Exhibit 10.2

 

 

 

PROMISSORY NOTE

 

FROM

 

STERLING NORTHLAND, LLC

 

TO

 

LIFE INSURANCE COMPANY OF THE SOUTHWEST

 

 

 

 

 

 

 

 

August _____, 2015

 

 

 

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TABLE OF CONTENTS

ARTICLE 1. INTEREST RATE

1

1.1

Interest Rate

1

ARTICLE 2. PAYMENT OF PRINCIPAL AND INTEREST

2

2.1

Schedule of Principal and Interest Payments

2

2.2

Business Day

2

ARTICLE 3. PREPAYMENT FEE

2

3.1

Prepayment Fee

2

3.2

Prepayment Premium

2

3.3

Prepayment without a Prepayment Fee

3

3.4

Prepayment Fee upon Acceleration

3

ARTICLE 4. GENERAL PROVISIONS AS TO PAYMENTS

3

4.1

Application of Payments

3

4.2

Payments in United States Currency

4

4.3

ACH

4

ARTICLE 5. DEFAULT; REMEDIES

4

5.1

Events of Default

4

5.2

Acceleration

4

5.3

Late Payment Charge

4

5.4

Late Payments

5

5.5

Interest Rate after Default

5

ARTICLE 6. GENERAL PROVISIONS

5

6.1

Attorneys' Fees

5

6.2

Obligation Unconditional; Time of Essence

5

6.3

Independence

5

6.4

Borrower's Waivers

6

6.5

Loss or Destruction

6

6.6

Binding Effect

6

6.7

Definitions; Construction and Interpretation

6

6.8

Joint and Several Obligations

7

6.9

Loan Agreement Provisions

7

ARTICLE 7. MAXIMUM INTEREST RATE

7

7.1

Interest

7

ARTICLE 8. RECOURSE

7

8.1

Recourse Obligations

7

8.2

Waivers

10

ARTICLE 9. EFFECTIVE DATE

10

9.1

Entry of Effective Date

10

 

 

 

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PROMISSORY NOTE

 

 

LSW LOAN NO. 210696

 

$35,600,000Bloomington,  MinnesotaAugust __, 2015

 

FOR VALUE RECEIVED, the undersigned, STERLING NORTHLAND, LLC, a Minnesota
limited liability company with offices at and mailing address of 1711 Gold Drive
South,  Fargo, ND  58103 ("Borrower"), promises to pay to the order of LIFE
INSURANCE COMPANY OF THE SOUTHWEST, a Texas corporation with offices at and
mailing address of One National Life Drive,  Montpelier,  VT    05604 or any
subsequent holder of this Note; Life Insurance Company of the Southwest and each
subsequent holder of this Note being referred to as "Lender"), the principal sum
of THIRTY-FIVE MILLION SIX HUNDRED THOUSAND DOLLARS ($35,600,000) or so much
thereof as is outstanding from time to time ("Principal Balance"), together
with:  (i) interest at the rate and in the manner hereinafter provided; (ii) all
amounts which may become due under the Mortgage of near or even date herewith
securing this Note ("Mortgage"), which Mortgage encumbers and is secured by that
certain Real Property located at 3800 American Boulevard, Bloomington, Hennepin
County, Minnesota, or under that certain Loan Agreement of near or even date
herewith ("Loan Agreement"), or under any guaranty or indemnity, or under any of
the other documents and agreements executed by Borrower or any other party in
favor of Lender in connection with the Loan (all of the above, collectively,
"Loan Documents"); (iii) any costs and expenses, including reasonable attorneys'
and appraisers' fees, incurred in the collection of this Note, foreclosure of
the Mortgage, the exercise of other rights and remedies under the Mortgage or
the other Loan Documents, protecting or sustaining the lien of the Mortgage, or
any litigation or controversy arising from or connected with this Note, the
Mortgage or any other Loan Document; and (iv) all taxes (other than Lender's
income taxes) or duties assessed against Lender upon the debt evidenced hereby
or upon the Property (the Principal Balance together with all amounts described
in (i) through (iv) above are collectively referred to as the
"Indebtedness").  The Real Property and all other collateral or assigned
interests securing this Note are collectively referred herein to as the
"Property."

Article 1.
INTEREST RATE

1.1

Interest Rate

Except as otherwise set forth herein or in any of the other Loan Documents, the
Indebtedness will bear interest at the rate of Four and Thirty-Two Hundredths
Percent (4.32%) per annum ("Interest Rate").  Interest will be calculated on a
basis of a thirty (30) day month and three hundred sixty (360) day year. 

 

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Article 2.
PAYMENT OF PRINCIPAL AND INTEREST

2.1

Schedule of Principal and Interest Payments

2.1.1 Interest at the Interest Rate accruing on the Principal Balance of this
Note from the date of disbursement through and including September 9, 2015, will
be due and payable on the date of disbursement. 

2.1.2 Payments consisting of principal and interest in the amount of ONE HUNDRED
SEVENTY SIX THOUSAND FIVE HUNDRED NINETY TWO AND 56/100 DOLLARS ($176,592.56)
(calculated based upon a 30-year amortization of the initial Principal Balance)
will be due and payable in arrears, commencing on October 10, 2015, and a like
sum will be due and payable on the tenth (10th) day of each calendar month
thereafter until the tenth (10th) day of September, 2027 at which time a final
payment of the Principal Balance together with accrued and unpaid interest
thereon and all other obligations and Indebtedness due hereunder will be due and
payable ("Maturity Date").  Borrower acknowledges that because the term of the
Loan is shorter than the amortization period, a substantial portion of the
Principal Balance will be due on the Maturity Date.

2.2

Business Day

Whenever any payment hereunder is due on a day other than a Business Day, such
payment will be made on the Business Day immediately preceding the due date.

Article 3.
PREPAYMENT FEE

3.1

Prepayment Fee

The Indebtedness may be prepaid in full, but not in part, on any payment due
date, and only upon the conditions stated herein.  Upon giving Lender not less
than sixty (60) days prior written notice (a "Prepayment Notice") specifying the
date on which prepayment will be made ("Anticipated Prepayment Date"), Borrower
may prepay the Indebtedness, on the condition that Borrower pays, in addition to
such Indebtedness, a prepayment fee ("Prepayment Fee") equal to the greater of
(a) one percent (1.0%) of the then outstanding Principal Balance; or (b) the
Prepayment Premium (as defined below). 

3.2

Prepayment Premium

The "Prepayment Premium" will be computed as follows:  (a) Lender will
determine, as of thirty (30) Business Days before the Anticipated Prepayment
Date, as reported by The Wall Street Journal (either in printed or electronic
form), or, if The Wall Street Journal is not then available, from another source
generally accepted as a standard in the financial community for such rates, the
annual yield then available under United States Treasury debt instruments having
a maturity date that, in Lender's reasonable judgment, is closest to the
Maturity Date ("Treasury Rate"); (b) the annual yield so determined plus 50
basis points will be subtracted from the Interest Rate; (c) the difference so

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Page 3

obtained (if such difference is less than zero, it will be deemed to be zero)
will be divided by twelve (12) to produce a monthly rate; (d) the monthly rate
so obtained will be multiplied by the number of months and partial months
between the Anticipated Prepayment Date and 90 days prior to the Maturity Date
to produce the "Premium Rate"; (e) the Premium Rate will be multiplied by the
then outstanding Principal Balance to determine the "Gross Premium"  as of the
Anticipated Prepayment Date; and (f) the Gross Premium will be discounted on a
monthly basis to its present value as of the Anticipated Prepayment Date to
determine the Prepayment Premium.  The time factor to be used in calculation of
the net (discounted) Prepayment Premium shall be the same as that used in
calculating the Gross Premium and the discount rate shall be equal to the
Treasury Rate plus 50 basis points. 

3.3

Prepayment without a Prepayment Fee

Notwithstanding anything in this Note to the contrary, this Note may be prepaid
without payment of the Prepayment Fee as follows:  (a) upon payment in full at
any time during the last ninety (90) days before the Maturity Date (the
"Prepayment Period"); (b) in connection with any amounts deemed applied to the
Indebtedness as provided for hereunder or under the other Loan Documents; (c)
payment to Lender of Insurance Proceeds or Condemnation Proceeds in accordance
with and as defined in the Loan Documents; and (d) application of any Insurance
Proceeds or Condemnation Proceeds to the Indebtedness provided, that a Default
is not in effect at the time of such application, that Lender has not elected to
make such Insurance Proceeds or Condemnation Proceeds available for repair or
reconstruction, and that, with respect to the application of Insurance Proceeds,
Borrower has at all times during which the Loan has been outstanding maintained
insurance meeting the requirements of the Loan Documents.

3.4

Prepayment Fee upon Acceleration

If Lender accelerates the Maturity Date of the Indebtedness,  whether resulting
from the occurrence of an Event of Default or as a result of any of the other
conditions or occurrences specifically allowing acceleration of the Maturity
Date, any payment to Lender or any application of any of the Property or any
Proceeds to the Indebtedness after such acceleration will be deemed to be a
voluntary prepayment of the Indebtedness and Borrower will also pay the
Prepayment Fee to Lender computed as if prepayment occurred on the date of such
acceleration.

Article 4.
GENERAL PROVISIONS AS TO PAYMENTS

4.1

Application of Payments

Payments received by Lender under this Note before an Event of Default will be
applied in the following order:  first, to interest due on Advances by Lender in
the exercise of Lender's rights and remedies under the Mortgage or the other
Loan Documents; second, to Advances and costs of Lender in the exercise of
Lender's rights and remedies under the Mortgage or the other Loan Documents;
third, to any late charges assessed under this Note; fourth, to interest due
under this Note; and fifth, to the Principal Balance.  After any Event of
Default, payments received by Lender will be applied by Lender to the
Obligations in such order as set forth in the Loan Agreement.

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4.2

Payments in United States Currency

All amounts owing under this Note will be paid in legal tender of the United
States of America.

4.3

ACH

Lender may, in its sole discretion, require that all payments hereunder be made
to Lender by ACH debit of immediately available funds.

Article 5.
DEFAULT; REMEDIES

5.1

Events of Default

An "Event of Default" has the meaning defined in the Loan Agreement.

5.2

Acceleration

Upon, or at any time after, an Event of Default, Lender may, in its sole
discretion, declare the entire Indebtedness immediately due and payable, without
the necessity for prior demand or notice.  If Lender exercises its option to
accelerate the Indebtedness upon an Event of Default, the Prepayment Fee will
also be due and payable.  If the Prepayment Fee is not paid upon acceleration of
the Indebtedness, the amount of the Prepayment Fee will be added to the
Indebtedness as of the date of acceleration.  Failure to exercise this right to
accelerate will not constitute a waiver of the right to exercise it at a later
date during the continuation of such Event of Default or in the event of any
subsequent Event of Default.

5.3

Late Payment Charge

If any installment of principal or interest or any deposit for taxes or
insurance premiums required under the Loan Documents is not received by Lender
by the fifteenth (15th) day of the month, the Lender may, at its option, assess
a "late charge" equal to the lesser of five percent (5%) of the amount overdue
or the maximum permitted by Law, with such late charge to be due and payable
along with the next scheduled monthly payment under the Loan.  Borrower agrees
that:  (a) such late payment will cause Lender to incur administrative costs,
collection costs, loss of interest, and other direct and indirect losses in
uncertain amounts, (b) it would be impractical or extremely difficult to fix the
exact amount of such losses and (c) the late charge is a reasonable estimate of
such losses and is fair compensation to Lender for its anticipated losses
resulting from such late payment.  Without limiting its rights to recover such
installment and to collect the Prepayment Fee when due and to exercise all other
rights under this Note, the Mortgage and the other Loan Documents, Lender's
acceptance of this Note constitutes Lender's agreement to accept such late
charge in lieu of its right to recover its actual losses resulting from such
late payment. 

5.4

Late Payments

In the event Borrower is late in making payment of any required amount due under
the Loan, Lender agrees to give notice and allow a 10 day grace period to make
such payment (from the date of such notice) two times per calendar year (each an
"Additional Grace Period").  Borrower shall be obligated to pay any fees
resulting from a late payment, and such additional cure period shall not be

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deemed to eliminate any interest which shall have accrued on the outstanding
balance due under the Loan pending receipt of such payment.  For the purpose of
this provision, any written communication (such as a "late notice") issued by
Lender, its loan correspondent, servicer, or legal counsel to Borrower, shall be
deemed effective and Lender shall not be required to comply with the other
specific Notice requirements contained in the Loan Documents.

5.5

Interest Rate after Default

After any Event of Default, the Indebtedness then outstanding will bear interest
equal to the lesser of (i) the sum of five hundred (500) basis points added to
the Interest Rate or (ii) the maximum rate permitted by Law ("Default Rate") per
annum, until the Indebtedness is paid in full or until Lender, in its sole
discretion, elects to accept a cure of such Event of Default.

Article 6.
GENERAL PROVISIONS

6.1

Attorneys' Fees

If any action is brought to enforce or collect any part of the Indebtedness,
Lender will be entitled to recover, as an element of the Indebtedness and not as
damages, actual and reasonable attorneys' fees and other reasonable
out-of-pocket costs of enforcement and collection. 

6.2

Obligation Unconditional; Time of Essence

No provision of this Note or of any other Loan Document will alter, impair or
render conditional the obligation of Borrower, which is absolute and
unconditional, to pay the Indebtedness under this Note at the place and at the
times herein prescribed.  Time is of the essence with respect to all of
Borrower's obligations under this Note.

6.3

Independence 

Except as otherwise provided in this Note or the other Loan Documents, Borrower
acknowledges liability for payment of all amounts owing under this Note and the
other Loan Documents and agrees that Lender does not have to foreclose its
Mortgage or realize on any other collateral before demanding full payment from
Borrower.

6.4

Borrower's Waivers

To the extent permitted by Law and so long as there is no intentional or
fraudulent misconduct on the part of Lender:

6.4.1 Borrower waives notice of acceptance of this Note, diligence, presentment,
protest, demand for payment, notice of protest, dishonor and nonpayment, and
waives the legal effect of Lender's failure to give all notices not expressly
provided for herein.

6.4.2 Borrower waives and releases the right to plead any statute of limitation
as a defense to any demand under this Note, or under any other Loan Document.

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6.4.3 Borrower waives and releases all errors, defects and imperfections in any
proceedings instituted by Lender under the terms of this Note, the Mortgage or
the other Loan Documents, as well as all benefit that might accrue to Borrower
by virtue of any present or future Laws exempting the Property, or any other
property, real or personal, pledged or mortgaged as security for the payment of
this Note, or any part of the Proceeds arising from any sale of any such
property, from attachment, levy, or sale under execution, or providing for any
stay of execution, exemption from civil process, or extension of time for
payment; and Borrower agrees that any real estate that may be levied upon
pursuant to a judgment obtained by virtue hereof, or any writ of execution
issued thereon, may be sold upon any such writ in whole or in part in any order
desired by Lender.

6.4.4 Borrower waives and releases the right to assert any counterclaim, other
than compulsory counterclaims, in any action or proceeding brought against
Borrower by Lender under this Note, however, Borrower may assert any such claim
in a separate action.

6.5

Loss or Destruction

Upon receipt of evidence reasonably satisfactory to Borrower of the loss or
mutilation of this Note, Borrower will execute and deliver, in substitution
hereof, a replacement note.

6.6

Binding Effect

This Note will be binding upon (as applicable) the heirs, executors,
administrators, successors and assigns of Borrower and all endorsers hereto and
will inure to the benefit of Lender and its successors and assigns.

6.7

Definitions; Construction and Interpretation

Terms with initial capital letters used in this Note but not herein defined
shall have the meanings ascribed to such terms in the Glossary located in the
Loan Agreement or as otherwise defined in any Loan Document.  The provisions in
the Loan Agreement dealing with construction and interpretation of the Loan
Documents are incorporated in this Note by reference and will be applied herein.

6.8

Joint and Several Obligations

If this Note is executed by more than one Person as Borrower, the Obligations of
such Persons will be joint and several obligations.

6.9

Loan Agreement Provisions

The terms and conditions of the Loan Agreement are incorporated in this Note by
reference and will be given effect as if fully set forth in this Note.

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Article 7.
MAXIMUM INTEREST RATE

7.1

Interest

Notwithstanding any provisions of this Note to the contrary, Borrower and Lender
agree that in no event will the interest required to be paid by Borrower to
Lender under this Note exceed the maximum interest that may lawfully be charged
by Lender under applicable Laws ("Maximum Legal Rate").  This Note will be
construed to provide that any interest paid in excess of the Maximum Legal Rate
will be considered to have been a payment in reduction of principal, not subject
to the Prepayment Fee.  All sums paid or agreed to be paid to the Lender for the
use, forbearance or detention of the Indebtedness will, to the extent permitted
by applicable Law, and only to the extent necessary to preclude exceeding the
Maximum Legal Rate, be amortized, pro-rated, allocated and spread from the date
of disbursement of the proceeds of this Note until payment in full of the
Indebtedness so that the actual rate of interest on account of such Indebtedness
is uniform throughout the balance of the term of this Note.  The terms of this
Article will control every other provision of the Loan Documents.

Article 8.
RECOURSE

8.1

Recourse Obligations

Except for the Recourse Obligations set forth below, and except as otherwise set
forth in any of the Loan Documents (including, specifically, the Environmental
Indemnity and the Guaranty), in any proceedings under the Loan Documents,
Lender's recovery against Borrower or any Borrower Party will be enforced only
against the Property, any other security that may at any time be given to secure
payment of the Indebtedness or performance of the Obligations, and to the rents,
income and profits produced thereby.  Notwithstanding the foregoing, nothing
herein contained shall be construed to limit Lender's rights to obtain
injunctive relief against Borrower, any Borrower Party or any other Person to
cause compliance with the terms and conditions contained in the Loan Documents
or to obtain such other relief as allowed by Law.

Borrower and Sterling Properties, LLLP, Bell Real Estate Holdings, LLC, and Buck
Properties, LLP (collectively, "Recourse Parties") shall be jointly and
severally liable for payment to Lender of the cumulative amounts only as a
result of and directly attributable to the Recourse Obligations, as hereafter
defined.

The following constitute the "Recourse Obligations:"

8.1.1 All Losses incurred by Lender as a result of material physical waste to
the Property.

8.1.2 All Losses incurred by Lender as a result of fraud or intentional material
misrepresentation by Borrower or any Recourse Party in connection with the Loan
or the Property.

8.1.3 The amount of all security deposits pertaining to any leases at the
Property that Lender fails to receive on demand after a Default, together with
all Losses from Borrower's

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failure to comply with the Loan Document requirements pertaining to Early Lease
Termination Amounts and Early Lease Termination Waiver Amounts.

8.1.4 The amount of all Proceeds (including, but not limited to Insurance
Proceeds) as set forth in the Mortgage applied, paid or distributed other than
in accordance with the Loan Documents.

8.1.5 All Losses arising from Borrower's failure to comply with the Application
of Revenue requirements.

8.1.6 All Losses incurred by Lender as a result of the failure to insure the
Property as required by the terms of the Loan Documents together with the amount
of any deductibles carried with respect to the insurance required under the Loan
Documents in excess of the deductible amounts permitted therein, including any
deductible amount pertaining to a "named storm," as designated by the National
Weather Service.

8.1.7 The replacement cost of any personal property of Borrower removed from the
Property in violation of the terms of the Loan Documents.  Nothing herein shall
limit the Borrower's right, in its sole discretion, to replace such personal
property, whether as a result of obsolescence, or otherwise with other property
or equipment of similar function and value throughout the term of the Loan.

8.1.8 All Losses incurred by Lender as a result of any lien granted by Borrower
that is determined to have priority over the lien created in favor of Lender
under the Loan Documents.

8.1.9 All Losses incurred by Lender as a result of any failure of the Property
to comply with the Americans with Disabilities Act of 1990, as amended,
including, also, all requirements and mandates under state and local Laws
pertaining to disabled/handicapped access, and if applicable the Fair Housing
Act of 1968, as amended (the "ADA").  Lender agrees, however, that this Recourse
Obligation shall terminate upon receipt by Lender of an ADA audit performed by
professionals with qualifications acceptable to Lender certifying that the
Property is currently in compliance with all ADA requirements.

8.1.10 All Losses incurred by Lender as a result of any failure of the Property
to fully comply with all local, state and federal land use laws and regulations
including, specifically, all applicable zoning laws and regulations promulgated
by the city and/or the county where the Property is located or requirements or
restrictions contained in any permits or approvals pertaining to the Property. 
Lender agrees, however, that this Recourse Obligation shall terminate upon
receipt by Lender of a property zoning report ("PZR") performed by professionals
with qualifications acceptable to Lender certifying that the Property is
currently in compliance with all such laws, regulations, requirements and
restrictions.

8.1.11 All Losses incurred by Lender as a result of the failure by Borrower to
timely pay for all Impositions (including mortgage taxes), assessments and
insurance premiums affecting the Property.

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8.1.12 All Losses incurred by Lender as a result of the transaction creating the
Mortgage being deemed, under federal bankruptcy, state insolvency, or similar
creditors' rights laws, to be (a) a fraudulent conveyance or fraudulent
transfer; or (b) a preferential transfer.

8.1.13 Costs and expenses incurred by Lender on account of Borrower's failure to
deliver, after an Event of Default, documents such as leases, plans,
specifications, operating agreements, etc., that Borrower has in its possession
or control. 

8.1.14 All of the outstanding Indebtedness, upon (a) the filing by Borrower for
relief under the United States Bankruptcy Code or any similar state insolvency
proceedings; or (b) upon the filing by any other person of a petition against
Borrower under the United States Bankruptcy Code or any similar state insolvency
proceedings, which petition or proceeding is not dismissed within sixty (60)
days of such filing.

8.1.15 Reasonable and actual costs, expenses and attorney fees incurred by
Lender to protect, enforce or collect the Recourse Obligations from Borrower or
any Recourse Parties.  All of such costs, expenses and fees shall be recoverable
by Lender whether or not legal proceedings are instituted or appearances made in
any court on behalf of Lender, and regardless of whether the matter or dispute
is resolved by compliance, compromise, settlement, or abandonment by a party of
its claim or defense.

Recourse Parties shall pay Interest on all of the above to the extent not
defined as Losses, at the Default Rate set forth herein beginning on the 30th
day after written demand by Lender. As a matter of clarification, the parties
agree that there shall be no double counting of Default Rate Interest on the
Recourse Obligations.

 

8.2

Waivers

Nothing in this Note will:

8.2.1 Constitute a waiver, release or impairment of any of Borrower's
Obligations under the Loan Documents.

8.2.2 Be deemed a waiver of any right of Lender under Sections 506(a), 506(b),
1111(b) or any other provisions of the United States Bankruptcy Code to file a
claim for the full amount of the Indebtedness, or to require that the Property
continue to secure all of the Indebtedness.

8.2.3 Impair the right of Lender to name Borrower, any Recourse Party, or any
Guarantor as a party or parties defendant in any action or suit for judicial
foreclosure and sale under the Mortgage.

8.2.4 Affect the validity or enforceability of, or limit recovery under, any
master lease, guaranty or indemnity relating to the Loan or the Property
including the Environmental Indemnity.

8.2.5 Impair the right of Lender to obtain the appointment of a receiver.

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8.2.6 Impair the enforcement of any assignment of leases included in the
Mortgage or executed separately in connection with the Loan.

Article 9.
EFFECTIVE DATE

9.1

Entry of Effective Date

In the event that this instrument is executed and delivered by the parties
without entering an effective date, the effective date, unless otherwise
provided for herein, will be deemed to be the date on which the Loan proceeds
were disbursed to the Borrower.

 

(Execution pages follow)

 

 

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Execution Page 1

 

 

IN WITNESS WHEREOF, the undersigned have executed and delivered this instrument
effective as of the date first above written.

 

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