EXHIBIT 10.4

 

MORTGAGE REGISTRATION TAX WAS PREVIOUSLY PAID ON $70,283,000.00 WITH DOCUMENT
NO. 248658 FILED ON December 27, 2006.

 

SIXTH AMENDED AND RESTATED MORTGAGE,

SECURITY AGREEMENT AND

ASSIGNMENT OF RENTS AND LEASES

 

THIS INDENTURE (hereinafter referred to as the “Mortgage”) made to be effective
as of May 17, 2013, by and between HERON LAKE BIOENERGY, LLC, a Minnesota
limited liability company (the “Mortgagor”), whose mailing address is 201
10th Street, Heron Lake, Minnesota 56137, and AGSTAR FINANCIAL SERVICES, PCA, an
United States instrumentality (the “Mortgagee”) whose mailing address is 1921
Premier Drive, P.O. Box 4249, Mankato, MN 56002-4249.

 

RECITALS

 

A.                                    Mortgagor and Mortgagee were parties to
the Fourth Amended and Restated Master Loan Agreement dated as of October 1,
2007, as amended by that certain First Amendment to Fourth Amended and Restated
Master Loan Agreement dated April 27, 2011 (together, the “2007 MLA”); the Third
Supplement to the Master Loan Agreement (Term Loan) dated as of October 1, 2007
(the “Third Supplement”); the Amended and Restated Fourth Supplement to the
Master Loan Agreement (Term Revolving Loan) dated as of April 27, 2011 (the
“Fourth Supplement”); and the Amended and Restated Fifth Supplement to the
Master Loan Agreement dated December 30, 2010 (which document was erroneously
captioned First Amendment to Fifth Supplement to the Master Loan Agreement), as
amended by the First Amendment to Amended and Restated Fifth Supplement dated
March 1, 2011, Amendment No. 2 to Amended and Restated Fifth Supplement dated
April 27, 2011, Amendment No. 3 to Amended and Restated Fifth Supplement dated
June 30, 2011, and Amendment No. 4 to Amended and Restated Fifth Supplement
dated August 1, 2011 (collectively, as amended, the “Fifth Supplement”), under
which Mortgagee extended certain loans and financial accommodations to Mortgagor
(collectively, the “Original Loans”).

 

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B.                                    The Original Loans were evidenced by a
Term Note dated October 1, 2007, in the original principal amount of
$59,583,000.00 (“Note One”), a Term Revolving Note dated October 1, 2007, in the
original principal amount of $5,000,000.00 (“Note Two”), and a Third Amended and
Restated Revolving Line of Credit Note dated December 30, 2010, in the original
principal amount of $6,750,000.00 (as the same has been modified from time to
time, “Note Three”). Note One, Note Two and Note Three are collectively, the
“Original Notes.”

 

C.                                    To secure payment and performance of the
2007 MLA, and other duties and liabilities arising out of the documents and
agreements related to the 2007 MLA and the Original Notes, the Mortgagor
executed, delivered and granted to Mortgagee that certain combination Mortgage,
Security Agreement and Assignment of Rents and Leases dated September 29, 2005,
recorded in the Office of the County Recorder of Jackson County on September 30,
2005, as Instrument No. 244879, as amended and restated by that certain Amended
and Restated Mortgage, Security Agreement and Assignment of Rents and Leases
dated November 20, 2006, recorded in the Office of the County Recorder of
Jackson County on December 6, 2006 as Instrument No. 248498; as amended and
restated by that certain Second Amended and Restated Mortgage, Security
Agreement and Assignment of Rents and Leases dated December 27, 2006, recorded
in the Office of the County Recorder of Jackson County on December 27, 2006 as
Instrument No. 248658, as amended and restated by that certain Third Amended and
Restated Mortgage, Security Agreement and Assignment of Rents and Leases dated
May 18, 2007, recorded in the Office of the County Recorder of Jackson County on
June 4, 2007 as Instrument No. A 250019 (as amended, the “Original Mortgage”),
by operation of which mortgage, the Mortgagee was granted liens and security
interests covering real property and related improvements of the Mortgagor, as
more fully described in Exhibit A to the Original Mortgage (the “Original Legal
Description”).

 

D.                                    On September 1, 2011, Mortgagor and
Mortgagee entered into a Fifth Amended and Restated Master Loan Agreement (the
“Amended Loan Agreement”), an Amended and Restated Term Note in the principal
amount of $40,000,000.00, and an Amended and Restated Term Revolving Note in the
principal amount of $8,008,689.00 (together, the “Amended Notes”). The Amended
Loan Agreement and the Amended Notes superseded and replaced in their entirety
the 2007 MLA, the Third Supplement, the Fourth Supplement, and the Fifth
Supplement, Note One, Note Two, and Note Three, the Forbearance Agreement (as
defined in the Amended Loan Agreement) and all supplements, amendments,
restatements and other modifications thereof.

 

E.                                     Pursuant to the Amended Loan Agreement
and the Amended Notes the parties amended and restated the Original Mortgage
pursuant to the Fourth Amended and Restated Mortgage, Security Agreement and
Assignment of Rents and Leases dated September 1, 2011, recorded in the Office
of the County Recorder of Jackson County on September 8, 2011 as Document No.
A262710 (hereinafter, the “September 1 2011 Mortgage”).

 

F.                                      Upon survey of the Real Property, the
Original Legal Description was amended and set forth on Exhibit A to the
September 1, 2011 Mortgage.  Following recording of the September 1 2011
Mortgage, a correction to the legal description attached thereto was deemed
necessary to conform said legal description to the survey of the real property.

 

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G.                                    A Fifth Amended and Restated Mortgage,
Security Agreement and Assignment of Rents and Leases dated September 20, 2011,
was filed for record on November 1, 2011, as Document Number A263140, securing
the principal sum of $48,008,689.00, amending the legal description, as set
forth on Exhibit A to the Fifth Amended and Restated Mortgage (the “2011 Amended
Legal Description”).

 

H.                                   Following recording of the September 20,
2011 Mortgage, a further correction to the legal description attached thereto is
deemed necessary to conform said legal description to the survey of the real
property, said correction is contained in Exhibit A attached hereto and made a
part hereof by this reference (the real property described thereon is
hereinafter referred to as the “Real Property”) and accurately describes the
real property subject to the mortgage lien granted under this Mortgage; and
accordingly, the Original Mortgage, the September 1, 2011 Mortgage and the
September 20, 2011 Mortgage are amended and restated to conform therewith, and
the mortgage lien of this Mortgage shall cover the Real Property legally
described on Exhibit A hereto, and not as set forth in the Original Legal
Description or on Exhibit A to the September 1, 2011 Mortgage or on Exhibit A to
the September 20, 2011 Mortgage.

 

Mortgagor is indebted to Mortgagee pursuant to the terms of (i) that certain
Sixth Amended and Restated Master Loan Agreement dated to be effective as of May
17, 2013, as the same may from time to time be amended, modified, extended,
renewed, refinanced or restated, (the “Loan Agreement”); (ii) that certain
Second Amended and Restated Term Note in the principal amount of $17,404,344.28,
issued by the Mortgagor to the order of the Mortgagee, as the same may from time
to time be amended, modified, extended, renewed, refinanced or restated (“Note
1”); and (iii) that certain Second Amended and Restated Term Revolving Note in
the principal amount of $20,500,000.00, issued by the Mortgagor to the order of
the Mortgagee, as the same may from time to time be amended, modified, extended,
renewed, refinanced or restated (“Note 2”) (together, the “Notes”), in addition
to any subsequent Notes that may be issued under the Loan Agreement and
subsequent Supplements. The Loan Agreement and the Notes supersede and replace
in their entirety the Fifth Amended and Restated Master Loan Agreement and the
Amended Notes therewith, the Forbearance Agreements and all supplements,
amendments, restatements, and other modifications thereof.

 

This Mortgage shall secure the original principal amount of Thirty-seven Million
Nine Hundred Four Thousand Three Hundred Forty-four and 28/100ths
($37,904,344.28) Dollars which amount constitutes the “Initial Amount of the
Debt” within the meaning of Minnesota Statutes Section 287.03, and this Mortgage
is further intended to secure the entire “Secured Indebtedness” as hereinafter
defined.

 

This Mortgage allows for future advances, but the amount of any advance is not
currently known. The Mortgagee is aware of Minnesota Statutes Section 287.05,
subdivision 5, and intends to comply with the requirements contained therein.

 

This Mortgage shall secure the performance of the covenants and commitments of
the Mortgagor to the Mortgagee, its successors and assigns, and the payment to
the Mortgagee, its successors and assigns, of (i) the Initial Amount of the
Debt, as evidenced by the Notes, in the

 

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principal sum of Thirty-seven Million Nine Hundred Four Thousand Three Hundred
Forty-four and 28/100ths ($37,904,344.28) Dollars, the balance of the Notes
being due and payable on or before the maturity dates as defined in the Loan
Agreement; unless sooner called by Mortgagee as provided in the Notes, (ii) the
Loan Agreement, (iii) the Notes, and (iv) all existing and future debts, Notes,
guaranties, and other obligations and liabilities of Mortgagee to Mortgagor of
whatever nature or amount, as the same may be from time to time amended,
modified, extended, renewed, refinanced or restated on any terms whatsoever,
including increases in interest, including without limitation, amounts owed to
Mortgagee, (v) for and to secure the payment to the Mortgagee, its successors
and assigns, at the times demanded and with interest thereon at the same rate(s)
specified in the Notes and Loan Agreement of all sums advanced in protecting the
lien of this Mortgage; (a) in payment of taxes on the “Mortgaged Premises” (as
hereinafter defined); (b) in payment of insurance premiums covering all
improvements thereon; (c) in payment of principal and interest on prior liens;
(d) in payment of expenses and attorneys’ fees herein provided for and all sums
advanced for any other purpose authorized herein or authorized by law (the
Notes, the Loan Agreement and all such sums advanced thereunder, together with
interest thereon, being collectively referred to herein as the “Secured
Indebtedness”); and (e) in consideration of the sum of $1.00 paid by the
Mortgagee to the Mortgagor and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Mortgagor does
hereby MORTGAGE, GRANT, BARGAIN, SELL AND CONVEY unto the Mortgagee, its
successors and assigns, forever, and GRANTS A SECURITY INTEREST to the
Mortgagee, its successors and assigns, in the following properties (all of the
following being hereafter collectively referred to as the “Mortgaged Premises”):

 

A. Real Property

 

All the tracts or parcels of real property lying and being in the County of
Jackson, State of Minnesota (the “Land”), all as more fully described in Exhibit
A attached hereto and made a part hereof, together with all the estates and
rights in and to the Land and in and to lands lying in any and all streets,
lanes, alleys, passages and roads adjoining the Land, and together with all
buildings, structures, improvements, fixtures, annexations, access rights,
easements, rights of way or use, servitudes, licenses, tenements, hereditaments,
appurtenances, minerals, mineral rights, water and water rights, now or
hereafter belonging or pertaining to the Land; and

 

B. Personal Property

 

All buildings, structures, equipment, fixtures, improvements, building supplies
and materials and personal property now or hereafter attached to, located in,
placed in or necessary to the use of the improvements on the Mortgaged Premises;
and

 

C. Leases, Rents, Issues and Profits

 

All leases, accounts, rents, issues and profits now due or which may hereafter
become with respect to the Mortgaged Premises or any part thereof; and

 

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D. Judgments and Awards

 

Any and all awards or compensation made by any governmental or other lawful
authorities for the taking or damaging by eminent domain of the whole or any
part of the Mortgaged Premises or any rights appurtenant thereto, including any
awards for a temporary taking, change of grade of streets or taking of access;
and

 

E. After-Acquired Property

 

All right, title, and interest of the Mortgagor in and to all extensions,
improvements, betterments, renewals, substitutes, and replacements of, and all
additions and appurtenants to the items or types of property described in
Sections A through D above, which are hereafter acquired by or released to the
Mortgagor, or are hereafter constructed, assembled or placed by the Mortgagor on
the Mortgaged Premises, and all conversions of the security constituted thereby,
immediately upon such acquisition, release, construction, assembling, placement,
or conversion, as the case may be, and in each such case, without any further
mortgage, conveyance, assignment, or other act by the Mortgagor, shall become
subject to the lien of this Mortgage as fully and completely, and with the same
effect, as though now owned by the Mortgagor and specifically described in the
granting clause hereof, but at any and all times the Mortgagor will execute and
deliver to the Mortgagee any and all such further assurances, mortgages,
conveyances, or assignments thereof as the Mortgagee may reasonably require for
the purpose of expressly and specifically subjecting the same to the lien of
this Mortgage.

 

TO HAVE AND TO HOLD the Mortgaged Premises unto the Mortgagee forever.

 

ARTICLE I

Mortgagor’s

Representations, Warranties

Covenants and Agreements

 

The Mortgagor makes and includes in this Mortgage the Statutory Covenants and
other provisions set forth in Minnesota Statutes Section 507.15 or in any future
Minnesota Statute providing for a statutory form of real estate mortgage, and
the Mortgagor makes the following additional representations, warranties,
covenants and agreements with the Mortgagee:

 

1.1. Good Title; Covenant to Defend. The Mortgagor represents, warrants and
covenants to and with the Mortgagee that: (a) the Mortgagor is the lawful owner
of and has good and marketable title to the Mortgaged Premises in fee simple,
free and clear of all liens and encumbrances, except for the Permitted
Encumbrances set forth on Exhibit B attached hereto and made a part hereof; (b)
the Mortgagor has the right and lawful authority to mortgage, grant, sell,
transfer and convey the Mortgaged Premises to the Mortgagee, as provided herein;
(c) the Mortgagor owns or will own all chattels and improvements installed on
the Mortgaged Premises and the same shall be free and clear of all liens and
claims, except those specifically set forth on Exhibit B attached hereto; (d)
this Mortgage is and shall remain a valid and enforceable lien on the Mortgaged
Premises, subject only to the exceptions referred to above; (e) the Mortgagor
will preserve its fee title to the Mortgaged Premises, and will warrant and
defend such fee title to the

 

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Mortgagee, against all claims and demands of all persons and parties whomsoever;
and (f) all buildings, structures and other improvements now or hereafter
located on the Land are, or will be, located entirely within the boundaries of
the Land and are set back from said boundaries in accordance with all applicable
zoning and “set-back” laws and ordinances; (g) the present or contemplated use
of the Mortgaged Premises complies with all applicable zoning laws and
ordinances; and (h) if the Mortgagor is a corporation or limited liability
company, the execution of this Mortgage has been duly authorized by its board of
directors or board of governors and no provision of its Articles of
Incorporation, Bylaws, Articles of Organization or Operating Agreement requires
consent of its stockholders or member to the execution and delivery of this
Mortgage.

 

1.2. Performance of the Notes and Mortgage. The Mortgagor shall: (i) duly and
punctually pay each and every installment of principal and interest and all
other sums to become due under and in accordance with the Notes, at the time and
place and in the manner specified by the Notes; (ii) pay all other Secured
Indebtedness, as and when the same shall become due; and (iii) duly and
punctually perform and observe all of the covenants, agreements and provisions
contained herein, in the Notes, and in any other instrument given as security
for the payment of the Notes. No payment or collection of any of the Secured
Indebtedness shall reduce the amount secured by this Mortgage.

 

1.3. Care of Mortgaged Premises; No Waste. The Mortgagor shall, at all times,
keep and maintain the Mortgaged Premises in good condition, repair and operating
condition, and shall not commit, or suffer to be committed, any waste or misuse
of the Mortgaged Premises, and shall promptly repair, restore or replace, any
buildings, improvements or structures now or hereafter placed or located on the
Mortgaged Premises which may become damaged or destroyed. The Mortgagor shall
not, without the prior written consent of the Mortgagee, or except in accordance
with the terms and conditions of the Loan Agreement: (i) remove or permit the
removal of any material buildings, structures or other material improvements or
material fixtures, or (ii) otherwise make any material alterations in any
improvements which will adversely alter the basic structure, adversely affect
the market value, or adversely change the existing architectural character of
the Mortgaged Premises, and the Mortgagor will complete within a reasonable time
any structures which are now or at any time in the process of erection. The
Mortgagor will not acquiesce in any rezoning classification, modification or
public or private restriction which in any way limits or otherwise affects the
Mortgaged Premises, or any part thereof. The Mortgagor shall not vacate or
abandon the Mortgaged Premises.

 

1.4. Payment of Utilities and Operating Costs. Subject to Section 1.9 hereof,
the Mortgagor shall pay, or cause to be paid, when due, all charges made for
electricity, gas, heat, water, sewer, and all other utilities and operating
costs and expenses, received, furnished or used in connection with the Mortgaged
Premises, and will, upon request by the Mortgagee, furnish proper receipt
showing payment therefore.

 

1.5. Liens. Subject to Section 1.9 hereof, the Mortgagor shall pay, from time to
time when the same shall become due, all lawful claims and demands of mechanics,
materialmen, laborers, and others which, if unpaid, might result in, or permit
the creation of a lien on the Mortgaged Premises, or any part thereof, or on the
revenues, rents, issues, income and profits

 

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arising therefrom, and in general will do or cause to be done everything
necessary so that the lien of this Mortgage shall be fully preserved, at the
cost of the Mortgagor, without expense to the Mortgagee. The Mortgagor shall not
do, or permit to be done, anything that may in anyway impair the value of the
Mortgaged Premises, or weaken, diminish, or impair the security of this
Mortgage. No fixtures will be installed on the Mortgaged Premises by the
Mortgagor, by any tenant of the Mortgagor, or by any other person subject to a
lease, vendor’s lien or other lien or claim. Should any fixture be installed to
the Mortgages Premises from or after the date hereof, the lien of this Mortgage
shall immediately attach to said fixture and shall be prior and superior to all
other liens or claims. The Mortgagor will promptly perform and observe, or cause
to be performed or observed, all of the terms, covenants, and conditions of all
Permitted Encumbrances, as set forth in Exhibit B attached hereto, the
noncompliance with which may affect the security of this Mortgage, or may impose
duty or obligation upon the Mortgagor or any sublessee or occupant of the
Mortgaged Premises or any part thereof, and the Mortgagor shall do or cause to
be done all things necessary to preserve in tact and unimpaired all easements,
appurtenances, and other interests and rights in favor of or constituting any
portion of the Mortgaged Premises.

 

1.6. Real Property Taxes and Assessments. The Mortgagor agrees to pay all real
property taxes, assessments, and other similar charges made against the
Mortgaged Premises.

 

1.7. Mortgage Taxation. In the event of a court decree or an enactment after the
date hereof by any legislative authority of any law imposing upon a mortgagee
the payment of the whole or any part of the amounts herein required to be paid
by the Mortgagor, or changing in any way the laws relating to the taxation of
mortgages or debts secured by mortgages or a mortgagee’s interest in the
Mortgaged Premises, so as to impose such imposition on the Mortgagee or on the
interest of the Mortgagee in the Mortgaged Premises, then, in any such event,
the Mortgagor shall bear and pay the full amount of such imposition, provided
that if for any reason payment by the Mortgagor of any such imposition would be
unlawful, or if the payment thereof would constitute usury or render the Secured
Indebtedness wholly or partially usurious, the Mortgagee, at its option, may
declare the whole sum secured by this Mortgage with interest thereon to be
immediately due and payable, without prepayment premium, or the Mortgagee, at
its option, may pay that amount or portion of such impositions as renders the
Indebtedness Secured Hereby unlawful or usurious, in which event the Mortgagor
shall concurrently therewith pay the remaining lawful and nonusurious portion or
balance of said imposition.

 

1.8. Compliance with Laws. Subject to Section 1.9 hereof, the Mortgagor shall
comply with all present and future laws, ordinances, regulations, covenants,
conditions and restrictions affecting the Mortgaged Premises or the operation
thereof, and shall pay all fees or charges of any kind in connection therewith.
The Mortgagor shall not, by act or omission, permit any property which is not
subject to this Mortgage to rely on the Mortgaged Premises or any part thereof
or any interest therein to fulfill any governmental requirement for the
character or use of such property; and the Mortgaged Premises shall not rely on
any property which is not subject to this Mortgage to fulfill any governmental
requirement for the character or use of the Mortgaged Premises. The Mortgagor
shall not, by act or omission, impair the integrity of the Mortgaged Premises as
a single separate subdivided zoning lot separate and apart from all other lots.

 

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1.9. Permitted Contests. Notwithstanding any provision of this Mortgage to the
contrary, the Mortgagor shall not be required to: (a) pay any charge referred to
Section 1.4 hereof; (b) discharge or remove any lien, encumbrance or charge
referred to in Section 1.5 hereof; (c) pay the tax, assessment or other charged
referred to in Sections 1.6 and 1.7 hereof, or (d) comply with any statute, law,
rule, regulation or ordinance referred to in Section 1.8 hereof, so long as the
Mortgagor shall in good faith contest the same or the validity thereof by
appropriate legal proceedings which shall operate to prevent the collection of
the imposition so contested, or the sale, forfeiture or loss of the Mortgaged
Premises, or any part thereof to satisfy the same, and further provided that the
Mortgagor shall, prior to the date such imposition is due and payable, have
given the Mortgagee such reasonable security as may be reasonably demanded by
the Mortgagee to ensure such payments and prevent any sale or forfeiture of the
Mortgaged Premises by reason of such nonpayment. Any such contest shall be
prosecuted with due diligence and the Mortgagor shall, after final determination
thereof, promptly pay the amount of any such imposition so determined, together
with all interest and penalties which may be payable in connection therewith.
Notwithstanding the provisions of this Section 1.9, the Mortgagor shall (and if
the Mortgagor shall fail so to do, the Mortgagee may but shall not be required
to) pay any such imposition notwithstanding such contest if, in the reasonable
opinion of the Mortgagee, the Mortgaged Premises shall be in jeopardy or in
danger of being forfeited or foreclosed.

 

1.10. Duty to Defend. The Mortgagor shall promptly notify the Mortgagee of and
appear in and defend any suit, action or proceeding that affects the value of
the Mortgaged Premises, the Secured Indebtedness, or any right or interest of
the Mortgagee under this Mortgage. The Mortgagee may, at its option, elect to
appear in or defend any such action or proceeding, and the Mortgagor agrees to
indemnify and reimburse the Mortgagee from any and all loss, damage, reasonable
expense or cost arising out of, or incurred in connection with any such suit,
action or proceeding, including, but not limited to, costs of evidence of title
and reasonable attorneys’ fees.

 

1.11. Insurance Coverage. The Mortgagor shall obtain and keep in full force and
effect during the term of this Mortgage at its sole cost and expense, the
following policies of insurance:

 

a.                                      Property insurance, in broad form
covering causes of loss customarily covered in the industry of Mortgagor’s
business, including the cost of debris removal, together with a vandalism and
malicious mischief endorsement, all in the amounts of not less than the full
insurable value or full replacement cost, without deduction for depreciation, of
the improvements on the Premises, whichever is greater, covering all buildings,
structures, fixtures, personal property and other improvements now existing or
hereafter erected or placed on the Premises, which insurance shall at all times
be in an amount at least equal to the unpaid Secured Indebtedness at any given
time.

 

b.                                      If the Mortgaged Premises are now or
hereafter located in a flood plain as defined by the Federal Insurance
Administration, the Mortgagor shall obtain flood insurance in the maximum
obtainable amount.

 

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c.                                       If steam boilers or similar equipment
for the generation of steam are located in, on or about the Mortgaged Premises,
the Mortgagor shall maintain insurance against loss or damage by explosion,
rupture or bursting of such equipment and appurtenances thereto, without a
co-insurance clause, in an amount satisfactory to the Mortgagee.

 

d.                                      Comprehensive general public liability
insurance covering the legal liability of the Mortgagor against claims for
bodily injury, death or property damage occurring on, in or about the Mortgaged
Premises in such amounts and with such limits as the Mortgagee may reasonably
require.

 

e.                                       Business interruption insurance in an
amount at least equal to coverage over one year’s debt service and required
escrow account.

 

All such insurance shall be written on forms and with companies satisfactory to
the Mortgagee, shall name as the insured parties the Mortgagor and the Mortgagee
as their interests may appear, shall be in amounts sufficient to prevent the
Mortgagor from becoming a co-insurer of any loss thereunder, shall name the
Mortgagee as a loss payee, shall bear a satisfactory mortgagee clause in favor
of the Mortgagee, and shall contain an agreement of the insurer that the
coverage shall not be terminated or materially modified without providing to the
Mortgagee thirty (30) days’ prior written notice of such termination or
modification. All required policies of insurance or acceptable certificates
thereof, together with evidence of the payment of current premiums therefor
shall be delivered to the Mortgagee. The Mortgagor shall, within thirty (30)
days prior to the expiration of any such policy, deliver other original policies
or certificates of the insurer evidencing the renewal of such insurance together
with evidence of the payment of current premiums therefor. In the event of a
foreclosure of this Mortgage or any acquisition of the Mortgaged Premises by the
Mortgagee, all such policies and any proceeds payable therefrom, whether payable
before or after a foreclosure sale, or during the period of redemption, if any,
shall become the absolute property of the Mortgagee to be utilized at its
discretion. In the event of foreclosure or the failure to obtain and keep any
required insurance, the Mortgagor empowers the Mortgagee to effect insurance
upon the Mortgaged Premises at the Mortgagor’s expense and for the benefit of
the Mortgagee in the amounts and types aforesaid for a period of time covering
the time of redemption from a foreclosure sale, and if necessary therefore, to
cancel any or all existing insurance policies. The Mortgagor agrees to furnish
the Mortgagee with copies of all inspection reports and insurance
recommendations received by the Mortgagor from any insurer.

 

1.12. Notice of Damage. The Mortgagor shall give the Mortgagee prompt notice of
any material damage to or destruction of the Mortgaged Premises and authorize
the Mortgagee to make proof of loss if not made promptly by the Mortgagor. In
case of loss covered by policies of insurance (whether before or after
foreclosure sale), the Mortgagee is hereby authorized at its option and without
the consent of the Mortgagor to settle, adjust and compromise any claim arising
out of such policies, and to collect and receive the proceeds payable therefrom;
provided, that the Mortgagor may itself adjust and collect for any losses
arising out of a single occurrence aggregating not in excess of $100,000.00. Any
expense incurred by the Mortgagee in the adjustment and collection of insurance
proceeds (including the cost of any independent appraisal of the loss or damage
on behalf of the Mortgagee) shall be reimbursed to the Mortgagee first out

 

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of any proceeds. So long as the Mortgagor is not in default under the terms of
this Mortgage, the proceeds or any part thereof shall be applied to the
restoration or repair of the Mortgaged Premises or to reduction of the Secured
Indebtedness then most remotely to be paid, whether due or not, without the
application of any prepayment premium, the choice of such application to be
solely at the discretion of the Mortgagor, otherwise, such choice shall be at
the sole discretion of the Mortgagee.

 

1.13. Condemnation. The Mortgagor shall give the Mortgagee prompt notice of any
action, actual or threatened, in condemnation or eminent domain. The Mortgagor
may in good faith contest any condemnation or eminent domain action by
appropriate legal action or proceedings. Any such contest shall be prosecuted
with due diligence. The Mortgagor hereby irrevocably assigns, transfers, and
sets over to the Mortgagee, to the extent of the remaining unpaid Secured
Indebtedness, the entire proceeds of any award, payment or claim for damages for
all or any part of the Mortgaged Premises taken or damaged, whether temporary or
permanent, under the power of eminent domain or condemnation, and authorizes the
Mortgagee to intervene in any such action in the name of the Mortgagor and to
collect and receive from the condemning authorities and give proper receipts and
acquaintances for such proceeds. Any expenses incurred by the Mortgagee in
intervening in such action or collecting such proceeds shall be reimbursed to
the Mortgagee first out of the proceeds. So long as the Mortgagor is not in
default under the terms of this Mortgage, the proceeds or any part thereof shall
be applied upon or in reduction of the Secured Indebtedness then most remotely
to be paid, whether due or not, without the application of any prepayment
premium, or to the restoration or repair of the Mortgaged Premises, the choice
of application to be solely at the discretion of the Mortgagor, otherwise, such
choice shall be at the sole discretion of the Mortgagee.

 

1.14. Restoration of Mortgaged Premises After Loss. Should any insurance or
condemnation proceeds be applied to the restoration or repair of the Mortgaged
Premises the restoration or repair shall be done under the supervision of an
architect reasonably acceptable to the Mortgagee, pursuant to plans and
specifications approved by the Mortgagee, and in accordance with all applicable
building laws, regulations and ordinances, including, but not limited to, the
Accessibility Guidelines set forth in the Americans with Disabilities Act. In
such case, the proceeds shall be held by the Mortgagee for such purposes and
will from time to time be disbursed by the Mortgagee to defray the costs of such
restoration or repair under such safeguards and controls as the Mortgagee may
reasonably require to assure completion in accordance with the approved plans
and specifications and free of liens or claims. Any surplus which may remain
after payment of all costs of restoration or repair may, at the option of the
Mortgagee, be applied on account of the Secured Indebtedness then most remotely
to be paid, whether due or not, without application of any prepayment premium,
or shall be returned to the Mortgagor as its interest may appear, the choice of
application to be solely at the discretion of the Mortgagee.

 

1.15. Hazardous Substances. The Mortgagor represents, warrants and covenants to
the Mortgagee that, except in compliance with all applicable federal, state and
local laws, regulations and ordinances, no toxic or hazardous substance, waste
or constituent, as defined in any local, state or federal law, regulation, code
or ordinance now existing or hereinafter enacted or amended, governing liability
for any such substance, waste or constituent is, or has in the past,

 

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been located in, on or released from the Mortgaged Premises. The Mortgagor
further represents, warrants and covenants to the Mortgagee that it shall not,
nor shall the Mortgagor permit others to, except in compliance with all
applicable federal, state and local laws, regulations and ordinances, use the
Mortgaged Premises at any time to generate, transport, store, process, treat, or
dispose of a toxic or hazardous substance, waste or constituent. The Mortgagor
shall not, nor shall the Mortgagor permit others to take, fail to take, or
permit any action which may result in a release of any toxic or hazardous
substance, waste or constituent in, on, about or from the Mortgaged Premises.
The Mortgagor warrants that neither the Mortgagor nor the Mortgaged Premises are
subject to any claim for which any local, state or federal law governing
liability for any such substance, waste or constituent may apply. Within five
(5) business days after learning of the occurrence of (a) any violation of any
applicable federal, state or local law, regulation or ordinance relating to any
toxic or hazardous substance, waste or constituent with respect to the Mortgaged
Premises, or (b) the commencement of any litigation, arbitration or other
proceeding that affects the Mortgaged Premises, or (c) notice from any
government or governmental agency that the Mortgaged Premises or any operations
thereon are not in compliance with any local, state or federal law rule or
ordinance, or (d) notice that the Mortgagor or all or part of the Mortgaged
Premises is subject to any investigation relating to any toxic or hazardous
substance, waste or constituent, the Mortgagor shall give the Mortgagee oral and
written notice thereof, describing the same and the steps that will be taken by
the Mortgagor with respect thereto.

 

1.16. Financial and Operating Statements. The Mortgagor shall keep and maintain,
at all times, full, true, and accurate books of accounts, in sufficient detail
to show the names of the tenants, if any, occupying the Mortgaged Premises, the
rent paid by each such tenant and security deposits, if any, copies of all
leases, if any, and such other books and records showing in detail the earnings
and expenses of the Mortgaged Premises, all of which should adequately reflect
the results of the operation of the Mortgaged Premises. All such records
relating thereto shall be open to inspection and copying by the Mortgagee or its
representatives at any time and from time to time upon request by the Mortgagee,
at the Mortgaged Premises or at such other place in the city and county in which
the Mortgaged Premises are located. Throughout the term of this Mortgage, the
Mortgagor shall deliver to the Mortgagee such other information with respect to
the Mortgagor or the Mortgaged Premises as the Mortgagee may reasonably request
from time to time. In the event the Mortgagor fails to furnish any such reports
and statements within thirty (30) days of Mortgagee’s request, the Mortgagee may
cause an audit to be made of the respective books and records at the sole cost
and expense of the Mortgagor.

 

1.17. Mortgagee’s Right of Entry. The Mortgagor shall permit the Mortgagee or
its authorized representatives to enter the Mortgaged Premises at all times for
the purpose of inspecting the same; provided, however, the Mortgagee shall have
no duty to make such inspections and shall not incur any liability or obligation
for making or not making any such inspections. Mortgagee and its authorized
representatives shall follow all safety procedures and protocols of Mortgagor
during any inspection and Mortgagee shall take all necessary actions to ensure
that such inspections shall not interfere with the operations of the Mortgagor
at the Mortgaged Premises.

 

1.18. Due on Sale. The Mortgagor shall not voluntarily or involuntarily sell,
convey, transfer, further mortgage, encumber, or dispose of the Mortgaged
Premises, or any part thereof,

 

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or any interest therein, legal or equitable, or agree to do so, without first
obtaining the written consent of the Mortgagee. The Mortgagee’s consent to any
one transaction shall not be deemed to be a waiver of the requirement to receive
the Mortgagee’s consent to future or successive transactions. If the Mortgagor
is a corporation, partnership, limited liability company or other entity,
seventy-five percent (75%) of the legal, beneficial or equitable ownership of
such entity shall not be changed by sale, conveyance, transfer, assignment or
encumbrance.

 

1.19. Mortgagee’s Right to Cure. Subject to the Mortgagor’s rights under Section
1.9 hereof, if the Mortgagor shall fail to comply with any of the covenants or
obligations of this Mortgage, then the Mortgagee may, but shall not be obligated
to, without further demand upon or notice to the Mortgagor, and without waiving
or releasing the Mortgagor from any obligation contained in this Mortgage,
perform such covenants and agreements, investigate and defend against such
action or proceeding, and take such other action as the Mortgagee deems
necessary to protect its interest in the Mortgaged Premises or this Mortgage.
The Mortgagor agrees to repay upon demand all sums incurred by the Mortgagee in
remedying any such failure, together with interest at the rate as specified in
the Notes. All such sums, together with interest as aforesaid, shall become so
much additional Secured Indebtedness, but no such advance shall be deemed to
relieve the Mortgagor from any failure hereunder.

 

1.20. Uniform Commercial Code Security Interest. This Mortgage shall constitute
a security agreement as defined in the Uniform Commercial Code and SHALL BE
EFFECTIVE AS A FINANCING STATEMENT FILED AS A FIXTURE FILING which is to be
filed in the real estate records of the County where the Mortgaged Premises are
situated. The name of the record owner of said real estate is the Mortgagor set
forth on page one of this Mortgage. Information concerning the security interest
created by this Mortgage may be obtained from the Mortgagee, as secured party,
at its address as set forth on page one of this Mortgage. The name and address
of the Mortgagor, as debtor, and the name and address of the Mortgagee, as
secured party, are as set forth on page one of this Mortgage. This Mortgage
covers goods which are, or are to become, fixtures. This Mortgage is sufficient
as a financing statement, and as a financing statement it covers goods which
are, or are to become, fixtures on the Land. In addition, the Mortgagor shall
execute and deliver to the Mortgagee, upon the Mortgagee’s request, any
financing statements or amendments thereto or continuation statements thereto
that the Mortgagee may require to perfect a security interest in said items or
types of property. The Mortgagor shall pay all costs of filing such instruments.

 

1.21. Leases. The Mortgagor shall, at its own cost and expense, perform, comply
with and discharge all of the obligations of the Mortgagor under all leases and
agreements for the use of the Mortgaged Premises and use its best efforts to
enforce or secure the performance of each obligation and undertaking of the
respective tenants under such leases and shall appear in and defend, at its own
cost and expense, any action or proceeding arising out of or in any manner
connected with the Mortgagor’s interest in any leases of the Mortgaged Premises.
The Mortgagor shall apply all tenants security deposits as required by Minnesota
Statutes Section 504B.178 and shall keep the covenants required of a lessor or
licensor pursuant to Minnesota Statutes Section 504B.161, subdivision 1, if the
Mortgaged Premises is used for residential purposes. The Mortgagor shall permit
no surrender nor assignment of any tenant’s interest under said leases unless
the right to assign or surrender is expressly reserved under the lease, nor
receive any

 

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installment of rent for more than one (1) month in advance of its due date, nor
execute any mortgage or create or permit a lien which may be or become superior
to any such leases, nor permit a subordination of any lease to such mortgage or
lien. The Mortgagor shall not materially modify or amend the terms of any such
leases, nor borrow against or pledge the rentals from such leases, nor exercise
or waive any default of the tenant thereunder without the prior consent of the
Mortgagee. The Mortgagor agrees to obtain the Mortgagee’s prior written approval
before entering into any lease with a term of five (5) years or more. Should the
Mortgagor fail to perform, comply with or discharge any obligations of the
Mortgagor under any lease or should the Mortgagee become aware of or be notified
by any tenant under any lease of a failure on the part of the Mortgagor to so
perform, comply with or discharge its obligations under said lease, the
Mortgagee may, but shall not be obligated to, and without further demand upon or
notice to the Mortgagor, and without waiving or releasing the Mortgagor from any
obligation in this Mortgage contained, remedy such failure, and the Mortgagor
agrees to repay upon demand all sums incurred by the Mortgagee in remedying any
such failure together with interest at the rate as specified in the Notes. All
such sums, together with interest as aforesaid, shall become so much additional
Secured Indebtedness, but no such advance shall be deemed to relieve the
Mortgagor from any default hereunder.

 

1.22. No Consent. Nothing contained in this Mortgage shall constitute any
consent or request by the Mortgagee, express or implied, for the performance of
any labor or services or for the furnishing of any materials or other property
in respect of the Mortgaged Premises or any part thereof, nor as giving the
Mortgagor or any party in interest with the Mortgagor any right, power or
authority to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
create any personal liability against the Mortgagee in respect thereof, or would
permit the making of any claim that any lien based on the performance of such
labor or services or the furnishing of any such materials or other property is
prior to the lien of this Mortgage.

 

1.23. Further Assurances. The Mortgagor shall execute and deliver to the
Mortgagee from time to time, on demand, such further instruments, security
agreements, financing statements under the Uniform Commercial Code and
assurances and do such further acts as Mortgagee may reasonably require to carry
out more effectively the purposes of this Mortgage and without limiting the
foregoing, to make subject to the lien hereof any property agreed to be
subjected hereto or covered by the granting clause hereof, or so intended to be.
The Mortgagor shall pay any recording fees, filing fees, mortgage registry
taxes, stamp taxes and other charges arising out of or incident to the filing or
recording of this Mortgage and all documents collateral there, such further
assurances and instruments and the issuance and delivery of the Notes.

 

1.24. Miscellaneous Rights of Mortgagee. Without affecting the liability of any
party liable for payment of the Secured Indebtedness or the performance of any
obligation contained herein, and without affecting the rights of the Mortgagee
with respect to any security not expressly released in writing, the Mortgagee
may, at any time, and without notice to or the consent of the Mortgagor or any
party with an interest in the Mortgaged Premises or the Notes (a) release any
person or entity liable for payment of all or any part of the Secured
Indebtedness or for the performance of any obligation herein, (b) make any
agreement extending the time or otherwise altering the terms of payment of all
or any part of the Secured Indebtedness or

 

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modifying or waiving any obligation, or subordinating, modifying or otherwise
dealing with the lien or charge hereof, (c) accept any additional security, (d)
release or otherwise deal with any property, real or personal, including any or
all of the Mortgaged Premises, including making partial releases of the
Mortgaged Premises, or (e) resort to any security agreements, pledges, contracts
of guaranty, assignments of rents and leases or other securities, and exhaust
any one or more of said securities and the security hereunder, either
concurrently or independently and in such order as it may determine. No act or
thing, except full payment of the Secured Indebtedness, which but for this
provision could act as a release, termination, satisfaction or impairment of
this Mortgage shall in any way release, terminate, satisfy or impair this
Mortgage.

 

ARTICLE II

Defaults and Remedies

 

2.1. Events of Default. The occurrence of any one or more of the following
events shall constitute an Event of Default under this Mortgage:

 

a.                                      The Mortgagor shall fail to pay any
amount on the Notes when due or shall fail to pay when due any subsequent loan
or advance made by the Mortgagee hereunder or the interest thereon.

 

b.                                      The Mortgagor shall fail to pay any
other Secured Indebtedness when due.

 

c.                                       The Mortgagor shall fail duly to
perform or observe any covenant or agreement in the Notes, this Mortgage, the
Loan Agreement, or any other promissory Notes, agreement, instrument or writing
made or delivered pursuant to or in connection with the Notes or this Mortgage
beyond the applicable cure period, if any. If any failure is curable, it may be
cured (and no Event of Default will have occurred) if Mortgagor, after receiving
written notice from Mortgagee demanding cure of such failure: (i) cures the
failure within thirty (30) days; or (ii) if the cure requires more than thirty
(30) days, immediately initiates steps sufficient to cure the failure and
thereafter continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.

 

d.                                      Any statement, representation or
warranty made by the Mortgagor at any time shall prove to have been incorrect or
misleading in any material respect when made and the Mortgagor does not correct
such incorrect or misleading statement, representation or warranty within thirty
(30) days of receipt of notice in writing.

 

e.                                       The Mortgagor shall be dissolved or
shall make a general assignment for the benefit of creditors or shall initiate
or have initiated against it any act, process or proceeding under any
insolvency, bankruptcy or similar law. Notwithstanding, it shall not be an Event
of Default if an involuntary case is commenced against Borrower by any creditor
of Borrower unless the action is not dismissed or discharged within 30 days of
filing.

 

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f.                                        The Mortgagor shall liquidate, merge,
consolidate, transfer a substantial part of its property.

 

g.                                       A trustee, receiver or liquidator of
the Mortgagor shall be appointed with the consent or acquiescence of the
Mortgagor, or any such appointment, if not so consented to or acquiesced in,
shall remain unacted or unstayed for an aggregate of thirty (30) days (whether
or not consecutive).

 

h.                                      Subject to the provisions of Section 1.9
of this Mortgage, execution shall have been levied against the Mortgaged
Premises or any lien creditor’s suit to enforce a judgment against the Mortgaged
Premises shall have been brought and (in either case) shall continue unstayed
and in effect for a period of more than ten (10) consecutive calendar days.

 

2.2. Remedies. Upon the occurrence of an Event of Default which remains uncured
during the time period provided, or at any time thereafter until such Event of
Default is cured to the satisfaction of the Mortgagee, the Mortgagee may, at its
option, and without notice to the Mortgagor, unless otherwise provided herein,
exercise any or all of the following rights and remedies, and any other rights
and remedies now or then available to it, either hereunder or at law or in
equity, including, without limitation, the rights and remedies provided in the
Assignment of Rents:

 

a.                                      Mortgagee may immediately, and without
notice to the Mortgagor, declare the entire unpaid principal balance of the
Notes together with all accrued interest thereon to be immediately due and
payable and thereupon all such and all other Secured Indebtedness shall be and
become immediately due and payable.

 

b.                                      The Mortgagee may foreclose this
Mortgage by action or advertisement, and the Mortgagor hereby authorizes and
fully empowers the Mortgagee to do so, with full authority to sell the Mortgaged
Premises at public auction upon giving notice of the sale to Mortgagor in the
manner required by law, and convey the same to the Purchaser in fee simple all
in accordance with and in the manner prescribed by law, and out of the proceeds
arising from sale and foreclosure to retain the principal and interest due on
the Notes and the Secured Indebtedness together with all such sums of money as
the Mortgagee shall have expended or advanced pursuant to this Mortgage or
pursuant to statute together with interest thereon as herein provided and all
costs and expenses of such foreclosure, including lawful attorneys’ fees, with
the balance, if any, to be paid to the persons entitled thereto by law.

 

c.                                       The Mortgagee may collect, receive, and
retain all rents, income, and profits (the “Rents”) from the Mortgaged Premises,
either through the appointment of a receiver or by self help and without
appointment of a

 

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receiver.

 

The Mortgagee shall be entitled as a matter of right without notice and without
giving bond and without regard to the solvency or insolvency of the Mortgagor,
or waste of the Mortgaged Premises or adequacy of the security of the Mortgaged
Premises, to apply for the appointment of a receiver in accordance with
applicable law; and Mortgagor does hereby irrevocably consent to such
appointment.

 

All Rents collected by Mortgagee, or by a receiver, shall be held and applied in
accordance with paragraph (d) of Minnesota Statutes Section 576.25; Subd. 5, as
it may be amended or replaced.  Any Rents that are not applied to the items
described in clauses (3) of (4) of paragraph (d) of Minnesota Statutes Section
576.25; Subd. 5, as they may be amended or replaced, shall be applied as
follows:

 

(i)                         if received prior to any foreclosure sale of the
Mortgaged Property to the payment of the Indebtedness secured by this Mortgage
in such order as Mortgagee shall elect, but no such payment made after
acceleration of the Indebtedness shall affect such acceleration; and

 

(ii)                      if received during or with respect to a period after a
foreclosure sale of the Mortgaged Property:

 

(1)                     if the purchaser at the foreclosure sale is not
Mortgagee, first to Mortgagee to the extent of any deficiency of the sale
proceeds to repay the Indebtedness secured by this Mortgage, second to the
purchaser as a credit to the redemption price, but if the Mortgaged Property is
not redeemed, then to the purchaser of the Mortgaged Property.

 

(2)                     if the purchaser at the foreclosure sale is Mortgagee,
first to Mortgagee to the extent of any deficiency of the sale proceeds to repay
the Indebtedness secured by this Mortgage and the balance to be retained by
Mortgagee as a credit to the redemption price, but if the Mortgaged Property is
not redeemed, then to Mortgagee, whether or not such deficiency exists.

 

The rights and powers of the Mortgagee under this Mortgage and the application
of the Rents shall continue and remain in full force and effect both before and
after commencement of any action or procedure to foreclose this Mortgage, after
any foreclosure sale of Mortgagor’s interest in the Mortgaged Property in
connection with the foreclosure of this Mortgage, and until expiration of the
period of redemption from any such

 

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foreclosure sale, whether or not any deficiency from the payment in full of the
Indebtedness secured by this Mortgage exists after such foreclosure sale.

 

Nothing contained in this Mortgage and no actions taken pursuant to this
Mortgage shall be construed as constituting the Mortgagee a mortgagee in
possession.

 

d.                                      In addition to the rights available to a
mortgagee of real property, the Mortgagee shall also have all the rights,
remedies and recourse available to a secured party under the Uniform Commercial
Code, including without limitation the right to proceed under the provisions of
the Uniform Commercial Code governing default as to any personal property which
may be included in the Mortgaged Premises or which may be deemed nonrealty in a
foreclosure of this Mortgage or to proceed as to such personal property in
accordance with the procedures and remedies available pursuant to a foreclosure
of real estate.

 

ARTICLE III

Miscellaneous

 

3.1.                            Mortgagor’s Acknowledgment of Remedies. THE
MORTGAGOR HEREBY CONSENTS AND AGREES TO THE FORECLOSURE AND SALE OF THE
MORTGAGED PREMISES BY ACTION PURSUANT TO MINNESOTA STATUTES CHAPTER 581 OR, AT
THE OPTION OF THE MORTGAGEE, BY ADVERTISEMENT PURSUANT TO MINNESOTA STATUTES
CHAPTER 580 (OR PURSUANT TO ANY SIMILAR OR REPLACEMENT STATUTES HEREAFTER
ENACTED), WHICH PROVIDES FOR SALE AFTER SERVICE OF NOTICE THEREOF UPON THE
OCCUPANT OF THE MORTGAGED PREMISES AND PUBLICATION OF SAID NOTICE FOR SIX (6)
WEEKS IN THE COUNTY IN MINNESOTA WHERE THE MORTGAGED PREMISES ARE SITUATED;
ACKNOWLEDGES THAT SERVICE NEED NOT BE MADE UPON THE MORTGAGOR PERSONALLY (UNLESS
THE MORTGAGOR IS AN OCCUPANT) AND THAT NO HEARING OF ANY TYPE IS REQUIRED IN
CONNECTION WITH THE SALE; AND EXCEPT AS MAY BE PROVIDED IN SAID STATUTES
EXPRESSLY WAIVES ANY AND ALL RIGHTS TO A PRIOR HEARING OF ANY TYPE IN CONNECTION
WITH THE SALE OF THE MORTGAGED PREMISES. Notwithstanding the foregoing
provision, the Mortgagor’s foregoing acknowledgment does not constitute a waiver
of the Mortgagor’s defenses to the foreclosure. The Mortgagor further
understands that in the event of such default the Mortgagee may also elect its
rights under the Uniform Commercial Code and take possession of the Personal
Property (as defined in this Mortgage) and dispose of the same by sale or
otherwise in one or more parcels provided that at least ten (10) days’ prior
notice of such disposition must be given, all as provided for by the Uniform
Commercial Code, as hereafter amended or by any similar or replacement statute
hereafter enacted. THE MORTGAGOR ACKNOWLEDGES THAT IT IS REPRESENTED BY LEGAL
COUNSEL; THAT BEFORE SIGNING THIS DOCUMENT THIS PARAGRAPH AND THE MORTGAGOR’S
RIGHTS WERE FULLY EXPLAINED BY SUCH COUNSEL AND THAT THE MORTGAGOR UNDERSTANDS

 

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THE NATURE AND EXTENT OF THE RIGHTS WAIVED HEREBY AND THE EFFECT OF SUCH WAIVER.

 

3.2. Continued Priority. Any agreement hereafter made by the Mortgagor and the
Mortgagee pursuant to this Mortgage shall be superior to the rights of the
holder of any intervening lien or encumbrance.

 

3.3. Cumulative Rights. Each right, power or remedy herein conferred upon the
Mortgagee is cumulative and in addition to every other right, power or remedy,
express or implied, now or hereafter arising, available to the Mortgagee, at law
or in equity, or under the Uniform Commercial Code or other law, or under any
other agreement, and each and every right, power and remedy herein set forth or
otherwise so existing may be exercised from time to time as often and in such
order as may be deemed expedient by the Mortgagee and shall not be a waiver of
the right to exercise at any time thereafter any other right, power or remedy.
No delay or omission by the Mortgagee in the exercise of any right, power or
remedy arising hereunder or arising otherwise shall impair any such right, power
or remedy or the right of the Mortgagee to resort thereto at a later date or be
construed to be a waiver of any Event of Default under this Mortgage or the
Notes.

 

3.4. Waiver. The Mortgagor hereby waives to the full extent lawfully allowed the
benefit of any homestead, appraisement, evaluation, stay and extension laws now
or hereafter in force. The Mortgagor hereby waives any rights available with
respect to marshaling of assets so as to require the separate sales of any
portion of the Mortgaged Premises, or as to require the Mortgagee or any other
person to exhaust its remedies against a specific portion of the Mortgaged
Premises before proceeding against the other and does hereby expressly consent
to and authorize the sale of the Mortgaged Premises or any part thereof as a
single unit or parcel.

 

3.5. Satisfaction of Mortgage. When all Secured Indebtedness has been paid, this
Mortgage and all assignments herein contained shall be void and this Mortgage
shall be satisfied and released by the Mortgagee at the cost and expense of the
Mortgagor.

 

3.6. Governing Law. This Mortgage is made and executed under the laws of the
State of Minnesota and is intended to be governed by the laws of said State.

 

3.7. Binding Effect. This Mortgage and each and every covenant, agreement and
other provision hereof shall be binding upon the Mortgagor and its successors
and assigns including without limitation each and every from time to time record
owner of the Mortgaged Premises and any other person having an interest therein,
shall run with the land and shall inure to the benefit of the Mortgagee and its
successors and assigns. As used herein the words “successors and assigns” shall
also be deemed to include the heirs, representatives, administrators and
executors of any natural person who is a party to this Mortgage.

 

3.8. Severability and Survival. The unenforceability or invalidity of any
provisions hereof shall not render any other provision, or provisions herein
contained unenforceable or invalid. The foreclosure of this Mortgage will not
affect or limit any remedy of the Mortgagee on

 

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account of any breach by the Mortgagor of the terms of this Mortgage occurring
prior to such foreclosure, except to the extent of the amount bid at
foreclosure.

 

3.9. Captions. The captions and headings of the various sections of this
Mortgage are for convenience only and are not to be construed as confining or
limiting in any way the scope or intent of the provisions hereof. Whenever the
context requires or permits the singular shall include the plural, the plural
shall include the singular and the masculine, feminine and neuter shall be
freely interchangeable.

 

3.10. Notices. Any notice which any party hereto may desire or may be required
to give to any other party shall be in writing and the mailing thereof by
certified mail to their respective addresses as set forth on page one herein, or
to such other places any party hereto may hereafter by notice in writing
designate shall constitute service of notice hereunder.

 

THE MORTGAGOR REPRESENTS, CERTIFIES, WARRANTS AND AGREES THAT THE MORTGAGOR HAS
READ ALL OF THIS MORTGAGE AND UNDERSTANDS ALL OF THE PROVISIONS OF THIS
MORTGAGE. THE MORTGAGOR ALSO AGREES THAT THE MORTGAGEE’S COMPLIANCE WITH THE
EXPRESS PROVISIONS OF THIS MORTGAGE SHALL CONSTITUTE GOOD FAITH AND SHALL BE
CONSIDERED REASONABLE FOR ALL PURPOSES.

 

IN WITNESS WHEREOF, the undersigned has executed this Mortgage as of the day and
year first above written.

 

 

MORTGAGOR:

 

 

 

HERON LAKE BIOENERGY, LLC, a Minnesota limited liability company

 

 

 

 

 

/s/ Robert J. Ferguson

 

By: Robert J. Ferguson

 

Its: General Manager

 

 

 

 

STATE OF MINNESOTA

)

 

 

) ss.

 

COUNTY OF JACKSON

)

 

 

On this 17th day of May, 2013, before me a Notary Public within and for said
County, personally appeared Robert J. Ferguson, to me known, who being by me
duly sworn, did say that he/she is the General Manager of Heron Lake BioEnergy,
LLC, the limited liability company named in the foregoing instrument, and that
said instrument was signed on behalf of said company by authority of its board
and as the free act and deed of said company.

 

 

/s/ Jean Marie Ferguson

 

Notary Public

 

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THIS INSTRUMENT WAS DRAFTED BY:

 

GRAY PLANT MOOTY MOOTY & BENNETT, P.A.

Phillip L. Kunkel

1010 West St. Germain St.

Suite 600

St. Cloud, MN 56301

 

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EXHIBIT A

LEGAL DESCRIPTION

 

TRACT A

 

Parcel A

 

Part of the SW¼ of Sec. 16, T104N, R37W, Jackson County, Minnesota, lying
Southerly of the Southerly right of way line of the Union Pacific Railroad,
described as follows:

 

Beginning at an existing iron monument at the SE corner of the SW¼ of said Sec.
16; thence South 89°57’49” West, along the South line of said SW¼, a distance of
1031.09 feet; thence North 00°37’05” East, parallel with the West line of said
SW¼, a distance of 275.02 feet; thence South 89°57’49” West, parallel with the
South line of said SW¼, a distance of 1600.10 feet, to a point on the West line
of said SW¼; thence North 00°37’05” East, along the West line of said SW¼, a
distance of 593.98 feet; thence South 89°22’55” East a distance of 412.00 feet;
thence North 00°37’05” East, parallel with the West line of said SW¼, a distance
of 400.00 feet; thence North 89°22’55” West a distance of 412.00 feet, to a
point on the West line of said SW¼; thence North 00°37’05” East, along the West
line of said SW¼, a distance of 103.50 feet, to a point on the Southerly right
of way line of the Union Pacific Railroad; thence North 76°38’53” East, along
the Southerly right of way line of said Union Pacific Railroad, a distance of
2706.70 feet, to a point on the East line of said SW¼; thence South 00°29’31”
West, along the East line of said SW¼, a distance of 1995.89 feet, to the point
of beginning,

 

AND ALSO that part of the S½ of the SW¼ of Sec. 16, T104N, R37W of the Fifth
Principal Meridian, Jackson County, Minnesota, described as follows: Commencing
at an existing iron monument at the Southeast corner of the SW¼ of said
Section 16; thence South 89 degrees 57 minutes 49 seconds West, bearing based on
Jackson County Coordinate System, along the South line of the SW¼ a distance of
1031.09 feet to the POINT OF BEGINNING; thence North 00 degrees 37 minutes 05
seconds East, parallel with the West line of said SW¼ , a distance of 275.02
feet; thence South 89 degrees 57 minutes 49 seconds West, parallel with the
South line of said SW¼ , a distance of 1600.10 feet to a point on the West line
of said SW¼; thence South 00 degrees 37 minutes 05 seconds West, along the West
line of said SW¼, a distance of 275.02 feet to the Southwest corner of said SW¼;
thence North 89 degrees 57 minutes 49 seconds East, along the South line of said
SW¼, to the point of beginning.

 

EXCEPTING a part of the S½ SW¼ of Sec. 16, T104N, R37W, Jackson County,
Minnesota, described as follows:  Commencing at an existing iron monument at the
SE corner of the SW¼ of said Sec. 16; thence South 89°57’49” West, bearing based
on Jackson County Coordinate System, along the South line of said SW¼ of said
Sec. 16, a distance of 1048.26 feet, to the point of beginning; thence
continuing South 89°57’49” West, along said South line, a distance of 503.33
feet; thence North 00°02’11” West a distance of 275.00 feet; thence North
89°57’49” East, parallel with the South line of said SW¼, a distance of 246.59
feet; thence North 00°02’11” West a distance of 74.71 feet; thence North
89°57’49” East, parallel with the South line of said SW¼, a distance of 256.74
feet; thence South 00°02’11” East a distance of 349.71 feet, to the point of
beginning.

 

Parcel B

 

Part of the SE¼ of Sec. 16, T104N, R37W, Jackson County, Minnesota, described as
follows:

 

Beginning at an existing iron monument at the SW corner of the SE¼ of said Sec.
16; thence North 00°29’31” East, bearing based on Jackson County Coordinate
System, along the West line of the SE¼ of said Sec. 16, a distance of 1995.89
feet, to a point on the Southerly right of way line of the Union Pacific

 

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Railroad; thence North 76°38’53” East, along the Southerly right of way line of
said Union Pacific Railroad, a distance of 2701.22 feet, to a point on the East
line of the SE¼; thence South 00°18’29” West, along the East line of said SE¼ a
distance of 1799.88 feet; thence South 89°57’40” West, parallel with the South
line of said SE¼, a distance of 593.49 feet; thence South 61°26’20” West a
distance of 545.54 feet; thence South 01°19’30” East, a distance of 557.71 feet,
to a point on the South line of said SE¼; thence South 89°57’40” West, along the
South line of said SE¼, a distance of 1575.92 feet, to the point of beginning.

 

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EXHIBIT B

PERMITTED ENCUMBRANCES

 

1.                                      Jackson County Ordinances, Codes, and
Resolutions of record.

 

2.                                      Transmission Line Easement in favor of
Interstate Power Company, dated 02/17/50, filed 03/03/50, in Book 160, page 72,
as Doc. #126735.  Runs over and across the S½ SW¼, Sec. 16-104-37, with other
land.  Exact location of easement is not clear.  PARCEL A.

 

3.                                      Transmission Line Easement in favor of
Interstate Power Company, dated 05/10/51, filed 05/17/51, in Book 160, Page 178
as Doc. #128876.  Grants 34 foot wide strip, located approximately 50 feet East
of and parallel to the West line of PARCEL A.

 

Partial Easement Assignment dated 12/20/07, filed 01/03/08 as Doc #A251649, by
Interstate Power and Light Company, to ITC Midwest, LLC.

 

Easement Assignment dated 12/20/07, filed 1/3/08 as Doc #A251650, by Interstate
Power and Light Company, to ITC Midwest, LLC.

 

First Mortgage and Deed of Trust dated 1/14/08, filed 1/17/08 as Doc #A251774,
to The Bank of New York Trust Company, N.A.

 

First Supplemental Indenture to First Mortgage and Deed of Trust dated 1/14/08,
filed 1/17/08 as Doc #A251775, to The Bank of New York Trust Company, N.A.

 

Second Supplemental Indenture to First Mortgage and Deed of Trust dated
12/15/08, filed 12/17/08 as Doc #A254516, to The Bank of New York Mellon Trust
Company, N.A., as successor to The Bank of New York Trust Company, N.A.

 

Third Supplemental Indenture to First Mortgage and Deed of Trust dated 12/15/08,
filed 12/17/08 as Doc #A254517, to The Bank of New York Mellon Trust Company,
N.A., as successor to The Bank of New York Trust Company, N.A.

 

Fourth Supplemental Indenture to First Mortgage and Deed of Trust dated
12/10/09, filed 12/15/09 as Doc #A257698, to The Bank of New York Mellon Trust
Company, N.A., as successor to The Bank of New York Trust Company, N.A.

 

Consent of Easement Holders given by ITC Midwest LLC to Power Partners Midwest,
LLC filed 4/29/11 as Doc #A261738.

 

Fifth Supplemental Indenture to First Mortgage and Deed of Trust dated 7/15/11,
filed 7/20/11 as Doc #A262368, to The Bank of New York Mellon Trust Company,
N.A., as successor to The Bank of New York Trust Company, N.A.

 

Sixth Supplemental Indenture to First Mortgage and Deed of Trust dated 11/29/11,
filed 12/16/11 as Doc #A263601, to The Bank of New York Mellon Trust Company,
N.A., as successor to The Bank of New York Trust Company, N.A.

 

Seventh Supplemental Indenture to First Mortgage and Deed of Trust
dated                    , filed 3/27/13 as Doc #A267760, to The Bank of New
York Mellon Trust Company, N.A., as successor to The Bank of New York Mellon
Trust Company, N.A.

 

4.                                      Weimer Township Resolution filed 3/25/86
as Doc #190214.  Establishes township roads.

 

5.                                      Easement Deed No. 86589 given to US
Sprint Communications Company Limited Partnership dated 3/6/91, filed 3/13/91 as
Doc #201551.  Grants a 10 foot wide strip over and across the SW¼ of Sec.
16-104-37.  Exact location of easement is not clear.  PARCEL A.

 

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6.                                      Transmission Line Easement in favor of
Interstate Power Company, dated 10/30/46, filed 11/13/46, in Book 158, Page 502,
as Doc #N/A.  Runs over and across the SE¼ of Sec. 16-104-37, said line to be
constructed 1 foot North of the highway along the South side of said property. 
PARCEL B.

 

7.                                      Mortgage dated 12/28/07, filed 01/09/08
as Doc #A251707, given by Heron Lake BioEnergy, LLC, to Federated Rural Electric
Association, securing the principal sum of $600,000.00. Secured by a .62 acre
parcel located in a portion of Parcel A of TRACT A.

 

8.                                      Mortgage dated 9/29/05, filed for record
on 9/30/05 as Doc #244879, given by Heron Lake BioEnergy, LLC, a Minnesota
limited liability company, in favor of AgStar Financial Services, PCA, securing
the amount of $61,883,000.00.  TRACT A

 

AND

 

Amended and Restated Mortgage, Security Agreement and Assignment of Rents and
Leases, by and between Heron Lake BioEnergy, LLC, a Minnesota limited liability
company, and AgStar Financial Services, PCA, dated 11/20/06, filed for record on
12/6/06, as Doc #248498, amending the original principal amount to
$65,583,000.00, among other items.

 

AND

 

Second Amended and Restated Mortgage, Security Agreement and Assignment of Rents
and Leases, by and between Heron Lake BioEnergy, LLC, a Minnesota limited
liability company, and AgStar Financial Services, PCA, dated 12/27/06, filed for
record on 12/27/06, as Doc #248658, amending the original principal amount to
$70,283,000.00, and amending the legal description of the original mortgage to
exclude an additional parcel, among other items.

 

AND

 

Third Amended and Restated Mortgage, Security Agreement and Assignment of Rents
and Leases, by and between Heron Lake BioEnergy, LLC, a Minnesota limited
liability company, and AgStar Financial Services, PCA, dated 05/08/07, filed for
record on 06/04/07, as Doc #A250019, amending the original principal amount to
$72,083,000.00, among other items.

 

AND

 

Fourth Amended and Restated Mortgage, Security Agreement and Assignment of Rents
and Leases, by and between Heron Lake BioEnergy, LLC, a Minnesota limited
liability company, and AgStar Financial Services, PCA, dated 09/01/11, filed for
record on 09/08/11, as Doc #A262710, amending the original principal amount to
$72,083,000.00, among other items.

 

AND

 

Fifth Amended and Restated Mortgage, Security Agreement and Assignment of Rents
and Leases, by and between Heron Lake BioEnergy, LLC, a Minnesota limited
liability company, and AgStar Financial Services, PCA, dated 9/20/11, filed for
record 11/1/11, as Document Number A263140, securing the principal sum of
$48,008,689.00, amending the legal description, among other items.

 

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