The URL can be used to link to this page

3. HRSR 05-16-2005.giver MEMORANDUM TO: Housing and Redevelopment Authority FROM: Heidi Steinmetz, Assistant Director of Economic Development DATE: May I6, 2005 SUBJECT: Consider Small Cities Development Program (SCDP) Loan Agreement Attachments • SCDP Loan Agreement Memo to HRA dated May 2, 2005 • Draft SCDP Loan Agreement including Promissory Note and Mortgage • U.S. Dept. of Housing & Urban Development (HUD) Income Limits & Maximum Rents, February 11, 2005 Background At its May 2, 2005 meeting, the HRA reviewed the attached memo regarding the draft SCDP loan agreement for the Jackson Place rental housing units. Several HRA commissioners expressed concerns regarding the Jackson Place tenant rent and income limits and decided to table the approval of the agreement in order to discuss their concerns with MetroPlains Development. Vern Hanson and John Errigo of MetroPlains will be in attendance to address any questions and to discuss their tenant profile and tenant application procedures. Issue The following questions and answers may address some of the concerns expressed by the HRA. What are the details of the rent and income limits included in the SCDP loan agreement? Pages 4 and 8 of the attached draft SCDP loan agreement include the following verbiage: Rent Limits The rents will be affordable to Tenants with household incomes that do not. exceed fifty percent (50%) of the Sherburne County Median Income as determined by HUD and adjusted fox household size (the "County Median Income"). Consider Small Cities Development Program Loan Agreement May 16, 2005 Special H12A Meeting Pagc2of2 Income Limits Upon initial occupancy of the Subject Property by each tenant, the Borrower shall obtain a certification that the tenant's household income does not exceed sixty percent (60%) of the County Median Income as adjusted for household size. At all times during the term of the Loan, Borrower shall require that the Assisted Dwelling Units are rented to households with incomes of sixty percent (60%) or less of the Sherburne County Median Income as adjusted for household size. What does this really mean? The attached HUD chart indicates the following: Rent Limits The rents are set according to state guidelines so that the rents are affordable to households earning 50% of the Sherburne County median income. Sherburne County's median income is $77,000 for the year 2005, so 50% of the median income is $38,500. Something to keep in mind is that Sherburne County's median income is calculated based on the median income for the Twin Cities Metropolitan Statistical Area (the 13-county metro area), which is the highest median income in the state. The maximum allowable rent for the Jackson Place apartments, based on 2005 HUD numbers is $721 fora 1-bedroom and $866 fora 2-bedroom. MetroPlains has set Jackson Place rents at $600 fora 1-bedroom and $700 fora 2-bedroom. Income Limits The income limits are 60% of the Sherburne County median income. Below are the income limits for each household size: 1-person household $32,340 2-person household $36,960 3-person household $41,580 4-person household $46,200 Why are these provisions in the SCDP loan agreement? This is because the SCDP loan coincides with the MN Housing Finance Agency (MHFA) tax credit financing that MetroPlains' received for the Jackson Place housing project. The July 2003 City Council Resolution No. 03-42 supported MetroPlains' application to MHFA for Low Income Housing Tax Credits. In addition, the City Council held a public hearing on October 27, 2003 to consider the SCDP grant application for the benefit of low and moderate-income residents and to alleviate blight conditions in the downtown area. Action Requested Since minor revisions may be made to the loan agreement upon final review by the Dept. of Employment & Economic Development (DEED) and MHFA, staff requests that the HRA consider approval of the loan agreement terms with MDI Limited Partnership #70 in the amount of $400,000 to be repaid in full at 1% interest at the end of 30 years. of fiver MEMORANDUM TO: Housing and Redevelopment Authority FROM: Heidi Steinmetz, Assistant Director of Economic Development DATE: May 2, 2005 SUBJECT: Consider Small Cities Development Program Loan Agreement Attachment • Draft Loan Agreement including Promissory Note and Mortgage Background A key component of the Downtown Revitalization Project financing has included a Small Cities Development Program (SCDP) grant that was awarded to the city from the MN Department of Employment and Economic Development (DEED) in 2004. Although the city's application included a funding request for commercial and rental rehabilitation, a $400,000 grant was awarded specifically to the Jackson Block rental housing new construction component of the application. The grant application proposed that the city through its HRA, the designated Local Development Organization, would loan MDI Limited Partnership #70 (asset manager for MetroPlains Development, LLC) $400,000 to help fill the financing gap that results from the disconnect between the cost of constructing affordable rental housing and cash flows available to repay debt. The application proposed that the loan would be repaid in full at 1 interest at the end of 30 years consistent with MN Housing Financing Agency (MHFA) financing. Issue The attached loan agreement was prepared by the City Attorney for the HRA's consideration. Staff and MetroPlains are in agreement on the document. MetroPlains anticipates closing on the project financing for the Jackson Block by the end of June. Key components of the loan agreement include the following: • MetroPlains must construct 32 units of affordable rental housing. Affordable means that the rental rates of all units must be affordable to households earning no more than 50% of the Sherburne County Median Income. Sherburne County falls under Consider Small Cities Development Program Loan Agreement May 2, 2005 HRA Mccting Page 2 of 2 the U.S. Housing & Urban Development's Minneapolis/St. Paul Median Family Income limit, which is currently $77,000 per year and is subject to change each year. • The loan is secured by a subordinate mortgage. • The loan will be disbursed on a drawdown basis during the construction of the project. MetroPlains will request the draw, which must be approved by DEED prior to the disbursement. • The agreement includes management and operations requirements, i.e. that MetroPlains must provide a property manager and that the property will be sufficiently maintained. • The agreement includes Federal requirements, in addition to State requirements, to be monitored by Short, Elliot, Hendrickson (SEH) per the Grant Administration Contract the City has with SEH. Action Requested Since minor revisions may be made to the loan agreement upon DEED's final review, staff requests that the HRA consider approval of the terms of the loan agreement with MDI Limited Partnership #70 in the amount of $400,000 to be repaid in full at 1% interest at the end of 30 years. Housing and Redevelopment Authority in and for the City of Elk River LOAN AGREEMENT $400,000 THIS LOAN AGREEMENT is made and entered into this day of 2005, by and between MDI Limited Partnership #70, a Minnesota limited partnership (hereinafter referred to as "Borrower" or "Partnership"), with its principal offices located at the address listed in Section 13 of this Agreement; and the Housing and Redevelopment Authority in and for the City of Elk River, a public body corporate and politic under the laws of the State of Minnesota (hereinafter referred to as "Lender"), with its principal offices located at the address listed in Section 13 of this Agreement. WITNESSETH: WHEREAS, Lender is authorized to make loans; and WHEREAS, Borrower is the owner in fee simple of the Real Estate described in Exhibit I (the "Subject Property") attached hereto and by this reference made a part hereof; and WHEREAS, Borrower has applied for and obtained a loan from Lender in the amount of Four Hundred Thousand and 00/100 Dollars ($400,000) (the "Loan") to assist in the financing of a housing development for households with low and moderate incomes (said housing development and all assets of whatsoever nature situated on or used in connection therewith is hereinafter referred to as the "Development"); and WHEREAS, there will be thirty-two (32) units of rental housing in the Development; and WHEREAS, all thirty-two (32) of the units in the Development will have rents that are affordable to households earning 50% or less of the current Sherburne County median income and the units will be assisted by receipt and use of the Loan (the "Assisted Dwelling Units"); and WHEREAS, Lender is willing to make the Loan to assist in the accomplishment of the above, but only on condition that Borrower fulfill the terms of this Loan Agreement; and WHEREAS, Borrower is willing to execute and abide by this Loan Agreement as a condition of obtaining the Loan. NOW, THEREFORE, it is hereby agreed by and between the parties hereto, and their respective permitted successors and assigns, as follows: 1 1. LOAN PROCEEDS AND PAYMENTS. A. Borrower shall comply with all terms and conditions of the Mortgage and Promissory Note of even date herewith, copies of which have been attached hereto and incorporated herein by this reference as Exhibit II and Exhibit III, respectively. In addition, Borrower agrees to comply with the applicable provisions of the Development Agreement covering the Subject Property dated December 6, 2004. Lender shall use the payments in its Program Income Plan as required by the terms of its grant from the State of Minnesota Department of Employment and Economic Development. B. Conditions. The obligation of Lender to make the Loan shall be subject to the satisfaction at or before the first Loan Disbursement and each subsequent Loan Disbursement (the date on which this Agreement has been executed and delivered by both parties and the first Loan Disbursement has been made is referred to herein as the "Closing") of the following conditions precedent: 1. The representations and warranties made herein shall be true and correct on and as of the date of each Loan Disbursement hereunder with the same effect as if made on such date, and Lender shall have received such assurances in this respect as Lender may reasonably require. 2. Borrower shall have performed and complied with all terms and conditions of this Agreement and any other agreements regarding the Loan required to be performed or complied with by Borrower at or before the time of the Closing and, at the time of the Closing and the particular Loan Disbursement there shall exist no Event of Default (as herein defined) or condition which might, with or without the passage of time or the giving of notice or both, result in an Event of Default by Borrower under this Loan. 3. Borrower shall have delivered to Lender the following documents: a. The Note duly executed by an authorized officer or partner of Borrower; b. Two counterparts of this Agreement duly executed by an appropriate officer or partner of Borrower; c. Original certificates of legal existence and good standing for Borrower and/or its general partners, as the case may be, issued by the Secretary of State of the state of incorporation, dated within thirty (30) days of the closing; d. A copy of the Partnership Agreement then in effect, certified by the Clerk or other appropriate officer or partner of Borrower; 2 e. A certificate of the Clerk or other appropriate officer or partner of Borrower (or other applicable entity) certifying (i) the votes duly authorizing the execution, delivery and performance of this Agreement, the Note, and all other documents executed by Borrower in connection with this Loan (the Agreement, Note, the Mortgage and such other documents are referred to collectively as the "Loan Documents"),and (ii) the name and signature of each officer of Borrower authorized to sign the Agreement, the Note, and other Loan Documents and to borrow and effect the transactions hereunder in form and substance satisfactory to Lender and its counsel; f. A statement, in reasonable detail, of all estimated costs and expenses of acquisition of the Site, including proposed sources of financing for all such costs and expenses. 4. All proceedings in connection with the transactions contemplated by this Agreement and all documents incident thereto shall be satisfactory in form and substance to Lender and its counsel, and Lender and such counsel shall have received all information and documents relating to Borrower as they shall have requested. 5. Borrower shall have delivered to Lender a statement, in reasonable detail, of all estimated costs of the completion of the Development, and such other relevant data as may be then reasonably available, including proposed sources of financing for all such costs and expenses; such statement shall be based on the best and most current data available to Borrower. D. Loan Disbursements. 1. Disbursements shall be made pursuant to Borrower's written request to and received by Lender (hereinafter referred to as a "Request for Disbursement") Lender shall make such disbursement within five business days after such request has been approved by the Department of Employment & Economic Development pursuant to Lender's Grant from such department. Each Request for Disbursement shall specify the amount and date of the proposed Loan Disbursement (a "Disbursement Date") and shall be accompanied by supporting documentation, each of which shall be in form and substance satisfactory to Lender, and which shall be signed only by an officer or authorized signatory of Borrower. 2. Lender shall have the right, exercisable in its sole and exclusive discretion, to approve or disapprove each request for a Loan Disbursement. Borrower hereby expressly acknowledges that Lender has no obligation whatsoever to make any Loan Disbursement to, or on behalf of, Borrower and that Borrower has no entitlement or right whatsoever to receive any Loan Disbursements unless and until such Loan Disbursement has been 3 approved by Lender in writing. Borrower further acknowledges that Lender shall in no event make any Loan Disbursement unless and until Lender shall have determined, in its sole discretion, that: (a) the Loan Disbursement will fund a Development expense approved by Lender; (b) as of the date of the Loan Disbursement, the Development is reasonably feasible; (c) Borrower is making adequate progress in planning or developing the Development; (d) Borrower has performed or satisfied, to Lender's satisfaction, all general, special and/or additional conditions set forth in the development agreement; and (e) the amount of the requested Loan Disbursement, when added to the sum of the amount of all prior Loan Disbursements to, or on behalf of, Borrower, shall not exceed $400,000. The Lender may require, when a Request for Disbursement has not been made within a sixty (60) day period, that Borrower provide to the Lender a brief accounting of funds spent and a description of the status of the Development. 3. This Agreement shall terminate, and Lender's obligations to approve and/or fund any Loan Disbursements shall cease, if Borrower fails to submit a request for, and Lender has not approved and funded, at least one Loan Disbursement on or prior to the original maturity date of the Note. 4. The making of a Loan Disbursement or any part of a Loan Disbursement shall not be deemed an approval by Lender of the costs incurred by or on behalf of Borrower. Borrower shall furnish evidence satisfactory to Lender, by receipts or otherwise, that the costs in question have been incurred, before each or any Loan Disbursement shall be made herewith. 5. Borrower shall not be entitled to any Loan Disbursement unless, in the sole judgment of Lender, all costs are reasonable and substantially in accordance with the anticipated Development expenses, and the proposed uses of such funds constitute acceptable uses in the sole judgment of Lender. Lender. may make Loan Disbursements before they become due if, in the sole judgment of Lender, it is advisable to do so, and all such Loan Disbursements shall be deemed to have been made pursuant to this Agreement and not in modification hereof. 6. All Loan Disbursements shall be made at the office of Lender set forth in this Agreement or at such other place as Lender shall designate. _____~ 2. RENTAL RATES AND OPERATING EXPENSES. A. Borrower agrees that the rents charged for the Assisted Dwelling Units will be affordable to Tenants with household incomes that do not exceed fifty percent (50%) of the Sherburne County Median Income as determined by HUD and adjusted for household size (the "County Median Income"). 4 B. Borrower agrees and understands that this Loan Agreement constitutes an assurance and undertaking by Borrower that the Development shall be operated on a continuous basis, and all operating expenses shall be paid by Borrower during the life of this Loan Agreement and that Borrower shall maintain the Development in good repair and condition. 3. ACCOUNTS AND FUNDS. A. Operating Receipts and Expense Account. Borrower shall maintain a separate bank account for property operations. Said bank account shall be established with a federally insured financial institution, and maintained by Borrower in accordance with the laws of the State of Minnesota. B. Security Deposit Account. Borrower shall collect, deposit, and disburse residents' security deposits in accordance with the terms of their respective leases. Said security deposits shall be placed in a bank account with a federally insured financial institution and maintained by Borrower in accordance with the laws of the State of Minnesota. 4. TAXES AND INSURANCE ESCROW. Monthly payments by Borrower to pay for real estate taxes and insurance premiums when due as required by any prior mortgage lender shall be held in escrow by such mortgage lender for the payment thereof. 5. MANAGEMENT AND OPERATION REQUIREMENTS. Borrower shall provide for the management of the Development in a manner satisfactory to Lender by a Management Agent, in accordance with the Management Agreement. A. Personnel of Borrower. Borrower or its Management Agent shall investigate, hire, pay supervise, and discharge all managerial and non-managerial personnel. Compensation for the services of such employees shall be considered an operating expense of the Development. Also, the Management Agent shall hire in its own name all managerial and non-managerial personnel necessary for the performance of its duties under this Loan Agreement. B. Inspection Prior to Occupancy. Prior to the occupancy of any rental unit by a tenant, Borrower or its Management Agent and the tenant shall inspect the unit and both shall certify that they have inspected the unit and have determined it to be decent, safe, and sanitary. 5 C. Maintenance and Repairs. Borrower or its Management Agent shall cause the Development to be maintained and repaired. Borrower or its Management Agent shall develop a preventive maintenance schedule including, but not limited to: periodic inspections of the units; residency commencement and termination check lists; inventory control; common area and equipment maintenance; seasonal exterior maintenance; and painting, decorating, and replacement timetables, as necessary. D. Property Taxes. Borrower or its Management Agent shall pay or cause to be paid any and all property taxes in a timely manner. E. Property Insurance. Borrower or its Management Agent shall cause to be placed in force all forms of insurance needed to adequately protect Borrower and the Development, including where appropriate, public liability insurance, boiler insurance, fire and extended coverage insurance, and burglary and theft insurance. All of the various types of insurance coverage required for the benefit of Borrower and the Development shall be placed with such companies, in such amounts, and with such beneficial interest appearing therein as shall be reasonably acceptable and at least in the outstanding balance of the Loan to Lender. All such policies of insurance shall be endorsed with a standard mortgagee clause with loss payable to Lender as a named insured, as Lender may direct, and shall be insured by companies qualified to do business in the State of Minnesota, and shall provide that Lender be given no less than thirty (30) days advance written notice of the cancellation, expiration, or termination of the policy or any material change in the coverage afforded thereunder. F. Review of Operations. Lender shall be permitted to conduct on-site evaluations no more often than annually of the performance of management services as stipulated in this Loan Agreement. Borrower's authorized representative shall be available for on-site evaluations. G. Collection and Delinquencies. Borrower or its Management Agent shall collect and deposit in a general operating account all rents and other charges due from residents and all rents or other payments due from users of parking spaces and from users or lessors of other non-dwelling facilities in the Development. Borrower or its Management Agent agrees to request, demand, collect, receive, and give receipts for any and all charges or rents which may at any time be or become payable; and further agrees to take such action, including legal action, with respect to delinquencies in payments due. H. Governmental Orders. Borrower shall take such action as may be necessary to comply promptly with any and all orders or requirements affecting the Development placed thereon by any federal, state, county, or municipal authority having jurisdiction hereover. I. Utility Service and Purchases. Borrower or its Management Agent shall make contracts for garbage and trash removal, fuel, oil, extermination, snow removal, elevator 6 maintenance, and other necessary services. Borrower or its Management Agent shall place orders for such equipment, tools, appliances, materials, and supplies as are necessary to maintain and repair the Development properly. J. Records and Reports. 1) Borrower or its Management Agent shall establish and maintain a comprehensive system of records, books, and accounts in a manner consistent with industry standards. 2) Upon Lender's written request, Borrower or its Management Agent shall deliver to Lender any requested and available annual financial statements for the Development, beginning in the year in which the request is made, by March 31St of each year. 3) Borrower or its Management Agent will furnish such information as may be requested by Lender from time to time with respect to the financial, physical, or operational condition of the Development. 4) Borrower shall file periodic reports with Lender from the time the Loan is disbursed until the Loan has been fully used or repaid, which shall at a minimum, state the manner in which Borrower has used the proceeds of the Loan. Reports must be supported by appropriate documentation. 5) Borrower shall prepare, execute, and file all forms, reports, returns required by law in connection with the employment or personnel, including unemployment insurance, workman's compensation insurance benefits, or taxes now in effect or hereafter imposed. K. Compliance of Residents. 1) Borrower or its Management Agent shall at all times during the term of this Loan Agreement operate and maintain the Development according to the highest standards achievable. Borrower or its Management Agent shall secure full compliance by the residents with terms and conditions of their respective leases. 2) Borrower or its Management Agent may lawfully terminate any tenancy when, in its judgment, sufficient cause occurs under the terms of the resident's lease. Documentation of eviction will be on file with Borrower or its Management Agent. 3) Borrower is authorized to consult with legal counsel to bring actions for eviction and to execute notices to vacate and to commence appropriate judicial proceedings. 7 4) Costs incurred in connection with such actions shall be considered an operating expense. ---.-~ 6. TENANT QUALIFICATION. C. Upon initial occupancy of the Subject Property by each tenant, the Borrower shall obtain a certification that the tenant's household income does not exceed sixty percent (60%) of the County Median Income as adjusted for household size. At all times during the term of the Loan, Borrower shall require that the Assisted Dwelling Units are rented to households with incomes of sixty percent (60%) or less of the Sherburne County Median Income as adjusted for household size. Tenant qualifications will follow Section 42 of the IRS Code. Upon written request, Borrower shall provide annual certifications to Lender of compliance with the tenant income requirements of Title 26, Section 42 of the United States Code. 7. AFFIRMATIVE COVENANTS OF BORROWER. Borrower covenants and agrees that: A. Borrower is legally organized under the laws of the State of Minnesota. B. There are no actions, suits, or proceedings pending or threatened against or affecting Borrower and Borrower is in good standing under the laws of the State of Minnesota. C. The undersigned is an authorized signer of Borrower. D. The Development will comply with all federal, state, and local laws and regulations concerning air and water quality; and will not result in the alteration of lands defined as wetlands without prior consultation with the appropriate federal, state, and local authorities. E. Borrower will comply with the provisions of any federal, state, or local law prohibiting discrimination in housing on the grounds of race, color, sex, creed, religion, marital status, physical or mental disability, economic status, or national origin, including Title VI of the 1964 Civil Rights Act (Public Law 88-352, 78 Stat. 241); all requirements imposed by or pursuant to the Regulations of HUD (24 C.F.R., Subtitle A, Part I) issued pursuant to that Title; regulations issued pursuant to Executive Order 11063; and Title VIII of the 1968 Civil Rights Act and: 8 1) Antitrust laws including any and all claims for overcharges as to goods and/or services provided in connection with this contract resulting from antitrust violations which arise under the antitrust laws of the United States and the antitrust laws of the State of Minnesota. 2) Unacceptable Risk. Borrower assures that Contractors and Subcontractors shall not be listed on the "unacceptable risk determination" list of the U.S. Department of Housing and Urban Development. 3) Equal Employment Opportunities: Section 109, Housing and Community Development Act of 1974 -Civil Rights Act of 1964. Borrower shall ensure that employees and applicants for employment are not discriminated against because of their race, color, creed, sex or national origin. This contract includes as attachments all equal opportunity clauses required under law. 4) Contractor Work Hours and Safety Standards Act. Borrower shall ensure compliance with Contract Work Hours and Safety Standards Act (40 USC 327-330) as supplemented by Department of Labor Regulations 29CFR, Part 5. These regulations briefly state the following: i) Section 107 of the Act provides that no laborer or mechanic shall be required to work in surroundings or conditions which are unsanitary, hazardous, or dangerous to health and safety. ii) Davis-Bacon Act, Copeland Anti-kickback Act. Which relate to prevailing wages and permissible deductions for workers on construction projects with federal funds. iii) Borrower shall assure that Contractors shall be required to compute the wages of every mechanic and laborer on the basis of a standard work week of forty (40) hours. Work in excess of a standard work week is permissible provided that the worker is compensated at a rate of not less than one and one-half (1 1 /2) times the basic rate of pay for hours worked in excess of forty (40) hours in the work week. 5) Section Three Clause. Borrower is to comply with provisions of Section 3 of the Housing and Urban Development Act of 1968 which briefly states the following: i) Contractor is encouraged to hire and train Section 3 covered (local) lower income residents. ii) Contractor is encouraged to utilize Section 3 covered (local) businesses for materials. 9 6) Lead-based Paint. Borrower assures compliance with Title X of the Housing and Community Development Act of 1992 as amended, governing Residential Lead- Based Paint Hazard Reduction. 7) National Environmental Policy Act of 1969, as amended. 8) Section 109 of the Housing Community Development Act of 1974. 9) Executive Orders 11246, 11625, 12432 and 12138 covering Federal Equal Opportunity. 10) Residential Anti-displacement and Relocation Assistance -Section 104(d) of the Housing and Community Development Act. 11) American with Disabilities Act, Minnesota Human Rights Laws, Chapter 363, and Section 504 of the Rehabilitation Act of 1973. 12) Borrower shall require all occupants to execute a lease and shall not rent any Assisted Dwelling Unit in the Development for a term of less than six (6) months unless a shorter lease term is required under the applicable guidelines for any other financing sources (including, but not limited to, Low Income Housing Tax Credits). 13) Payment for services, supplies, or materials for the Development, whether to independent third parties or related parties, shall not exceed the amount ordinarily paid for such services, supplies, or materials in the area where the services are rendered or the supplies or materials are furnished. 14) Borrower agrees to comply with provisions of Title 1 of the Housing and Community Development Act of 1974 as amended including Title 24 of the Code of Federal Regulations, Part 570. 8. NEGATIVE COVENANTS OF BORROWER. Borrower covenants and agrees that it shall not, without the express prior written approval of Lender: A. Sell, assign, convey, transfer, lease or otherwise any of the Development or the Subject Property or any portion thereof, or permit any such acts, except as required by prior mortgage lenders and in regards to the Loan, any Rental Assistance Agreements, and such acts that are required by the Minnesota Housing Finance Agency concerning any other financing sources (including, but not limited to, Low Income Housing Tax Credits). 10 B. Assign, transfer, dispose of, or encumber any personal property of the Development, including rent, or pay out any funds except for reasonable operating expenses and necessary repairs as provided herein. C. Convey, assign, or transfer any interest of any individual owner, joint tenant in common, or general partner in a partnership owning the Subject Property, or any right to manage or receive the rents and profits from the Subject Property or the Development. Consent will not be unreasonably withheld. D. Require, as a condition of the occupancy or leasing of any unit in the Development, any consideration or deposit other than the prepayment of the first and last month's rent plus a security deposit in compliance with applicable law to guarantee the performance of the covenants of the lease. Any funds collected as security shall be kept separate apart from all other funds, in an escrow account, the amount of which at all times shall equal or exceed the aggregate of all outstanding obligations under this account. E. Permit the use of the dwelling accommodations of the Development for any purpose except the use that was originally approved by Lender. F. Transfer, assign, or pledge any right to or interest in or title to, any funds deposited by Borrower under this Loan Agreement. 9. RIGHTS AND REMEDIES. Upon violation of any provision of this Loan Agreement, or the Mortgage or Promissory Note, or any other agreements by Borrower (including the Development Agreement, as incorporated herein), Lender may give written notice thereof to Borrower, by registered or certified mail, addressed to the address stated in this Loan Agreement, or such other address as may subsequently, upon appropriate written notice thereof to Lender, be designated by Borrower as its legal business address. If such violation is not corrected to the satisfaction of Lender within thirty (30) days after the date such notice is mailed, or within such further time as Lender reasonably determines is necessary to correct the violation, Lender may, without further notice, declare a default under this Loan Agreement effective .on the date of such declaration, and thereupon Lender may apply to any court, State or Federal, for specific performance of the covenants and agreements contained herein or for an injunction against any violation of such covenants and agreements. In addition, in the event that the violation is not corrected within the time period as set forth above, Lender may exercise its remedies under the Promissory Note or any other agreement related to this loan and foreclose on the Mortgage and seek recapture of the Loan in accordance with the terms of this Loan Agreement. Lender's election to pursue any one or more of the above remedies shall not be construed to preclude or to be a waiver of Lender's right to pursue any other remedy. 11 10. MUTUAL COVENANTS AND AGREEMENTS. The parties covenant and agree with each other that: A. In the event that any term, covenant, or condition of this Loan Agreement shall be finally determined by a court of competent jurisdiction to be invalid, those terms, covenants, or conditions so determined to be invalid are hereby declared severable and shall not affect the validity of the remaining portions of this Loan Agreement. B. No waiver by either party of any term, covenant, or conditions of this Loan Agreement shall be binding unless in writing and signed by both parties hereto. C. No amendment, modification, or termination of this Loan Agreement shall be binding unless in writing and signed by both parties. D. This Loan Agreement shall remain in effect so long as Lender is the holder of the Loan or any interest therein. E. This Loan Agreement shall be binding upon the parties hereto and their respective permitted successors and assigns. F. This Loan Agreement and all related loan documents executed pursuant to this Loan Agreement shall be governed by the laws of the State of Minnesota. 11. FURTHER PROVISIONS APPLICABLE TO BORROWER. A. No amendments will be made to Borrower's organizational documents that would affect Lender's rights under any of the terms and conditions of this Loan Agreement, without Lender's prior written approval. B. In the event the retirement, death, insanity, incapacity, withdrawal, dissolution, liquidation, bankruptcy, or assignment for benefit of creditors of a general partner of Partnership, the business may be continued by the remaining general partners pursuant to aright set forth in the Partnership Agreement. In the event of dissolution of Partnership, no title or right to possession and control of the Development, and no right to collect rents therefrom, shall pass to any person who is not bound by this Loan Agreement in a manner satisfactory to Lender. C. No general partner will voluntarily withdraw from or be substituted by Partnership without the prior written approval of Lender. Said approval will be made within thirty (30) days or assumed accepted and will not be unreasonably withheld if there are one or more remaining or substitute general partners who, in Lender's opinion and sole 12 discretion, are financially capable and competent to cause Borrower to have the capacity to effectively own and operate the Development, subject to the terms and provisions of this Loan Agreement. D. In the event of the retirement, death, insanity, incapacity, withdrawal, dissolution, liquidation, bankruptcy, or assignment for benefit of creditors of Borrower, the Development may be continued pursuant to the rights set forth in the Limited Partnership Agreement. In the event of dissolution of Borrower, no title or right to possession and control of the Development, and no right to collect rents therefrom, shall pass to any person who is not bound by this Loan Agreement in a manner satisfactory to Lender. E. All costs associated with closing the Loan will be paid by Borrower, including reimbursing Lender for attorney's fees incurred preparing the loan documentation and closing the loan. 12. TERM OF THIS LOAN AGREEMENT. The Loan Term, as stated in the Mortgage- and Promissory Note attached herewith, is thirty (30) years. 13. NOTICES. Borrower: MDI Limited Partnership #70 Attn: Asset Manager 1600 University Avenue West, Suite 212 St. Paul, Minnesota 55104-3825 Lender: Housing and Redevelopment Authority in and for City of Elk River Attn: Director of Economic Development 13065 Orono Parkway Elk River, MN 55330 14. NOTICE TO BORROWER. This Loan Agreement, together with the Mortgage, Promissory Note, and all other related documents executed in connection herewith which evidence or otherwise relate to the Loan constitute the final expression of the agreement of the parties and may not be contradicted by evidence of any prior or contemporaneous oral agreement among the parties. Each party 13 hereto acknowledges that sufficient space has been provided herein for nonstandard terms, and each party hereto affirms that no unwritten oral agreement among the parties exists. 15. INDEMNIFICATION BY BORROWER. Borrower shall indemnify and hold Lender harmless at all times after the date hereof against and in respect of all costs, expenses, claims, suites, damages, deficiencies, liabilities and losses (including, without limitation, reasonable costs and expenses for legal and accounting services incurred in connection therewith) of any nature suffered, incurred or paid by Lender which would not have been suffered, incurred or paid if all the representations, warranties, covenants and agreements made by Borrower in this Agreement or in any other instrument or document furnished to Lender in connection herewith had been (with respect to representations and warranties) true, complete and correct and had been (with respect to covenants and agreements) performed and fulfilled. 14 IN WITNESS WHEREOF, the parties have executed this Loan Agreement on the day and year first written above. BORROWER MDI Limited Partnership #70 a Minnesota limited partnership By: MetroPlains Properties, Inc. a Minnesota corporation Its General Partner Gary L. Stenson Its Vice President/Secretary STATE OF MINNESOTA ) ss. COUNTY OF RAMSEY ) The foregoing instrument was acknowledged before me on the date written above by Gary L. Stenson, Vice President/Secretary of MetroPlains Properties, Inc., a Minnesota corporation, General Partner of MDI Limited Partnership #70, a Minnesota limited partnership, on behalf of said corporation and said limited partnership. Notary Public Stamp Notary Public Signature 15 EXHIBIT I LEGAL DESCRIPTION A parcel of land lying in the North Half of the Southwest Quarter of Section 34, Township 33, Range 26, Sherburne County, Minnesota, described as follows: Beginning at the southwest corner of Lot 1, Block 3, of the Village of Elk River, according to said plat on file and of record in the office of the Register of Deeds, Sherburne County, Minnesota; thence North 11 degrees 06 minutes 40 seconds East, an assumed bearing, along the West line of said Lot 1, a distance of 179.00 feet to the Northwest corner of said Lot 1, being a point on the southerly line of the state highway right of way of Trunk Highway No. 10; thence North 64 degrees 17 minutes 53 seconds West a distance of 121.42 feet along said southerly right of way line to a line drawn parallel with and distant 80.00 feet East of the East line of Block 2 of said plat; thence South 11 degrees 06 minutes 40 seconds West along said parallel line a distance of 210.28 feet to the northerly line of right of way of Main Street as dedicated in said plat; thence South 79 degrees 13 minutes 30 seconds East along said northerly right of way of Main Street a distance of 117.50 feet to the point of beginning. EXHIBIT II MORTGAGE Draft 2-25-2005 3-8-2005 4-27-2005 FOR USE BY FILING OFFICER ONLY COMBINATION MORTGAGE, SECURITY AGREEMENT, AND FIXTURE FINANCING STATEMENT THIS MORTGAGE is made and entered into on this day of , 2005, between MDI Limited Partnership #70, a Minnesota limited partnership ("Mortgagor"), and the Housing and Redevelopment Authority in and for the City of Elk River, a public body corporate and politic ("Mortgagee"). WITNESSETH: In consideration of the sum of Four Hundred Thousand and No/100 Dollars ($400,000), in hand paid to Mortgagor, and for other good and valuable consideration, the receipt and sufficiency of which sum and consideration is hereby acknowledged, Mortgagor does hereby mortgage, grant, bargain, sell, and convey unto Mortgagee, its successors and assigns, forever, all the tract(s) or parcel(s) of land (the "Land") located in the County of Sherburne, State of Minnesota, described in Exhibit A attached hereto and made a part hereof. TOGETHER WITH (i) all the buildings, structures, and other improvements now or hereafter erected on the Land, (ii) all building materials, supplies, and equipment now or hereafter located on the Land, and suitable or intended to be incorporated or installed in any building, structure, or other improvement erected or to be erected on the Land, (iii) all lighting, heating, ventilating, air conditioning, sprinkling and plumbing fixtures, water and power systems, engines and machinery, boilers, ranges, ovens, dishwashers, carpeting, mirrors, mantels, furnaces, oil burners, elevators and motors, refrigeration, electrical equipment, storm and screen windows, doors, awnings and shades, and all other fixtures of every description now or hereafter found or used upon or appurtenant to the Land or any improvement thereon, (iv) all carpeting, drapes, curtains, furniture, furnishings, appliances, maintenance equipment, and all other personal property of Mortgagor now or hereafter installed or placed in or about, or used in connection with the use, operation, or maintenance of, the Land or any building, structure, or other improvement or fixture, (v) all additions, accessions, increases, parts, fittings, accessories, replacements, substitutions, betterments, repairs, and proceeds of or to any or all of the foregoing, and (vi) all hereditaments, easements, appurtenances, rents, issues, profits, condemnation awards, royalties and mineral, oil and gas rights now and hereafter belonging or pertaining in any way to the Land or any improvement or fixture now or hereafter located thereon (all of the foregoing, together with the Land, are herein called the "Mortgaged Property"). TO HAVE AND TO HOLD, the Mortgaged Property unto Mortgagee, its successors and assigns, forever. PROVIDED, NEVERTHELESS, that if Mortgagor (i) shall pay to Mortgagee when due the sum of Four Hundred Thousand and No/100 Dollars ($400,000.00) (the "Loan"), together with interest thereon in accordance with the terms of that certain Promissory Note (the "Note") of Mortgagor, of even date herewith, payable to the order of Mortgagee, which Note is payable in full on ,and (ii) shall also pay all other sums, with interest thereon, as may be payable by Mortgagor to Mortgagee in accordance with this Mortgage, or the payment of which may now or hereafter be secured by this Mortgage, including, but not limited to, all prepayment charges payable upon the occurrence of an Event of Default as defined herein, and all amounts disbursed or incurred by Mortgagee in exercising any rights and remedies under this Mortgage the Development Agreement, the Note or the Loan Agreement, including, without limitation, all reasonable attorney's fees (the indebtedness evidenced by the Note, or any instrument issued in substitution therefor, or in renewal, or as a refinancing thereof, and all such other sums are collectively the "Indebtedness"), and (iii) shall also keep and perform all and singular the covenants and warranties herein contained on the part of Mortgagor to be kept and performed, then this Mortgage shall be null and void; otherwise this Mortgage shall be and remain in full force and effect. Mortgagor warrants and covenants that: (i) it is lawfully seized in fee simple of the Mortgaged Property that is real property as described in the attached Exhibit A, and is the absolute owner of the Mortgaged Property that is personal property, (ii) it has the right and power 2 to mortgage and convey the Mortgaged Property, (iii) the Mortgaged Property is free from all liens, security interests, and encumbrances, except those listed in Exhibit B attached hereto and made a part hereof (the "Permitted Encumbrances"), (iv) Mortgagor shall quietly enjoy and possess the Mortgaged Property, (v) it shall warrant and defend the title to the Mortgaged Property against all claims, whether now existing or hereafter arising, and (vi) all buildings, improvements, and fixtures now or hereafter located on the Land are, or will be, located entirely within the boundaries of the Land. The foregoing warranties shall survive foreclosure of this Mortgage and shall run with the Land. Mortgagor further covenants and agrees as follows: 1. PAYMENT OF INDEBTEDNESS AND COMPLIANCE WITH OTHER AGREEMENTS. Mortgagor will pay promptly when due the principal of and interest on the Note, the Annual Fee, if any, provided for in the Note, prepayment charges, if any, provided for in the Note, and all other Indebtedness, at the stated maturity date or dates, or earlier in the event of acceleration. Mortgagor will promptly and faithfully observe and perform all of the terms and provisions under, and will permit or suffer no default or event of default to occur under the Development Agreement, Note, and Loan Agreement, of even date herewith, between Mortgagor and Mortgagee, and any other agreement now in effect or hereafter made between Mortgagor and Mortgagee with respect to the transaction evidenced by the Note and this Mortgage. The provisions of the Note and the agreements itemized in this Section 1 are hereby incorporated by reference into this Mortgage as fully as if set forth at length herein. In addition, Mortgagor will promptly and faithfully observe and perform all of the terms and provisions of, and will not permit, suffer, or allow any default or event of default to occur under, any document evidencing any other lien or encumbrance on the Mortgaged Property, whether junior or senior to the lien of this Mortgage, which shall include, but not be limited to, the Permitted Encumbrances. 2. COMPLIANCE WITH LAWS. The improvements made and to be made upon the Land and all plans and specifications comply with all municipal ordinances and regulations made or promulgated by lawful authority, and the same will upon completion comply with all such municipal ordinances and regulations, and with all rules of the applicable fire rating or inspection organization, bureau, association, or office, which are now or may hereafter become applicable. 3. USE OF MORTGAGED PROPERTY. Mortgagor will not permit or suffer the use of any of the Mortgaged Property for any purpose other than the use for which the same is intended at the time of execution of this Mortgage. Mortgagor will keep the buildings and other improvements now or hereafter erected on the Land in good repair and condition, ordinary depreciation excepted. Mortgagor will not commit or permit waste, will not alter the design or structural character of any building now or hereafter erected on the Land without the prior written consent of Mortgagee, will not do any act or thing that would unduly impair or depreciate the value of the Mortgaged Property, and will not abandon the Mortgaged Property. In the event of the failure of Mortgagor to keep the buildings or other improvements in good repair, Mortgagee may make such repairs at Mortgagor's expense as in Mortgagee's discretion it may deem necessary for the proper preservation thereof, and any sums paid for such repairs shall bear interest from the date of payment at the rate specified in the Note, shall be due and payable on demand, and shall be fully secured by this Mortgage. Mortgagor will not remove from the Land any fixtures or personal property included in the Mortgaged Property unless the same is immediately replaced with like property, subject to the lien and security interest of this Mortgage, of at least equal value and utility. Mortgagor will comply with all present and future laws, ordinances, regulations, and requirements of any governmental body applicable to the Mortgaged Property and to the occupancy and operation thereof, including without limitation, all applicable provisions of Minn. Stat. § 504B.178 with respect to any security deposits received by it, and all covenants required of it by the provisions of Minn. Stat. § 504B.161, subd. 1. 4. MORTGAGOR'S DUTY TO PAY TAXES. Mortgagor shall pay, before a fine or penalty might attach for nonpayment thereof, all taxes, assessments and all other charges whatsoever levied upon or assessed, placed or made against the Mortgaged Property. Mortgagor shall, upon written request by Mortgagee, promptly deliver to Mortgagee any receipts for the payment of such charges; provided, however, that Mortgagor need not pay any such taxes, assessments or other charges so long as Mortgagor shall in good faith contest such taxes, assessments or other charges by appropriate legal proceedings effective to prevent the enforcement of any lien created by such failure to pay, and to prevent the loss of any of the Mortgaged Property. Mortgagor likewise will 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 Indebtedness secured hereby. 5. MORTGAGOR'S DUTY TO PAY UTILITIES. Mortgagor will pay all charges made by utility companies, public or private, for electricity, gas, heat, water, or sewer, furnished to or used in connection with the Mortgaged Property or any part thereof, and upon written request by Mortgagee, will promptly deliver to Mortgagee receipts for the payment of such charges; provided, however, that Mortgagor need not pay any such charges so long as Mortgagor shall in good faith contest such charges by appropriate legal proceedings effective to prevent the enforcement of any lien created by such failure to pay, and to prevent the loss of any of the Mortgaged Property. 6. INSURANCE. At its own expense, Mortgagor will maintain for the benefit of Mortgagee title insurance insuring the interest of Mortgagee in the Mortgaged Property, and will keep the improvements now existing or hereafter erected on the Mortgaged Property insured against loss by fire and such other hazards, casualties, and contingencies as may be stipulated from time to time by Mortgagee, and all such insurance shall be evidenced by standard title insurance, and standard fire and extended coverage insurance policy or policies, in such amounts as may be required by Mortgagee, and in default thereof Mortgagee shall have the right to effect insurance at the expense of Mortgagor. Such policies, other than the title insurance policy referenced above, shall be endorsed with a standard Mortgagee clause with loss payable to Mortgagee, shall have a replacement cost endorsement, and shall be deposited with the Mortgagee. Mortgagor shall pay all premiums on such insurance at least ten (10) days prior to the date the premium on each policy shall become due and payable, subject to the provisions for premium escrow set forth in Section 7 hereof. At the written request of Mortgagee, Mortgagor shall promptly furnish to Mortgagee all written notices and all paid premium receipts received by Mortgagor. In the event of loss, Mortgagor shall give prompt notice by mail to the insurance carrier and Mortgagee, and Mortgagee may make proof of loss if not made promptly by Mortgagor. Mortgagee is hereby authorized in the event of loss to compromise and settle all loss claims on said policy on such terms as it deems appropriate. Mortgagor shall promptly furnish to Mortgagee a copy of any proof of loss given to the insurance carrier. If the Mortgaged Property, or any part thereof, shall be damaged by fire or other insured hazard, the amounts paid by any insurance company shall be paid to Mortgagee, to the extent of the Indebtedness then remaining unpaid, and, at the option of Mortgagee, all or any part of such amount may be applied in reduction of the Indebtedness, or released for the repairing or rebuilding of the Mortgaged Property. 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 Indebtedness. 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 on foreclosure. Notwithstanding anything to the contrary contained in this Section 6, or in Section 13 hereof relating to condemnations, Mortgagee agrees that, for the term of this Mortgage, in the event of a loss by fire or other hazard or a partial taking in condemnation permitting repair or restoration of the Mortgaged Property, then Mortgagee shall, provided that the amount of condemnation or insurance proceeds plus any other monies that Mortgagor deposits with Mortgagee are sufficient, in Mortgagee's sole discretion, to fully repair or restore the Mortgaged Property to its condition immediately prior to such loss or partial taking, authorize the release of such insurance proceeds or apply such condemnation awards to the repair or restoration of the Mortgaged Property. 7. ESCROW FOR TAXES, INSURANCE, AND OTHER CHARGES. Notwithstanding anything in this paragraph, no escrow is necessary so long as such escrow is made pursuant to the LMIR Mortgage or other first mortgage. If no escrow is being made pursuant to the LMIR Mortgage or other mortgage approved in wirtting by Lender, in order more fully to protect the security of this Mortgage, Mortgagor will pay to the Mortgagee, beginning on the date set forth below for commencement of payment, and thereafter as Mortgagee shall direct, the following sums: (a) Commencing on or before the first day of the month following Lender's request for an escrow, and on or before the first day of each month thereafter thereafter, an amount sufficient to accumulate the annual mortgage insurance premium in the hands of Mortgagee one month prior to its due date. (b) Commencing on such date as Mortgagee, in its discretion, shall designate to Mortgagor, and thereafter on a monthly basis, a sum equal to: (i) the ground rents, if any, next due, plus the premiums that will next become due and payable on the policies of fire and other property insurance covering the Mortgaged Property, plus water rates, taxes, and assessments next due on the Mortgaged Property (all as estimated by Mortgagee), and less all sums already paid therefor, (ii) divided by the number of months to elapse before one month prior to the date when such ground rents, premiums, water rates, taxes, and assessments will become delinquent, with such sums to be held by Mortgagee in escrow to pay said ground rents, premiums, water rates, taxes, and special assessments. Mortgagor hereby expressly acknowledges its liability under this Mortgage to pay all taxes, special assessments, and other lawful government charges with respect to the Mortgaged Property before they become delinquent, subject to the escrow provisions set forth above. (c) All payments required to be made by Mortgagor pursuant to this Section 7 shall be added together, and the aggregate amount thereof shall be paid each month in a single payment to be applied by Mortgagee to the following items in the following order of priority: (i) premium charges of the private mortgage insurer, if any, (ii) ground rents, taxes, special assessments, water rates, fire and other property insurance premiums. 8. NO SALE OR LEASE. It is hereby expressly agreed by Mortgagor that it shall not sell, assign, convey, transfer, lease or otherwise encumber the Mortgaged Property without the express prior written consent of Mortgagee, which consent will be given in cases of: (a) Receipt of a prepayment in full of the Loan in conformity with the prepayment requirements of the Mortgagee as set forth in this Mortgage and the Note. (b) Grant of easements, licenses, or rights-of--way over, under, or upon the Mortgaged Property that, in the opinion of the Mortgagee, do not destroy or diminish its usefulness for the purpose intended. (c) Lease of the Mortgaged Property, or a part thereof, to a third party for the purpose of operation of a housing development, provided that the proposed lessee is approved by Mortgagee and such lease is permitted by law, and is subject to all of the terms, provisions, and limitations of this Mortgage. (d) Sale or exchange of a portion of the Mortgaged Property on which no building or structure is situated, and which in Mortgagee's opinion is not needed for operation of the Mortgaged Property, provided that the proceeds thereof shall be paid to Mortgagee and applied in reduction of the Indebtedness, and the value of the remaining Property, in Mortgagee's sole option and discretion, will exceed the then outstanding principal balance of the Loan and any prior loan combined. (e) Sale to another eligible Mortgagor approved by resolution of Mortgagee, who assumes all obligations of Mortgagor under this Mortgage and accompanying documents, in which case Mortgagee may, in its discretion, release Mortgagor. Mortgagee specifically agrees to approve such a sale if (i) Mortgagor is then not in default of any of its agreements with Mortgagee, whether such agreements involve the Loan or some other loan that is secured by the Mortgaged Property, (ii) an assumption fee in an amount to be determined by Mortgagee, in its sole option and discretion, is paid to Mortgagee, (iii) the proposed assignee agrees to be bound by the provisions contained in the Regulatory Agreement and is capable of performing all of the duties specified therein, and (iv) the proposed assignee is creditworthy in Mortgagee's sole opinion. In such event, Mortgagee agrees that the interest rate as set forth in the Note or in any amendment thereof shall be unchanged as a result of said transfer and shall remain payable as provided in the Note or any amendment thereof. For purposes of this Section 8, a sale, assignment, conveyance, or transfer of the Mortgaged Property includes, but is not limited to, one or more of the following: (f) A transfer by Mortgagor, in whole or in part. (g) A transfer by a party having a substantial interest in Mortgagor. (h) Transfers by more than one party of interests aggregating a substantial interest in Mortgagor. (i) Any other similarly significant change in the ownership of interests in Mortgagor, or in the relative distribution of interests by any other method or means. The term "substantial interest" means the interest of any individual owner, joint tenant, or tenant in common, general partner, any limited partner having atwenty-five percent (25%) or more interest in the organization, any corporate officer or director, and any stockholder having a ten percent (10%) or more interest in the organization. 9. NO JUNIOR FINANCING. Mortgagor will not, without the prior written consent of Mortgagee, grant or create any mortgage lien or consensual security interest on the Mortgaged Property other than the lien and security interest of this Mortgage, and the Permitted Encumbrances. 10. LIENS. Mortgagor will keep the Mortgaged Property free from all liens, other than the Permitted Encumbrances, whether superior or subordinate to this Mortgage, and upon written demand of Mortgagee, will promptly pay and procure the release of any lien, whether arising prior or subsequent to the execution of this Mortgage, which in any way may, in the judgment of Mortgagee, impair the security of this Mortgage; provided, however, that Mortgagor need not discharge any such lien so long as it shall agree to pay the obligation secured by such lien in a manner acceptable to Mortgagee, or shall in good faith contest such lien by appropriate legal proceedings effective to prevent the enforcement of the lien and the loss of any of the Mortgaged Property. 11. MORTGAGEE'S OPTION TO PAY. In the event of Mortgagor's failure to pay any sums provided for in this Mortgage, Mortgagee, at its option, may pay the same. Any funds accumulated under Section 7(b) hereof remaining after payment of the items therein specified shall be credited against subsequent monthly payments of the same items required thereunder; provided, however, that if any such item shall exceed the estimate therefor, or if Mortgagor shall fail to pay any other governmental or municipal charge, Mortgagor shall forthwith make good the deficiency, or pay the charge before the same becomes delinquent or subject to interest or penalties and in default thereof Mortgagee may pay the same. All sums paid by Mortgagee, and any sums that Mortgagee may advance to pay mortgage insurance premiums, shall be added to the Indebtedness, and shall bear interest from the date of payment by Mortgagee at the rate of seven percent (7%), and shall be due and payable on demand. In case of termination of a contract of mortgage insurance, if any, by prepayment of the Indebtedness in full or otherwise (except as provided herein), accumulations under Section 7(a) hereof not required to meet payments due under the contract of mortgage insurance shall be credited to Mortgagor. If the Mortgaged Property is sold under foreclosure, or is otherwise acquired by Mortgagee after default, any remaining balance of the accumulations under Section 7(b) hereof shall be applied in reduction of the Indebtedness as of the date of the commencement of the foreclosure proceedings, or as of the date the property is otherwise acquired, as the case may be, and accumulations under Section 7(a) hereof shall be likewise applied in reduction of the Indebtedness, unless needed to pay sums due under the contract of mortgage insurance. 12. PROTECTION OF MORTGAGEE'S SECURITY. If Mortgagor fails to perform any of the covenants and agreements contained in this Mortgage, or if any action or proceeding is commenced that 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 its option, and without waiving other remedies, may perform such covenants and agreements, defend against and/or investigate such action or proceeding, and take such other action as it deems necessary to protect its interest. Mortgagor irrevocably authorizes and empowers Mortgagee to enter upon the Mortgaged Property as its agent, and in its name or otherwise, to perform any and all covenants and agreements to be performed by it as herein provided. The 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 it under the provisions hereof, and any such subrogation rights shall be additional and cumulative security for this Mortgage. Nothing contained in this Section 12 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 it pursuant to this Section 12. Any amounts disbursed or incurred by Mortgagee pursuant to this Section 12, including but not limited to reasonable attorney's fees, with interest thereon at the rate provided in the Note, shall become additional Indebtedness of Mortgagor, payable upon demand, and shall be secured by this Mortgage. 13. CONDEMNATION. Mortgagor hereby irrevocably assigns to Mortgagee any award or payment that becomes payable by reason of any taking of the Mortgaged Property, or any part thereof, either temporarily or permanently, in or by condemnation or other eminent domain proceedings, or by reason of sale under threat thereof, or in anticipation of the exercise of the right of condemnation or other eminent domain proceedings. Mortgagor will file and prosecute in good faith and with due diligence what would otherwise be its claim in any such award or payment, and will cause 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 name of Mortgagor or otherwise, to file, prosecute, settle, or compromise any such claim, and to collect receipt for and retain the same. The proceeds of the award of payment may, subject to the provisions contained in Section 6 hereof, after deducting all reasonable costs and expenses which may have been incurred by Mortgagee in the collection thereof, at the sole discretion of Mortgagee, be released to Mortgagor, applied to restoration of the Mortgaged Property, or applied in reduction of the Indebtedness secured hereby. 14. REAMORTIZATION. At the option of Mortgagor, the Indebtedness may be reamortized on terms acceptable to Mortgagee i£ (i) a partial prepayment results from an award in condemnation in accordance with provisions of Section 13 hereof, or from an insurance payment made in accordance with provisions of Section 6 hereof, and (ii) there is a resulting loss of income from the Mortgaged Property. 15. INSPECTION. Mortgagee, or its agents, may at all reasonable times enter upon the Mortgaged Property for the purposes of inspection. Mortgagee shall have no duty to make such inspection and shall not be liable to Mortgagor or any person in possession if it makes such inspection. Mortgagee, or its agents, shall also have the right at all reasonable times to examine the books and records of Mortgagor pertaining to the Mortgaged Property and to make extracts therefrom and copies thereof. 16. NO DISCRIMINATION. So long as this Mortgage and the Note secured hereby are held by Mortgagee, Mortgagor will not execute or file for record any instrument that imposes a restriction upon the sale or occupancy of the Mortgaged Property on the basis of race, creed, color, religion, sex, national origin, familial status, marital status, status with regard to public assistance, disability or sexual orientation. 17. SECURITY INTEREST. This Mortgage shall constitute a security agreement with respect to, and Mortgagor hereby grants Mortgagee a security interest in, all of Mortgagor's accounts, equipment, personal property, and fixtures, and all proceeds thereof, presently or hereafter used in the operation of the Mortgaged Property. Mortgagor hereby authorizes Mortgagee at any time and from time to time to file any and all financing statements covering such personal property and fixtures (in a form satisfactory to Mortgagee) that Mortgagee may reasonably consider necessary or appropriate to perfect its interest. Mortgagor will pay to Mortgagee, on demand, the amount of any and all costs and expenses (including reasonable attorney's fees and legal expenses) paid or incurred by Mortgagee in connection with the exercise of any right or remedy referred to in Section 20 hereof. 18. PREPAYMENT. The Note provides that the Indebtedness may be prepaid in whole or part without the prior approval of Mortgagee in accordance with the prepayment provisions set forth in the Note, which provisions are incorporated herein by reference as if set forth in full herein. 19. EVENTS OF DEFAULT. Each of the following occurrences shall constitute an event of default hereunder (an "Event of Default"): (a) Mortgagor shall fail to pay the Note in accordance with its terms, or shall fail duly to perform or observe any of its covenants or commitments contained in this Mortgage, or in any other mortgage lien or other consensual security interest on the Mortgaged Property, whether or not authorized by Mortgagee, or in any other agreement incorporated herein, and such failure shall continue for thirty (30) calendar days (or with respect to other agreements incorporated herein, such failure shall not be cured within the number of days specified therein). (b) A responsible title insurance company shall fail duly to issue a policy or commitment for a policy of title insurance to or for the benefit of Mortgagee, free from exceptions for mechanic's and materialmen's liens, and other exceptions not previously approved by Mortgagee, insuring this Mortgage to be a valid lien (subject only to those exceptions, if any, previously enumerated herein) on the Land and related real property interests in an amount not less than the stated principal amount of the Note; or, if issued, any such policy or commitment shall be repudiated or revoked, or shall not be duly performed. (c) Any warranty of title made by Mortgagor in this Mortgage shall be broken. (d) Any representation or warranty made by Mortgagor in any of the agreements identified or referred to in Section 1 hereof, or in any financial statements or reports submitted to Mortgagee by or on behalf of Mortgagor, shall prove false or materially misleading. (e) Mortgagor shall make an assignment for the benefit of its creditors, or shall be dissolved, or shall commit an act of bankruptcy under the United States Bankruptcy Act (as now or hereafter amended), or shall admit in writing its inability to pay its debts as they become due, or shall file a petition in bankruptcy, or shall become or be adjudicated a bankrupt or insolvent, however defined, or shall file a petition seeking any reorganization, dissolution, liquidation, arrangement, composition, readjustment, or similar relief under any present or future bankruptcy or insolvency statute, law, or regulation or shall file an answer admitting to or not contesting the material allegations of a petition filed against it in such proceedings, or shall not, within thirty (30) days after the filing of such a petition against it, have the same dismissed or vacated, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver, or liquidator of a material part of its properties, or shall not, within thirty (30) days after the appointment (without its consent or acquiescence) of a trustee, receiver, or liquidator of any material part of its properties, have such appointment vacated. (f) Mortgagor shall abandon the Mortgaged Property. (g) Mortgagor shall fail to promptly and faithfully observe and perform all of the terms and provisions under, or permit or allow any default or event of default to occur under, any document evidencing any other lien or encumbrance of the Mortgaged Property, whether junior or senior to the lien of this Mortgage, which shall include, but not be limited to, the Permitted Encumbrances. 20. ACCELERATION; FORECLOSURE. Upon the occurrence of any Event of Default, or at any time thereafter until such Event of Default is cured to the written satisfaction of Mortgagee, Mortgagee may, at its option, exercise one or more of the following rights and remedies available to it: (a) Mortgagee may declare immediately due and payable all unmatured Indebtedness secured by this Mortgage including all sums described in Section 18 hereof as if a prepayment were then made of the Note, and the same shall thereupon be immediately due and payable, without notice or demand. (b) Mortgagee shall have and may exercise with respect to all personal property and fixtures that are part of the Mortgaged Property, all the rights and remedies accorded upon default to a secured party under the Uniform Commercial Code, as in effect and as amended from time to time in the State of Minnesota. If notice to Mortgagor of intended disposition of such property is required by law in a particular instance, such notice shall be deemed commercially reasonable if given (in the manner specified in Section 22 hereof) at least ten (10) calendar days prior to the date of intended disposition. (c) Mortgagee may (and is hereby authorized and empowered to) foreclose this Mortgage by action or advertisement, pursuant to the statutes of the State of Minnesota in such case made, and provided, power being expressly granted to sell the Mortgaged Property at public auction, and convey the same to the purchaser in fee simple, and out of the proceeds arising from such sale, to pay all Indebtedness secured hereby with interest including all sums described in Section 18 hereof as if a prepayment were then made of the Note, and all legal costs, and charges of such foreclosure, and the maximum attorney's fees permitted by law, which costs, charges, and fees Mortgagor agrees to pay; and THE UNDERSIGNED MORTGAGOR HEREBY EXPRESSLY CONSENT(S) TO SALE OF THE MORTGAGED PROPERTY BY ADVERTISEMENT PURSUANT TO MINNESOTA STATUTES, CHAPTER 580, WHICH PROVIDES FOR THE SALE AFTER SERVICE OF NOTICE THEREOF UPON THE OCCUPANT OF THE MORTGAGED PROPERTY AND PUBLICATION OF SAID NOTICE FOR SIX WEEKS IN THE LOCALITY. SERVICE MAY NOT BE MADE UPON MORTGAGOR PERSONALLY, AND NO HEARING OF ANY TYPE IS REQUIRED IN CONNECTION WITH THE SALE. EXCEPT AS REQUIRED BY THE AFORESAID STATUTORY PROVISIONS, THE UNDERSIGNED HEREBY EXPRESSLY WAIVE(S) ANY AND ALL RIGHTS TO NOTICE OF SALE OF THE MORTGAGED PROPERTY AND ANY AND ALL RIGHTS TO A HEARING OF ANY TYPE IN CONNECTION WITH THE SALE OF THE MORTGAGED PROPERTY. (d) Mortgagee shall be entitled, without notice and without any showing of waste of the Mortgaged Properly, inadequacy of the Mortgaged Property as security for the Note, or insolvency Mortgagor, to the appointment of a receiver of the rents and profits of the Mortgaged Property, including those past due. 21. FORBEARANCE NOT A WAIVER; RIGHTS AND REMEDIES CUMULATIVE. Any delay by Mortgagee in exercising any right or remedy provided herein or otherwise afforded by law or equity shall not be a waiver of or preclude the exercise of such right or remedy. All such rights and remedies shall be distinct and cumulative and may be exercised singly or serially (in any order) or concurrently, and as often as the occasion therefor arises. Mortgagee's taking action pursuant to Section 3, 11, or 12 hereof, or receiving proceeds, awards, or damages pursuant to Section 6, 12, or 13 hereof, shall not impair any right or remedy available to Mortgagee under Section 20 hereof. 22. NOTICES. Except as otherwise provided herein, whenever any approval or notice on behalf of Mortgagee is required under this Mortgage, or whenever any action on behalf of Mortgagee is required or permitted, the Director of Mortgagee shall have the power and right to approve, give notice or act on behalf of Mortgagee. Any notice from Mortgagee to Mortgagor under this Mortgage shall be deemed to have been given by Mortgagee and received by Mortgagor, when mailed by certified mail by Mortgagee to Mortgagor at the following address: MDI Limited Partnership #70 1600 University Avenue Suite 212 Saint Paul, MN 55104 Attention: Asset Manager or at such other address as Mortgagor may designate to Mortgagee, by certified mail received by Mortgagee at 13065 Orono Parkway, Elk River, Minnesota 55330, or such other address as Mortgagee may designate by written notice. 23. 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 any other provision of this Mortgage that can be given effect without the conflicting provisions, and to this end, the provisions of the Mortgage are declared to be severable. 24. MISCELLANEOUS RIGHTS OF MORTGAGEE. Mortgagee may at any time, and from time to time without notice, release any person liable for the payment of any Indebtedness, extend the time or agree to alter the terms of payment of any Indebtedness, release any property securing any Indebtedness, consent to the making of 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, all without in any way affecting the liability of any person (other than the person so released), or the validity or priority of this Mortgage (except as it covers property so released). Any personal property remaining upon the Mortgaged Property, after the Mortgaged Property has been possessed or occupied by Mortgagee or its agent following foreclosure of this Mortgage, or under any deed in lieu of foreclosure, shall be conclusively presumed to have been abandoned by Mortgagor. 25. OTHER DEBT. This Mortgage shall also secure, and the Indebtedness shall also include, any and all other advances heretofore or at any time hereafter made to Mortgagor by Mortgagee, and all other Indebtedness of any and every type and description now or hereafter owed to Mortgagee by Mortgagor, unless (in the case of any such advance or indebtedness) Mortgagee has otherwise agreed in writing; provided, however, that notwithstanding such provision, Mortgagee shall not be obligated to make any such advance or to permit or suffer the creation of any such indebtedness. 26. FIXTURE FILING. From the date of its recording, this Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all goods constituting part of the Mortgaged Property, as described above, that 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 Debtor: MDI Limited Partnership #70 1600 University Avenue Suite 212 Saint Paul, MN 55104 (b) Debtor's Tax Identification Number or Social Security Number: #41-1898788 (c) Debtor is an organization (d) Type of organization: limited partnership (e) Jurisdiction of organization: Minnesota (f) Organization I.D. Number: (g) Name and Address of Secured Party: Housing and Redevelopment Authority in and for City of Elk River 13065 Orono Parkway Elk River, MN 55330 (h) This document covers goods that are to become fixtures. 27. WAIVER OF MARSHALLING. Mortgagor waives and releases any right to have the Mortgaged Property marshalled. 28. SUCCESSORS AND ASSIGNS BOUND; NUMBER; GENDER; JOINT AND SEVERAL LIABILITY; CAPTIONS. The covenants and agreements contained herein shall bind, and the rights conferred hereby shall inure to, the respective heirs, legal representatives, successors, and assigns of Mortgagee and Mortgagor. Wherever used, the singular number shall include the plural, and the plural the singular; and the use of any gender shall apply to all genders. All covenants and agreements of Mortgagor shall be joint and several. The captions and headings of the sections of this Mortgage are for convenience only and are not to be used to interpret or define the provisions hereof. 29. ADDITIONAL COVENANTS. Mortgagor further covenants and agrees that: (a) Mortgagor represents and warrants that (i) Mortgagor's exact legal name as indicated in the public record in the jurisdiction in which Mortgagor is organized, if any, is as set forth in Section 25 hereof, and (ii) all information in Section 25 hereof with respect to Mortgagor's type of organization, jurisdiction, organizational identification number, and address is accurate. (b) Mortgagor covenants that (i) Mortgagor will not change its name, place of business, chief executive office, mailing address, or organizational number, if any, without providing not less than thirty (30) days' prior written notice to Mortgagee, and (ii) Mortgagor will not change its type of organization, jurisdiction of organization, or other legal status without the written consent of Mortgagee. (c) Mortgagor covenants that Mortgagor will operate and maintain the Mortgaged Property during the term of the Indebtedness so that it is eligible at all times for the low- income housing credits provided by Section 42 of the Internal Revenue Code of 1986, as amended, for at least Thirty two (32) units. (THE REMAINING PORTION OF THIS PAGE IS INTENTIONALLY LEFT BLANK) IN WITNESS WHEREOF, Mortgagor has duly executed this Mortgage the day and year first above written. MDI Limited Partnership #70 a Minnesota limited partnership By: MetroPlains Properties, Inc. a Minnesota corporation Its General Partner Gary L. Stenson Its Vice President/Secretary STATE OF MINNESOTA ) ss. COUNTY OF RAMSEY ) On this day of , 2004, before me, a Notary Public within and for said County, personally appeared Gary L. Stenson, to me personally known, who being duly sworn, did say that he/she is the Vice President/Secretary of MetroPlains Properties, Inc., a Minnesota corporation, General Partner of MDI Limited Partnership #70, a Minnesota limited partnership, and that said instrument was signed on behalf of said Corporation and said Limited Partnership and acknowledged that said instrument is the free act and deed of said Corporation and said Limited Partnership. Notary Public Notary Public Stamp This document was prepared by: Gray Plant Mooty 500 IDS Center 80 South 8~' Street Minneapolis, MN 55402 Notary Public Signature EXHIBIT A LEGAL DESCRIPTION A parcel of land lying in the North Half of the Southwest Quarter of Section 34, Township 33, Range 26, Sherburne County, Minnesota, described as follows: Beginning at the southwest corner of Lot 1, Block 3, of the Village of Elk River, according to said plat on file and of record in the office of the Register of Deeds, Sherburne County, Minnesota; thence North 11 degrees 06 minutes 40 seconds East, an assumed bearing, along the West line of said Lot 1, a distance of 179.00 feet to the Northwest corner of said Lot 1, being a point on the southerly line of the state highway right of way of Trunk Highway No. 10; thence North 64 degrees 17 minutes 53 seconds West a distance of 121.42 feet along said southerly right of way line to a line drawn parallel with and distant 80.00 feet East of the East line of Block 2 of said plat; thence South 11 degrees 06 minutes 40 seconds West along said parallel line a distance of 210.28 feet to the northerly line of right of way of Main Street as dedicated in said plat; thence South 79 degrees 13 minutes 30 seconds East along said northerly right of way of Main Street a distance of 117.50 feet to the point of beginning. EXHIBIT B PERMITTED ENCUMBRANCES That certain Minnesota Housing Finance Agency Low and Moderate Income Rental Program Regulatory Agreement, of even date with the document to which this Exhibit is attached, by and between MDI Limited Partnership #70, a Minnesota Limited partnership, as Mortgagor, and the Minnesota Housing Finance Agency, as MHFA, which will be filed in the office of the in and for the County of ,State of Minnesota. 2. That certain Minnesota Housing Finance Agency Low and Moderate Income Rental Program Assignment of Rents and Leases, of even date with the document to which this Exhibit is attached, by and between MDI Limited Partnership #70, a Minnesota limited partnership, as Assignor, and the Minnesota Housing Finance Agency, as Assignee, in an amount of and No/100 Dollars ($ ), which will be filed in the office of the Minnesota. in and for the County of State of 3. That certain Master Subordination Agreement, of even date with the document to which this Exhibit is attached, by and between the MetroPlains Development, LLC, a Minnesota limited liability company, as Developer, the Minnesota Housing Finance Agency, as the MHFA, and MDI Limited partnership #70, a Minnesota limited partnership, as Mortgagor, which will be filed in the office of the in and for the County of ,State of Minnesota. 4. A $200,000 mortgage to the Greater Minnesota Housing Fund A Mortgage from securing Bonds from the City of Elk River (TIF) 6. A Declaration of Land Use restrictive Covenants for Low Income Housing Tax credits (sometimes referred to as the Extended Use Agreement, as required under section 42 (h) (6) of the IRS Code) to be recorded after construction is completed. EXHIBIT III PROMISSORY NOTE Housing and Redevelopment Authority in and for the City of Elk River PROMISSORY NOTE $400,000 FOR VALUE RECEIVED, MDI Limited Partnership #70, a Minnesota limited partnership (hereinafter referred to as "Borrower"), with its principal offices located at: 1600 University Avenue West, Suite 212 St. Paul, Minnesota 55104-3825 hereby promises to pay to: the Housing and Redevelopment Authority in and for the City of Elk River, a public body corporate and politic under the laws of the State of Minnesota (hereinafter referred to as "Lender"), with its principal offices located at: 13065 Orono Parkway Elk River, Minnesota 55330 the principal sum of Four Hundred Thousand Dollars ($400,000), together with interest thereon, subject to the terms and conditions hereof, as follows: 1. Security. As security for payment of this Promissory Note, the undersigned shall execute a Loan Agreement and Mortgage regarding certain Real Estate located in the County of Sherburne, State of Minnesota, commonly known as the "Jackson Block", located at 300 Jackson Street, City of Elk River, hereinafter referred to as the "Subject Property", and more fully described in Exhibit I attached hereto and by this reference made a part hereof and subordinate to: A. Existing real estate property taxes upon the Subject Property. B. A first mortgage from MDI Limited Partnership #70 for permanent financing from Minnesota Housing Finance Agency in an amount not to exceed $1,086,284. C. A second mortgage from MDI Limited Partnership #70 to secure the assignment of the Tax Increment revenue note in accordance with Section 5.2 of the Development Agreement, dated as of December 6, 2004 between the City and MetroPlains Development, LLC. D. A Declaration of Land Use Restrictive Covenants for Low Income Housing Tax credits (sometimes referred to as the Extended Use Agreement as required under Section 43 (h) (6) of the IRS Code) to be recorded after construction is complete. 2. Loan Purpose. The funds loaned hereunder are provided to Borrower for the purpose of constructing the Development, as defined in the Loan Agreement between Borrower and Lender (the "Loan Agreement") and creating 32 rental housing units (the "Assisted Dwelling Units") as defined in the Loan Agreement. 3. Disbursement. A. The amount of the advance by drawdown is Four Hundred Thousand Dollars ($400,000). B. Borrower shall certify that funds released hereunder are used solely for the purpose of constructing improvements upon the Subject Property. 4. Interest. Interest shall accrue at a rate of 1 percent (1%) per annum compounded annually and accruing upon the outstanding principal balance of this Promissory Note. 5. Repayment. A. So long as Borrower is not in default hereunder, the unpaid principal and accrued interest shall be due and payable in one lump sum thirty (30) years after the date written below and shall be payable at the offices of Lender. B The debt evidenced by this Promissory Note may be prepaid, in total or in part, at any time prior to the final maturity date hereof, without penalty or prior written approval of Lender. C. In the Event of Default as set forth hereunder, and Borrower's failure to cure such default upon notice thereof if cure is available, all principal and accrued interest evidenced herein shall be due and payable within thirty (30) days from the date Borrower receives written notice of such default and demand by Lender for payment thereof. 6. Event of Default. Borrower shall be in default under the terms of this Promissory Note under any one or more of the following conditions: A. Failure of Borrower to substantially complete planned construction of improvements upon the Subject Property by December 31, 2006. B. Use of funds advanced hereunder by Borrower is used for purposes other than to construct the Development. C. Failure of Borrower to satisfy claims for payment for materials and services rendered upon the Subject Property, unless Borrower reasonably disputes the validity of such 2 claims and sets aside and places in an escrow account with Lender sufficient funds to satisfy such claims while the same remains pending. D. Failure of Borrower to maintain sufficient workmen's compensation, unemployment, and liability insurance, as applicable, upon the Subject Property. E. Failure of Borrower to supply Lender such information and reports that are necessary for Lender to comply with the terms of SCDP funds. F. Sale or transfer of the Subject Property by Borrower to a third party if sale has not previously been approved in writing by Lender. G. Failure of Borrower to observe or comply with any term, covenant, or condition of the Loan Agreement, Mortgage or any other agreement incorporated therein. 7. Remedies. In the Event of Default as outlined above, Lender shall notify Borrower of such default. If Borrower fails to cure such default within thirty (30) days from the date of written notice by Lender, Lender may: A. Declare all outstanding principal and interest due and payable by Borrower within thirty (30) days from the date of written notice of demand. B. Take such action as to the Subject Property as provided in the Loan Agreement and Mortgage being executed by Borrower concurrently herewith. C. Charge interest upon the then unpaid principal balance hereunder at the rate five percent (5%) per annum from the date of default until all principal and interest are paid in full. 8. Miscellaneous Provisions. A. Borrower agrees to pay the reasonable costs of collection required hereunder, including reasonable attorney fees. B. Borrower acknowledges that this Promissory Note is for business purposes only. C. In the event that legal action is commenced as a result of default hereunder, Borrower consents to personal jurisdiction over Borrower in the District Court in and for the County of Sherburne, State of Minnesota. D. Notwithstanding anything in this Promissory Note to the contrary, neither Borrower, nor any of its general or limited partners, shall have any personal liability with respect to the obligation evidence by this Promissory Note. In any action or other proceeding to enforce any right or remedy under this Promissory Note, Lender shall only exercise its rights 3 against the real and personal property of Borrower which secures this Promissory Note and shall not seek any judgment for deficiency against Borrower or any of its general or limited partners, or their heirs, successors, or assigns. E. Failure of Lender to exercise any rights provided hereunder shall not constitute waiver of Lender's rights to enforce the provisions of this Promissory note at a later time. F. Borrower acknowledges receipt of a completed copy of this Promissory Note upon execution hereof. This Promissory Note was signed this day of , 2005. IN THE PRESENCE OF: BORROWER MDI Limited Partnership #70 a Minnesota limited partnership By: MetroPlains Properties, Inc. a Minnesota corporation Its General Partner Gary L. Stenson Its Vice President/Secretary STATE OF MINNESOTA ) ss. COUNTY OF RAMSEY ) On this day of , 2004, before me, a Notary Public within and for said County, personally appeared Gary L. Stenson, to me personally known, who being duly sworn, did say that he/she is the Vice President/Secretary of MetroPlains Properties, Inc., a Minnesota corporation, General Partner of MDI Limited Partnership #70, a Minnesota limited partnership, and that said instrument was signed on behalf of said Corporation and said Limited Partnership and acknowledged that said instrument is the free act and deed of said Corporation and said Limited Partnership. Notary Public 4 Notary Public Stamp Notary Public Signature EXHIBIT I LEGAL DESCRIPTION A pazcel of land lying in the North Half of the Southwest Quarter of Section 34, Township 33, Range 26, Sherburne County, Minnesota, described as follows: Beginning at the southwest corner of Lot 1, Block 3, of the Village of Elk River, according to said plat on file and of record in the office of the Register of Deeds, Sherburne County, Minnesota; thence North 11 degrees 06 minutes 40 seconds East, an assumed bearing, along the West line of said Lot 1, a distance of 179.00 feet to the Northwest corner of said Lot 1, being a point on the southerly line of the state highway right of way of Trunk Highway No. 10; thence North 64 degrees 17 minutes 53 seconds West a distance of 121.42 feet along said southerly right of way line to a line drawn parallel with and distant 80.00 feet East of the East line of Block 2 of said plat; thence South 11 degrees 06 minutes 40 seconds West along said pazallel line a distance of 210.28 feet to the northerly line of right of way of Main Street as dedicated in said plat; thence South 79 degrees 13 minutes 30 seconds East along said northerly right of way of Main Street a distance of 117.50 feet to the point of beginning. 'nnesota Housing Finance Agency county: All Counties Effective Date: 02/11/2005 County: Sherburne Effective Date: 02/11/2005 30% 35% 40% 45% 50% 55% 60% 30% 35% 40% 45% 50% 55% 60% 1 404 471 539 606 673 741 808 Income Limits And Maximum Rents Median Income(AMI): $77,000 ---------- Income Limits By Household Size -- 1 2 3 4 5 16,170 18,480 20,790 23,100 24,960 18,865 2],560 24,255 26,950 29,120 21,560 24,640 27,720 30,800 33,280 24,255 27,720 31,185 34,650 37,440 26,950 30,800 34,650 38,500 41,600 29,645 33,880 38,115 42,350 45,760 32,340 36,960 41,580 46,200 49,920 ---- Maximum Gross Rents By Household Size(Pre 1990) ---- 2 3 4 5 6 7 8 462 519 577 624 669 716 762 539 606 ~ 673 728 781 835 889 616 693 770 832 893 955 1,0]6 693 779 866 936 1,004 1,074 1,143 770 866 962 1,040 1,116 1,193 1,270 847 952 1,058 1,144 1,227 1,313 1,397 924 1,039 1,155 1,248 1,339 1,432 1,524 Date Run: 03/01/2005 Page 36 of `44 6 7 8 26,790 28,650 30,480 31,255 33,425 35,560 35,720 38,200 40,640 40,185 42,975 45,720 44,650 47,750 50,800 49,115 52,525 55,880 53,580 57,300 60,960 ---- Maximum Gross Rents By Bedroom Size(Post 19 89) ---- 0 1 2 3 4 5 6 404 433 519 600 669 739 808 471 505 606 700 781 862 943 539 577 693 801 893 985 1,078 606 649 779 901 1,004 1,108 1,212 673 721 866 1,001 1,116 1,231 1,347 741 794 952 1,101 .1,227 1,355 1,482 808 866 1,039 1,201 1,339 1,478 1,617