mortgagee hereby waives and holds the City harmless from and against any and
all other rights, claims or actions that the Mortgagee, or parties claiming by or under it, may have
against the Mortgagor in connection with the Mortgage or otherwise. .
10.
following:
The City's obligations pursuant to this Agreement shall be conditioned upon the
a.
The Improvements shall be Substantially Complete, all sums for costs of construction of the
Improvements shall have been disbursed by the Mortgagee, there shall be no other unpaid
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BURN IS 592193.2
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claims or liens, including claims or liens for materials or labor against the mortgaged property,
and there shall be no claims or liens for unpaid Impositions affecting the mortgaged property.
b.
The Mortgagor and the Mortgagee shall provide to the City a written construction cost
certification certified by the Mortgagor, the Mortgagee and the Mortgagor's contractor,
setting forth the total amount of all mortgage loan proceeds expended for construction of the
Improvements.
c.
The loan-to-value ratio of the Mortgage shall be and remain no more than seventy percent
(70%) based on an as built appraisal certified to the City of the value of the Improvements
(excluding the value of the mortgaged property) prepared by an appraiser chosen by the City.
d.
The Improvements and the mortgaged property shall be in good condition, satisfactory to the
City in its sole reasonable discretion, based upon soils condition tests, environmental analyses,
engineering reports, surveys and other analyses and documentation obtained by the City at
its sole discretion.
e.
No event of default shall have occurred pursuant to the Mortgage that is not a monetary
default due to the failure of the Mortgagor to pay principal and interest, and taxes and
insurance due thereunder as and when due;
f.
The City shall have successfully terminated the Mortgagor's rights pursuant to the Ground
Lease, prior to the expiration of the Mortgagor's statutory right of redemption pursuant to
the Mortgage, and there shall be no unresolved claims, actions or demands by the Mortgagor
against the City with respect to such termination;
g. The City Council for the City of Elk River shall have approved the terms of this Agreement.
11. With respect to subparagraph (f) of Section 10 above, the City agrees that it will
exercise its rights to terminate the Ground Lease in a timely and good faith manner as required and
permitted by law, in the event of any Event of Default by Mortgagor pursuant to the Ground Lease.
The City will not unreasonably withhold or delay such exercise for the purpose of avoiding its
undertakings pursuant to this Mortgagee Agreement.
12. This Agreement may not be amended, modified or revised by the parties hereto except
by written agreement executed by all parties hereto.
13. This Agreement shall be construed under and enforced in accordance with the laws
of the State of Minnesota.
14. This Agreement may be executed in separate counterpart originals, all of which
together shall constitute one agreement.
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BURNIS 592193.2
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IN WITNESS WHEREOF, this Agreement has been entered into as of the date first above
written.
BURNIS 592193.2
CITY OF ELK RIVER
By:
Its:
FffiST NATIONAL BANK OF ELK RIVER
By:
Its:
BOYS AND GIRLS CLUB OF ELK RIVER, INe.
By:
Its:
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STATE OF MINNESOTA
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COUNTY OF
The foregoing instrument was acknowledged before me this _ day of , 199 -' by
, the of The City of Elk River,
a public body corporate under the laws of the State of Minnesota, on behalf of said public body
corporate.
Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _ day of , 199 -' by
, the of First National Bank
of Elk River, a national banking association, on behalf of said association.
Notary Public
ST ATE OF MINNESOTA
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COUNTY OF
The foregoing instrument was acknowledged before me this _ day of , 199 -' by
, the of the Boys and Girls Club of Elk
River, Inc., a Minnesota nonprofit corporation, on behalf of said corporation.
Notary Public
BURN IS 592193.2
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EXHmIT A
Legal Description
That part of the North 95.00 feet of the South 420.00 feet, lying west of a line 495.00
feet west of, and parallel with, the centerline of Jackson Avenue (formerly known as
"old Highway No. 169" and State Trunk Highway No. 201), and lying east of a line
713.00 feet west of, and parallel with, said centerline of Jackson Avenue; all as
measured at right angles, and all being part of the Southwest Quarter of the
Northwest Quarter of Section 34, Township 33, Range 26, Sherburne County,
Minnesota.
BURNIS 592193.2
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