6.3. EDSR 09-04-2018
Request for Action
To Item Number
Economic Development Authority 6.3
Agenda Section Meeting Date Prepared by
General Business September 17, 2018 Amanda Othoudt, EDD
Item Description Reviewed by
Satisfaction Agreement for SBH Properties, LLC Cal Portner, City Administrator
operated by APEX Design & Embroidery, Inc.
Reviewed by
Action Requested
Approve, by motion, a resolution and a certificate of forgiveness for Apex Design & Embroidery, Inc.
Background/Discussion
Apex received a $200,000 forgivable loan to help finance the acquisition of land, construction, and
equipping of a new manufacturing facility on October 17, 2016. They pledged to grow their workforce by
approximately seven additional employees averaging $17.71 per hour within two years of project
completion.
Apex Embroidery provides a variety of apparel decorating solutions, including screen printed transfers,
custom applique, custom rhinestone transfers digital transfers, embroidery programing, laser cutting, heat
transfer and more.
Apex in accordance with Section 6 of the Loan Agreement has notified the EDA that all conditions have
been met for the loan to be forgiven and has requested that the EDA issue a Certificate of Forgiveness
The EDA hereby finds that conditions have been met for the loan to be forgiven:
1. Evidence from the employer showing four jobs have been created and awarded to low and
moderate income (LMI) employees.
2. Evidence from the employer showing retaining the four jobs for a minimum of one year.
Financial Impact
N/A
Attachments
Resolution
Certificate of Forgiveness
Release of Mortgage
Forgivable Loan Program – Loan Agreement
Promissory Note
Mortgage & Security Agreement
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity
ECONOMIC DEVELOPMENT AUTHORITY OF
THE CITY OF ELK RIVER
COUNTY OF SHERBURNE
STATE OF MINNESOTA
RESOLUTION NO. _________
RESOLUTION APPROVING ISSUANCE OF A CERTIFICATE OF FORGIVENESS
(APEX DESIGN & EMBROIDERY, INC. PROJECT)
WHEREAS, SBH Properties, LLC, Inc., a Minnesota limited liability company (the
“Borrower”), has heretofore entered into a Loan Agreement, dated October 26, 2016, by and
between the Economic Development Authority of the City of Elk River (“EDA”) and the Borrower
(the “Loan Agreement”) providing a loan to the Borrower in the amount of $200,000 to help finance
the acquisition of land and the construction and equipping of a new manufacturing located in the
City of Elk River to be operated by Apex Design & Embroidery, Inc., an affiliate of the Borrower;
and
WHEREAS, in accordance with Section 6 of the Loan Agreement the Borrower has
notified the EDA that all conditions have been met for the loan to be forgiven and has requested
that the EDA issue a Certificate of Forgiveness.
NOW THEREFORE BE IT RESOLVED By the Board of Commissioners (the “Board”) of
the Economic Development Authority of the City of Elk River (“EDA”) as follows:
Section 1. EDA Approval. The EDA hereby finds that conditions have been met for the
loan to be forgiven, and the President and the Executive Director are hereby authorized and directed
to execute the Certificate of Forgiveness and Release of Mortgage, together with any related
documents necessary in connection therewith (the “Release Documents”), on behalf of the EDA and
deliver the Note, the Entity Guaranty and the Personal Guaranty (as defined in the Loan Agreement)
to the Borrower. The approval hereby given to the Release Documents includes approval of such
additional details therein as may be necessary and appropriate and such modifications thereof,
deletions therefrom and additions thereto including without limitation filling in any missing
information, as may be necessary and appropriate and approved by legal counsel to the EDA and by
the officers authorized herein to execute said documents prior to their execution; and said officers
are hereby authorized to approve said changes on behalf of the EDA. The execution of any
instrument by the appropriate officers of the EDA herein authorized shall be conclusive evidence of
the approval of such document in accordance with the terms hereof.
536599v2 JSB EL185-45
Approved by the Board of Commissioners of the Economic Development Authority of the
th
City of Elk River this 17 day of September, 2018.
President
ATTEST:
Secretary
536599v2 JSB EL185-45
CERTIFICATE OF FORGIVENESS
September ___, 2018
WHEREAS, the Economic Development Authority of Elk River, Minnesota (the
“EDA”), a body corporate and politic subdivision of the State of Minnesota and SBH Properties,
LLC, Inc., a Minnesota limited liability company (the “Borrower”) have entered into a Loan
Agreement dated October 26, 2016 (the “Loan Agreement”); and
WHEREAS, the Loan Agreement requires the Borrower to meet certain conditions as set
forth in the Loan Agreement;
WHEREAS, the Borrower has met the conditions set forth in the Loan Agreement to
forgive the loan;
NOW, THEREFORE, this is to certify that the Borrower has met the conditions set
forth in the Loan Agreement to forgive the loan. As a result, the EDA shall forgive all
outstanding principal and interest due on the loan and relieve the Borrower of all further
obligations under the Loan Agreement and deliver to the Borrower the following:
(a) Promissory Note marked cancelled;
(b) Release of Mortgage;
(c) the Personal Guaranty (as defined in the Loan Agreement) to the Borrower; and
(d) the Entity Guaranty (as defined in the Loan Agreement) to the Borrower.
536598v2 JSB EL185-45
1
IN WITNESS WHEREOF, the Economic Development Authority of Elk River,
Minnesota has caused this Certificate of Forgiveness to be executed with by its duly authorized
officer as of the date first written above.
ECONOMIC DEVELOPMENT
AUTHORITY OF ELK RIVER,
MINNESOTA
By
President
By
Executive Director
536598v2 JSB EL185-45
2
RELEASE OF MORTGAGE
Dated: September__, 2018
THAT MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING
STATEMENT dated ________, 2018 (the “Mortgage”), from SBH Properties, LLC, a
Minnesota limited liability company (the “Mortgagor”), in favor of the Economic Development
Authority of the City of Elk River, a public body corporate and politic of the State of Minnesota
(the “Mortgagee”), recorded in the office of the Recorder of Sherburne County, Minnesota, on
October __, 2018, as Document No. __________, is, for valuable consideration, terminated and
released in accordance with its terms.
(The remainder of this page is intentionally left blank.)
536603v1 JSB EL185-45
IN WITNESS WHEREOF, the undersigned has executed this Release of Mortgage as of
the date and year first written above.
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER
By:
Its: President
By:
Its: Executive Director
STATE OF MINNESOTA )
) SS.
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this ____ day of ____________,
2018, by __________________, the President and ________ the Executive Director of the City
of Economic Development Authority of the City of Elk River, on behalf of the public body
corporate and politic.
Notary Public
This Instrument was drafted by:
Kennedy & Graven, Chartered (JSB)
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis, MN 55402
(612) 337-9300
536603v1 JSB EL185-45
S-1
LOAN AGREEMENT
(Forgivable Loan Program)
THIS LOAN AGREEMENT ("Agreement") is made effective as of October _, 2016 (the
"Closing Date"), by and between SBH PROPERTIES, LLC, a Minnesota limited liability
company ("Borrower"), and the ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY
OF ELK RIVER, a public body corporate and politic of the State of Minnesota ("Lender").
RECITALS
A. Borrower has applied to Lender for a Forgivable Loan Program loan for
Borrower's acquisition of land and construction and equipping of a new manufacturing facility
located on certain real property at 9775 158th Circle, NW, Elk River, Minnesota 55330 (the
"Loan Property") in the principal amount of $200,000.00.
B. Lender is willing to make such loan to Borrower in the principal amount of
$200,000.00 (the "Loan"), subject to all of the terms and conditions of this Agreement.
C. Contemporaneously with the execution hereof, Borrower is delivering to Lender
the following security documents:
(i) A Promissory Note ("Note") effective as of the date herewith made by
Borrower and payable to the order of Lender, in the original principal amount of
$200,000.00.
(ii) The personal guaranty of Brian Hill, President of Borrower (the "Personal
Guaranty");
(iii) Mortgage and Assignment of Rents and Security Agreement and Fixture
Financing Statement securing the Note ("Mortgage"). The Mortgage is of even date
herewith, is executed by Borrower, as mortgagor, in favor of Lender, as mortgagee, and
covers the Loan Property as well as a security interest in certain other property described
therein; and
(iv) An entity guaranty (the "Entity Guaranty") of Apex Design &
Embroidery, Inc. (the "Entity Guarantor").
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, it is
hereby agreed as follows:
1. Amount and Purpose of Loan. Borrower agrees to take and Lender agrees to
make a loan in the principal amount of Two Hundred Thousand and No/100s Dollars
($200,000.00) (the "Loan") to be advanced in a single disbursement as hereinafter provided, the
Loan will be evidenced by the Note and secured by the Personal Guaranty, the Mortgage, the
Entity Guaranty and any other security document required under this Agreement. The Loan
proceeds will be used only towards the cost of the construction and equipping of a new
manufacturing facility on the Loan Property.
2. The Project. For the purposes of this Agreement, the term "Loan Property"
means the real estate described in the Mortgage together with all improvements now located or
hereafter placed thereon. Borrower agrees to improve as a part of the Loan Property a project
("Project") consisting generally of constructing and equipping a new manufacturing facility for
its apparel decorating business, substantially in accordance with plans and specifications which
have been provided to Lender. The improvements to and equipping of the Loan Property
contemplated by the plans and specifications, as the same may be changed with the approval of
Lender, are herein referred to as the "Improvements." Construction has not commenced of the
Improvements. Borrower will commence construction of the Improvements promptly after the
date of this Agreement and to carry on continuously, diligently and with reasonable dispatch the
construction of the Improvements to full and final completion. Failure to complete the
Improvements on or before July 1, 2017 shall be a default hereunder.
3. Title Insurance. Sherburne County Abstract & Title Co. ("Title") is designated as
the title insurer with respect to this Agreement. Title will insure Lender against loss or damage
on account of mechanic's liens upon or unmarketability of the title to the Loan Property, and
will ensure that the Mortgage constitutes a second priority lien upon Borrower's interest in the
Loan Property as contemplated by this Agreement, subject only to a mortgage in favor of the
Bank of Elk River in the amount of $1,120,000 (the "First Lien Mortgage"). Borrower agrees
to promptly and fully observe and comply with the reasonable requirements of Title and Lender
with respect to the title, the Mortgage, disbursements of funds and such other reasonable
requirements as Title may make.
4. Documents to be Delivered. Borrower covenants and agrees to immediately
cause the compliance with the following conditions:
(a) Note. Deliver to Lender the Note.
(b) Personal Guaranty. Deliver to Lender the Personal Guaranty.
(c) Entity Guaranty. Deliver to Lender the Entity Guaranty.
(d) Mortgage. Deliver to Lender the Mortgage, together with evidence that
the Mortgage has been or will be duly filed for record.
(e) Bank Loan Documents. Deliver to Lender copies of all of the documents
relating to the First Lien Mortgage (the "Bank Loan Documents").
(f) Environmental Indemnification Agreement. Deliver to Lender the
Environmental Indemnification Agreement.
(g) Organizational Documents and Resolutions. Deliver to Lender copies of
the (i) articles of organization for Borrower certified by the Minnesota Secretary of State,
(ii) certificate of good standing for Borrower issued by the Minnesota Secretary of State;
(iii) Borrower's operating agreement, member control agreement and bylaws; and (iv)
certified resolutions of Borrower authorizing the execution and delivery of the Mortgage,
the Entity Guaranty and any other document to be executed by Borrower pursuant to this
Agreement.
(h) Organizational Documents and Resolutions. Deliver to Lender copies of
the (i) articles of incorporation for Entity Guarantor certified by the Minnesota Secretary
of State, (ii) certificate of good standing for Entity Guarantor issued by the Minnesota
Secretary of State; (iii) Entity Guarantor's bylaws; and (iv) certified resolutions of Entity
Guarantor authorizing the execution and delivery of the Note and this Agreement and any
other document to be executed by Entity Guarantor pursuant to this Agreement.
(i) Project Cost and Source of Funds Certificate. Deliver to Lender a sworn
certificate detailing costs and sources of funds to be utilized for the Project ("Project Cost
Certificate"), in a form acceptable to Lender, verified on oath by a authorized
representative of Borrower showing an itemized breakdown of. (i) the source and amount
of all Project funds; and (ii) of the total cost of the Project. Not less than 50% of the
Project funds must come from a source other than the Loan proceeds. Borrower shall
deliver to Lender lien waivers, receipts for payment and other evidence of payment
acceptable to Lender with respect to any such portion of costs and charges incurred to the
date of the Project Cost Certificate.
0) Insurance. Deliver to Lender: (i) a certificate or policy for all insurance
required, under the terms hereof to be maintained by Borrower; and (ii) evidence that no
part of the Loan Property is located in an area designated as being a flood plain or flood
hazard area as defined by the Flood Hazard Boundary Map published by the Federal
Insurance Administration.
(k) Compliance with Laws Etc. Deliver to Lender such evidence as Lender
may require as to the compliance of the Loan Property and the Improvements with: (i) all
applicable laws, codes, rules, regulations and ordinances, including, without limitation,
those relative to environmental protection, protection of wetlands, building and zoning
matters and the Americans with Disabilities Act; and (ii) the requirements of any
restrictive covenants, conditions and restrictions; conditional use permit or planned unit
development applicable to the Loan Property.
(1) Hazardous Substances. Deliver to Lender evidence acceptable to Lender,
that: (i) the Loan Property has not been used as a hazardous waste storage facility or
burial site; (ii) the soil is free from hazardous waste, hazardous substances, pollutants and
contaminants; and (iii) no hazardous waste, hazardous substance, pollutant or
contaminant has been used in the construction or use of any building or other
improvement on the Loan Property. For purposes of this subparagraph, the terms
"hazardous waste," "hazardous substances," "pollutants" and "contaminants" shall
include, but not be limited to, polychlorinated biphenyls (PCBs), asbestos, petroleum
products and any other chemical or substance determined to be a hazard to human health
or the environment.
(m) Program Fee. Deliver to Lender the program fee of $2,000.
(n) Indemnity. Deliver to Title any indemnity agreement in favor of Title in
the form required by Title in order for Title to issue the title insurance policies referred to
above.
(o) Expend Funds, Lien Waivers; Property Documents. Not later than 15
days after the issuance of the certificate of occupancy for the Loan Property, Borrower
shall deliver to Lender: (i) a copy of the certificate of occupancy for the Loan Property;
(ii) a final Project Cost Certificate; and (iii) evidence acceptable to Lender that Borrower
has paid all costs of the Project.
(p) Lease. Deliver to Lender a copy of the lease agreement for the use of the
Loan Property, executed no later than the date of this Agreement, by and between
Borrower, as landlord, and the Entity Guarantor, as tenant (the "Lease").
Lender may waive any of the above requirements in its sole discretion.
5. Disbursement of Loan. Upon receipt by Lender of all of the items required
pursuant to Section 4 above, with the exception of item (o) which shall be delivered after
construction has been completed, in the form and condition required therein and confirmation
from Title that Title is prepared to issue the mortgagee's title insurance policy as required herein,
Lender agrees to disburse the Loan proceeds to Borrower.
6. Forgivable Loan Requirements and Covenants.
(a) Loan Forgiveness Program. This Loan is made pursuant to the Lender's
Forgivable Loan Program. From and after the Closing Date through and until the
Conversion Date (as defined below), Borrower shall not be required to make any
payments of principal or interest, though interest shall accrue at the interest rate set forth
in the Note.
(b) Reporting. On each anniversary of the Closing Date, Borrower shall
provide an annual report in a form acceptable to Lender, certified by an officer of
Borrower, reporting: (i) the number of jobs created by Borrower; (ii) the hourly wage
paid to each position; (iii) average weekly hours worked by each employee; and (iv) the
location of the business, and each annual reports shall have the pay stubs for each
employee attached.
(c) Guidelines. The Loan will be forgiven as set forth below if Borrower
meets all of the following requirements:
(i) Location/Existence. Upon the delivery of a certificate of
occupancy for the Project, the Borrower's business has at all times been, located
in Elk River and has been open for business as a going concern.
(ii) Job Creation/Maintenance. The Borrower has created or caused
the Entity Guarantor to create not less than 7 new jobs from and after the date of
completion of the Project, which date shall be the date the Certificate of
Occupancy for the Loan Property is issued (the "Benefit Date"). For the created
jobs: (A) the salary/wage of each position created must be $12.19/hour or greater
(inclusive of salary and benefits); (B) at least 4 of the created jobs must be filled
by a person who meets State of Minnesota's most current low to moderate income
guidelines; (C) the employee filling such job must have worked for at least 1,750
hours in any 12 month period; provided that the 12 -month period shall commence
no later than the 2 year anniversary of the Benefit Date. If the employee initially
hired to any created position leaves or is terminated prior to completing the
required time of employment, Lender may allow a replacement employee hired to
fill the position to complete the requirements of this section, in the sole discretion
of Lender as to: (X) whether to allow such "tacking"; and (Y) the terms and
conditions of such completion.
(iii) No Defaults. As of the Determination Date, there are no defaults
under this Agreement or any other agreement between Lender and Borrower
which is beyond any notice and cure period.
(d) Completion. Within a reasonable time after: (i) the 3rd Anniversary of the
Benefit Date; or (ii) such earlier date as Borrower requests Lender's review, Lender will
determine, in its sole and absolute discretion, whether Borrower has fully and timely
complied with the requirements of this Section 6. Borrower will promptly provide all
such documentation as Lender reasonably requests in Lender's effort to determine
whether Borrower has timely complied with the requirements of this Section 6. The date
upon which Lender gives Borrower written notice of its determination of Borrower's
compliance with the requirements of this Section 6 is the "Determination Date". If
Borrower has timely and completely complied with all of the requirements of this Section
6, as strictly interpreted, Lender will forgive all outstanding principal and interest due and
owing pursuant to the Loan as of the Determination Date. Within a reasonable time
thereafter, Lender will return the Note, the Personal Guaranty and the Entity Guaranty to
Borrower and will provide a satisfaction and release of the Mortgage and a termination of
its financing statement. If, however, Lender determines that Borrower has not fully or
timely complied with the requirements of this Section 6 or at any time after the 2nd
Anniversary of the Benefit Date reasonably determines that Borrower cannot comply
with the requirements of this Section 6, then: (i) all interest accrued to date shall be
capitalized as of the next occurring first of a calendar month (the "Conversion Date"); (ii)
the term of the Loan shall be 7 years, commencing upon the Conversion Date; (iii)
Lender will calculate the monthly payments due and owing from Borrower, based upon a
7 year amortization; (iv) the first payment will be due and payable on the Conversion
Date; and (v) the terms and conditions of this Loan Agreement and any other related loan
document and the Borrower's obligations thereunder shall continue until the Loan and all
accrued interest is repaid in full.
7. Access to Loan Property. Lender and its respective representatives shall have at
all reasonable times the right to enter and have free access to the Loan Property and the right to
inspect the Loan Property.
8. Books and Records. Borrower agrees to maintain accurate and complete books,
accounts and records in regard to the Loan Property in a manner reasonably acceptable to
Lender. Lender, acting solely through its municipal or financial advisor, shall have the right to
inspect, examine and copy all such books and records of Borrower and Borrower shall, at
Lender's request, furnish such information solely to the Lender's municipal or finance advisor,
as may reasonably be demanded. The Borrower will not be required to provide its books and
records directly to the Lender. Borrower shall also ensure that Entity Guarantor maintains
accurate and complete books, accounts, and records in a manner reasonably acceptable to
Lender. Lender and its representatives shall have the right to inspect, examine and copy all such
books and records of Entity Guarantor and Entity Guarantor shall, at Lender's request, furnish
such information as Lender may reasonably demand.
9. Encumbrances and Transfer. Other than the First Lien Mortgage and the Lease
from the Entity Guarantor, Borrower agrees not to sell, transfer, lease or convey the Loan
Property or any part of it, or any interest therein, or encumber the Loan Property or any part of it,
in any manner, without written consent of Lender which consent may be granted or withheld in
the sole discretion of Lender. This requirement shall apply to each and every sale, transfer, lease
or conveyance, whether voluntary or involuntary and whether or not Lender has consented to any
such prior sale, transfer lease or conveyance. This requirement shall apply to each and every
sale, transfer, lease or conveyance, whether voluntary or involuntary and whether or not Lender
has consented to any such prior sale, transfer lease or conveyance.
10. Time of Essence. Time is of the essence in the performance of this
Agreement.
11. Assi ability. Borrower shall not assign this Agreement without written consent
of Lender, which consent may be withheld, conditioned or delayed in Lender's sole discretion.
Lender may freely assign or otherwise transfer (including by participation) all or any part of its
interest in the Loan or any or all of the Loan documents, in Lender's sole discretion.
12. Miscellaneous Covenants of Borrower. Borrower covenants and agrees with
Lender that, without cost to Lender, Borrower will or will cause Entity Guarantor to:
(a) Performance of Conditions. Promptly keep, perform and comply with all
of the terms, covenants and conditions to be kept and performed by Borrower and/or
Entity Guarantor, as required by the City of Elk River (the "City") and any other
governmental body having jurisdiction over the Loan Property as a condition of platting,
rezoning or developing the Loan Property; keep unimpaired the rights of Borrower and/or
Entity Guarantor under any permit or agreement issued or made by the City or other
governmental body having jurisdiction over the Loan Property and any contracts obtained
or held by Borrower and/or Entity Guarantor in connection with the construction or
operation of the Improvements; and to enforce the prompt performance of all of the
terms, covenants and conditions to be kept and performed by the City or other
governmental body having jurisdiction over the Loan Property, respectively, under any
permits or agreements issued or made by the City or such other governmental bodies, and
any contractors under all contracts obtained or held by Borrower and/or Entity Guarantor
in connection with construction or operation of the Improvements or Borrower's
business.
(b) Amendment, Etc. of Documents. Not amend, cancel, terminate,
supplement or waive any of the material terms, covenants and conditions of any permit or
agreement issued or made by the City or any other governmental body having jurisdiction
over the Loan Property, or any other contracts obtained or held by Borrower and/or
Entity Guarantor in connection with the construction or operation of the Improvements or
any contracts, documents or agreements referred to herein without the prior written
approval of Lender. Borrower will provide to Lender complete documentation
concerning any change made to the Project.
(c) Performance of Note etc. Without limiting the foregoing, keep and
perform all of the terms, covenants, conditions and requirements of the Note and this
Agreement.
(d) Insurance. During the term of this Agreement, Borrower shall procure and
maintain or cause to be procured and maintained at its sole expense, casualty insurance,
public liability insurance and such other types of insurance as are reasonably required by
Lender from time to time, including, without limitation, the coverages expressly required
by the Mortgage, insuring Lender and Borrower with coverages, in amounts and with
companies satisfactory to Lender. The policy or policies or duly executed certificate or
certificates for such insurance and renewals or replacements thereof shall be deposited
with Lender.
(e) Pay Charges. Pay at closing, or within 30 days of written notice from the
Lender, all loan charges including, but not limited to: (i) Lender's attorneys' fees; (ii) title
insurance fees, costs and premiums; and (iii) filing fees of any instruments required under
this Agreement.
(f) Default Notices. Provide Lender with a copy of any default notice
received by the Borrower or the Entity Guarantor pursuant to any documents related to
any financing secured by the Loan Property, promptly after receipt of the same.
(g) Continual Operation. At all times while any portion of the Loan remains
outstanding, Borrower will: (i) maintain its status as a for profit entity; (ii) maintain a
positive net worth; and (iii) will operate its business from the Loan Property in a first
class manner (from and after issuance of the Certificate of Occupancy for the Loan
Property).
(h) Default Notices. Provide Lender with a copy of any default notice
received pursuant to the Bank Loan Documents (to the extent that such notice is send by
a party other than Lender) or any governmental authority, promptly after receipt of the
same.
(i) Positive Net Worth. On the Closing Date and each anniversary thereof,
Borrower shall provide interim financial statements (to date) of Borrower consisting of at
least statements of income, cash flow, and a balance sheet such year to date, setting forth
in each case in comparative form corresponding figures from the previous fiscal year,
which statements shall be certified by Borrower as true, correct and complete. In each
such interim financial statement, Borrower must show a positive net worth.
13. Warranties. Borrower represents and warrants to Lender the following:
(a) The Borrower is a corporation duly formed, validly existing and in good
standing under the laws of the State of Minnesota.
(b) The making and performance of this Agreement and the execution and
delivery of the Note, the Mortgage and any other instrument required hereunder are
within the powers of the Borrower and have been duly authorized by all necessary
company action on the part of the Borrower. This Agreement and the Note, Mortgage
and any other instruments required hereunder have been duly executed and delivered and
are the legal, valid and binding obligations of the Borrower and the Entity Guarantor
enforceable in accordance with their respective terms.
(c) No litigation, tax claims or governmental proceedings are pending or
threatened against the Borrower, the Entity Guarantor or the Loan Property, and no
judgment or order of any court or administrative agency is outstanding against the
Borrower, the Entity Guarantor or the Loan Property which would have a material
adverse effect on Borrower, the Entity Guarantor or the Loan Property.
(d) Borrower and the Entity Guarantor have filed all tax returns (federal and
state) required to be filed for all prior years and paid all taxes shown thereon to be due,
including interest and penalties. Borrower and the Entity Guarantor will file all such
returns and pay all such taxes for the current and future years.
(e) All information, financial or other, which has been submitted by
Borrower, the personal guarantors, and the Entity Guarantor in connection with the Loan
is true, accurate and complete in all material respects.
(f) The Borrower and the Entity Guarantor a under common ownership.
14. Indemnification. Borrower agrees to indemnify Lender and save it harmless
against all loss, liability, expense, or damages including but not limited to attorneys' fees, which
may arise by reason of the assertion of any lien against the Loan Property. Borrower will
indemnify and hold Lender harmless from any damages Lender may suffer or incur from any
default by Borrower under this Agreement, the Note or any other document supporting this Loan.
15. Defaults. Each of the following shall constitute an Event of Default:
(a) If (i) Entity Guarantor or Borrower fails to commence construction of the
Improvements by December 1, 2016; (ii) work on construction of the Improvements is
halted for more than 5 consecutive business days; (iii) construction of the Improvements
is not completed by July 1, 2017; (iv) the Improvements are not constructed in
accordance with this Agreement; or (v) Borrower or Entity Guarantor abandons the Loan
Property.
(b) Bankruptcy, reorganization, assignment, insolvency or liquidation
proceedings, or other proceedings for relief under any applicable bankruptcy law or other
law for relief of debtors are instituted by or against Borrower and, if such proceedings are
instituted against Borrower, an order, judgment or decree, without the consent of
Borrower appointing a trustee or receiver for Borrower or any part of its property or
approving a petition under the bankruptcy laws of the United States or any similar laws
of any state or other competent jurisdiction, shall have remained in force undischarged or
unstayed for a period of 30 days.
(c) Any judgment, attachment, garnishment or other similar process is entered
against Borrower or against any property or assets of Borrower and is not released,
satisfied or discharged or bonded to Lender's satisfaction within 30 days of entry.
(d) Any of the terms, covenants or conditions of any permit or other
agreement issued or made by the City or other governmental body having jurisdiction
over the Loan Property are not complied with within the time required thereby or are
terminated or modified by the City or such other governmental body and Borrower has
not taken or has not caused the Entity Guarantor to take the necessary steps to correct or
cure the same within thirty (30) days after written notice is given by Lender.
(e) Any mechanic's or material supplier's lien is filed, against the Loan
Property and is not released, satisfied or discharged or bonded to Lender's satisfaction.
(f) A transfer which violates by Paragraph 9 hereof, Encumbrances and
Transfer, occurs.
(g) Borrower: (i) fails to pay when due any amount due under this Agreement,
the Note, or any other documents listed in Section 3; (ii) fails to perform any other
obligation to be performed under this Agreement, the Mortgage, the Note, or any other
document executed by Borrower pursuant to this Agreement; or (iii) fails to pay any
amount or perform any obligation under any other note, mortgage or other agreement
now or hereafter made by Borrower in favor of or with Lender or otherwise now or
hereafter held by Lender or Bank, and such failure continues beyond any applicable cure
period.
(h) Any representation or warranty by Borrower contained herein or in the
Note, the Mortgage, or any other instrument required hereunder is false or untrue in any
material respect when made.
(i) A default under the Entity Guaranty, the Mortgage or the Personal
Guaranty beyond any applicable notice and cure period.
Upon the occurrence of an Event of Default, Lender, at its option, shall, in addition to any other
remedies which it might be entitled to by law, have the right to:
(a) Perform such other acts or deeds which reasonably may be necessary to
cure any default existing under this Agreement, and to this end, it is hereby agreed as
follows:
(i) All sums expended by Lender in effectuating its rights under
paragraphs (ii) and (iii) of this paragraph shall be deemed to have
been advanced under this Agreement and to be secured by any
security document required under this Agreement as security for the
Loan.
(ii) To enter into possession of the Loan Property and perform any and
all work and labor necessary to complete the Improvements
substantially as required under this Agreement and to do all things
necessary or incidental thereto;
(iii) Borrower hereby constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution either in the name of
Lender or in the name of Borrower or in the name of both, for the
following purposes: (A) to prosecute and defend all actions or
proceedings in connection with the Loan Property and do any and
every act which Borrower might do in its own behalf, (B) to perform
each of the terms, covenants and conditions to be kept and
performed by Borrower under any contracts and/or leases obtained
or held by Borrower in connection with the operation of the
Improvements and any other contracts; (C) without limiting the
foregoing, to perform each of the terms, covenants and conditions to
be kept or performed by Borrower under this Agreement and any
other instrument required under this Agreement; and (D) to do all
things that Lender reasonably deems necessary or advisable for the
purpose of carrying out the powers enumerated in (A), (B), (C) and
(D) of this Subparagraph (ii);
(iv) The powers herein granted Lender shall be deemed to be powers
coupled with an interest and the same are irrevocable;
(b) cancel this Agreement;
(c) bring appropriate action to enforce such performance and the correction of
such Event of Default;
(d) declare the entire unpaid principal of the Note and all accrued interest
thereon immediately due and payable without notice;
(e) exercise any remedies under the Entity Guaranty, the Personal Guaranty,
foreclose the Mortgage, foreclose any other security instrument referred to in this
Agreement and/or exercise any other rights or remedies it may have under the Entity
Guaranty, the Personal Guaranty, the Mortgage and any other security instruments.
16. Default under Note. The failure by Borrower to keep or perform any of the terms,
covenants and conditions to be kept or performed by it under this Agreement shall constitute a
default under the Note, the Mortgage and any other security instrument held by Lender in
connection with the Loan.
17. Notices. Any notices given hereunder shall be in writing and shall be deemed to
have been given when delivered personally or three (3) days after deposited in the United States
mail, registered, postage prepaid, addressed as follows:
If to Borrower:
If to Lender:
SBH Properties, LLC
9775 158a' Circle NW
Elk River, MN 55330
Attention: Brian Hill
Economic Development Authority of the City of Elk River
13065 Orono Parkway
Elk River, Minnesota 55330
Attn: Director of Economic Development
or addressed to any such party at such other address as such party shall hereafter furnish by
notice to the other party. Any notice delivered personally to Borrower shall be delivered to an
officer of Borrower, and any notice delivered personally to Lender shall be delivered to an
officer of Lender at the address for Lender for the mailing of notices. Either party may change its
address for the giving of notices by giving the other party at least ten (10) days' notice in the
manner provided above.
18. Headings. The headings used in this Agreement are for convenience only and do
not define, limit or construe the contents of this Agreement.
19. Bindings on Successors and Assigns. Subject to the limitations on transfer
contained in this Agreement, this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Minnesota, without giving effect to any choice or conflict of law
provision or rule.
21. Counterparts. This Agreement may be executed in two (2) or more counterparts,
each of which shall be an original and all of which shall constitute the same agreement.
22. Entire Agreement. This Agreement, the Note, the Mortgage and the other
documents executed by Borrower and/or Lender pursuant to this Agreement contain the entire
agreement between the parties with respect to the subject matter hereof and supersede all prior
understandings and agreements, both oral and written. This Agreement may be amended only in
a writing signed by the parties hereto.
23. Fees and Expenses. Borrower agrees to pay to Lender immediately upon demand
all costs and expenses, including, without limitation, all attorneys' fees, incurred by Lender in
connection with the enforcement of the Lender's rights and/or the collection of any amounts
which become due to Lender under this Agreement, the Note, the Mortgage or the other
documents executed in connection herewith; and the prosecution or defense of any action in any
way related to this Agreement, the Note, the Mortgage, or the other documents executed in
connection herewith.
24. Business Subsidies Act.
(a) In order to satisfy the provisions of Minnesota Statutes, Sections 116J.993
to 116J.995 (the "Business Subsidies Act"), the Borrower acknowledges and agrees that
the amount of the "Business Subsidy" granted to the Borrower under this Agreement is
the amount of the loan, which is $200,000, and that the Business Subsidy is needed
because the project is not sufficiently feasible for the Borrower to undertake without the
Business Subsidy. The public purpose of the Business Subsidy is to develop
manufacturing facilities, increase the tax base in the City and stimulate the creation and
retention of jobs. In consideration of the Business Subsidy provided for the Project, the
Borrower represents that it will meet the following goals (the "Goals"): the Borrower
shall create, or cause the Entity Guarantor to create, 7 full-time equivalent jobs in Elk
River, Minnesota (the "City"), at the Loan Property at an hourly wage equal to the greater
of $15.00 per hour or 150% of the state or federal minimum wage, whichever is greater
(the "Jobs"), by the two (2) year anniversary of the date a certificate of occupancy is
issued for the Project (the "Benefit Date").
(b) If none of the Goals are met, the Borrower agrees to repay all of the
Business Subsidy to the City, plus interest ("Interest") set at the greater of 2.00% per
annum or the implicit price deflator defined in Minnesota Statutes Section 275.70,
subdivision 3, accruing from and after the date of closing on the Loan, compounded
semiannually. If the Goals are met in part, the Borrower agrees to repay a portion of the
Business Subsidy (plus Interest) determined by multiplying the Business Subsidy by a
fraction, the numerator of which is the number of Jobs in the Goals which were not
relocated and created at the wage level set forth above and the denominator of which is 7
(i.e. number of Jobs set forth in the Goals).
(c) The Borrower agrees to: (i) report the Entity Guarantor's progress on
achieving the Goals to the City until the later of the date the Goals are met or two years
from the Benefit Date, or, if the Goals are not met, until the date the Business Subsidy is
repaid, (ii) include in the report the information required in Section 116J.994, subdivision
7 of the Business Subsidies Act on forms developed by the Minnesota Department of
Employment and Economic Development, and (iii) send completed reports to the City.
The Borrower agrees to file these reports no later than March 1 of each year commencing
March 1, 2017, and within 30 days after the deadline for meeting the Goals. The City
agrees that if it does not receive the reports, it will mail the Entity Guarantor and the
Borrower a warning within one week of the required filing date. If within 14 days of the
post marked date of the warning the reports are not made, the Borrower agrees to pay to
the City a penalty of $100 for each subsequent day until the report is filed up to a
maximum of $1,000.
(d) Pursuant to the terms of the Entity Guaranty, the Entity Guarantor has
agreed that it will continue operations in the City and maintain the Jobs for at least 5
years after the Benefit Date.
(e) Other than the loan provided pursuant to this Agreement and abatement
assistance from the City and the County, there are no other state or local government
agencies providing financial assistance for the project.
(f) There is no parent corporation of the Entity Guarantor or the Borrower.
[Signature Pages follow]
Signature Page to Loan Agreement
IN TESTIMONY WHEREOF, each of the parties hereto has caused these presents to be
effective as of the day and year first above written.
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER
Name: 2 G V) -T\/-46+(l
Its: President
-Name: La1���(�'�
Its: Executive Director
S-2
487521Q ELI 85-45
EXHIBIT A
LIST OF EQUIPMENT
12tttach Yost of equipment]
S-1
487521Q ELI 85-45
Signature Page to Loan Agreement
IN TESTIMONY WHEREOF, each of the parties hereto has caused these presents to be
effective as of the day and year first above written.
SBH PROPERTIES, LLC
By: —L—===
06.
Its:
487521 v4 ELI 85-45 S-1
Signature Page to Loan Agreement
IN TESTIMONY WHEREOF, each of the parties hereto has caused these presents to be
effective as of the day and year first above written.
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER
By:
Name:
Its: President
By:
Name:
Its: Executive Director
S-2
487521A EL185-45
PROMISSORY NOTE
(Forgivable Loan)
Amount: $200,000.00
Interest: 3.00%
Maturity: To Be Determined
October 28, 2016
FOR VALUE RECEIVED, the undersigned, SBH PROPERTIES, LLC, a Minnesota
limited liability company ("Borrower"), promises to pay to the order of the ECONOMIC
DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, a public body corporate and
politic of the State of Minnesota ("Lender"), at 13065 Orono Parkway, Elk River, Minnesota
55330, or such other place as the Lender or any other holder of this Note may designate in
writing, on or before the Maturity Date (as defined below), the principal sum of Two Hundred
Thousand Hundred and 00/100 Dollars ($200,000.00), together with interest on any and all
amounts remaining unpaid thereon from time to time from the date hereof (computed on the
basis of actual days elapsed in a year of 360 days) at a fixed interest rate of three percent (3%)
per annum.
This Note is made pursuant to a Loan Agreement, between Borrower and Lender, of even
date herewith ("Loan Agreement"). All capitalized terms which are not otherwise defined herein
shall have the meanings set forth in the Loan Agreement.
This Note is secured by, among other things, the Mortgage by the Borrower in favor of
Lender, the Personal Guaranty made by Brian Hill, and that certain Entity Guaranty made by the
Apex Embroidery Design, Inc., all of which are made to Lender of even date herewith
(collectively, the "Security Documents"). All of the terms and conditions contained in the
Security Documents which are to be kept and performed by Borrower are hereby made a part of
this Note to the same extent and with the same force and effect as if they were fully set forth
herein; and Borrower covenants and agrees to keep and perform them, or cause them to be kept
and performed, strictly in accordance with their terms.
This Note is made pursuant to Lender's Forgivable Loan program. On the Determination
Date (as defined in the Loan Agreement), Lender will make a determination as to whether
Borrower has fully and timely complied with the requirements of the program. If Borrower has
done so, Lender will forgive the entire principal balance of the Note, pursuant to the terms of the
Loan Agreement as of the Determination Date. If Lender determines that Borrower has failed to
timely and fully comply with the terms of the program, Borrower will be required to begin
making monthly installment payments of principal and interest due hereunder, commencing on
the Conversion Date (as defined in the Loan Agreement), which payments shall continue on the
first (1st) day of each and every month thereafter until the 5th anniversary of the Conversion
Date (the "Maturity Date"), when all outstanding principal and accrued but unpaid interest shall
be payable in full. All unpaid interest which has accrued to the Conversion Date shall be
capitalized into principal and the principal and interest payments under this Note shall be
calculated based upon a 5 year term and a 20 year amortization, as of the Conversion Date.
487518v4 ELI 8545
Lender shall use commercially reasonable efforts to inform Borrower of its monthly installment
payment prior to the Conversion Date; provided that failure to do so shall not be a Lender
default or extend the time for payment. To the extent that there is any conflict between the Loan
Agreement and this paragraph, the terms of the Loan Agreement shall control.
If the Lender, or any other holder of this note, has not received the full amount of any
monthly installment provided for in this note, by the end of 7 calendar days after the date it is
due, Borrower shall pay a late charge fee to the Lender, or any other holder of this note. The
amount of the late charge fee shall be 8.00% of the overdue monthly installment. The Borrower
shall pay this late charge fee on demand, however, collection of the late charge fee shall not be
deemed a waiver of the Lender's right to declare an Event of Default and exercise its rights and
remedies as provided for in the Loan Agreement and the Security Documents.
Each monthly installment and other payments made under this note shall be applied as
follows: (i) first, to be applied against and pay interest which has accrued and remains unpaid on
the date the payment is received; then (ii) to be applied against and pay unpaid late charges and
any other charges, including attorneys' fees and protective advances; and then (iii) all remaining
amounts, if any, shall be applied against and reduce the then outstanding principal balance of
this note.
If an Event of Default shall occur hereunder or under the Loan Agreement or the Security
Documents and any cure period provided for in the Loan Agreement or the Security Documents
has expired, the Borrower agrees to pay a default rate of interest equal to ten percent (10.00%)
per annum as the applicable interest rate of this note, and the entire principal amount
outstanding, accrued interest and any other charges due hereon shall at once become due and
payable at the option of the Lender or the holder hereof. Any failure of the Lender to exercise
its right to increase the interest rate by the default rate of interest set forth above or its option to
accelerate this note at any time shall not constitute a waiver of the right to exercise the same
right to increase the interest rate or accelerate at any subsequent time. Notwithstanding
anything contained herein to the contrary, the default rate of interest hereon shall never exceed
the highest rate permitted by law.
The Borrower may prepay the principal under this note at any time and from time to time,
in whole or in part, without premium or penalty. No partial prepayment shall postpone the due
date of any monthly installment or reduce the amount of any such monthly installment unless the
Lender agrees otherwise in writing.
All sums payable to the Lender under this Note shall be paid in immediately available
funds.
The Borrower promises to pay all costs in connection with the enforcement of this Note,
including but not limited to, those costs, expenses and attorneys' fees of Lender whether or not
suit is filed with respect thereto and whether or not such cost or expense is paid or incurred or to
be paid or incurred prior to or after the entry of judgment or for the pursuance of, or defense of,
any litigation, appellate, bankruptcy or insolvency proceeding.
2
487518A EL185-45
Presentment, notice of dishonor and protest are hereby waived by all makers, sureties,
guarantors and endorsers hereof. This Note shall be binding upon Borrower, its successors and
assigns.
The remedies of Lender, as provided herein and in the Loan Agreement and the Security
Documents, shall be cumulative and concurrent and may be pursued singly, successively or
together, at the sole discretion of Lender, and may be exercised as often as occasion therefor
shall occur; and the failure to exercise any such right or remedy shall in no event be construed as
a waiver or release thereof.
Time is of the essence hereof.
This Note shall be governed by and be construed under the laws of the State of Minnesota,
without regard to principles of conflicts of law.
[Signature Page Follows]
3
487518v4 ELI 8545
IN WITNESS WHEREOF, the undersigned has caused this Note to be effective as of the
day and year first above written.
SBH PROPERTIES, LLC
a Minnesota limited liability company
Its:
S-1
487518v4 EL185-45
MORTGAGE
AND
ASSIGNMENT OF RENTS
AND
SECURITY AGREEMENT
AND
FIXTURE FINANCING STATEMENT
(Forgivable Loan Program)
This Mortgage and Assignment of Rents and Security Agreement and Fixture Financing
Statement ("Mortgage") is made as of October.: -S, 2016, by SBH PROPERTIES, LLC, a
Minnesota limited liability company (hereinafter the "Borrower" or "Mortgagor"), in favor of the
ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER, a public body
corporate and politic of the State of Minnesota ("Mortgagee").
THE MAXIMUM AMOUNT SECURED BY THIS MORTGAGE IS $200,000.00 OF
PRINCIPAL INDEBTEDNESS, TOGETHER WITH ALL INTEREST ACCRUING
THEREON AND ANY AMOUNTS WHICH MAY BE ADVANCED BY MORTGAGEE IN
PROTECTION OF THE MORTGAGED PREMISES OR THE LIEN OF THIS MORTGAGE.
RECITALS
A. The Borrower has executed and delivered to Mortgagee a Promissory Note
effective as of the date hereof in the principal amount of $200,000.00 and bearing interest at the
rate set forth therein, with principal being due and payable as set forth therein and with all
principal and interest, if not sooner paid, being due and payable on or before November 1, 2023
(the Promissory Note as the same may be renewed, extended, replaced, modified or amended is
herein called the "Note"). The proceeds of the Note are being utilized to pay a portion of the
acquisition of land and the construction and equipping of a new manufacturing facility on the
Mortgaged Property (as defined below).
B. Contemporaneous herewith, Borrower has entered into that certain loan
agreement (the "Loan Agreement") setting forth the terms and conditions of Mortgagor and
Lender's obligations with relation to this loan facility.
Return to:
Sherburne Co. Abstract & Title Co.
351 Main Street
4875190 ELI 85-45 Elk River, MN 55330
C. Mortgagor is the owner of the Mortgaged Property and is the landlord under that
certain unrecorded lease dated October 10, 2016, with the Borrower as tenant leasing a portion of
the Mortgaged Property to the Borrower.
D. As a condition of entering into the loan facility, Lender has required that
Mortgagor provide this Mortgage to secure its obligations under Note, the Loam Agreement and
any other documents relating to or arising from this loan facility.
NOW THEREFORE, in consideration of the Recitals and for the purpose of securing the
payment and performance of all of Mortgagor's obligations under the Note and the Loan
Agreement (collectively "Obligations"); and to secure the performance of all covenants,
conditions and agreements herein and in the Note and Loan Agreement, Mortgagor does hereby
mortgage, grant, bargain, sell, release and convey unto Mortgagee, with power of sale, forever all
of Mortgagor's right, title and interest in all the tracts or parcels of land lying and being in
Sherburne County, Minnesota, legally described in Exhibit A hereto, (hereinafter the "Land"),
whether now owned or hereafter acquired, together with: (i) all building materials, supplies and
equipment now or hereafter located on the Land and suitable or intended to be incorporated in
any building, structure, or other improvement located or to be erected on the Land; and (ii) all of
the buildings, structures and other improvements now standing or at any time hereafter
constructed or placed upon the Land; and (iii) all heating, plumbing and lighting apparatus,
motors, engines, and machinery, electrical equipment, incinerator apparatus., air conditioning
equipment, water and gas apparatus, pipes, faucets, and all other fixtures of every description
which are now or may hereafter be placed or used upon the Land or in any building or
improvement now or hereafter located thereon; and (iv) all additions, accessions, increases, parts,
fittings, accessories, replacements, substitutions, betterments, repairs and proceeds to any and all
of the foregoing; and (v) all hereditaments, easements, appurtenances, estates, rents, issues,
profits, condemnation awards, proceeds of policies of insurance and other rights and interests
now or hereafter belonging or in any way pertaining to the Land or to any building or
improvement now or hereafter located thereon; and (vi) all leases or other occupancy agreements
now or hereafter in effect in any way appertaining to the Land or to any building or improvement
now or hereafter located thereon, including, without limitation, all cash and security deposits,
advance rentals and deposits or payments of a similar nature ("Leases"), and all Rents (as herein
defined) (all of the foregoing, together with the Land, hereinafter being referred to as the
"Property" or "Mortgaged Property"),
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee forever;
PROVIDED, NEVERTHELESS, that this Mortgage is given upon the express condition
that if Mortgagor shall cause to be paid and performed all of the Obligations, and shall also keep
and perform all and singular the covenants herein contained on the part of Mortgagor to be kept
and performed, then the Mortgage and the estate hereby granted shall cease and be and become
void and shall be released of record at the expense of Mortgagor; otherwise this Mortgage shall
be and remain in full force and effect.
MORTGAGOR REPRESENTS, WARRANTS AND COVENANTS to and with
Mortgagee that Mortgagor has good right and full power and authority to execute this Mortgage
and to mortgage the Mortgaged Property; that the Mortgaged Property is free -From all liens and
2
487519A ELI 85A5
encumbrances except a mortgage in favor of the Bank of Elk River in the amount of $1,120,000
(the "First Lien Mortgage") and those other certain permitted encumbrances identified in
Exhibit B hereto (the "Permitted Encumbrances"); that Mortgagee shall quietly enjoy and
possess the Mortgaged Property; that Mortgagor will warrant and defend the title to the
Mortgaged Property against all claims, whether now existing or hereafter arising. The covenants
and warranties of this paragraph shall survive foreclosure of this Mortgage and shall run with the
Land.
AND IT IS FURTHER COVENANTED AND AGREED AS FOLLOWS:
ARTICLE ONE
GENERAL COVENANTS, AGREEMENTS, WARRANTIES
1.1. Payment of Obligations; Observance of Covenants. Mortgagor will duly pay and
perform its Obligations and will perform all other agreements and covenants by Mortgagor to be
performed hereunder.
1.2. Payment of Impositions. Mortgagor agrees to pay, before a penalty might attach
for nonpayment thereof, all taxes, assessments, water and sewer charges, and other fees, taxes
and charges of whatsoever nature levied upon or assessed or placed against the Mortgaged
Property (collectively "Impositions"). Mortgagor will likewise pay all taxes, assessments and
other charges, levied upon or assessed, placed or made against, or measured by, this Mortgage,
or the recordation hereof, or the Obligations, provided that Mortgagor shall not be obliged to pay
such tax, assessment or charge if such payment would be contrary to law or would result in the
payment of an usurious rate of interest on the Obligations. Mortgagor shall promptly furnish to
Mortgagee all notices received by Mortgagor of amounts due under this Section and upon
Mortgagee's request, shall deliver proper receipts evidencing the payment of such amounts. In
the event of a judicial decree or legislative enactment after the date of this Mortgage, providing
that any such imposition may not be lawfully paid by Mortgagor, or in the event that the payment
of any such imposition by Mortgagor would result in the payment of a usurious rate of interest
on the Obligations, the Obligations, together with interest, shall become immediately due and
payable, or, at Mortgagee's option, Mortgagee may pay any amount or portion of such
Imposition as renders the Obligations unlawful or usurious, in which event Mortgagor shall
concurrently therewith pay the remaining lawful and non -usurious portion or balance of said
Imposition.
1.3. Payment of Operating Costs, Mortgages and Liens. Mortgagor agrees that it will
pay, or cause to be paid, all operating costs and expenses of the Mortgaged Property; keep the
Mortgaged Property free from mechanics' and material suppliers' and other liens, subject to
Mortgagor's right to contest in good faith as set forth in Section 1.4 hereof; will keep the
Mortgaged Property free from levy, execution or attachment and will immediately pay when due
all indebtedness which may be secured by mortgage, lien or charge on the Mortgaged Property
and upon request will exhibit to Mortgagee satisfactory evidence of such payment and discharge.
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4875190 ELI 8545
1.4. Contest of Impositions Liens and Levies. Mortgagor shall not be required to pay,
discharge or remove any Imposition, lien or levy so long as Mortgagor shall in good faith contest
the same or the validity thereof by appropriate legal proceedings which shall operate to prevent
the collection of the levy, lien or Imposition so contested and the sale of the Mortgaged Property,
or any part thereof to satisfy the same; provided, however, that Mortgagor, prior to the date such
levy, lien or Imposition is due and payable or, in the case of a mechanic's lien or other
involuntary lien within (30) days after the same shall have been filed, shall. have given such
reasonable security as may be demanded by Mortgagee to ensure such payments and any
penalties and interest that may accrue thereon and prevent any sale or forfeiture of the
Mortgaged Property by reason of such nonpayment. Any such contest shall be prosecuted with
due diligence and Mortgagor shall promptly after final determination thereof pay the amount of
any such levy, lien or Imposition so determined, together with all interest and penalties, which
may be payable in connection therewith. Notwithstanding the provisions of this Section,
Mortgagor shall, and Mortgagee may (but shall have no obligation to), pay any such levy, lien or
Imposition notwithstanding such contest if in the reasonable opinion of Mortgagee, the
Mortgaged Property is in jeopardy or in danger of being forfeited or foreclosed..
1.5. Maintenance and Repairs; Inventory. Mortgagor agrees that it will keep and
maintain (or cause to be kept and maintained) the Mortgaged Property in good condition and
repair, free from any waste or misuse, and will comply with all requirements of law, municipal
ordinances and regulations, restrictions and covenants affecting the Mortgaged Property and its
use, and will promptly repair or restore any buildings, improvements or structures now or
hereafter on the Mortgaged Property which may become damaged or destroyed. Mortgagor
further agrees that without the prior consent of Mortgagee it will not remove from the Mortgaged
Property any fixtures or any personal property that is included in the Mortgaged Property unless
the same is immediately replaced with like fixtures or personal property of at least equal value,
or is otherwise removable under Section 6.1 hereof, or expand any improvements on the
Mortgaged Property, erect any new improvements or make any material alterations in any
improvements which will materially alter the basic structure, materially and adversely affect the
market value or materially change the existing architectural character of the Mortgaged Property.
Mortgagor agrees that it will complete within a reasonable time any buildings now or at any time
in the process of erection on the Mortgaged Property. Mortgagor agrees not to acquiesce in any
rezoning classification, modification or restriction affecting the Mortgaged Property without
Mortgagee's prior written consent. Mortgagor agrees that it will not abandon the Mortgaged
Property. Upon request of Mortgagee, Mortgagor shall deliver to Mortgagee an inventory in
detail reasonably acceptable to Mortgagee of any personal property owned by Mortgagor that is
included in the Mortgaged Property pursuant to the terms hereof together with a certification by
Mortgagor that said inventory is a true and complete schedule of the personal property to be
included in the Mortgaged Property pursuant to the terms hereof. Such inventory shall list any
conditional sales contracts and other title retention arrangements to which such personal property
may be subject.
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4875190 ELI 85-45
1.6. Insurance.
(a) So long as the Obligations remain unpaid, Mortgagor shall, at its own cost,
maintain or cause to be maintained with insurers of recognized responsibility acceptable
to Mortgagee the following insurance:
(i) hazard and fire insurance on the improvements now existing or
hereafter constructed on the Land insuring against loss by fire, hazards included
in the term "extended coverage," loss by vandalism or malicious mischief, and
such other hazards, casualties and contingencies as may be required by
Mortgagee, on the basis of replacement cost without a coinsurance clause, in an
amount equal to the full replacement cost thereof (without deduction for
depreciation) or such additional amounts and for such periods as may be required
by Mortgagee;
(ii) comprehensive general public liability insurance covering the
liability of Mortgagor against claims for bodily injury, death or property damage
occurring on or about the Mortgaged Property in such minimum amounts and
limits as Mortgagee may require but in no event, less than $2,000,000.00
combined single limit per occurrence and naming Mortgagee: as an additional
insured;
(iii) insurance covering the Mortgaged Property against loss or damage
by explosion, rupture or bursting of steam boilers, steam pipes, steam turbines,
steam engines or pressure vessels or fly wheels located on or a part of the
Mortgaged Property and providing for full repair and full replacement cost
coverage; and
(iv) such other forms of insurance in such minimum amounts as
Mortgagee may reasonably require or as may be required by law.
Mortgagor shall pay or cause to be paid all premiums on insurance required
hereunder by making payment directly to the insurer. Mortgagee shall have the
right to hold the policies and renewals thereof, and Mortgagor shall promptly
furnish to Mortgagee all such policies, renewals thereof, renewal notices and all
paid -premium receipts received by it. All policies of insurance and any and all
refunds of unearned premiums are hereby assigned to Mortgagee as additional
security for the payment of the Obligations secured hereby. In the event of
foreclosure of this Mortgage, all right, title and interest of Mortgagor in and to
any insurance policies then in force shall pass to the purchaser at the foreclosure
sale.
(b) The policies of all such insurance shall have mortgagee and loss payable
provisions in favor of Mortgagee. All such insurance shall be in form acceptable to
Mortgagee, shall provide for at least thirty (30) days' prior written notice of cancellation,
termination or modification thereof to Mortgagee, shall permit Mortgagee to make
5
487519v3 ELI 8545
premium payments to prevent cancellation, and shall provide that no act or negligence of
Mortgagor or of any occupant of the Mortgaged Property, and no occupancy or use of the
Mortgaged Property for purposes more hazardous than permitted by the terms of the
policy, will affect the validity or enforceability of such insurance as against Mortgagee.
In the event of loss under such insurance Mortgagor shall give prompt notice to the
insurance carrier and Mortgagee; Mortgagor shall duly make proof of loss, and shall
immediately furnish to Mortgagee a copy of such proof of loss.
(c) Subject to the rights of the mortgagee under the Fir;3t Lien Mortgage
which has priority over this Mortgage, Mortgagee is authorized and empowered to settle,
collect and receive all fire and hazard insurance proceeds, to apply such proceeds to all
expenses (including reasonable attorneys' fees) reasonably incurred by Mortgagee in
collecting the same and, at Mortgagee's option and in its sole discretion, apply the
balance of said proceeds ("Net Proceeds") to payment of the Obligations or make the Net
Proceeds available for the repair and restoration of the Mortgaged Property; provided,
however, Mortgagor may settle claims without Mortgagee's consent if the loss is less
than $5,000.00 and no Event of Default exists at the time of settlement. Mortgagor shall
apply any such proceeds to the repair and restoration of the Mortgaged Property. So long
as no Event of Default exists, any settlement of a fire and hazard insurance claim of more
than $5,000.00 shall require the consent of Mortgagor, which consent will not be
unreasonably withheld.
(d) If Mortgagee elects to apply the Net Proceeds to repair and restoration of
the Mortgaged Property (i) the Net Proceeds shall be held by Mortgagee and at
Mortgagee's election may be disbursed either by Mortgagee or a disbursing agent
selected by Mortgagee and paid by Mortgagor, (ii) upon Mortgagee's request prior to
disbursement of any Net Proceeds or thereafter, from time to time, Mortgagor will
deposit with Mortgagee such amounts in excess of remaining Net Proceeds as Mortgagee
reasonably determines is required to complete the repair and restoration, (iii) the Net
Proceeds and any funds deposited by Mortgagor shall be held and disbursed in
accordance with sound construction loan disbursement practices, including, but not
limited to, approval of the plans and specifications, appraisal, its other conditions for
disbursement of draw requests and inspection of the work, and such other reasonable
conditions as Mortgagee may impose and (iv) any Net Proceeds not so applied to repair
and restoration shall be applied to the payment of the Obligations. If an Event of Default
occurs prior to full disbursement, any undisbursed portion of the Net Proceeds and any
funds deposited by Mortgagor with Mortgagee may at Mortgagee's option be applied to
the Obligations.
1.7. Inspection. Mortgagee, or its agents, shall have the right to enter upon the
Mortgaged Property during ordinary business hours for the purposes of inspecting the Mortgaged
Property or any part thereof. Mortgagee shall have no duty, however, to make such inspection.
Mortgagee, or its agents, shall also have the right during ordinary business hours to examine the
books and records of Mortgagor pertaining to the Mortgaged Property and to make extracts
therefrom and copies thereof The parties agree that Mortgagee's right to inspect the books and
records of Mortgagor, as described in this provision, relates solely to the Mortgaged Property.
6
4875190 ELI 85-45
in accordance with all applicable laws, ordinances, rules and regulations, and the requirements of
all governmental authorities having jurisdiction, and otherwise to the satisfaction of Mortgagee.
A failure to do so shall constitute a default by Mortgagor under this Mortgage.
1.10. Escrows. Upon the request of Mortgagee after the occurrence of an Event of
Default (whether or not such Event of Default is subsequently cured), Mortgagoz shall deposit
with Mortgagee, on the first day of each and every month, commencing with the date the first
payment shall be due on the Note which is after the date of such request, a deposit to pay the
Impositions and insurance premiums (collectively "Charges") in an amount equal td:
(a) One -twelfth (1/12) of the Impositions next to become due upon the
Mortgaged Property; provided, however, that, in the case of the first such ideposit, there
shall be deposited in addition an amount as estimated by Mortgagee which, when added
to monthly deposits to be made thereafter as provided for herein, shall assure that there
will be sufficient funds on deposit to pay the Impositions as they come due; Plus
(b) One -twelfth (1/12) of the annual premiums on each policy of insurance
required to be maintained hereunder; provided that with the first such deposit there shall
be deposited, in addition, an amount equal to one -twelfth (1/12) of such annual insurance
premiums multiplied by the number of months elapsed between the date premiums on
each policy are last paid to and including the date of deposit.
The amount of such deposits shall be based upon Mortgagee's reasonable estimate as to the
amount of Impositions and premiums of insurance next to be payable. Mortgagee will, upon
timely presentation to Mortgagee by Mortgagor of the bills therefor, pay the Charges from such
deposits. In the event the deposits on hand shall not be sufficient to pay all of the Charges when
the same shall become due from time to time, or the prior deposits shall be less than the currently
estimated monthly amounts, then Mortgagor shall pay to Mortgagee on demand any amount
necessary to make up the deficiency. The excess of any such deposits shall be returned to
Mortgagor or credited towards subsequent Charges, at the discretion of Mortgagee. If an Event
of Default shall occur under the terms of this Mortgage, Mortgagee may, at its o0tion, without
being required so to do, apply any deposits on hand to the Obligations, in such orddr and manner
as Mortgagee may elect. When the Obligations have been fully paid, any remaihiing deposits
shall be returned to Mortgagor as its interest may appear. All deposits are herebl y pledged as
additional security for the Obligations, shall be held for the purposes for which made as herein
provided, may be held by Mortgagee and may be commingled with other funds of Mortgagee,
shall be held without any allowance of interest thereon, and shall not be subject to the decision or
control of Mortgagor. Mortgagee shall not be liable for any act or omission made or taken in
good faith. In making any payments, Mortgagee may rely on any statement, bill or estimate
procured from or issued by the payee without inquiry into the validity or accuracy of the same.
If the taxes shown in the tax statement shall be levied on property more extensive than the
Mortgaged Property, Mortgagee shall be under no duty to seek a tax division or apportionment of
the tax bill, and any payment of taxes based on a larger parcel shall be paid by Mortgagor, and
Mortgagor shall expeditiously cause a tax subdivision to be made.
8
487519v3 ELI 85-45
1.8. Protection of Mortgagee's Security. If Mortgagor fails to perform any of the
covenants and agreements contained in this Mortgage and such failure shall continue beyond any
applicable notice and cure period contained in Article Two hereof or if any action or proceeding
is commenced which does or may adversely affect the Mortgaged Property or the interest of
Mortgagor or Mortgagee therein, or the title of Mortgagor thereto, then Mortgagee, at
Mortgagee's option, may perform such covenants and agreements, defend against such action or
proceeding, or otherwise act as Mortgagee deems necessary to protect its interest. In the event
that, after.damage to or destruction of the Mortgaged Property or condemnation of a portion of
the Mortgaged Property or a sale under threat thereof, the proceeds are used to restore the
Mortgaged Property, and the insurance, sale or condemnation proceeds which are paid to
Mortgagee are not sufficient to pay for such restoration, Mortgagee may nevertheless effect the
restoration. Any amounts disbursed or costs incurred by Mortgagee pursuant to this Section,
including interest and reasonable attorney's fees, shall become additional Obligations of
Mortgagor secured by this Mortgage. All amounts disbursed or costs incurred by Mortgagee
pursuant to this paragraph shall be payable upon demand, and shall bear interest from the date of
disbursement or incurrence at the rate set forth in the Note unless payment of interest at such rate
would be contrary to law, in which event such amounts shall bear interest at the highest rate
permitted by law. Mortgagee shall, at its option, be subrogated to any encumbrance, lien, claim
or demand, and to all the rights and securities for the payment thereof, paid or discharged with
the principal sum secured hereby or by Mortgagee under the provisions hereof, and any such
subrogation rights shall be additional and cumulative security for this Mortgage. Nothing
contained in this Section shall require Mortgagee to incur any expense or do any act hereunder,
and Mortgagee shall not be liable to Mortgagor for any damages or claims arising out of action
taken by Mortgagee pursuant to this paragraph.
1.9. Hazardous Materials. Mortgagor hereby represents and warrants to Mortgagee
that the Mortgaged Property has not at any time been used for storage, transfer, transportation or
disposal of hazardous substances, hazardous wastes, pollutants, contaminants or similar
substances (collectively "Hazardous Substances"), or for the discharge of the same into the
environment in violation of any law, regulation, or judicial or administrative order or judgment;
and the Mortgaged Property is not contaminated by, and does not contain, any Hazardous
Substances. Mortgagor will not use or permit the use of the Mortgaged Property for such
purposes. Mortgagor will fully indemnify Mortgagee and defend Mortgagee against any claims,
losses, damages, actions, costs and expenses of any kind, including without limitation, court
costs and reasonable attorneys' fees, in connection with any Hazardous Substances now or
hereafter located on the Mortgaged Property or any other violation of any federal, state or local
environmental statute, ordinance, rule or regulation ("Environmental Laws"). This indemnity
shall not apply to the extent that the willful act or omission of the Mortgagee contributes to the
actual or threatened discharge, dispersal, release, storage, treatment, generation, disposal or
escape of the Hazardous Substances. The indemnity provisions of this Section shall survive the
foreclosure or other termination of this Mortgage.
Without limiting the generality of the foregoing, Mortgagor agrees that upon the discovery
of a release or threatened release of Hazardous Substances on or from the Mortgaged Property, it
will promptly, diligently and without cost to Mortgagee, proceed to remediate all contamination
7
4875190 ELI 85-45
1. 11. Compliance with Code. Mortgagor covenants that when completed the
improvements to the Mortgaged Property shall comply with all applicabl$ restrictions,
conditions, codes, ordinances, regulations and laws of the City of Elk River (the "City") and
other governmental bodies having jurisdiction over the Mortgaged Property, including, without
limitation, the Americans with Disabilities Act and those related to enviromnental protection.
Mortgagor has NOT commenced construction of improvements to the Mortgaged Property.
4875190 ELI 8545
ARTICLE TWO
EVENTS OF DEFAULT
Each of the following occurrences shall constitute an Event of Default hereunder:
2.1. Failure to pay. Mortgagor's failure to pay any amount due under tl�e Note or any
other amount required to be paid by Mortgagor hereunder when due.
2.2. Other Performance Failure. The Mortgagor's failure to duly observe or perform
any of the other terms, conditions, covenants or agreements required to be observed or performed
by Mortgagor hereunder or in the Note and the continuation of such failure for a period of thirty
(30) days after Mortgagee gives Mortgagor written notice of such failure.
2.3. Breach of Warranty of Title. Subject to Mortgagor's right to contesi in good faith
as set forth in Section 1.4 hereof, the breach of any warranty of title or any otlier ,%✓arranty made
by Mortgagor hereunder.
2.4. Misrepresentation. The making of any material misstatement in any financial
statement or report submitted to Mortgagee by or on behalf of Mortgagor.
2.5. Foreclosure. The institution of a foreclosure or other enforcement proceedings by
the holder of any other lien on the Mortgaged Property (without hereby implyin4 Mortgagee's
consent to any mortgage or other lien).
2.6. Sale of Property. The sale, assignment, conveyance, mortgage, 'iencumbrance,
lease or transfer of: (i) Mortgagor's interest in the Mortgaged Property or any part t1hereof, or any
interest therein; or (ii) any transfer in ownership or control of Mortgagor, without the prior
written consent of Mortgagee, which consent may be granted or withheld by Mortgagee at its
sole discretion.
2.7. Breach of the Mortgages, Other Agreements, etc. Any default or breach under the
First Lien Mortgage, any other note, mortgage or other obligation of Mortgagor or $orrower now
held or hereafter acquired by Mortgagee or City, or any other failure to comply With the terms
and conditions thereof and the continuance thereof beyond any applicable notice and/or cure
period contained therein.
10
487519v3 ELI 85-45
ARTICLE THREE
ACCELERATION AND FORECLOSURE; OTHER REMEDIES
Upon any Event of Default, Mortgagee may, at its option, exercise one Or more of the
following rights and remedies (and any other rights and remedies available to it):
3.1. Acceleration. Mortgagee may declare immediately due an4 payable all
unmatured Obligations secured by this Mortgage, and the same shall thereupon b� immediately
due and payable, without notice or demand.
3.2. UCC Remedies. Mortgagee shall have and may exercise with respect to all
fixtures and any personal property included in the Mortgaged Property, all the rights and
remedies accorded upon default to a secured party under the Uniform Comm.erci4l Code, as in
effect in the State of Minnesota.
3.3. Foreclosure, Action or Advertisement. Mortgagee may (and is hereby authorized
and empowered to) foreclose this Mortgage by action or advertisement, pursulant to the statutes
of the State of Minnesota in such case made and provided, power being expressly 0anted to sell
the Mortgaged Property at public auction and convey the same to the purchaser to the full extent
of Mortgagor's interest and, out of the proceeds arising from such sale, to pay all Obligations
secured hereby with interest, and all legal costs and charges of such foreclosure and the
maximum attorneys' fees permitted by law, which costs, charges and fees Mortg4gor agrees to
pay. Any real estate or interest or estate sold hereunder may be sold in one parcel, 0 an entirety,
or in such parcels and in such manner or order as Mortgagee, in its sole discretion, Imay elect. In
case of any sale of the Mortgaged Property pursuant to any judgment or decree: of any court or at
public auction or otherwise in connection with the enforcement of any of the terms of this
Mortgage, Mortgagee, its successors and assigns, may become the purchaser, and fbr the purpose
of making settlement for or payment of the purchase price, shall be entitled to de�iver over and
use any sum then due under the Note and any claims for interest accrued and u*paid thereon,
together with all other sums, with interest, advanced and unpaid hereunder. ana all statutory
charges for such foreclosure including maximum attorney's fees allowed by lawj in order that
there may be credited as paid on the purchase price the sum then due under the Not and all other
sums, with interest, advanced and unpaid hereunder, and all charges and expenses of such
foreclosure including maximum attorneys' fees allowed by law.
3.4. Receiver. Mortgagee shall be entitled as a matter of right withdut notice and
without giving bond and without regard to the solvency or insolvency of Mortgagor, or waste of
the Mortgaged Property or adequacy of the security of the Mortgaged Property, td apply for the
appointment of a receiver, in accordance with the statutes and law made and provided. The
receiver shall collect the rents, and all other income of any kind; manage the Mortgaged Property
so to prevent waste; execute leases within or beyond the period of receivership, pa� all expenses
for normal maintenance of the Mortgaged Property and perform the terms of this Mortgage and
apply the rents, issues and profits as permitted by Minnesota Statutes, Section $76.25 in the
following order to (i) payment of the reasonable fees of said receiver, (ii) applicaltion of tenant
security deposits as required by Minnesota Statutes Section 504B.178, (iii) payme when due of
11
487519v3 EL185-45
prior or current real estate taxes or special assessments with respect to the Mortgaged Property
or, if this Mortgage so requires, to the periodic escrow for the payment thereof, (iv) the payment
when due of premiums for insurance of the type required by this Mortgage or, if this Mortgage
so requires, to the periodic escrow for the payment thereof; and (v) as further provided in any
Assignment of Rents executed by Mortgagor as further security for the Obligations (whether
included in this Mortgage or separate instrument), including but not limited to applying the same
to the costs and expenses of the receivership, including reasonable attorneys' fees, to the
repayment of the Obligations and to the operation, maintenance, upkeep and repair of the
Mortgaged Property, including payment of taxes and payments of premiums of insurance.
Mortgagor does hereby irrevocably consent to such appointment.
3.5. Specific Performance. Mortgagee may bring suit for specific performance of any
covenant or warranty hereunder.
3.6. Forbearance and Other Rights of Mortgagee. Any delay by Mortgagee in
exercising any right or remedy hereunder, or otherwise afforded by law or equity, shall not be a
waiver of or preclude the exercise of such right or remedy or any other right or remedy
hereunder or at law or in equity. The failure of Mortgagee to exercise any option to accelerate
maturity of the Obligations secured by the Mortgage, the forbearance by Mortgagee before or
after the exercise of such option, or the withdrawal or abandonment of proceedings provided for
by this Mortgage shall not be a waiver of the right to exercise such option or to accelerate the
maturity of such Obligations by reason of any past, present or future event which would permit
acceleration. The procurement of insurance or the payment of taxes or other liens or charges by
Mortgagee shall not be a waiver of Mortgagee's right to accelerate the! maturity of the
Obligations. Mortgagee's receipt of any awards, proceeds or damages shall not operate to cure
or waive default by Mortgagor. Mortgagee may at any time, without notice, release any person
liable for payment of any Obligations, extend the time or agree to alter the terms of payment of
any of the Obligations, accept additional security of any kind, release any plat or map of the
Mortgaged Property or the creation of any easement thereon or any covenants restricting use or
occupancy thereof, or agree to alter or amend the terms of this Mortgage in any way. No such
release, modification, addition or change shall affect the liability of any person other than the
person so released, for payment of any Obligations, nor affect the priority and lien status of this
Mortgage upon any property not so released.
12
4875190 ELI 85-45
ARTICLE FOUR
ASSIGNMENT OF RENTS
4.1. Assi m ent. As security in addition to the lien of this Mortgage upon the
Property, Mortgagor hereby grants, transfers and assigns to Mortgagee all of the %ight, title and
interest of Mortgagor in and to all Leases and all rents, income, profits, rev es, royalties,
bonuses, rights, accounts, contract rights, general intangibles and benefits (all of which are
sometimes hereinafter referred to as "Rents"), now or hereafter accruing or owing y reason of a
Lease of any or all of the Property.
i
I
4.2. Covenants of Performance. To protect the security of this) Assignment,
Mortgagor warrants, covenants and agrees:
(a) to faithfully abide by, perform and discharge each and every obligation,
covenant and agreement under any Leases to be performed by Mortgagor hereunder; to
give prompt written notice to Mortgagee of any notice of default on the part of Mortgagor
with respect to any Lease received from a tenant thereunder; to enforce or secure short of
termination of any Lease the performance of each and every obl igatibn., covenant,
condition and agreement of the Leases by the tenants thereunder to be performed; not to
borrow against, pledge or assign any of the Rents, or anticipate the Rc;nts;l not to waive,
excuse, condone or in any manner release or discharge any tenant thereunder of or from
the obligations, covenants, conditions and agreements to be performed land r the Lease or
to permit the tenant to assign its interest in the Lease unless required to dos by the terms
of the Lease; not to terminate the Leases or accept a surrender thereof or discharge of
the tenant unless required to do so by the terms of the Lease; not to! consent to a
subordination of the interest of the tenant thereunder to any party other tl�la.n Mortgagee
and then only if specifically required to do so by Mortgagee;
(b) at Mortgagor's sole cost and expense, to appear in and def�Ind any action
or proceeding arising under, growing out of or in any manner connected w1ith the Leases
or the obligations, duties or liabilities of Mortgagor and tenants thereunder,! and to pay all
costs and expenses of Mortgagee, including attorneys' fees in a reasonablle sum, in any
such action or proceeding in which Mortgagee may appear or with respe6t to which it
may incur costs;
(c) that Mortgagor has the full right and title to assign the ReAts; that at the
date of this Mortgage there exist no Leases which now or in the fut*re affect the
Mortgaged Property which have not been disclosed to Mortgagee in wriiing; and that
there is no outstanding assignment or pledge of the Leases or Rents; and
(d) to furnish to Mortgagee, at Mortgagee's written request, a c4m.plete list of
all Leases and security deposits made thereunder as to any part of tl e Mortgaged
Property, showing the type of lease, the name of the tenant, the monthly renal, the date to
which paid, the term of the Lease, the date of occupancy, and the date of 4xpiration and
any and every special premium, concession or inducement granted to the tenant.
13
4875190 ELI 95A5
4.3. Assignment Absolute. This Assignment is absolute and is effective immediately.
Notwithstanding the foregoing, until an Event of Default, as defined in ARTICLE tWO above,
has occurred, Mortgagor may receive, collect and enjoy the Rents. Upon or at any time after an
Event of Default has occurred, Mortgagee may at its option, without notice:
(a) in the name, place and stead of Mortgagor (i) enter upon! manage and
operate the Mortgaged Property, or retain the services of an independent! contractor to
manage and operate the same, (ii) make, enforce, modify and accept surrender of the
Leases, (iii) obtain or evict tenants, demand, collect, sue for, receive and give
acquittances for, fix or modify Rents and enforce all rights of Mortgagor under the
Leases, and (iv) perform any and all other acts that may be necessary or prdpf:r to protect
the security of this Assignment; provided always, however, that until the end of any
redemption period available to Mortgagor after any foreclosure of this Mortgage
Mortgagee shall continue to deal with the Leases on the Property in i a reasonable
businesslike manner, recognizing and protecting Mortgagor's continuing; rights during
such period to retake possession and control of the Mortgaged Property upon paying the
appropriate redemption price, and to resume the management of such L(, -ase§;
(b) give or require Mortgagor to give notice to any and all ten4nts under the
Leases authorizing and directing the tenants to pay all Rents due under the Leases
directly to Mortgagee; and
(c) apply for, and Mortgagor hereby consents to, the appgintment of a
receiver of the Mortgaged Property.
4.4. Application of Rents.
(a) All Rents collected by Mortgagee, or by a receiver, shall, be held and
applied by Mortgagee in its reasonable discretion, in accordance with applicable law,
including, without limitation to: (i) payment of all reasonable fees of the receiver, if any,
approved by the court; (ii) the repayment when due of all tenant security deposits
pursuant to the provisions of Minnesota Statutes Section 504B.178; (iii) 0ayment of all
delinquent or current real estate taxes and special assessments payable withrespect to the
Property or, if this Mortgage so requires, to the periodic escrow for the: payment thereof,
(iv) payment of all premiums then due for the insurance required by the provisions of this
Mortgage or, if this Mortgage so requires, to the periodic escrow for the payment thereof;
(v) payment of expenses incurred for normal maintenance of the MortgOLged Property.
(b) Any amounts remaining after such application shall be applied as follows:
(i) if received prior to any foreclosure sale of the Mortgaged Property
to Mortgagee for payment of the indebtedness secured by this Mo>ftgage, but no
such payment made after acceleration of the indebtedness shall affect such
acceleration; and
14
4875190 ELI 8S-45
(ii) if received during or with respect to a period after is foreclosure
sale of the Mortgaged Property:
(1) if the purchaser at the foreclosure sale is nit Mortgagee,
first to Mortgagee to the extent of any deficiency of the sae proceeds to
repay the indebtedness secured by this Mortgage, second to;the purchaser
as a credit to the redemption price, but if the Mortgaged Pj operty is not
redeemed, then to the purchaser of the Mortgaged Property;
(2) if the purchaser at the foreclosure sale is Mortgagee, first to
Mortgagee to the extent of any deficiency of the sale proceeds to repay the
indebtedness secured by this Mortgage and the balance to �e retained by
Mortgagee as a credit to the redemption price, but if toe Mortgaged
Property is not redeemed, then to Mortgagee, whether or not such
deficiency exists.
4.5. Continuing Effect. The rights and powers of Mortgagee under thils Assignment
and the application of the Rents shall continue and remain in full force and effect b6th before and
after commencement of any action or procedure to foreclose this Mortgage, after at y foreclosure
sale of Mortgagor's interest in the Property in connection with the foreclosure of this Mortgage,
and until expiration of the period of redemption from any such foreclosure sale, Xl hether or not
any deficiency from the unpaid balance of the Obligations exists after such fore:closlure sale.
4.6. Mortgagee Not Obligated. Mortgagee shall not be obligated b;y this Assignment
for the control, care, management or repair of the Mortgaged Property, nor for the darrying out of
any of the terms and conditions of the Leases; nor shall this Assignment op$rate to make
Mortgagee responsible or liable for any waste committed on the Mortgaged Prbperty by the
tenants or any other party, or for any dangerous or defective condition of the Mortgaged
Property, or for any violation of Environmental Laws or for any negligence in. the! management,
upkeep, repair or control of the Mortgaged Property resulting in any loss or any injury or death to
any person.
4.7. Hold Harmless. Mortgagor shall and does agree to indemnify; and to hold
Mortgagee harmless of and from any and all liability, loss or damage which it may or might
incur under or by reason of this Assignment, and of and from any and all claims; and demands
whatsoever which may be asserted against it by reason of any alleged obligations of undertakings
on its part to perform or discharge any of the terms, covenants or agreements colitained in the
Leases; provided, however, that such indemnification shall not apply if the samI6 arises out of
Leases intentionally breached by Mortgagee which were made by Mortgagor i the ordinary
course of managing the Mortgaged Property and prior to the time Mortgagee obt fined the right
to possess and manage the Mortgaged Property, or if the same arises out of th negligent or
willful act of Mortgagee in operating and using the Mortgaged Property. 5ho Id Mortgagee
incur any such liability, loss or damage under any Lease or by reason of this Ass gement, or in
the defense of any such claims or demands, the amount thereof, including costs, expenses, and
reasonable attorneys' fees, shall be secured hereby and Mortgagor shall reirnbu�,se Mortgagee
therefor immediately upon demand. Mortgagee shall give Mortgagor notice of a$iy such claim
15
4875190 ELI 8545
and Assignor shall have the opportunity to defend Mortgagee in connection therewith with
counsel reasonably acceptable to Mortgagee; provided Mortgagee's failure to gig e such notice
and opportunity to defend shall not affect Mortgagor's obligations under this Sec�ion except to
the extent Mortgagor is actually prejudiced by such failure.
4.8. Authorization to Tenants. The tenants under any of the Leasos are hereby
irrevocably authorized and directed to recognize the claims of Mortgagee dr its assigns
hereunder without investigating the reason for any action taken by Mortgagee., or the validity or
the amount of indebtedness owing to Mortgagee, or the existence of any such even of default, or
the application of the Rents to be made by Mortgagee. Mortgagor hereby irrevocably directs and
authorizes each tenant to pay to Mortgagee all sums due under its Lease and conse> is and directs
that said sums shall be paid to Mortgagee without the necessity for a judicial determination that
any such event of default has occurred or that Mortgagee is entitled to exercise its rights
hereunder, and to the extent such sums are paid to Mortgagee, Mortgagor agrees tl at the tenants
shall have no further liability to Mortgagor for the same. The sole signature ofMortgagee shall
be sufficient for the exercise of any rights under this Assignment and the sale receipt of
Mortgagee for any sums received shall be a full discharge and release therefor to !the tenants or
occupants of the Mortgaged Property.
4.9. Mortgagee Attorney -in -Fact. Mortgagor hereby irrevocably appoijts Mortgagee
as its agent and attorney in fact, which appointment is coupled with an interest, t0 exercise any
rights or remedies hereunder and to execute and deliver during the term of this As$ignment such
instruments as Mortgagee may deem necessary to make this Assignment anal any further
assignment effective.
4.10. Mortgagee Not in Possession. Nothing herein contained and no !actions taken
pursuant to this Assignment shall be construed as constituting Mortgagee a " Mortgagee in
Possession."
16
4875190 ELI 85-45
ARTICLE FIVE
CONDEMNATION
5.1. Notice. Mortgagor will give Mortgagee prompt notice of any action, actual or
threatened, in condemnation or eminent domain, direct or inverse.
5.2. Awards. Subject to any obligations under the First Lien Mortgage., which has
priority over this Mortgage, Mortgagor hereby assigns, transfers, and sets over to Mortgagee the
entire proceeds of any award or payment which becomes payable by reason of Oy taking of or
damage to the Mortgaged Property, or any part or appurtenance thereof, either temporarily or
permanently, in or by condemnation or other eminent domain proceedings or by season of sale
under threat thereof, or in anticipation of the exercise of the right of condemn4tion or other
eminent domain proceedings. Mortgagor will file or prosecute in good faith !anal with due
diligence what would otherwise be its claim in any such award or payment and caulse the same to
be collected and paid over to Mortgagee, and Mortgagor irrevocably authorizes and empowers
Mortgagee, which power is coupled with an interest and is irrevocable, in the n.am� of Mortgagor
or otherwise, in the event that Mortgagor fails to do so, to file and prosecute any sluch claim and
to collect, receipt for and retain the same. The proceeds of the award or payment, dfter deducting
all reasonable costs, attorneys' fees and other expenses which may have been incurred by
Mortgagee in collection thereof, at the sole discretion of Mortgagee, may be released to
Mortgagor, applied to restoration of the Mortgaged Property or applied to the p4yment of any
part of the Obligations, in such order of application as Mortgagee may determine. If proceeds
are made available to be applied to restoration, they shall be held and disbursed 'in accordance
with Paragraph 1.6(d) hereof.
17
4875190 FL185-45
ARTICLE SIX
UNIFORM COMMERCIAL CODE
6.1. Security Interest. This Mortgage shall constitute a security agreement as defined
in the Uniform Commercial Code with respect to, and Mortgagor hereby grants Mortgagee a
security interest in, all of fixtures and any personal property included in the Mortgaged Property
and substitutions therefor and proceeds thereof. Mortgagor hereby authorizes Mortgagee to file
one or more financing statements, covering such fixtures and personal property (in a form
satisfactory to Mortgagee) which Mortgagee may reasonably consider necessary pr appropriate
to perfect its security interest. Mortgagor also authorizes Mortgagee to file aiinendments to
financing statements, and terminations of financing statements filed by other secuted parties, all
with respect to all fixtures and personal property included in the Mortgaged Property, in such
form and substance as Mortgagee, in its reasonable discretion, may determine. Mortgagor will
pay to Mortgagee, on demand, the amount of any and all costs and expenses (including
reasonable attorneys' fees and legal expenses) paid or incurred by Mortgagee in cgnnection with
the exercise of any right or remedy referred to in this Section. In any instance wh6re Mortgagor
in its sound discretion determines that any item subject to a security interest under this Mortgage
has become: (i) inadequate, obsolete, worn out, or (ii) unsuitable, undesirable or uh, necessary for
the operation of the Mortgaged Property, Mortgagor may, at its expense, remove and dispose of
it and substitute and install other items not necessarily having the same function, provided, that
such removal and substitution shall not impair the operating utility and unity of the Mortgaged
Property. With respect to items which are a part of the Mortgaged Property, all items substituted
for such items shall become a part of the Mortgaged Property and subject to tlite lien of this
Mortgage. Any amounts received or allowed Mortgagor upon the sale or other disposition of the
removed items of property shall be applied against the cost of acquisition and installation of the
substituted items. Nothing herein contained shall be construed to prevent any tenant or subtenant
from removing from the Mortgaged Property trade fixtures, furniture and equipment installed by
it and removable by tenant under its terms of any one or more of the Leases, on the condition,
however, that Mortgagor shall assure the repair of any and all damages -to tie Mortgaged
Property resulting from or caused by the removal thereof. Mortgagee acknowledges that no
items of personal property are included in the Mortgaged Property.
6.2. Fixture Filing. From the date of its recording, this Mortgage shall be effective as
a financing statement with respect to all goods constituting part of the Mortgaged Property which
are or are to become fixtures related to the real estate described herein. For this purpose, the
following information is set forth:
(a) Name and Address of Mortgagor:
9775 158th Circle, NW
Elk River, MN 55330
Attention: Brian Hill
18
4875190 ELI 8545
(b) Name and address of Secured Party:
Economic Development Authority of the City of Elk River
13065 Orono Parkway
Elk River, MN 55330
Attention: Director of Economic Development
(c) This document covers goods which are or are to become fixtures.
(d) The real estate to which such fixtures are or are to be attached is that
described in Exhibit A attached hereto.
19
4875190 ELI 8545
ARTICLE SEVEN
MISCELLANEOUS
7.1. Mortgagee's Remedies Cumulative. All remedies of Mortgagee ar.e distinct and
cumulative to any other right or remedy under this Mortgage or afforded by law or equity, and
may be exercised concurrently or independently, as often as the occasion therefore Arises.
7.2. Successors and Assigns Bound; Captions. The covenants and ,agreements herein
contained shall bind, and the rights hereunder shall inure to, the respectiv$ :heirs, legal
representatives, successors and assigns of Mortgagee and Mortgagor. The captions and headings
of the Sections of this Mortgage are for convenience only and are not to be used io interpret or
define the provisions hereof.
7.3. Notices. Any notice from Mortgagee to Mortgagor under this Mortgage shall be
deemed to have been given by Mortgagee and received by Mortgagor, when de:live�ed personally
to an officer of Mortgagor or three (3) days after the date it is mailed by certified rnail addressed
as follows:
SBH Properties, LLC
9775 158th Circle, NW
Elk River, MN 55330
Attention: Brian Hill
7.4. Governing Law; Severability. This Mortgage shall be governed by the laws of the
State of Minnesota. In the event that any provision or clause of this Mortgage conflicts with
applicable law, such conflict shall not affect other provisions of this Mortgage Which can be
given effect without conflicting provisions and to this end the provisions of this'Mortgage are
declared to be severable.
7.5. Counterparts. This Mortgage may be executed in any number d counterparts,
each of which shall be an original but all of which together shall constitute one instfurnent.
7.6. Waiver of Appraisement, Homestead Marshaling. Mortgagor hereby waives the
benefit of any homestead, appraisement, evaluation, stay and extension laws now or hereinafter
in force. Mortgagor hereby waives any rights available with respect to marshaling bf assets so as
to require the separate sales of any portion of the Mortgaged Property or to require! Mortgagee to
exhaust its remedies against a specific portion of the Mortgaged Property before proceeding
against the other.
7.7. Subsequent Agreements. Any agreement hereafter made by Mortgagor and
Mortgagee pursuant to this Mortgage shall be superior to the rights of the Holder of any
intervening lien or encumbrance.
[Signature Page follows]
20
487519v3 EL185-45
Signature Page to Mortgage
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be duly executed as of
the day and year first written.
SBH PROPERTIES, LLC,
a Minnesota limited liability company
By:
Its:
IIn
STATE OF MINNESOTA )
ss.
COUNTY, OF )
Its:
The foregoing instrument was acknowledged before me on , 2016, by
and and , respectively, of SBH
Properties, LLC, a Minnesota limited liability company, on behalf of the company.
Notary Public
My Commission Expires:
This Instrument was drafted by:
Kennedy & Graven, Chartered (JSB)
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis, Minnesota 55402
Telephone: (612) 337-9300
S-1
4875190 ELI 8545
EXHIBIT A
Legal Description
Parcel Identification Number 758110125, Lot 5, Block 1, Renner Fourth Addition, Sherburne
County, Minnesota
B-1
487519v3 EL185-45
EXHIBIT B
ke— Encu.>1 1rfti6
B-1
4875190 EL185-45