Exhibit 10.5

 

 

 

 

 

 

 

 

ATTENTION: COUNTY RECORDER—THIS INSTRUMENT COVERS GOODS THAT ARE OR WILL BECOME
FIXTURES ON THE DESCRIBED REAL PROPERTY AND SHOULD BE FILED FOR RECORD IN THE
REAL PROPERTY RECORDS WHERE MORTGAGES ON REAL ESTATE ARE RECORDED. THIS
INSTRUMENT SHOULD ALSO BE INDEXED AS A UNIFORM COMMERCIAL CODE FINANCING
STATEMENT COVERING GOODS THAT ARE OR WILL BECOME FIXTURES ON THE DESCRIBED REAL
PROPERTY. THE MAILING ADDRESSES, TELEPHONE NUMBERS, AND FAX NUMBERS OF THE
SECURED PARTY AND THE DEBTOR ARE WITHIN.

 

MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING

(Anoka County and Ramsey County)

STERLING GEORGETOWN, LLC,
a Minnesota limited liability company,
Borrower,

having an office at
1711 Gold Drive South, Suite 100
Fargo, North Dakota 58103

to

TRANSAMERICA LIFE INSURANCE COMPANY,
an Iowa corporation,
Lender,

having an office
c/o AEGON USA Realty Advisors, LLC
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499-5443

effective as of the ___ day of December, 2014 (the “Effective Date”)

Loan Amount:  $62,595,000.00
Premises:  Sterling Minnesota Portfolio, Anoka County and Ramsey County,
Minnesota

NOTICE:  NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, ENFORCEMENT OF THIS
MORTGAGE IS LIMITED TO A DEBT AMOUNT OF $62,595,000, TOGETHER WITH PROTECTIVE
ADVANCES, UNDER CHAPTER 287 OF MINNESOTA STATUTES.

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Mortgage, Security Agreement and Fixture Filing

This Mortgage, Security Agreement and Fixture Filing (this “Mortgage”) is made
and given as of the Effective Date, by STERLING GEORGETOWN, LLC, as borrower, a
Minnesota limited liability company, whose address is 1711 Gold Drive South,
Suite 100, Fargo, North Dakota 58103 (the “Borrower”), to TRANSAMERICA LIFE
INSURANCE COMPANY, as lender, an Iowa corporation having an office c/o AEGON USA
Realty Advisors, LLC, 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499-5443
(the “Lender”). The definitions of capitalized terms used in this Mortgage may
be found either in Sections 3 or 22 below, or through the cross-references
provided in those Sections.

1.

Recitals

a.

Under the terms of a commercial Loan Application/Commitment dated November 20,
2014, as amended (the “Commitment”), AEGON USA Realty Advisors, LLC (“AEGON”),
as agent for the Lender, agreed to fund a loan in the principal amount of
$62,595,000 (the “Loan”).

b.

The Lender has funded the Loan in the principal amount of $62,595,000 in
accordance with the Commitment, and to evidence the Loan, the Borrower has
executed and delivered to the Lender (1) a certain Secured Promissory Note, of
even date, in the amount of $45,890,000, with a maturity and final payment date
of January 1, 2030 (the “15-Year Note”), and (2) a certain Secured Promissory
Note, of even date, in the amount of $16,705,000, with a maturity and final
payment date of January 1, 2025 (the “10-Year Note”) (each, a “Note”).  The
15-Year Note and the 10-Year Note, together with any extensions, renewals or
modifications, are collectively described as the “Notes.”

c.

The Notes and the Loan are further described in a Loan Agreement dated as of the
date hereof (the “Loan Agreement”).

d.

The Commitment requires that the Loan be secured by all of the Borrower’s
existing and after-acquired interest in certain real property and by certain
tangible and intangible personal property.

2.

Granting Clause

To secure the repayment of the Indebtedness, any increases, modifications,
renewals or extensions of the Indebtedness, and any substitutions for the
Indebtedness, as well as the performance of the Borrower’s other Obligations,
and in consideration of the sum of ten dollars ($10.00) and other valuable
consideration, the receipt and sufficiency of which are acknowledged, the
Borrower mortgages, grants, bargains, warrants, conveys, alienates, releases,
assigns, sets over and confirms to the Lender, and to its successors and assigns
forever, all of the Borrower’s existing and after acquired interests in the Real
Property.

3.

Defined Terms 

The following defined terms are used in this Mortgage and in other Loan
Documents. For ease of reference, terms relating primarily to the Security
Agreement are defined in Subsection 22.1.

“Absolute Assignment of Leases and Rents” means the Loan Document bearing this
heading.

“Affiliate” of any person means any entity controlled by, or under common
control with, that person.

“Appurtenances” means all rights, estates, titles, interests, privileges,
easements, tenements, hereditaments, titles, royalties, reversions, remainders
and other interests, whether presently held by the Borrower or acquired in the
future, that may be conveyed as interests in the Land under the laws of
Minnesota. Appurtenances include the Easements and the Assigned Rights.

“Assigned Rights” means all of the Borrower’s rights, easements, privileges,
tenements, hereditaments, contracts, claims, licenses or other interests. The
Assigned Rights include all of the Borrower’s rights in and to, whether
presently held by the Borrower or acquired in the future:

(a)

any greater estate in the Real Property;

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(b)

insurance policies required to be carried hereunder, including the right to
negotiate claims and to receive Insurance Proceeds and unearned insurance
premiums (except as expressly provided in Subsection 8.1);

(c)

Condemnation Proceeds;

(d)

licenses and agreements permitting the use of sources of groundwater or water
utilities, septic leach fields, railroad sidings, sewer lines, and means of
ingress and egress;

(e)

drainage over other property;

(f)

air space above the Land;

(g)

mineral rights;

(h)

party walls;

(i)

vaults and their usage;

(j)

franchises;

(k)

commercial tort claims relating to the Property;

(l)

construction contracts;

(m)

roof and equipment guarantees and warranties;

(n)

building and development licenses and permits;

(o)

tax credits, refunds or other governmental entitlements, credits or rights,
whether or not vested;

(p)

licenses and applications (whether or not yet approved or issued);

(q)

rights under management and service contracts;

(r)

leases of Fixtures; and

(s)

trade names, trademarks, trade styles, service marks, logos and copyrights
relating to the Real Property, and agreements with architects, environmental
consultants, property tax consultants, engineers, and any other third-party
contractors whose services benefit the Real Property.

“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as amended, 11 U.S.C.
Sections 101 et seq., and the regulations promulgated pursuant to those
statutes.

“Brighton Village Parcel” means the Parcel located in New Brighton, Minnesota
and described on Exhibit A to the Loan Agreement as Parcel “P-1.”

“Business Day” means any day when state and federal banks are open for business
in New York, New York.

“Carveout Guarantee and Indemnity” means that certain “Carveout Guarantee and
Indemnity Agreement” entered into by the Carveout Obligor on the date of this
Mortgage, together with all substitutions, modifications, and amendments.

“Carveout Obligations” means those obligations described in Section 21.

“Carveout Obligor” means Sterling Properties, LLLP, a North Dakota limited
liability limited partnership. Any other Person who expressly assumes liability
for the Carveout Obligations during the term of the Loan shall become a
“Carveout Obligor” for purposes of this Mortgage.

“Carveouts” means those matters from which Carveout Obligations may arise, which
are described in Section 21.

“Condemnation Proceeds” means all money or other property that has been, or is
in the future, awarded or agreed to be paid or given in connection with any
taking by eminent domain of all or any part of the Real Property

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(including a taking through the vacation of any street dedication or through a
change of grade of such a street), either permanent or temporary, or in
connection with any purchase in lieu of such a taking, or as a part of any
related settlement, except for the right to condemnation proceeds awarded to the
tenant in a separate proceeding in respect of the lost value of the tenant’s
leasehold interest, provided that the award does not reduce, directly or
indirectly, the award to the owner of the Real Property.

“Curable Non-Monetary Default” means any of the acts, omissions, or
circumstances specified in Subsection 10.3 below.

“Default” means any of the acts, omissions, or circumstances specified in
Section 10 below.

“Default Rate” means the rate of interest specified as the “Default Rate” in
each Note.

“Development Agreements” means all development, utility or similar agreements
included in the Permitted Encumbrances.

“Easements” means the Borrower’s existing and future interests in and to the
declarations, easements, covenants, and restrictions appurtenant to the Real
Property.

“Environmental Indemnity Agreement” means the Loan Document bearing that
heading, together with all substitutions, modifications, and amendments.

“Environmental Laws” means all present and future laws, statutes, ordinances,
rules, regulations, orders, guidelines, rulings, decrees, notices and
determinations of any Governmental Authority to the extent that they pertain to:
(A) the protection of health against environmental hazards; (B) the protection
of the environment, including air, soils, wetlands, and surface and underground
water, from contamination by any substance that may have any adverse health
effect on humans, livestock, fish, wildlife, or plant life, or which may disturb
an ecosystem; (C) underground storage tank regulation or removal; (D) wildlife
conservation; (E) protection or regulation of natural resources; (F) the
protection of wetlands; (G) management, regulation and disposal of solid and
hazardous wastes; (H) radioactive materials; (I) biologically hazardous
materials; (J) indoor air quality; or (K) the manufacture, possession, presence,
use, generation, storage, transportation, treatment, release, emission,
discharge, disposal, abatement, cleanup, removal, remediation or handling of any
Hazardous Substances. “Environmental Laws” include the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §9601 et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq., the Federal
Water Pollution Control Act, as amended by the Clean Water Act, 33 U.S.C. §1251
et seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the Toxic Substances
Control Act, 15 U.S.C. §2601 et seq., all similar state statutes and local
ordinances, and all regulations promulgated under any of those statutes, and all
administrative and judicial actions respecting such legislation, all as amended
from time to time.

“ESA” means the written environmental site assessment of the Real Property
obtained under the terms of the Commitment.

“Escrow Expenses” means those expenses in respect of real and personal property
taxes and assessments, Insurance Premiums and such other Impositions as the
Lender pays from time to time directly from the Escrow Fund using monies
accumulated through the collection of Monthly Escrow Payments.

“Escrow Fund” means the funds deposited by Borrower with the Lender pursuant to
Section 9 hereof, as reflected in the accounting entry maintained on the books
of the Lender as funds available for the payment of Escrow Expenses under the
terms of this Mortgage.

“Fixtures” means all materials, supplies, equipment, apparatus and other items
now or hereafter attached to or installed on the Land and Improvements in a
manner that causes them to become fixtures under the laws of Minnesota,
including all built-in or attached furniture or appliances, elevators,
escalators, heating, ventilating and air conditioning system components,
emergency electrical generators and related fuel storage or delivery systems,
septic system components, storm windows, doors, electrical equipment, plumbing,
water conditioning, lighting,

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cleaning, snow removal, lawn, landscaping, irrigation, security, incinerating,
fire-fighting, sprinkler or other fire safety equipment, bridge cranes or other
installed materials handling equipment, satellite dishes or other
telecommunication equipment, built-in video conferencing equipment, sound
systems or other audiovisual equipment, and cable television distribution
systems. Fixtures do not include trade fixtures, office furniture and office
equipment owned by a tenant who is unrelated to the Borrower, provided such
items may be detached and removed by the tenant without damage to the Real
Property, other than incidental damage that the tenant is obligated to repair
under the terms of its Lease. Fixtures expressly include HVAC, mechanical,
security and similar systems of general utility for the operation of the
Improvements as leasable commercial real property.

“Governmental Authority” means any political entity with the legal authority to
impose any requirement on the Property, including the governments of the United
States, the State of Minnesota, Anoka County and Ramsey County, any city, town
or village in which any of the Land is located, and any other entity with
jurisdiction to decide, regulate, or affect the ownership, construction, use,
occupancy, possession, operation, maintenance, alteration, repair, demolition or
reconstruction of any portion or element of the Real Property.

“Hazardous Substance” means any substance the release of or the exposure to
which is prohibited, limited or regulated by any Environmental Law, or which
poses a hazard to human health, including: (A) any “oil,” as defined by the
Federal Water Pollution Control Act and regulations promulgated thereunder
(including crude oil or any fraction of crude oil), (B) any radioactive
substance and (C) Stachybotrys chartarum or other molds. However, the term
“Hazardous Substance” includes neither (A) a substance used in the cleaning and
maintenance of the Real Property, if the quantity, storage and manner of its use
are customary, prudent, and do not violate applicable law, nor (B) automotive
motor oil in immaterial quantities, if leaked from vehicles in the ordinary
course of the operation of the Real Property and cleaned up in accordance with
reasonable property management procedures and in a manner that violates no
applicable law.

“Impositions” means all real and personal property taxes levied against the
Property; general or special assessments; ground rent; water, gas, sewer, vault,
electric or other utility charges; common area charges; owners’ association dues
or fees; fees for any easement, license or agreement maintained for the benefit
of the Property; and any and all other taxes, levies, user fees, claims, charges
and assessments whatsoever that at any time may be assessed, levied or imposed
on the Property or upon its ownership, use, occupancy or enjoyment, and any
related costs, interest or penalties. In addition, “Impositions” include all
documentary, stamp or intangible personal property taxes that may become due in
connection with the Indebtedness, including Indebtedness in respect of any
future advance made by the Lender to the Borrower, or that are imposed on any of
the Loan Documents.

“Improvements” means, to the extent of the Borrower’s existing and future
interest, all buildings and improvements of any kind erected or placed on the
Land now or in the future, including the Fixtures, together with all appurtenant
rights, privileges, Easements, tenements, hereditaments, titles, reversions,
remainders and other interests.

“Incurable Non-Monetary Default” shall have the meaning stated in Section 10.2.
 

“Indebtedness” means all sums that are owed or become due pursuant to the terms
of each Note, this Mortgage, or any of the other Loan Documents or any other
writing executed by the Borrower relating to the Loan, including scheduled
principal payments, scheduled interest payments, default interest, late charges,
prepayment premiums, accelerated or matured principal balances, advances,
collection costs (including reasonable attorneys’ fees), reasonable attorneys’
fees and costs in enforcing or protecting each Note, this Mortgage, or any of
the other Loan Documents in any probate, bankruptcy or other proceeding,
receivership costs and all other financial obligations of the Borrower incurred
in connection with the Loan transaction, provided, however, that this Mortgage
shall not secure any Loan Document or any particular person’s liabilities or
obligations under any Loan Document to the extent that such Loan Document
expressly states that it or such particular person's liabilities or obligations
are unsecured by this Mortgage. “Indebtedness” shall also include any
obligations under agreements executed and delivered by Borrower which
specifically provide that such obligations are secured by this Mortgage.

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“Insurance Premiums” means all premiums or other charges required to maintain in
force any and all insurance policies that this Mortgage requires that the
Borrower maintain.

“Insurance Proceeds” means (A) all proceeds of all insurance now or hereafter
carried by or payable to the Borrower with respect to the Real Property,
including with respect to the interruption of rents or income derived from the
Property, all unearned insurance premiums and all related claims or demands, and
(B) all Proceeds (as defined in Subsection 22.1).

“Key Principal” means Sterling Properties, LLLP, a North Dakota limited
liability limited partnership.

“Land” means those certain tracts of land located in Anoka County and Ramsey
County, Minnesota, which are described on Exhibit A, attached hereto and made a
part hereof, together with the Appurtenances.

“Leases” means all leases, subleases, licenses, concessions, extensions,
renewals and other agreements (whether written or oral, and whether presently
effective or made in the future) through which the Borrower grants any
possessory interest in and to, or any right to occupy or use, all or any part of
the Real Property, and any related guaranties.

“Legal Control” means the power, either directly or indirectly, to exercise the
authority of the Borrower as owner of the Real Property, either as the majority
shareholder of the common stock of a corporation, the sole general partner of a
limited partnership, the managing general partner of a general partnership, or
the sole manager or sole managing member of a limited liability company,
provided the person or entity exercising such authority cannot be divested of
such authority without its consent, either directly or indirectly, except for
cause.

“Legal Requirements” means all laws, statutes, rules, regulations, ordinances,
judicial decisions, administrative decisions, building permits, development
permits, certificates of occupancy, or other requirements of any Governmental
Authority.

“Loan Allocation” has the meaning set forth in the Loan Agreement.

“Loan Documents” means all documents evidencing the Loan or delivered in
connection with the Loan, whether entered into at the closing of the Loan or in
the future, including each Note, this Mortgage, the Absolute Assignment of
Leases and Rents, the Carveout Guarantee and Indemnity, and the Environmental
Indemnity Agreement.

“Maximum Permitted Rate” means the highest rate of interest permitted to be paid
or collected by applicable law with respect to the Loan.

“Monthly Escrow Payment” means the sum of the Monthly Imposition Requirement,
the Monthly Insurance Premium Requirement, and the Monthly Reserve Requirement.

“Monthly Imposition Requirement” means one-twelfth (1/12th) of the annual amount
that the Lender estimates will be required to permit the timely payment by the
Lender of those Impositions that the Lender elects, from time to time, to
include in the calculation of the Monthly Imposition Requirement. Such
Impositions shall include real and personal property taxes and may include, at
the Lender’s sole and absolute discretion, any Impositions that the Borrower has
failed to pay on a timely basis during the term of the Loan. The Lender shall
base its estimate on the most recent information supplied by the Borrower
concerning future Impositions. If the Borrower fails to supply such information
or if it is unavailable at the time of estimation, the Lender shall estimate
future Impositions using historical information and an annual inflation factor
equal to the lesser of five percent (5%) and the maximum inflation factor
permitted by law.

“Monthly Insurance Premium Requirement” means one-twelfth (1/12th) of the annual
amount that the Lender estimates (based on available historical data and using,
if future Insurance Premiums are as yet undeterminable, a five percent (5%)
inflation factor) will be required to permit the timely payment of the Insurance
Premiums by the Lender.

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“Monthly Reserve Requirement” means the monthly payment amount which the Lender
estimates will result, over the subsequent twelve (12) months, in the
accumulation of a surplus in the Escrow Fund equal to the sum of the Monthly
Imposition Requirement and the Monthly Insurance Premium Requirement.

“Notes” has the meaning set forth in the Recitals, and includes all extensions,
renewals and modifications of the Notes.

“Notice” means a notice given in accordance with the provisions of Subsection
25.13.

“Obligations” means all of the obligations required to be performed under the
terms and conditions of any of the Loan Documents by any Obligor.

“Obligor” means the Borrower, the Carveout Obligor, or any other Person that is
liable under the Loan Documents for the payment of any portion of the
Indebtedness, or the performance of any other obligation required to be
performed under the terms and conditions of any of the Loan Documents, under any
circumstances.

“Parcel” has the meaning set forth in the Loan Agreement.

“Participations” means participation interests in the Loan Documents granted by
the Lender.

“Permitted Control Group Member” shall mean any member of a group comprised of
the Key Principal.

“Permitted Encumbrances” means (A) the lien of taxes and assessments not yet due
and payable and (B) those matters of public record listed as special exceptions
or subordinate matters in the Lender's title insurance policy insuring the
priority of this Mortgage.

“Permitted Transfer” means a transfer specifically described in Section 14 as
permitted.

“Person” means any individual, corporation, limited liability company,
partnership, trust, unincorporated association, government, governmental
authority or other entity.

“Property” means the Real Property and the Leases, Rents and Personal Property
(as such latter term is defined in Subsection 22.1 below).

“Qualified Offer” means a written offer from the Borrower to do whichever of the
following the Lender elects: (A) permit an uncontested foreclosure, or (B)
deliver a deed in lieu of foreclosure within sixty (60) days of the Lender’s
acceptance of the offer. An offer is not a Qualified Offer if the offer is
conditioned on any payment by the Lender, on the release of any Obligor from any
Obligation, or on any other concession.

“Qualified Property Manager” means either (A) a financially sound, professional
property management company, experienced in managing properties similar in type
and quality to the Real Property, and which is one of the top three
institutional property management companies in the real estate market where the
Real Property is located, based on the number of units under its management or
(B) another property management company approved in writing by the Lender.

“Real Property” means the Land and the Improvements.

“Rents” means all rents, income, receipts, issues and profits and other benefits
paid or payable for using, leasing, licensing, possessing, operating from or in,
residing in, selling, mining, extracting minerals from, or otherwise enjoying
the Real Property, whether presently existing or arising in the future, to which
the Borrower may now or hereafter become entitled or may demand or claim from
the commencement of the Loan term through the time of the satisfaction of all of
the Obligations, including security deposits, amounts drawn under letters of
credit securing tenant obligations, minimum rents, additional rents, common area
maintenance charges, parking revenues, deficiency rents, termination payments,
space contraction payments, damages following default under a Lease, premiums
payable by tenants upon their exercise of cancellation privileges, proceeds from
lease guarantees, proceeds payable under any policy of insurance covering loss
of rents resulting from untenantability caused by destruction or damage to the
Real Property, all rights and claims of any kind which the Borrower has or may
in the

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future have against the tenants under the Leases, lease guarantors, or any
subtenants or other occupants of the Real Property, all proceeds of any sale of
the Real Property in violation of the Loan Documents, any future award granted
the Borrower in any court proceeding involving any such tenant in any
bankruptcy, insolvency, or reorganization proceedings in any state or federal
court, and any and all payments made by any such tenant in lieu of rent.

“Restoration” means (A) in the case of a casualty resulting in damage to or the
destruction of the Improvements, the repair or rebuilding of the Improvements to
their original condition, or (B) in the case of the condemnation of a portion of
the Real Property, the completion of such work as may be necessary in order to
remedy the effects of the condemnation so that the value and income-generating
characteristics of the Real Property are restored.

“Roseville Parcel” means that Parcel described as P-5 in the Loan Agreement
consisting of Rosedale Estates South and North, and located in Roseville,
Minnesota.  The Roseville Parcel is legally described on Exhibit A to this
Mortgage as Tracts 2 and 6, collectively.

“Roseville Special Assessment” means the special assessment or assessments that
are shown as deferred assessments for streets affecting the Roseville Parcel as
described in the title insurance policy issued to Lender in connection with the
Loan by First American Title Insurance Company as Assessment “P-99-02-23.”

“Termination Payments” means Rents paid to the Borrower in consideration of the
Borrower’s release of a party from liability for a contractual or other legal
obligation (e.g., lease termination, space contraction, and legal settlement
payments). Termination Payments do not include payments of Rents under $250,000
paid pursuant to termination or space contraction options contained in Leases
approved by the Lender or in Leases deemed approved or not requiring Lender
approval under the Assignment.

4.

Title

The Borrower represents to and covenants with the Lender and with its successors
and assigns that, at the point in time of the grant of this Mortgage, the
Borrower is well seized of good and indefeasible title to the Real Property, in
fee simple absolute, subject to no lien or encumbrance except the Permitted
Encumbrances. The Borrower warrants this estate and title to the Lender and to
its successors and assigns forever, against all lawful claims and demands of all
Persons. The Borrower shall maintain mortgagee title insurance issued by a
solvent carrier, covering the Real Property in an amount at least equal to the
amount of the Loan’s original principal balance. This Mortgage is and shall
remain a valid and enforceable first mortgage on and security title to the Real
Property, and if the validity or enforceability of this first mortgage is
attacked by appropriate proceedings, the Borrower shall diligently and
continuously defend it through appropriate proceedings. Should the Borrower fail
to do so, the Lender may at the Borrower’s expense take all necessary action,
including the engagement and compensation of legal counsel, the prosecution or
defense of litigation, and the compromise or discharge of claims. The Borrower
shall defend, indemnify and hold the Lender harmless in any suit or proceeding
brought to challenge or attack the validity, enforceability or priority of this
Mortgage. If a prior construction, mechanics’ or materialmen’s lien on the Real
Property arises by operation of statute during any construction or repair of the
Improvements, the Borrower shall either cause the lien to be discharged by
paying when due any amounts owed to such persons, or shall comply with Section
12 of this Mortgage.

5.

Representations of the Borrower

The Borrower represents to the Lender as follows: 

5.1

Legal Control

The Borrower is under the Legal Control of the Key Principal.

5.2

Formation, Existence, Good Standing

The Borrower is a limited liability company duly organized, validly existing and
in good standing under the laws of Minnesota.

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5.3

Power and Authority

The Borrower has full power and authority to carry on its business as presently
conducted, to own the Property, to execute and deliver the Loan Documents, and
to perform its Obligations.

5.4

Anti-Terrorism Regulations

No Borrower, Borrower Affiliate, or person owning an interest in the Borrower or
in any Borrower Affiliate, is either a “Specially Designated National” or a
“Blocked Person” as those terms are defined in the Office of Foreign Asset
Control Regulations (31 CFR Section 500 et seq.).

5.5

Due Authorization

The Loan transaction and the performance of all of the Borrower’s Obligations
have been duly authorized by all requisite limited liability company action, and
each individual executing any Loan Document on behalf of the Borrower has been
duly authorized to do so.

5.6

No Conflict, Default or Violations

The delivery, execution or performance of the Borrower’s Obligations will not
conflict with, result in any breach of, or constitute a default under, any
contract, agreement, document or other instrument to which the Borrower is a
party or by which the Borrower may be bound or affected, and do not and will not
violate or contravene any law, statute, rule, order or regulation of any
Governmental Authority to which the Borrower or the Property are subject; nor do
any such other instruments impose or contemplate any obligations which are or
will be inconsistent with the Loan Documents.

5.7

No Further Approvals or Actions Required

No approval by, authorization of, or filing with any Governmental Authority is
necessary in connection with the authorization, execution and delivery of the
Loan Documents by the Borrower.

5.8

Due Execution and Delivery

Each of the Loan Documents to which the Borrower is a party has been duly
executed and delivered on behalf of the Borrower.

5.9

Legal, Valid, Binding and Enforceable

Each of the Loan Documents to which the Borrower is a party constitutes the
legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms.

5.10

Accurate Financial Information

All financial information furnished by the Borrower to the Lender in connection
with the application for the Loan is true, correct and complete in all material
respects and does not omit to state any fact or circumstance necessary to make
the statements in them not misleading, and there has been no material adverse
change in the financial condition of the Borrower since the date of such
financial information.  Notwithstanding the foregoing, Lender acknowledges that
the Borrower has relied in part on information furnished by the Seller of the
Real Property in providing financial information about the real property.

5.11

Compliance with Legal Requirements

All governmental approvals and licenses required for the conduct of the
Borrower’s business and for the maintenance and operation of the Real Property
in compliance with applicable law are in full force and effect, and the Real
Property is currently being operated in compliance with the Legal Requirements
in all material respects.

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5.12

Contracts and Franchises

All contracts and franchises necessary for the conduct of the Borrower’s
business and for the operation of the Real Property in accordance with good
commercial practice are in force.

5.13

No Condemnation Proceeding

As of the Effective Date of this Mortgage, the Borrower has no knowledge of any
present, pending or threatened condemnation proceeding or award affecting the
Real Property.

5.14

No Litigation

As of the Effective Date of this Mortgage, to Borrower’s knowledge, there is no
suit or administrative proceeding pending, or threatened, against or affecting
the Borrower or the Real Property which, if adversely determined, may have a
material adverse effect on the Real Property or on the financial condition or
business of the Borrower.

5.15

No Casualty

As of the Effective Date of this Mortgage, no damage to the Real Property by any
fire or other casualty has occurred, other than damage that has been repaired in
accordance with good commercial practice and in compliance with applicable law.

5.16

Independence of the Real Property

The Real Property may be operated independently from other land and improvements
not included within or located on the Land, and it is not necessary to own or
control any property other than the Real Property in order to meet the
obligations of the landlord under any Lease, or in order to comply with the
Legal Requirements.

5.17

Complete Lots and Tax Parcels

The Land is comprised exclusively of tax parcels that are entirely included
within the Land, and, if the Land is subdivided, of subdivision lots that are
entirely included within the Land.

5.18

Ownership of Fixtures

The Borrower owns the Fixtures free of any encumbrances, including purchase
money security interests, rights of lessors, and rights of sellers under
conditional sales contracts or other financing arrangements.

5.19

Commercial Property

The Real Property consists of multifamily apartment projects to be owned by
Borrower for commercial investment purposes, and the Loan has not been made for
personal, family or household purposes.

5.20

Real Property is not Homestead Property

The Real Property is NOT HOMESTEAD PROPERTY of the Borrower or of the spouse of
any person named as the Borrower.

5.21

Performance under Development Agreements

All of the obligations of the owner of the Real Property due under the
Development Agreements, if any, have been fully, timely and completely performed
and such performance has been accepted by the related governmental agency or
utility company, and no Governmental Authority has alleged that any default
exists under any of the Development Agreements.

5.22

Status of Certain Title Matters

To Borrower’s knowledge, each of the Easements included within the Appurtenances
(a) is valid and in full force and effect and may not be amended or terminated,
except for cause, without the consent of the

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Borrower, (b) has not been amended or supplemented, (c) requires no approval of
the Improvements that has not been obtained, (d) is free of defaults or alleged
defaults, (e) does not provide for any assessment against the Real Property that
has not been paid in full, and (f) has not been violated by the owner of the
Real Property or, to the best of the Borrower’s knowledge, by any tenant of the
Real Property.

5.23

No Prohibited Transactions

The Borrower represents to the Lender that either (a) the Borrower is not an
“employee benefit plan” within the meaning of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), that is subject to Title I of ERISA,
a “plan” within the meaning of Section 4975 of the Internal Revenue Code of
1986, as amended (the “Code”), or an entity that is deemed to hold “plan assets”
within the meaning of 29 C.F.R. §2510.3-101 of any such employee benefit plan or
(b) the execution of the Loan Documents, the acceptance of the Loan by the
Borrower and the existence of the Loan will not result in a non-exempt
prohibited transaction under §406 of ERISA or Section 4975 of the Code. The
Borrower further warrants and covenants that the foregoing representation will
remain true during the term of the Loan.

5.24

Background of the Borrower and its Principals

There is no history of or pending litigation for felonious charges, foreclosure,
or insolvency on the part of the Borrower, any party that has a significant
economic interest in the Borrower, or any party that has Legal Control of the
Borrower.

5.25

Solvency

The Borrower is not the subject of any bankruptcy court filing, insolvency
proceeding, receivership, composition or assignment for the benefit of
creditors, and is solvent and has the ability to pay its debts as they become
due.  As of the Effective Date of this Mortgage, to Borrower’s knowledge, there
is no suit or administrative proceeding pending, or threatened, against or
affecting the Borrower or the Real Property which, if adversely determined, may
have a material adverse effect on the Real Property or on the financial
condition of the Borrower.

The Lender acknowledges that the Borrower has relied in full or in part on
representations from, or on information furnished by, the seller of the Real
Property in making the representations of Subsections 5.11 (“Compliance with
Legal Requirements”), 5.12 (“Contracts and Franchises”), 5.13 (“No Condemnation
Proceeding”), 5.14 (“No Litigation”), 5.15 (“No Casualty”), 5.21 (“Performance
under Development Agreements”), and 5.22 (“Status of Certain Title Matters”).

6.

Covenants

6.1

Good Standing

The Borrower shall remain in good standing as a limited liability company under
the laws of Minnesota and shall maintain in force all statements of fictitious
name and registrations necessary for the lawful operation of its business in
Minnesota during the term of the Loan.

6.2

No Default or Violations

The Borrower shall not enter into any contract, agreement, document or other
instrument, if the performance of the Borrower's Obligations would result in any
breach of, or constitute a default under, any such contract, agreement, document
or other instrument, or if the contract, agreement, document or other instrument
would impose or contemplate any obligations the performance of which would
result in a Default under the Loan Documents or would be inconsistent with the
performance of the Borrower's Obligations.

6.3

Payment and Performance

The Borrower shall pay the Indebtedness and perform all of its other
Obligations, as and when the Loan Documents require such payment and
performance.

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6.4

Bankruptcy Remote Entity

The Borrower represents, warrants and covenants that it has not and will not:

(a)

engage in any business or activity other than the ownership, operation and
maintenance of the Property, and activities incidental thereto;

(b)

acquire or own any assets other than (A) the Property, and (B) such incidental
Personal Property as may be necessary for the operation of the Property;

(c)

merge into or consolidate with any Person, or dissolve, terminate, liquidate in
whole or in part, transfer or otherwise dispose of all or substantially all of
its assets or change its legal structure;

(d)

fail to observe all organizational formalities, or fail to preserve its
existence as an entity duly organized, validly existing and in good standing (if
applicable) under the Legal Requirements of the jurisdiction of its organization
or formation, or amend, modify, terminate or fail to comply with the provisions
of its organizational documents;

(e)

own any subsidiary, or make any investment in, any Person;

(f)

commingle its assets with the assets of any other Person;

(g)

incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than the Indebtedness, unsecured trade
payables and unsecured equipment leases (both of which must be incurred in the
ordinary course of business relating to the ownership and operation of the
Property) provided the same (x) do not exceed at any time in the aggregate a
maximum amount of three percent (3%) of the outstanding principal amount of the
Notes, and (y) are paid within sixty (60) days after the date incurred;

(h)

fail to maintain its records, books of account, bank accounts, financial
statements, accounting records and other entity documents separate and apart
from those of any other Person (provided, however, Lender acknowledges that
Sterling Properties, LLLP will own 100% of Borrower and, as a result, Borrower’s
financial statements will be part of the Sterling Properties, LLLP consolidated
statement);

(i)

enter into any contract or agreement with any general partner, member,
shareholder, principal or Affiliate, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on
an arm’s-length basis with unaffiliated third parties;

(j)

maintain its assets in such a manner that it will be costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person;

(k)

assume or guaranty the debts of any other Person, hold itself out to be
responsible for the debts of any other Person, or otherwise pledge its assets
for the benefit of any other Person or hold out its credit as being available to
satisfy the obligations of any other Person;

(l)

make any loans or advances to any Person;

(m)

fail to file its own tax returns (unless prohibited by Legal Requirements from
doing so) it being acknowledged that Borrower may file a consolidated return
with Sterling Properties LLLP;

(n)

fail either to hold itself out to the public as a legal entity separate and
distinct from any other Person or to conduct its business solely in its own name
or fail to correct any known misunderstanding regarding its separate identity;

(o)

fail to maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its
contemplated business operation;

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(p)

fail to pay its own liabilities or to separately account for such liabilities;
and

(q)

acquire obligations or securities of its partners, members, shareholders or
other Affiliates, as applicable.

6.5

Payment of Impositions

The Borrower shall pay the Impositions on or before the last day on which they
may be paid without penalty or interest, and shall, within thirty (30) days,
furnish the Lender with a paid receipt or a cancelled check as evidence of
payment. If the Lender does not receive such evidence, the Lender may obtain it
directly. If it does so, the Lender will charge the Borrower an administrative
fee of $250 for securing the evidence of payment. The payment of this fee shall
be a demand obligation of the Borrower. The Borrower may meet the Imposition
payment requirements of this Subsection 6.5 by remitting the Monthly Escrow
Payments when due, by immediately providing Notice to the Lender of any new
Imposition or increased Imposition unknown to the Lender, and by paying to the
Lender on demand any amount required to increase the Escrow Fund to an amount
sufficient to permit the Lender to pay all Impositions from the Escrow Fund on
time. If the Borrower wishes to contest the validity or amount of an Imposition,
it may do so by complying with Section 12. If any new Legal Requirement (other
than a general tax on income or on interest payments) taxes this Mortgage so
that the yield on the Indebtedness would be reduced, and the Borrower may
lawfully pay the tax or reimburse the Lender for its payment, the Borrower shall
do so.

6.6

Legal Control of the Borrower

The Borrower shall remain under the Legal Control of the Key Principal during
the term of the Loan.

6.7

Management of the Real Property

The Real Property shall be managed at all times by the Key Principal, by a
property management company engaged by the Key Principal to manage the Real
Property, or by a Qualified Property Manager.

6.8

Maintenance of the Real Property

The Borrower shall not commit or permit any waste of the Real Property as a
physical or economic asset, and agrees to maintain in good repair the
Improvements, including structures, roofs, mechanical systems, parking lots or
garages, and other components of the Real Property that are necessary or
desirable for the use of the Real Property, or which the Borrower as landlord
under any Lease is required to maintain for the benefit of any tenant. In its
performance of this Obligation, the Borrower shall promptly and in a good and
workmanlike manner repair or restore, as required under Subsection 6.19, any
elements of the Improvements that are damaged or destroyed. The Borrower shall
also comply with all operation and maintenance plans required by the Lender in
connection with the closing of the Loan and repair or replace roofs, parking
lots, mechanical systems, and other elements of the Improvements requiring
periodic repair or replacement. The Borrower shall carry out such replacements
no less frequently than would a commercially reasonable owner intending to
maintain the maximum income-generating potential of the Real Property over its
reasonable economic life. The Borrower shall not, without the prior written
consent of the Lender, demolish, reconfigure, or materially alter the structural
elements of the Improvements or commence any new construction on the Real
Property, unless such an action is the obligation of the Borrower under a Lease
approved by Lender. The Lender agrees that any request for its consent to such
an action shall be deemed given if the Lender does not respond within fifteen
(15) Business Days to any written request for such a consent, if the request is
accompanied by all materials required to permit the Lender to analyze the
proposed action. 

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6.9

Use of the Real Property

The Borrower agrees that the Real Property may only be used as a residential
apartment complex and for no other purpose. The Real Property may not be
converted to a cooperative or condominium without Lender’s prior written
consent, which consent may be withheld in Lender's sole and absolute discretion.

6.10

Legal Requirements

The Borrower shall maintain in full force and effect all governmental approvals
and licenses required for the conduct of the Borrower’s business and for the
maintenance and operation of the Real Property in compliance with applicable
law, and shall comply with all Legal Requirements relating to the Real Property
at all times.

6.11

Contracts and Franchises

The Borrower shall maintain in force all contracts and franchises necessary for
the conduct of the Borrower’s business and for the operation of the Real
Property in accordance with good commercial practice.

6.12

Covenants Regarding Certain Title Matters

The Borrower shall promptly pay, perform and observe all of its obligations
under the Easements included within the Appurtenances or under reciprocal
easement agreements, operating agreements, declarations, and restrictive
covenants included in the Permitted Encumbrances, shall not modify or consent to
the termination of any of them without the prior written consent of the Lender,
shall promptly furnish the Lender with copies of all notices of default under
them, and shall cause all covenants and conditions under them and benefiting the
Real Property to be fully performed and observed.

6.13

Independence of the Real Property

The Borrower shall maintain the independence of the Real Property from other
land and improvements not included within or located on the Land. In fulfilling
this covenant, the Borrower shall neither take any action which would make it
necessary to own or control any property other than the Real Property in order
to meet the obligations of the landlord under any Lease, or in order to comply
with the Legal Requirements, nor take any action which would cause any land or
improvements other than the Land and the Improvements to rely upon the Land or
the Improvements for those purposes.

6.14

Complete Lots and Tax Parcels

The Borrower shall take no action that would result in the inclusion of any
portion of the Land in a tax parcel or subdivision lot that is not entirely
included within the Land.

6.15

Commercial Property

The Real Property shall be used for investment purposes as a commercial
apartment complex rather than for  personal or family residential purposes. 

6.16

Real Property is not Homestead Property

The Real Property shall NOT BECOME HOMESTEAD PROPERTY of the Borrower or of the
spouse of any person named as the Borrower.

6.17

Performance under Development Agreements

The Borrower shall fully, timely and completely perform all of the obligations
of the owner of the Real Property due under the Development Agreements, if any,
and shall cause no default under any of the Development Agreements.

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6.18

Status of Certain Title Matters

The Borrower shall not take or fail to take any action with respect to the
Easements included within the Appurtenances or the reciprocal easement
agreements, operating agreements, declarations, and restrictive covenants
included in the Permitted Encumbrances if, as the result of such an action or
failure, the subject Easement or other title matter would (a) be rendered
invalid or without force or effect, (b) be amended or supplemented without the
consent of the Lender, (c) be placed in default or alleged default, (d) result
in any lien against the Real Property, or (e) give rise to any assessment
against the Real Property, unless immediately paid in full.

6.19

Restoration upon Casualty or Condemnation

If a casualty or condemnation occurs, the Borrower shall promptly commence and
diligently complete the Restoration of the Real Property, provided the related
Insurance Proceeds or Condemnation Proceeds held by the Lender are available for
Restoration under the terms of Sections 8.3 and 8.5.

6.20

Performance of Landlord Obligations 

The Borrower shall perform its obligations as landlord under the Leases and
shall neither take any action, nor fail to take any action, if the action or
failure would be inconsistent with the commercially reasonable management of the
Real Property for the purpose of enhancing its long-term performance and value.

6.21

Financial Reports and Operating Statements

(a)

Maintenance of Books and Records

During the term of the Loan, the Borrower shall maintain complete and accurate
accounting and operational records, including copies of all Leases and other
material written contracts relating to the Real Property, copies of all tax
statements, and evidence to support the payment of all material property-related
expenses.

(b)

Delivery of Financial and Property-Related Information

Within one hundred twenty (120) days after the end of each of its fiscal years,
or, if a Default exists, on demand by the Lender, the Borrower shall deliver to
the Lender copies of the financial statements of the Borrower, including balance
sheets and earnings statements. Within forty-five (45) days after the end of
each of its fiscal quarters, or, if a Default exists, on demand by the Lender,
the Borrower shall deliver to the Lender (A) a complete and accurate operating
statement for the Real Property, and (B) a complete rent roll, all in form
satisfactory to the Lender. The operating statement and rent roll must be
certified by the Borrower to be true and correct and must include each tenant’s
name, unit type and address, occupied and leased, rent, lease expiration date,
renewal options and related rental rates, delinquencies and vacancies.  If the
Borrower fails to deliver the items required in this Subsection, the Lender may
engage an accounting firm to prepare the required items. The Borrower shall
cooperate fully with any investigative audit required to permit the accounting
firm to produce these items, and the fees and expenses incurred in connection
with their preparation shall be paid on demand by the Borrower.

(c)

Reporting Format

The Borrower shall cooperate in providing the reports required above in any
industry-standard format that the Lender may designate, provided such reporting
format is not cost prohibitive.

(d)

Effect of Failure to Deliver Financial and Property Reports

If no Default exists and the Borrower or the Carveout Obligor fails to provide
the financial and property reports required under this Section before the
applicable deadline, the Lender will provide a Notice of this failure and a
thirty (30)-day opportunity to cure before a Default shall exist. All

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monthly payments of principal and interest under the Notes that become due after
this cure period has elapsed but before the reports are received by the Lender
must be accompanied by a fee of .000834 times the principal balance of the Loan
at the beginning of the previous month until such time as the required reports
are received by the Lender, regardless of whether the Notice has asserted that
the failure constitutes a Default under this Mortgage. This fee represents a
notional re-pricing of the Loan by one hundred (100) basis points to compensate
the Lender for (A) the increased risk resulting from the Lender’s inability to
monitor and service the Loan using up-to-date information and (B) the reduced
value and liquidity of the Loan as a financial asset.

(e)

Certification of Information

The annual financial and operating statements provided under this Subsection
need not, as an initial matter, be certified by an independent certified public
accountant as having been prepared in accordance with generally accepted
accounting principles, consistently applied, or, in the case of financial
statements prepared on a cash or income tax basis, or of operating statements,
as not materially misleading based on an audit conducted in accordance with
generally accepted auditing standards. The Borrower shall, however, certify that
such statements are true and correct, and the Lender expressly reserves the
right to require such a certification by an independent certified public
accountant if a Default exists or if the Lender, in good faith, has reason to
believe that any previously provided financial or operating statement is
misleading in any material respect.

6.22

Estoppel Statements

Upon request by the Lender, the Borrower shall, within ten (10) Business Days of
Notice of the request, furnish to the Lender or to whom it may direct, a written
statement acknowledging the amount of the Indebtedness and disclosing  all
offsets or defenses exist against the Indebtedness. Thereafter, the Borrower
shall be estopped from asserting any other offsets or defenses alleged to have
arisen as of the date of the statement.

6.23

Prohibition on Certain Distributions

If a Default exists under any of Subsections 10.1,  10.2(b),  10.2(c),  10.2(d),
 10.2(e) or 10.2(f), the Borrower shall not pay any dividend or make any
partnership, trust or other distribution, and shall not make any payment or
transfer any property in order to purchase, redeem or retire any interest in its
beneficial interests or ownership.

6.24

Use of Loan Proceeds

The Loan proceeds shall be used solely for commercial purposes.

6.25

Prohibition on Cutoff Notices

The Borrower shall not issue any Notice to the Lender to the effect that liens
on the Real Property after the date of the Notice will enjoy priority over the
lien of this Mortgage.

6.26

Prohibited Person Compliance

The Borrower warrants, represents and covenants that neither the Borrower nor
any Obligor nor any of their respective affiliated entities is or will be an
entity or person (i) that is listed in the Annex to, or is otherwise subject to
the provisions of, Executive Order 13224 issued on September 24, 2001
(“EO13224”), (ii) whose name appears on the United States Treasury Department's
Office of Foreign Assets Control (“OFAC”) most current list of “Specifically
Designated Nationals and Blocked Persons” (which list may be published from time
to time in various mediums including, but not limited to, the OFAC website,
http://www.treasury.gov/ofac/downloads/t11sdn.pdf), (iii) who commits, threatens
to commit or supports “terrorism”, as that term is defined in EO13224, or (iv)
who is otherwise affiliated with any entity or person listed above (any and all
parties or persons described in subparts [i] - [iv] above are herein referred to
as a

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“Prohibited Person”). The Borrower covenants and agrees that neither the
Borrower, nor any Obligor nor any of their respective affiliated entities will
(i) conduct any business, nor engage in any transaction or dealing, with any
Prohibited Person, including, but not limited to, the making or receiving of any
contribution of funds, goods, or services to or for the benefit of a Prohibited
Person, or (ii) engage in or conspire to engage in any transaction that evades
or avoids, or has the purpose of evading or avoiding, or attempts to violate,
any of the prohibitions set forth in EO13224. The Borrower further covenants and
agrees to deliver (from time to time) to the Lender any such certification or
other evidence as may be requested by the Lender in its sole and absolute
discretion, confirming that (i) neither the Borrower nor any Obligor is a
Prohibited Person and (ii) neither the Borrower nor any Obligor has engaged in
any business, transaction or dealings with a Prohibited Person, including, but
not limited to, the making or receiving of any contribution of funds, goods, or
services, to or for the benefit of a Prohibited Person.

7.

Insurance Requirements

At all times until the Indebtedness is paid in full, the Borrower shall maintain
insurance coverage and administer insurance claims in compliance with this
Section.

7.1

Minimum Required Coverages

(a)

“All Risk” Property Insurance Coverage

The Borrower shall maintain property insurance coverage at least equivalent or
superior to the Insurance Services Offices (ISO) “Cause of Loss – Special Form”
coverage in an amount not less than one hundred percent (100%) of the
replacement cost of all insurable elements of the Real Property and of all
tangible Personal Property, with coinsurance waived, or if a coinsurance clause
is in effect, with an Agreed Amount endorsement acceptable to the Lender.
Coverage shall extend to the Real Property and to all tangible Personal
Property.

(b)

Broad Form Boiler and Machinery/HVAC/Equipment Breakdown

The Borrower shall maintain broad form boiler and machinery coverage, including
coverage for resulting loss of income/loss of rents/extra expense if any of the
following is located on the Real Property: any boiler or other fired-pressure
vessel; any machinery containing pressure; or any machinery generating or
transmitting power, including without limitation, centralized HVAC equipment,
community water heaters, refrigeration or air conditioning vessels, or pumps.

(c)

Flood

If the Real Property is located in a special flood hazard area (SFHA, also known
as the 100-year floodplain) according to the most current flood insurance rate
map (FIRM) issued by the Federal Emergency Management Agency (FEMA) and if flood
insurance is available, the Borrower shall maintain flood insurance coverage on
all insurable elements of the Real Property and of all tangible Personal
Property for one hundred percent (100%) of the replacement cost or the maximum
amount available under the National Flood Insurance Program (NFIP), and if
available the resulting loss of business income/loss of rents/extra expense.

(d)

Windstorm

The Borrower shall maintain windstorm coverage that includes all named
windstorms. Windstorm coverage may be provided by a policy separate from the
other insurance coverage required in this Section.

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(e)

Business Interruption/Time Element Coverage

The Borrower shall maintain a form of business interruption coverage or loss of
rents/extra expense coverage for resulting loss of income by a covered peril in
the amount of one year’s business income from the Property or loss of
rents/extra expense.

(f)

Construction-Related Coverage

During the term of the Loan, while construction of any Improvements is in
progress, the Borrower shall maintain Builder’s Risk coverage written on an all
risk basis, completed value form, with limits reflecting the total completed
value of the structure. Coverage shall extend to all property of the Borrower
that is to be used during the excavation and preparation of the site of the
Improvements, the construction of the Improvements (whether underground or
above-ground) or that is intended to be incorporated into the Improvements,
whether located on the Real Property, stored off-site or in transit. The
Borrower and the general contractor (if it is an entity other than the Borrower)
shall be named as insured under liability coverage.

(g)

Comprehensive/General Liability (CGL)

The Borrower shall maintain commercial general liability coverage for not less
than $1,000,000 combined single limit per occurrence and general aggregate limit
of $2,000,000.

(h)

Umbrella/Excess Liability

The Borrower shall maintain umbrella or excess liability coverage in an amount
reasonably determined by the Lender, but in no event less than $1,000,000 per
occurrence and in the aggregate. Umbrella or excess coverage should follow form
to the underlying coverage.

(i)

Elective or Additional Coverages

The Lender may require additional insurance coverages or endorsements
appropriate to the property type and site location. Additional coverages may
include earthquake, mine subsidence, sinkhole, personal property, supplemental
liability, or coverages of other property-specific risks.  Borrower agrees to
maintain in effect law and ordinance coverage satisfactory to Lender for the
Brighton Village Parcel, in an amount not less than Five Million Dollars
($5,000,000), throughout the term of the Loan, unless otherwise agreed in
writing by Lender; provided however, that such coverage may be effected through
a blanket endorsement subject to the limitations in Section 7.2 below.

7.2

Blanket Coverage

The Borrower may satisfy the requirements of this Section through a so-called
“blanket insurance policy” if (a) the policy includes limits by property
location and (b) the Lender determines, in the exercise of its sole and absolute
discretion, that the amount of such coverage is sufficient in light of the other
risks and properties insured under the blanket policy.

7.3

How the Lender Shall Be Named

On all property insurance policies and coverages required under this Section
(including coverage against loss of business income, also known as business
income/loss of rents/extra expense), the Lender must be named as “first
mortgagee” under a standard mortgagee clause and as a “loss payee” under a loss
payee endorsement or a Lenders Loss Payable endorsement. On the Builder’s Risk
and Commercial General Liability policies, the Lender must be named as an
“additional insured.” The Lender shall be referred to verbatim as follows:
“Transamerica Life Insurance Company and its successors, assigns, and
affiliates; as their interest may appear; c/o AEGON USA Realty Advisors, LLC;
Mortgage Loan Dept.; 4333 Edgewood Rd., NE; Cedar Rapids, Iowa  52499-5443.”

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7.4

Rating

Each insurance carrier providing insurance required under this Section must
have, independently of its parent’s or any reinsurer’s rating, a Best’s Rating
of A- or better, and a Financial Size Rating of X or better, as reported in the
most current issue of Best’s Insurance Guide, or as reported by Best on its
internet web site.

7.5

Deductible

The maximum deductible on each required coverage or policy is $250,000.

7.6

Notices, Changes and Renewals

All policies must require the insurance carrier to give the Lender a minimum of
ten (10) days’ notice in the event of modification, cancellation or termination
for nonpayment of premium and a minimum of thirty (30) days’ notice of
cancellation or nonrenewal, or as required under state law. Prior to each policy
renewal, the Borrower shall report to the Lender all sublimits, margin clauses
and other conditions and endorsements that reduce the coverages required in this
Section and changes to deductibles for sub-limited coverages, self-insured
retentions, fronting arrangements, or other endorsements or conditions that
require the Borrower to retain additional risk. The Borrower shall report to the
Lender immediately any facts known to the Borrower that may adversely affect the
appropriateness or enforceability of any insurance contract, including, without
limitation, changes in the ownership or occupancy of the Real Property, any
hazard to the Real Property and any matters that may give rise to any claim. No
fewer than thirty (30) days prior to expiration of any policy required under
this Section, the Borrower shall provide either (a) an original or certified
copy of the renewed policy, or (b) a certificate of insurance, including an
Acord 28 (real property), Acord 27 (personal property) or Acord 25 (liability)
certificate, or another document satisfactory to the Lender conferring on the
Lender the rights and privileges of mortgagee. If the Borrower meets the
foregoing requirement under clause (b), the Borrower shall supply an original or
certified copy of the original policy within ninety (90) days. All certificates,
documents, and original or certified copies of policies must (i) name the
Borrower as a named insured or as an additional insured, (ii) include the
complete and accurate property address, (iii) show that the applicable coverage
or endorsement is in full force and effect, (iv) convey to the Lender the rights
and privileges of a named mortgagee under the related policy, (v) include the
Lender as loss payee (for business interruption coverages), and (vi) include the
Lender as additional insured (for liability coverages).

7.7

Unearned Premiums

If this Mortgage is foreclosed, the Lender may at its discretion cancel any of
the insurance policies required under this Section and apply any unearned
premiums to the Indebtedness.

7.8

Forced Placement of Insurance

If the Borrower fails to comply with the requirements of this Section, the
Lender may, at its discretion, procure any required insurance. Any premiums paid
for such insurance, or the allocable portion of any premium paid by the Lender
under a blanket policy for such insurance, shall be a demand obligation under
this Mortgage, and any unearned premiums under such insurance shall comprise
Insurance Proceeds and therefore a portion of the Property.

8.

Insurance and Condemnation Proceeds

8.1

Adjustment and Compromise of Claims and Awards

The Borrower may settle any insurance claim or condemnation proceeding if the
effect of the casualty or the condemnation as it relates to any Parcel, may be
remedied for $250,000 or less. If a greater sum is required, the Borrower may
not settle any such claim or proceeding without the advance written consent of

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the Lender. If a Default exists, the Borrower may not settle any insurance claim
or condemnation proceeding without the advance written consent of the Lender.

8.2

Direct Payment to the Lender of Proceeds

If the Insurance Proceeds received in connection with a casualty or the
Condemnation Proceeds received in respect of a condemnation as it relates to any
Parcel, exceed $250,000, or if there is a Default, then such proceeds shall be
paid directly to the Lender. The Lender shall have the right to endorse
instruments which evidence proceeds that it is entitled to receive directly.

8.3

Availability to the Borrower of Proceeds

Insurance Proceeds and Condemnation Proceeds shall be paid to the Lender for use
in accordance with Subsection 8.4, unless the amount received, as it relates to
any Parcel, is less than five percent (5%) of the Loan Allocation for such
Parcel as determined in accordance with Exhibit A to the Loan Agreement, in
which case the Borrower shall have the right to use the Insurance Proceeds and
Condemnation Proceeds to carry out the Restoration of the Real Property, subject
to the conditions set forth in Subsections 8.5,  8.6, and 8.7.

If the amount received in respect of a casualty or condemnation for a Parcel
equals or exceeds five percent (5%) of the Loan Allocation for a Parcel, and if
the Loan-to-Value ratio of the Parcel on completion will be sixty-eight percent
(68%) or less, as determined by the Lender in its discretion based on its
estimate of the market value of the Parcel, the Lender shall receive such
Insurance Proceeds or Condemnation Proceeds directly and hold them in a fund for
Restoration subject to the conditions set forth in Subsections 8.5,  8.6, and
8.7 of this Section. If the Lender’s estimate of the market value of the Parcel
implies a Loan-to-Value ratio of over 68%, and the Borrower disagrees with the
Lender’s estimate, the Borrower may require that the Lender engage an
independent appraiser (the “Fee Appraiser”) to prepare and submit to AEGON a
full narrative appraisal report estimating the market value of the Parcel. The
Fee Appraiser shall be certified in Minnesota and shall be a member of a
national appraisal organization that has adopted the Uniform Standards of
Professional Appraisal Practice (USPAP) established by the Appraisal Standards
Board of the Appraisal Foundation. The Fee Appraiser will be required to use
assumptions and limiting conditions established by the Lender prior to the
funding of the Loan and to prepare the appraisal in conformity with the Lender’s
Appraisal Guidelines. For purposes of this Section, the independent appraiser’s
value conclusion shall be binding on both the Lender and the Borrower. The
Borrower shall have the right to make a prepayment of the Loan, without premium,
sufficient to achieve this Loan-to-Value ratio. The independent fee appraisal
shall be at the Borrower’s expense, and the Borrower shall pay to the Lender an
administrative fee of $2,500 in connection with its review. The Lender may
require that the Borrower deposit $10,000 with the Lender as security for these
expenses or may pay the Fee Appraiser’s and administrative fees from the
proceeds at its sole discretion.

8.4

Lender’s Use of Proceeds

Unless the Borrower has the right to use the Insurance Proceeds or the
Condemnation Proceeds under the foregoing paragraphs, the Lender may, in its
sole and absolute discretion, either apply them to the Loan balance or disburse
them for the purposes of repair and reconstruction, or to remedy the effects of
the condemnation. No prepayment premium will be charged on Insurance Proceeds or
Condemnation Proceeds applied to reduce the principal balance of the Loan.

8.5

Conditions to Availability of Proceeds

The Lender shall have no obligation to release Insurance Proceeds or
Condemnation Proceeds to the Borrower, and may hold such amounts as additional
security for the Loan, if (a) a Default exists, (b) the Lender has delivered to
the Borrower Notice of any act, omission or circumstance that will, if uncured,
become a Default, and the required cure has not been effected or (c) if the
Insurance Proceeds or

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Condemnation Proceeds received by the Lender and any other funds deposited by
the Borrower with the Lender are insufficient, as determined by the Lender in
its reasonable discretion, to complete the Restoration. If a Default exists, the
Lender may at its sole and absolute discretion apply such Insurance Proceeds and
Condemnation Proceeds to the full or partial cure of the Default.

8.6

Gross Up of Restoration Fund; Permitted Mezzanine Financing

If the Lender determines that the Insurance Proceeds or Condemnation Proceeds
received in respect of a casualty or a condemnation, as the case may be, would
be insufficient to permit the Borrower to effect the Restoration, then the
Borrower shall deposit in the Restoration fund such additional funds as the
Lender determines are necessary to effect the Restoration. The Lender agrees to
permit the Borrower to secure mezzanine financing in order to meet its
obligation under this Subsection. The mezzanine loan may be secured by a pledge
of interests in the Borrower, subject to an inter-creditor agreement on market
terms for securitized loans.

8.7

Draw Requirements

The Borrower’s right to receive Insurance Proceeds and Condemnation Proceeds
held by the Lender under this Section shall be conditioned on the Lender’s
approval of plans and specifications for the Restoration. Each draw, except the
last, shall be in the minimum amount of $50,000. Draw requests shall be
accompanied by customary evidence of construction completion, and, if requested
by Lender, by endorsements to the Lender’s mortgagee title insurance coverage
insuring the absence of construction, mechanics’ or materialmen’s liens. Draws
based on partial completion of the Restoration shall be subject to a ten percent
(10%) holdback. All transactional expenses shall be paid by the Borrower.

9.

Escrow Fund

The Borrower shall pay the Monthly Escrow Payment on the first (1st) day of
every month, commencing with the month in which the first regular monthly
payment is due under the terms of each Note. The Lender shall hold Monthly
Escrow Payments in a non-interest-bearing fund from which the Lender will pay on
a timely basis those Escrow Expenses that the Lender has anticipated will become
payable on a regular basis during the Loan’s term, and on which the Lender has
based its determination of the Monthly Imposition Requirement, the Monthly
Insurance Premium Requirement and the Monthly Reserve Requirement. The Escrow
Fund will be maintained as an accounting entry in the Lender’s general account,
where it may be commingled with the Lender’s other funds. The Lender may
reanalyze the projected Escrow Expenses from time to time and shall advise the
Borrower of any change in the amount of the Monthly Escrow Payment. Upon the
foreclosure of this Mortgage, the delivery of a deed in lieu of foreclosure, or
the payoff of the Loan, the Lender shall apply amounts in the Escrow Fund, net
of accrued Escrow Expenses, to the Indebtedness. The Lender shall remit any
amounts in excess of the Indebtedness to the Borrower.

10.

Default

10.1

Payment Defaults

A “Default” shall exist without Notice upon the occurrence of any of the
following events:

(a)

Scheduled Payments

The Borrower’s failure to pay, or to cause to be paid, (i) any regular monthly
payment of principal and interest under the Notes, together with any required
Monthly Escrow Payment, on or before the tenth (10th) day of the month in which
it is due or (ii) any other scheduled payment under the Notes, this Mortgage or
any other Loan Document.

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(b)

Payment at Maturity

The Borrower’s failure to pay, or to cause to be paid, the Indebtedness when the
Loan matures by acceleration under Section 16, because of a transfer or
encumbrance under Section 13, or by lapse of time.

(c)

Demand Obligations

The Borrower’s failure to pay, or to cause to be paid, within five (5) Business
Days of the Lender’s demand, any other amount required under the Notes, this
Mortgage or any of the other Loan Documents.

10.2

Incurable Non-Monetary Default

A Default shall exist upon any of the following (each of which is an “Incurable
Non-Monetary Default”):

(a)

Material Untruth or Misrepresentation

The Lender’s discovery that any representation made by the Borrower in any Loan
Document was materially untrue or misleading when made, if the misrepresentation
either was intentional or is not capable of being cured as described in
Subsection 10.3(a) below.

(b)

Due on Sale or Encumbrance

The occurrence of any sale, conveyance, transfer or vesting that would result in
the Loan becoming immediately due and payable at the Lender’s option under
Section 13.

(c)

Voluntary Bankruptcy Filing

The filing by the Borrower of a petition in bankruptcy or for relief from
creditors under any present or future law that affords general protection from
creditors.

(d)

Insolvency

The failure of the Borrower generally to pay its debts as they become due, its
admission in writing to an inability so to pay its debts, the making by the
Borrower of a general assignment for the benefit of creditors, or a judicial
determination that the Borrower is insolvent.

(e)

Receivership

The appointment of a receiver or trustee to take possession of any of the assets
of the Borrower.

(f)

Levy or Attachment

The taking or seizure of any material portion of the Property under levy of
execution or attachment.

(g)

Lien

The filing against the Real Property of any lien or claim of lien for the
performance of work or the supply of materials, or the filing of any federal,
state or local tax lien against the Borrower, or against the Real Property,
unless the Borrower promptly complies with Section 12 of this Mortgage.

(h)

Defaults under other Loan Documents

The existence of any default under any other Loan Document, provided any
required Notice of such default has been given and any applicable cure period
has expired.

(i)

Dissolution or Liquidation

The Borrower shall initiate or suffer the commencement of a proceeding for its
dissolution or liquidation, and such proceeding shall not be dismissed within
thirty (30) days, or the Borrower shall cease to exist as a legal entity (unless
resulting in a Permitted Transfer).

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10.3

Curable Non-Monetary Default

A Default shall exist, following the cure periods specified below, under the
following circumstances:

(a)

Unintentional Misrepresentations that are Capable of Being Cured

With Notice, if the Lender discovers that the Borrower has unintentionally made
any material misrepresentation that is capable of being cured, unless the
Borrower promptly commences and diligently pursues a cure of the
misrepresentation approved by the Lender, and completes the cure within thirty
(30) days. Any such cure shall place the Lender in the risk position that would
have existed had the false representation been true when made. If the Borrower
has relied in full or in part on representations from, or on information
furnished by, the seller of the Real Property as described in the last sentence
of Section 5.25, and the representation is capable of being cured as described
above, the misrepresentation shall be considered curable for purposes of this
paragraph.

(b)

Involuntary Bankruptcy or Similar Filing

The Borrower becomes the subject of any petition or action seeking to adjudicate
it bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief, or
that may result in a composition of its debts, provide for the marshaling of the
Borrower’s assets for the satisfaction of its debts, or result in the judicially
ordered sale of the Borrower’s assets for the purpose of satisfying its
obligations to creditors, unless a motion for the dismissal of the petition or
other action is filed within twenty (20) days and results in its dismissal
within sixty (60) days of the filing of the petition or other action.

(c)

Entry of a Material Judgment

Any judgment is entered against the Borrower or any other Obligor, and the
judgment may materially and adversely affect the value, use or operation of the
Real Property, unless the judgment is satisfied or appealed within twenty (20)
days. If the judgment is appealed, the Borrower shall comply with the provisions
of Section 12 of this Mortgage as though the judgment lien were a lien described
in that Section.

(d)

Other Defaults

The Borrower fails to observe any promise or covenant made in this Mortgage,
unless the failure results in a Default described elsewhere in this Section 10,
provided the Lender delivers written Notice to the Borrower of the existence of
such an act, omission or circumstance, and that such an act, omission or
circumstance shall constitute a Default under the Loan Documents unless the
Borrower promptly initiates an effort to cure the potential Default, pursues the
cure diligently and continuously, and succeeds in effecting the cure within one
hundred twenty (120) days of its receipt of Notice. The Lender shall afford the
Borrower an additional period of one hundred twenty (120) days in cases where
construction or repair is needed to cure the potential Default, and the cure
cannot be completed within the first one hundred twenty (120) day cure period.
During the cure period, the Borrower has the obligation to provide on demand
satisfactory documentation of its effort to cure, and, upon completion, evidence
that the cure has been achieved. All notice and cure periods provided in this
Mortgage shall run concurrently with any notice or cure periods provided by law
and in any of the other Loan Documents.

11.

Right to Cure

The Lender shall have the right to cure any Default. The expenses of doing so
shall be part of the Indebtedness, and the Borrower shall pay them to the Lender
on demand.

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12.

Contest Rights

The Borrower may secure the right to contest Impositions and construction,
mechanics’ or materialmen’s liens, through appropriate proceedings conducted in
good faith, by either (A) depositing with the Lender an amount equal to one
hundred twenty five percent (125%) of the amount of the Imposition or the lien,
or (B) obtaining and maintaining in effect a bond issued by a surety acceptable
to the Lender, in an amount equal to the greater of (i) the amount of a required
deposit under clause (A) above and (ii) the amount required by the surety or by
the court in order to obtain a court order staying the foreclosure of the lien
pending resolution of the dispute, and releasing the lien of record. The
proceeds of such a bond must be payable directly to the Lender. The surety
issuing such a bond must be acceptable to the Lender in its sole discretion.
After such a deposit is made or bond issued, the Borrower shall promptly
commence the contest of the lien and continuously pursue that contest in good
faith and with reasonable diligence. If the contest of the related Imposition or
lien is unsuccessful, any deposits or bond proceeds shall be used to pay the
Imposition or to satisfy the obligation from which the lien has arisen. Any
surplus shall be refunded to the Borrower.  Notwithstanding the foregoing,
promptly, but in any case not later than three (3) days after learning that such
a lien has been filed, the Borrower may request that the Lender waive the
requirement that Borrower either deposit cash or a bond with the Lender as
explained above.  The Lender will consider such request in good faith, but shall
not be bound to provide such a waiver.

13.

Due on Transfer or Encumbrance

Upon the sale or transfer of any portion of the Real Property or any other
conveyance, transfer or vesting of any direct or indirect interest in the
Borrower or the Property, including (i) the direct or indirect transfer of, or
the granting of a security interest in, the ownership of the Borrower or the
voting rights in the Borrower, (ii) any encumbrance (other than a Permitted
Encumbrance) of the Real Property (unless the Borrower contests the encumbrance
in compliance with Section 12) and (iii) the lease, license or granting of any
security interest in the Personal Property, the Indebtedness shall, at the
Lender’s option, become immediately due and payable upon Notice to the Borrower,
unless the sale, conveyance, transfer or vesting is a Permitted Transfer or is
permitted by Section 8.6.

14.

Due on Sale Exceptions

Notwithstanding Section 13 of this Mortgage, any Permitted Transfer under the
Loan Agreement shall be a Permitted Transfer for purposes of this Mortgage.

15.

Notice of Absolute Assignment of Leases and Rents

Under the Absolute Assignment of Leases and Rents, the Borrower has assigned to
the Lender, and to its successors and assigns, all of the Borrower’s right and
title to, and interest in, the Leases, including all rights under the Leases and
all benefits to be derived from them. The rights assigned include all authority
of the Borrower to modify or terminate Leases, or to exercise any remedies, and
the benefits assigned include all Rents. This assignment is present and
absolute, but under the terms of the Absolute Assignment of Leases and Rents,
the Lender has granted the Borrower a conditional license to collect and use the
Rents, and to exercise the rights assigned, in a manner consistent with the
Obligations, all as more particularly set forth in the Absolute Assignment of
Leases and Rents. The Lender may, however, terminate the license by written
Notice to the Borrower on certain conditions set forth in the Absolute
Assignment of Leases and Rents.

16.

Acceleration

If a Default exists, the Lender may, at its option, declare the unpaid principal
balance of each Note to be immediately due and payable, together with all
accrued interest on the Indebtedness, all costs of collection (including
reasonable attorneys’ fees and expenses) and all other charges due and payable
by the Borrower under each Note or any other Loan Document. If the subject
Default has arisen from a failure by the Borrower to make a regular monthly
payment of principal and interest, the Lender shall not accelerate the
Indebtedness unless the Lender shall have given the Borrower a cure period of at
least three (3) Business Days following Notice of its intent to do so.

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If the subject Default is curable and non-monetary in nature, the Lender shall
exercise its option to accelerate only by giving Notice of acceleration to the
Borrower. The Lender shall not give any such Notice of acceleration until (a)
the Borrower has been given any required Notice of the prospective Default and
(b) any applicable cure period has expired.

Except as expressly described in this Section, no notice of acceleration shall
be required in order for the Lender to exercise its option to accelerate the
Indebtedness in the event of Default.

17.

Rights of Entry and to Operate

17.1

Entry on Real Property

If a Default exists, the Lender may, to the extent permitted by law, enter upon
the Real Property and take exclusive possession of the Real Property and of all
books, records and accounts, all without Notice and without being guilty of
trespass, but subject to the rights of tenants in possession under the Leases.
If the Borrower remains in possession of all or any part of the Property after
Default and without the Lender’s prior written consent, the Lender may, without
Notice to the Borrower (except as required by applicable law), invoke any and
all legal remedies to dispossess the Borrower.

17.2

Operation of Real Property

Following Default, the Lender may hold, lease, manage, operate or otherwise use
or permit the use of the Real Property, either itself or by other persons, firms
or entities, in such manner, for such time and upon such other terms as the
Lender may deem to be prudent under the circumstances (making such repairs,
alterations, additions and improvements thereto and taking any and all other
action with reference thereto, from time to time, as the Lender deems prudent),
and apply all Rents and other amounts collected by the Lender in accordance with
the provisions of the Absolute Assignment of Leases and Rents.

18.

Receivership

Following Default, the Lender may apply to a court of competent jurisdiction for
the appointment of a receiver of the Property, pursuant to Minnesota law,
including Chapter 576 of the Minnesota Statutes, and Minnesota Statutes 559.17,
ex parte without Notice to the Borrower (except as otherwise required by law),
whether or not the value of the Property exceeds the Indebtedness, whether or
not waste or deterioration of the Real Property has occurred, and whether or not
other arguments based on equity would justify the appointment. The Borrower
irrevocably, with knowledge and for valuable consideration, consents to such an
appointment. Any such receiver shall have all the rights and powers given to
receivers in Minnesota by applicable law and custom, including the rights and
powers granted to the Lender by this Mortgage, the power to maintain, lease,
operate, market and sell the Real Property on terms approved by the court, and
the power to collect the Rents and apply them to the Indebtedness or otherwise
as the court may direct. Once appointed, a receiver may at the Lender’s option
remain in place until the Indebtedness has been paid in full, and during any
post-foreclosure sale period of redemption.

19.

Foreclosure 

19.1

Foreclosure By Action; Foreclosure By Advertisement

If a Default shall occur the Lender shall have the right to enforce the
provisions of this Mortgage and Borrower hereby authorizes and fully empowers
the Lender,

(a)

to foreclose this Mortgage by action or by any appropriate judicial proceedings;
or

(b)

to foreclose this Mortgage by advertisement, with full authority and power to
sell the Property at public auction and convey the same to the purchaser in fee
simple, either in one parcel or separate lots and parcels, all in accordance
with and in the manner prescribed by law.

Out of the proceedings arising from sale and foreclosure, Lender is authorized
to retain the principal and interest due on each Note and the Indebtedness
together with all such sums of money as the Lender shall

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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 attorney’s fees, with the balance, if any, to
be paid to the persons entitled thereto by law. In any suit to foreclose the
lien hereof, there shall be allowed and included as additional Indebtedness in
the decree for sale all expenditures and expenses which may be paid or incurred
by or on behalf of Lender for reasonable attorneys’ fees, appraiser’s fees,
outlays for documentary and expert evidence, stenographers’ charges, publication
costs, and costs (which may be estimated as to items to be expended after entry
of the decree) of procuring all such abstracts of title, title searches and
examinations, title insurance policies, and similar data and assurances with
respect to the title as Lender may deem reasonably necessary either to prosecute
such action to evidence to bidders at any sale which may be had pursuant to such
decree the true condition of the title to or the value of the Property. All
expenditures and expenses of the nature in this Paragraph mentioned and such
expenses and fees as may be incurred in the protection of the Property and the
maintenance of the lien of this Mortgage, including the reasonable fees of any
attorneys employed by Lender in any litigation or proceeding affecting this
Mortgage, the Notes or the Property, including appellate, probate and bankruptcy
proceedings, or in preparations for the commencement or defense of any
proceedings or threatened suit or proceeding shall be immediately due and
payable by Borrower, with interest thereon at the Default Rate and shall be
secured by this Mortgage.

19.2

Acknowledgment of Waiver of Hearing Before Sale

The Borrower understands and agrees that if a Default shall occur, the Lender
has the right, inter alia, to foreclose this Mortgage by advertisement pursuant
to Minn. Stat. Chapter 580, as hereafter amended, or pursuant to any similar or
replacement statute hereafter enacted; that if the Lender elects to foreclose by
advertisement, it may cause the Property, or any part thereof, to be sold at
public auction; that notice of such sale must be published for six (6)
successive weeks at least once a week in a newspaper of general circulation and
that no personal notice is required to be served upon the Borrower. The Borrower
further understands that upon the occurrence of a Default, the Lender may also
elect its rights under the UCC and take possession of the Personal Property 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 UCC, as hereafter amended or by any similar or replacement
statute hereafter enacted. The Borrower further understands that under the
Constitution of the United States and the Constitution of the State of Minnesota
it may have the right to notice and hearing before the Property may be sold and
that the procedure for foreclosure by advertisement described above does not
insure that notice will be given to the Borrower and neither said procedure for
foreclosure by advertisement nor the UCC requires any hearing or other judicial
proceeding. THE BORROWER HEREBY EXPRESSLY CONSENTS AND AGREES THAT THE PROPERTY
MAY BE FORECLOSED BY ADVERTISEMENT AND THAT THE PERSONAL PROPERTY MAY BE
DISPOSED OF PURSUANT TO THE UCC, ALL AS DESCRIBED ABOVE. THE BORROWER
ACKNOWLEDGES THAT IT IS REPRESENTED BY LEGAL COUNSEL; THAT BEFORE SIGNING THIS
DOCUMENT THIS SECTION AND THE BORROWER’S CONSTITUTIONAL RIGHTS WERE FULLY
EXPLAINED BY SUCH COUNSEL AND THAT THE BORROWER UNDERSTANDS THE NATURE AND
EXTENT OF THE RIGHTS WAIVED HEREBY AND THE EFFECT OF SUCH WAIVER.

20.

Waivers

To the maximum extent permitted by law, the Borrower irrevocably and
unconditionally WAIVES and RELEASES any present or future rights (a) of
reinstatement or redemption (b) that may exempt the Property from any civil
process, (c) to appraisal or valuation of the Property, (d) to extension of time
for payment, (e) that may subject the Lender’s exercise of its remedies to the
administration of any decedent’s estate or to any partition or liquidation
action, (f) to any homestead and exemption rights provided by the Constitution
and laws of the United States and of Minnesota, (g) to notice of acceleration or
notice of intent to accelerate (other than as expressly stated herein), and (h)
that in any way would delay or defeat the right of the Lender to cause the sale
of the Real Property for the

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purpose of satisfying the Indebtedness. The Borrower agrees that the price paid
at a lawful foreclosure sale, whether by the Lender or by a third party, and
whether paid through cancellation of all or a portion of the Indebtedness or in
cash, shall conclusively establish the value of the Real Property.

The foregoing waivers shall apply to and bind any party assuming the Obligations
of the Borrower under this Mortgage.

21.

Exculpation Clause and Carveout Obligations

The Lender agrees that it shall not seek to enforce any monetary judgment with
respect to any Obligation against the Borrower except through recourse to the
Property, unless the Obligation from which the judgment arises is a Carveout
Obligation. The Carveout Obligations include (a) the obligation to repay any
portion of the Indebtedness that arises because the Lender has advanced funds or
incurred expenses in respect of any of the “Carveouts” (as defined below), (b)
the obligation to repay the entire Indebtedness, if the Lender’s exculpation of
the Borrower from personal liability under this Section has become void as set
forth below, (c) the obligation to indemnify the Lender in respect of its actual
damages suffered in connection with a Carveout, and (d) the obligation to defend
and hold the Lender harmless from and against any claims, judgments, causes of
action or proceedings arising from a Carveout.

21.1

The Carveouts

The Carveouts are:

(a)

Fraud or material written misrepresentation.

(b)

Waste of the Property (which shall include damage, destruction or disrepair of
the Real Property caused by a willful act or grossly negligent omission of the
Borrower, but shall exclude ordinary wear and tear in the absence of gross
negligence).

(c)

Misappropriation of tenant security deposits (including proceeds of tenant
letters of credit), Insurance Proceeds or Condemnation Proceeds.

(d)

Failure to turn over to the Lender all tenant security deposits and tenant
letters of credit required to be held by the Borrower under the terms of the
Leases on or prior to the date on which the Lender receives title to the Real
Property following the foreclosure of its lien or by delivery of the deed in
lieu of foreclosure.

(e)

Failure to pay property taxes, assessments or other lienable Impositions to the
taxing authority prior to their due date or to the Lender to the extent such
Impositions have accrued on the date the Lender receives title to the Real
Property following the foreclosure of its lien or by delivery of the deed in
lieu of foreclosure.

(f)

Failure to maintain insurance coverage that meets the requirements set forth in
the Loan Documents.

(g)

The cost to the Lender of the forced placement of insurance, as permitted under
the Loan Documents.

(h)

Failure to pay to the Lender all Termination Payments.

(i)

Failure to pay to the Lender all Rents, income and profits (including any rent
collected more than one month in advance, or any rent for the last month of the
lease term, under any Lease in force at the time of Default), net of reasonable
and customary operating expenses, received in respect of a period when the Loan
is in Default.

(j)

Removal from the Real Property of Fixtures or Personal Property, unless replaced
in a commercially reasonable manner.

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(k)

The out-of-pocket expenses of enforcing the Loan Documents following Default,
not including expenses incurred after the Lender has received a Qualified Offer.

(l)

Executing, terminating or amending a Lease in violation of the Loan Documents.

(m)

Any liability of the Borrower under the Environmental Indemnity Agreement.

(n)

The inability of the Brighton Village Parcel to be restored or repaired under
applicable laws or ordinances to the fullest extent necessary to maintain the
use, value or income of the Brighton Village Parcel immediately prior to such
casualty or destruction (provided, however, that such inability shall not, in
and of itself, cause a Default if a Default has not otherwise occurred under the
Loan Documents).

(o)

Any cost, expense or liability to Lender arising out of Lender’s payment or
discharge of the Roseville Special Assessment occurring after a foreclosure
sale, acceptance of a deed-in-lieu of foreclosure, or other succession to title
to the Roseville Parcel by Lender.

21.2

Exculpation Void

The Lender’s exculpation of the Borrower from personal liability for the
repayment of the Indebtedness evidenced by the Notes shall be void without
Notice if any of the following occurs:

(a)

The Borrower voluntarily transfers the Property or creates any material
voluntary lien on the related parcel in violation of the Mortgage.

(b)

The Borrower causes or allows the filing of an involuntary bankruptcy petition
under Title 11 of the United States Code in collusion with creditors other than
the Lender.

(c)

The Borrower files a voluntary petition for reorganization under Title 11 of the
United States Code (or under any other present or future law, domestic or
foreign, relating to bankruptcy, insolvency, reorganization proceedings or
otherwise similarly affecting the rights of creditors), and has not made a
Qualified Offer prior to the filing.

(d)

After the Lender accepts a Qualified Offer, the Borrower defaults in fulfilling
the terms of the accepted Qualified Offer.

22.

Security Agreement and Fixture Filing

22.1

Definitions

“Accounts” shall have the definition assigned in the UCC.

“Bank” shall have the definition assigned in the UCC.

“Chattel Paper” shall have the definition assigned in the UCC.

“Deposit Account” shall have the definition assigned in the UCC.

“Document” shall have the definition assigned in the UCC.

“Equipment” shall have the definition assigned in the UCC.

“Financing Statements” shall have the definition assigned in the UCC.

“General Intangibles” shall have the definition assigned in the UCC.

“Goods” shall have the definition assigned in the UCC. “Goods” include all
detached Fixtures, items of Personal Property that may become Fixtures, major
appliances, property management files, accounting books and records, reports of
consultants relating to the Real Property, site plans, test borings,
environmental or geotechnical surveys, samples and test results, blueprints,
construction and shop drawings, and plans and specifications.

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“Instrument” shall have the definition assigned in the UCC.

“Investment Property” shall have the definition assigned in the UCC.

“Letter of Credit” shall have the definition assigned in the UCC.

“Letter of Credit Rights” shall have the definition assigned in the UCC.

“Money Collateral” means all money received in respect of Rents.

“Personal Property” means Accounts, Chattel Paper, Deposit Accounts, Documents,
Equipment, General Intangible Collateral, Goods, Instruments, Investment
Property, Letter of Credit Rights, Letters of Credit, and Money Collateral, all
as now owned or hereafter acquired by the Borrower.

“Proceeds” shall have the definition assigned in the UCC.

“UCC” means the Uniform Commercial Code as adopted in Minnesota.

22.2

Creation of Security Interest

This Mortgage shall be self-operative and shall constitute a security agreement
pursuant to the provisions of the UCC with respect to the Personal Property. The
Borrower, as debtor, hereby grants the Lender, as secured party, for the purpose
of securing the Indebtedness, a security interest in the Borrower’s interest in
all Accounts, Chattel Paper, Deposit Accounts, Documents, Equipment Collateral,
General Intangibles, Goods, Instruments, Investment Property, Letter of Credit
Rights, Letter of Credit, and money, in the accessions, additions, replacements,
substitutions and Proceeds of any of the foregoing items of collateral arising
from or relating to the Real Property. Upon Default, the Lender shall have the
rights and remedies of a secured party under the UCC as well as all other rights
and remedies available at law or in equity, and, at the Lender’s option, the
Lender may also invoke the remedies provided elsewhere in this Mortgage as to
such Property. The Borrower and the Lender agree that the rights granted to the
Lender as secured party under this Section 22 are in addition to rather than a
limitation on any of the Lender’s other rights under this Mortgage with respect
to the Property.

22.3

Filing Authorization

The Borrower irrevocably authorizes the Lender to file, in the appropriate
locations for filings of UCC financing statements in any jurisdictions as the
Lender in good faith deems appropriate, such financing statements and amendments
as the Lender may require in order to perfect or continue this security
interest, or in order to prevent any filed financing statement from becoming
misleading or from losing its perfected status. The Borrower irrevocably
authorizes the Lender to file such financing statements describing the
collateral as “all of the Debtor’s personal property” or “all of the Debtor’s
assets.”

22.4

Additional Searches and Documentation

The Borrower shall provide to the Lender upon request, certified copies of any
searches of UCC records deemed necessary or appropriate by the Lender to confirm
the first-priority status of its security interest in the Personal Property,
together with copies of all documents or records evidencing security interests
disclosed by such searches.

22.5

Costs

The Borrower shall pay all filing fees and costs and all reasonable costs and
expenses of any record searches (or their continuations) as the Lender may
require.

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22.6

Representations, Warranties and Covenants of the Borrower

(a)

Ownership of the Personal Property

All of the Personal Property is, and shall during the term of the Loan continue
to be, owned by the Borrower, and is not the subject matter of any lease,
control agreement or other instrument, agreement or transaction whereby any
ownership, security or beneficial interest in the Personal Property is held by
any person or entity other than the Borrower, subject only to (1) the Lender’s
security interest, (2) the rights of tenants occupying the Property pursuant to
Leases approved by the Lender, and (3) the Permitted Encumbrances.

(b)

No Other Identity

The Borrower represents and warrants that the Borrower has not used or operated
under any other name or identity for at least five (5) years. The Borrower
covenants and agrees that Borrower will furnish Lender with notice of any change
in its name, form of organization, or state of organization within thirty (30)
days prior to the effective date of any such change.

(c)

Location of Equipment

All Equipment is located upon the Land.

(d)

Removal of Goods

The Borrower will not remove or permit to be removed any item included in the
Goods from the Land, unless the same is either (a) obsolete and no longer
beneficial to the Property, or (b) is replaced promptly with unencumbered Goods
(1) of a quality and value equal or superior to that which it replaces and (2)
which is located on the Land. All such replacements, renewals, and additions
shall become and be immediately subject to the security interest of this
Mortgage. 

(e)

Proceeds

The Borrower may, without the Lender’s prior written consent, dispose of Goods
in the ordinary course of business, provided that, following the disposition,
the perfection of the Lender’s security interest in the Proceeds of the
disposition will continue under § 9-315 (d) of the UCC. The Borrower shall not,
without the Lender’s prior written consent, dispose of any Personal Property in
any other manner, except in compliance with Paragraph (d) of this Subsection
22.6.

22.7

Fixture Filing

This Mortgage constitutes a financing statement filed as a fixture filing in the
Official Records of the County Recorders of Anoka County and Ramsey County,
Minnesota, with respect to any and all fixtures comprising Property. The
“debtor” is Sterling Georgetown, LLC, a limited liability company organized
under Minnesota law; the “secured party” is Transamerica Life Insurance Company,
an Iowa corporation; the collateral is as described in Subsection 22.2 above and
the granting clause of this Mortgage; and the addresses of the debtor and
secured party are the addresses stated in Subsection 25.13 of this Mortgage for
Notices to such parties. The organizational identification number of the debtor
is 795104300020. The owner of record of the Real Property is Sterling
Georgetown, LLC.

23.

Environmental Matters

23.1

Representations

The Borrower represents as follows:

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(a)

No Hazardous Substances

To the best of the Borrower’s knowledge and except as disclosed in the ESA, no
release of any Hazardous Substance has occurred on or about the Real Property in
a quantity or at a concentration level that (i) violates any Environmental Law,
or (ii) requires reporting to any regulatory authority or may result in any
obligation to remediate under any Environmental Law.

(b)

Absence of Mold Contamination

To the best of the Borrower’s knowledge, the amount of mold present in the air
within the Improvements and the extent of mold growth on the elements of the
Improvements are no greater than normal in buildings free of moisture intrusion.
No mold-related tenant complaint or legal proceeding relating to the
Improvements exists, except as otherwise disclosed to AEGON in writing.

(c)

Compliance with Environmental Laws

To the best of Borrower’s knowledge, the Real Property and its current use and
presently anticipated uses comply with all Environmental Laws, including those
requiring permits, licenses, authorizations, and other consents and approvals.

(d)

No Actions or Proceedings

To the best of Borrower’s knowledge, no Governmental Authority or agency has
commenced any action, proceeding or investigation based on any suspected or
actual violation of any Environmental Law on or about the Real Property. To the
best of the Borrower’s knowledge as a duly diligent property owner, no such
authority or agency has threatened to commence any such action, proceeding, or
investigation.

23.2

Environmental Covenants

The Borrower covenants as follows:

(a)

Compliance with Environmental Laws

The Borrower shall, and the Borrower shall cause all employees, agents,
contractors, and tenants of the Borrower and any other persons present on or
occupying the Real Property to, keep and maintain the Real Property in
compliance with all Environmental Laws.

(b)

Notices, Actions and Claims

The Borrower shall as promptly as possible advise the Lender in writing of (i)
any notices from any governmental or quasi-governmental agency or authority of
violation or potential violation of any Environmental Law received by the
Borrower, (ii) any and all enforcement, cleanup, removal or other governmental
or regulatory actions instituted, completed or threatened pursuant to any
Environmental Law, (iii) all claims made or threatened by any third party
against the Borrower or the Real Property relating to damage, contribution, cost
recovery, compensation, loss or injury resulting from any Hazardous Substances,
and (iv) discovery by the Borrower of any occurrence or condition on any real
property adjoining or in the vicinity of the Real Property that creates a
foreseeable risk of contamination of the Real Property by or with Hazardous
Substances.

23.3

The Lender’s Right to Control Claims

The Lender shall have the right (but not the obligation) to join and participate
in, as a party if it so elects, any legal proceedings or actions initiated in
connection with any Hazardous Substances and to have its related and reasonable
attorneys’ and consultants’ fees paid by the Borrower upon demand.

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23.4

Indemnification

The Borrower shall be solely responsible for, and shall indemnify, defend, and
hold harmless the Lender and its directors, officers, employees, agents,
successors and assigns, from and against, any claim, judgment, loss, damage,
demand, cost, expense or liability of whatever kind or nature, known or unknown,
contingent or otherwise, directly or indirectly arising out of or attributable
to the use, generation, storage, release, threatened release, discharge,
disposal, or presence (whether prior to or after the Effective Date of this
Mortgage) of Hazardous Substances on, in, under or about the Real Property
(whether by the Borrower, a predecessor in title, any tenant, or any employees,
agents, contractor or subcontractors of any of the foregoing or any third
persons at any time occupying or present on the Real Property), including: (i)
personal injury; (ii) death; (iii) damage to property; (iv) all consequential
damages; (v) the cost of any required or necessary repair, cleanup or
detoxification of the Real Property, including the soil and ground water
thereof, and the preparation and implementation of any closure, remedial or
other required plans; (vi) damage to any natural resources; and (vii) all
reasonable costs and expenses incurred by the Lender in connection with clauses
(i) through (vi), including reasonable attorneys’ and consultants’ fees;
provided, however, that nothing contained in this Section shall be deemed to
preclude the Borrower from seeking indemnification from, or otherwise proceeding
against, any third party including any tenant or predecessor in title to the
Real Property, and further provided that this indemnification will not extend to
matters caused by the Lender's gross negligence or willful misconduct, or
arising from a release of Hazardous Substances which occurs after the Lender has
taken possession of the Real Property, so long as the Borrower has not caused
the release through any act or omission. The covenants, agreements, and
indemnities set forth in this Section shall be binding upon the Borrower and its
heirs, personal representatives, successors and assigns, and shall survive
repayment of the Indebtedness, foreclosure of the Real Property, and the
Borrower’s granting of a deed to the Real Property. Payment shall not be a
condition precedent to this indemnity.  Any costs or expenses incurred by the
Lender for which the Borrower is responsible or for which the Borrower has
indemnified the Lender shall be paid to the Lender on demand, with interest at
the Default Rate from the date incurred by the Lender until paid in full, and
shall be secured by this Mortgage. Without the prior written consent of the
Lender, the Borrower shall not enter into any settlement agreement, consent
decree, or other compromise in respect to any claims relating to Hazardous
Substances. The Lender agrees that it shall not unreasonably delay its
consideration of any written request for its consent to any such settlement
agreement, consent decree, or other compromise once all information, reports,
studies, audits, and other documentation have been submitted to the Lender.

23.5

Environmental Audits

If a Default exists, or at any time the Lender has reason to believe that a
release of Hazardous Substances may have occurred or may be likely to occur (as
determined by Lender in good faith), the Lender may require that the Borrower
retain, or the Lender may retain directly, at the sole cost and expense of the
Borrower, a licensed geologist, industrial hygienist or an environmental
consultant acceptable to the Lender to conduct an environmental assessment or
audit of the Real Property, the scope of which shall be within the sole
discretion of Lender and may include, without limitation, soil and groundwater
sampling and laboratory analysis. In the event that the Lender makes a
reasonable determination of the need for an environmental assessment or audit,
the Lender shall inform the Borrower in writing that such a determination has
been made and, if requested to do so by the Borrower, give the Borrower a
written explanation of that determination before the assessment or audit is
conducted. The Borrower shall afford any person conducting an environmental
assessment or audit access to the Real Property and all materials reasonably
requested. The Borrower shall pay on demand the cost and expenses of any
environmental consultant engaged by the Lender under this Subsection. The
Borrower shall, at the Lender’s request and at the Borrower’s sole cost and
expense, take such investigative and remedial measures, as the Lender determines
to be necessary to address any condition discovered by the assessment or audit
so that (i) the Real Property shall be in compliance with all Environmental
Laws, (ii) the condition of the Real Property

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shall not constitute any identifiable risk to human health or to the
environment, and (iii) the value of the Real Property shall not be affected by
the presence of Hazardous Substances.

24.

Loan Information

24.1

Dissemination of Information

In connection with any transfer of the Loan or Participation, the Lender may
forward any documents and information that the Lender now has or acquires in the
future concerning the Loan, including the financial statements of any
Obligor,  and such other information as may be reasonably related to the
Obligors, the Property or the Leases to any transferee or prospective transferee
of the Loan or Participation, or other party involved in the transaction, or to
any of their consultants, attorneys, advisors or other representatives, and the
Borrower waives any legal right it may have to prohibit such disclosure.

24.2

Cooperation

The Borrower, any guarantor and any Carveout Obligor shall cooperate with the
Lender in connection with any transfer of the Loan or any Participation. The
Borrower agrees to provide to the Lender or to any persons to whom the Lender
may disseminate such information, at the Lender’s request, financial statements
of Obligors, an estoppel certificate and such other documents as may be
reasonably related to any Obligor, the Property, or the Leases, including,
without limitation, any historical information on the Real Property that is in
the Borrower’s possession or is reasonably obtainable by the Borrower.

24.3

Reserves/Escrows

The Lender shall have the right, if required by the transferee of the Loan or
any Participation, to cause funds held by the Lender in escrow or as reserves to
be transferred to deposit or investment accounts at creditworthy financial
institutions, to be held or used in accordance with the Loan Documents.

25.

Miscellaneous

25.1

Successors and Assigns

All of the terms of the Loan Documents shall apply to, be binding upon and inure
to the benefit of the heirs, personal representatives, successors and assigns of
the Obligors, or to the holder of each Note, as the case may be.

25.2

Survival of Obligations

Each and all of the Obligations shall continue in full force and effect until
the latest of (a) the date the Indebtedness has been paid in full and the
Obligations have been performed and satisfied in full, (b) the last date
permitted by law for bringing any claim or action with respect to which the
Lender may seek payment or indemnification in connection with the Loan
Documents, and (c) the date on which any claim or action for which the Lender
seeks payment or indemnification is fully and finally resolved and, if
applicable, any compromise thereof of judgment or award thereon is paid in full.

25.3

Further Assurances

The Borrower, upon the request of the Lender, shall complete, execute,
acknowledge, deliver and record or file such further instruments and do such
further acts as may be necessary to carry out more effectively the purposes of
this Mortgage, to subject any property intended to be covered by this Mortgage
to the mortgage and security interests it creates, to place third parties on
notice of the mortgage and security interests, or to correct any defects which
may be found in any Loan Document.

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25.4

Right of Inspection

The Lender shall have the right from time to time, upon reasonable advance
notice to the Borrower, to enter onto the Real Property for the purpose of
inspecting and reporting on its physical condition, tenancy and operations.

25.5

Expense Indemnification

The Borrower shall pay all filing and recording fees, documentary stamps,
intangible taxes, and all expenses incident to the execution and acknowledgment
of this Mortgage, each Note or any of the other Loan Documents, any supplements,
amendments, renewals or extensions of any of them, or any instrument entered
into under Subsection 25.3. The Borrower shall pay or reimburse the Lender, upon
demand, for all costs and expenses, including appraisal and reappraisal costs of
the Property and reasonable attorneys’ and legal assistants’ fees, which the
Lender may incur in connection with enforcement proceedings under each Note,
this Mortgage, or any of the other Loan Documents (including all fees and costs
incurred in enforcing or protecting each Note, this Mortgage, or any of the
other Loan Documents in any bankruptcy proceeding), and attorneys’ and legal
assistants’ fees incurred by the Lender in any other suit, action, legal
proceeding or dispute of any kind in which the Lender is made a party or appears
as party plaintiff or defendant, affecting the Indebtedness, each Note, this
Mortgage, any of the other Loan Documents, or the Property, or required to
protect or sustain  this Mortgage. The Borrower shall be obligated to pay (or to
reimburse the Lender) for such fees, costs and expenses and shall indemnify and
hold the Lender harmless from and against any and all loss, cost, expense,
liability, damage and claims and causes of action, including attorneys’ fees,
incurred or accruing by reason of the Borrower’s failure to promptly repay any
such fees, costs and expenses. If any suit or action is brought to enforce or
interpret any of the terms of this Mortgage (including any effort to modify or
vacate any automatic stay or injunction, any trial, any appeal, any petition for
review or any bankruptcy proceeding), the Lender shall be entitled to recover
all expenses reasonably incurred in preparation for or during the suit or action
or in connection with any appeal of the related decision, whether or not taxable
as costs. Such expenses include reasonable attorneys’ fees, witness fees (expert
or otherwise), deposition costs, copying charges and other expenses. Whether or
not any court action is involved, all reasonable expenses, including the costs
of searching records, obtaining title and credit reports, appraisals,
environmental assessments, surveying costs, title insurance premiums, and
reasonable attorneys’ fees, incurred by the Lender that are necessary at any
time in the Lender’s opinion for the protection of its interest or enforcement
of its rights shall become a part of the Indebtedness payable on demand and
shall bear interest from the date of expenditure until repaid at the interest
rate as provided in the 10-Year Note.

25.6

General Indemnification

The Borrower shall indemnify, defend and hold the Lender (together with its
officers, directors and employees) harmless against: (i) any and all claims for
brokerage, leasing, finder’s or similar fees which may be made relating to the
Real Property or the Indebtedness and (ii) any and all liability, obligations,
losses, damages, penalties, claims, actions, suits costs and expenses (including
the Lender's reasonable attorneys’ fees, costs and expenses, together with
reasonable appellate counsel fees, costs and expenses, if any) of whatever kind
or nature which may be asserted against, imposed on or incurred by the Lender in
connection with the Indebtedness, this Mortgage, the Real Property or any part
thereof, or the operation, maintenance and/or use thereof, or the exercise by
the Lender of any rights or remedies granted to it under this Mortgage or
pursuant to applicable law; provided, however, that nothing herein shall be
construed to obligate the Borrower to indemnify, defend and hold harmless the
Lender from and against any of the foregoing which is imposed on or incurred by
the Lender by reason of the Lender’s willful misconduct or gross negligence.

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25.7

Recording and Filing

The Borrower shall cause this Mortgage and all amendments, supplements, and
substitutions to be recorded, filed, re-recorded and re-filed in such manner and
in such places as the Lender may reasonably request. The Borrower will pay all
recording filing, re-recording and re-filing taxes, fees and other charges.

25.8

No Waiver

No deliberate or unintentional failure by the Lender to require strict
performance by the Borrower of any Obligation shall be deemed a waiver, and the
Lender shall have the right at any time to require strict performance by the
Borrower of any Obligation.

25.9

Covenants Running with the Land

All Obligations are intended by the parties to be and shall be construed as
covenants running with the Land.

25.10

Severability

The Loan Documents are intended to be performed in accordance with, and only to
the extent permitted by, all applicable Legal Requirements. Any provision of the
Loan Documents that is prohibited or unenforceable in any jurisdiction shall
nevertheless be construed and given effect to the extent possible. The
invalidity or unenforceability of any provision in a particular jurisdiction
shall neither invalidate nor render unenforceable any other provision of the
Loan Documents in that jurisdiction, and shall not affect the validity or
enforceability of that provision in any other jurisdiction. If a provision is
held to be invalid or unenforceable as to a particular person or under a
particular circumstance, it shall nevertheless be presumed valid and enforceable
as to others, or under other circumstances.

25.11

Usury

The parties intend that no provision of either Note or the Loan Documents be
interpreted, construed, applied, or enforced so as to permit or require the
payment or collection of interest in excess of the Maximum Permitted Rate. In
this regard, the Borrower and the Lender each stipulate and agree that it is
their common and overriding intent to contract in strict compliance with
applicable usury laws. Accordingly, none of the terms of this Mortgage, either
Note or any of the other Loan Documents shall ever be construed to create a
contract to pay, as consideration for the use, forbearance or detention of
money, interest at a rate in excess of the Maximum Permitted Rate, and the
Borrower shall never be liable for interest in excess of the Maximum Permitted
Rate. Therefore, (a) in the event that the Indebtedness and Obligations are
prepaid or the maturity of the Indebtedness and Obligations is accelerated by
reason of an election by the Lender, unearned interest shall be canceled and, if
theretofore paid, shall either be refunded to the Borrower or credited on the
Indebtedness, as the Lender may elect; (b) the aggregate of all interest and
other charges constituting interest under applicable laws and contracted for,
chargeable or receivable under each Note and the other Loan Documents or
otherwise in connection with the transaction contemplated thereby shall never
exceed the maximum amount of interest, nor produce a rate in excess of the
Maximum Permitted Rate; and (c) if any excess interest is provided for or
received, it shall be deemed a mistake, and the same shall, at the option of the
Lender, either be refunded to the Borrower or credited on the unpaid principal
amount (if any), and the Indebtedness shall be automatically reformed so as to
permit only the collection of the interest at the Maximum Permitted Rate.
Furthermore, if any provision of either Note or any of the other Loan Documents
is interpreted, construed, applied, or enforced, in such a manner as to provide
for interest in excess of the Maximum Permitted Rate, then the parties intend
that such provision automatically shall be deemed reformed retroactively so as
to require payment only of interest at the Maximum Permitted Rate. If, for any
reason whatsoever, interest paid or received during the full term of the
applicable Indebtedness produces a rate which exceeds the Maximum Permitted
Rate, then the amount of such excess shall be deemed credited retroactively in
reduction of the then outstanding principal amount of the Indebtedness, together
with interest at such Maximum Permitted Rate. The Lender shall

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credit against the principal of such Indebtedness (or, if such Indebtedness
shall have been paid in full, shall refund to the payor of such interest) such
portion of said interest as shall be necessary to cause the interest paid to
produce a rate equal to the Maximum Permitted Rate. All sums paid or agreed to
be paid to the Lender for the use, forbearance or detention of money shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread in equal parts throughout the full term of the applicable Indebtedness,
so that the interest rate is uniform throughout the full term of such
Indebtedness. In connection with all calculations to determine the Maximum
Permitted Rate, the parties intend that all charges be excluded to the extent
they are properly excludable under applicable usury laws, as they from time to
time are determined to apply to this transaction. The provisions of this Section
shall control all agreements, whether now or hereafter existing and whether
written or oral, between the Borrower and the Lender.

25.12

Entire Agreement

The Loan Documents contain the entire agreements between the parties relating to
the financing of the Real Property, and all prior agreements which are not
contained in the Loan Documents are terminated. The Loan Documents represent the
final agreement between the parties and may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the parties. There are
no unwritten oral agreements between the parties. The Loan Documents may be
amended, revised, waived, discharged, released or terminated only by a written
instrument or instruments executed by the party against whom enforcement of the
amendment, revision, waiver, discharge, release or termination is asserted. Any
alleged amendment, revision, waiver, discharge, release or termination that is
not so documented shall be null and void.

25.13

Notices

In order for any demand, consent, approval or other communication to be
effective under the terms of this Mortgage, “Notice” must be provided under the
terms of this Subsection. All Notices must be in writing. Notices may be (a)
delivered by hand, (b) transmitted by facsimile (with a duplicate copy sent by
first class mail, postage prepaid), (c) sent by certified or registered mail,
postage prepaid, return receipt requested, or (d) sent by reputable overnight
courier service, delivery charges prepaid. Notices shall be addressed as set
forth below:

If to the Lender:

Transamerica Life Insurance Company

c/o AEGON USA Realty Advisors, LLC

4333 Edgewood Road, N.E.

Cedar Rapids, Iowa 52499-5443

Attn:  Mortgage Loan Department

Reference:  Loan #10514231 and 10514235

Fax Number: (319) 355-2277

If to the Borrower:

Sterling Georgetown, LLC
1711 Gold Drive South, Suite 100
Fargo, North Dakota 58103
Fax Number: (701) 478-8111

Notices delivered by hand or by overnight courier shall be deemed given when
actually received or when refused by their intended recipient. Notices sent by
facsimile will be deemed delivered when a legible copy has been received
(provided receipt has been verified by telephone confirmation or one of the
other permitted means of giving Notices under this Subsection). Mailed Notices
shall be deemed given on the

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date of the first attempted delivery (whether or not actually received). The
Lender or the Borrower may change its address for Notice by giving at least
fifteen (15) Business Days’ prior Notice of such change to the other party.

25.14

Counterparts

This Mortgage may be executed in any number of counterparts, each of which shall
be an original, but all of which together shall constitute but one instrument.

25.15

Choice of Law

This Mortgage shall be interpreted, construed, applied, and enforced according
to, and will be governed by, the laws of Minnesota, without regard to any choice
of law principle which, but for this provision, would require the application of
the law of another jurisdiction and regardless of where executed or delivered,
where payable or paid, where any cause of action accrues in connection with this
transaction, where any action or other proceeding involving the Loan is
instituted, or whether the laws of Minnesota otherwise would apply the laws of
another jurisdiction.

25.16

Forum Selection

The Borrower agrees that the sole and exclusive forum for the determination of
any action relating to the validity and enforceability of each Note, this
Mortgage and the other Loan Documents, and any other instruments securing each
Note shall be either in an appropriate court of the State of Minnesota or the
applicable United States District Court.

25.17

Sole Benefit

This Mortgage and the other Loan Documents have been executed for the sole
benefit of the Borrower and the Lender and the successors and assigns of the
Lender. No other party shall have rights thereunder or be entitled to assume
that the parties thereto will insist upon strict performance of their mutual
obligations hereunder, any of which may be waived from time to time. The
Borrower shall have no right to assign any of its rights under the Loan
Documents to any party whatsoever.

25.18

Release of Claims

The Borrower hereby RELEASES, DISCHARGES and ACQUITS forever the Lender and its
officers, directors, trustees, agents, employees and counsel (in each case,
past, present or future) from any and all Claims existing as of the Effective
Date (or the date of actual execution hereof by the Borrower, if later). As used
herein, the term “Claim” shall mean any and all liabilities, claims, defenses,
demands, actions, causes of action, judgments, deficiencies, interest, liens,
costs or expenses (including court costs, penalties, attorneys’ fees and
disbursements, and amounts paid in settlement) of any kind and character
whatsoever, including claims for usury, breach of contract, breach of
commitment, negligent misrepresentation or failure to act in good faith, in each
case whether now known or unknown, suspected or unsuspected, asserted or
unasserted or primary or contingent, and whether arising out of written
documents, unwritten undertakings, course of conduct, tort, violations of laws
or regulations or otherwise.

25.19

No Partnership

Nothing contained in the Loan Documents is intended to create any partnership,
joint venture or association between the Borrower and the Lender, or in any way
make the Lender a co-principal with the Borrower with reference to the Property.

25.20

Payoff Procedures

If the Borrower pays or causes to be paid to the Lender all of the Indebtedness,
then Lender’s interest in the Real Property shall cease, and upon receipt by the
Lender of such payment, the Lender shall either (a) cancel this Mortgage or (b)
assign the Loan Documents and endorse each Note (in either case without

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recourse or warranty of any kind) to a takeout lender, upon payment (in the
latter case) of an administrative fee of $2,500 plus all out-of-pocket expenses
incurred by the Lender in connection with such cancellation or assignment.

25.21

Future Advances 

Under this Mortgage, “Indebtedness” is defined to include amounts advanced by
the Lender in the future. Such advances include any additional disbursements to
the Borrower (unless in connection with another, independent mortgage
financing), as well as any amounts advanced to pay Impositions, to cure
Defaults, or to pay the costs of collection and receivership. Accordingly, any
such sums shall be equally secured with, and have the same priority as, the
Indebtedness, and shall be subject to all of the terms and provisions of this
Mortgage. The Borrower shall pay any taxes that may be due in connection with
any such future advance.

25.22

Defeasance

This Mortgage is made upon the conditions that if (a) all of the Indebtedness
and Obligations, including all future advances and other future indebtednesses,
obligations and liabilities included therein, are paid and performed in full,
(b) the Borrower reimburses the Lender for any amounts the Lender shall have
paid in respect of liens, Impositions, prior mortgages, insurance premiums,
repairing or maintaining the Real Property, performing the Borrower’s
obligations under any Lease, performing the Borrower’s obligations with respect
to environmental matters, and for any other advancements hereunder, and interest
thereon, (c) the Borrower fulfills all of the Borrower’s other Obligations, (d)
the Lender has no obligation to extend any further credit to or for the account
of the Borrower, and (e) no contingent liability of the Borrower secured by this
Mortgage then exists, this conveyance shall be null and void upon the filing by
the Lender of the written instrument of termination described in Section 25.23.

25.23

Satisfaction

This Mortgage and the Lender’s security interest under this Mortgage in the Real
Property will not be terminated until a written mortgage satisfaction instrument
executed by one of the Lender’s officers is filed for record in the county in
which the Land is located. Except as otherwise expressly provided in this
Mortgage, no satisfaction of this Mortgage shall in any way affect or impair the
representations, warranties, agreements or other obligations of the Borrower or
the powers, rights and remedies of the Lender under this Mortgage with respect
to any transaction or event occurring prior to such satisfaction, all of which
shall survive such satisfaction.

25.24

Date

The date of this Mortgage is intended as a date for the convenient
identification of this Mortgage and is not intended to indicate that this
Mortgage was executed and delivered on that date.

25.25

Interpretation

(a)

Headings and General Application

The section, subsection, paragraph and subparagraph headings of this Mortgage
are provided for convenience of reference only and shall in no way affect,
modify or define, or be used in construing, the text of the sections,
subsections, paragraphs or subparagraphs. If the text requires, words used in
the singular shall be read as including the plural, and pronouns of any gender
shall include all genders.

(b)

Sole Discretion

The Lender may take any action or decide any matter under the terms of this
Mortgage or of any other Loan Document (including any consent, approval,
acceptance, option, election or

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authorization) in its sole and absolute discretion, for any reason or for no
reason, unless the related Loan Document contains specific language to the
contrary. Any approval or consent that the Lender might withhold may be
conditioned in any way.

(c)

Result of Negotiations

This Mortgage and all other Loan Documents result from negotiations between the
Borrower and the Lender and from their mutual efforts. Therefore, it shall be so
construed, and not as though it had been prepared solely by the Lender.

(d)

Reference to Particulars

The scope of a general statement made in this Mortgage or in any other Loan
Document shall not be construed as having been reduced through the inclusion of
references to particular items that would be included within the statement’s
scope. Therefore, unless the relevant provision of a Loan Document contains
specific language to the contrary, the term “include” shall mean “include, but
shall not be limited to” and the term “including” shall mean “including, without
limitation.”

25.26

Joint and Several Liability

If there is more than one individual or entity executing this Mortgage as the
Borrower, liability of such individuals and entities under this Mortgage shall
be joint and several.

25.27

Time of Essence

Time is of the essence of each and every covenant, condition and provision of
this Mortgage to be performed by the Borrower.

25.28

Jury Waiver

THE BORROWER AND BY ITS ACCEPTANCE HEREOF, THE LENDER, HEREBY WAIVE ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (I)
UNDER THIS MORTGAGE OR ANY OTHER LOAN DOCUMENT OR (II) ARISING FROM ANY LENDING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS MORTGAGE OR ANY OTHER LOAN
DOCUMENT, AND THE BORROWER AND BY ITS ACCEPTANCE HEREOF, THE LENDER, AGREE THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A
JURY.

25.29

Renewal, Extension, Modification and Waiver

The Lender, at its option, may at any time renew or extend this Mortgage, each
Note or any other Loan Document. The Lender may enter into a modification of any
Loan Document or of the Environmental Indemnity Agreement without the consent of
any person not a party to the document being modified. The Lender may waive any
covenant or condition of any Loan Document or of the Environmental Indemnity
Agreement, in whole or in part, at the request of any person then having an
interest in the Property or in any way liable for any part of the Indebtedness.
The Lender may take, release, or resort to any security for each Note and the
Obligations and may release any party primarily or secondarily liable on any
Loan Document or on the Environmental Indemnity Agreement, all without affecting
any liability not expressly released in writing by the Lender.

25.30

Cumulative Remedies

Every right and remedy provided in this Mortgage shall be cumulative of every
other right or remedy of the Lender, whether conferred by law or by grant or
contract, and may be enforced concurrently with any such right or remedy. The
acceptance of the performance of any obligation to cure any Default shall not be
construed as a waiver of any rights with respect to any other past, present or
future Default. No waiver in a

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Mortgage and Security Agreement

Sterling Minnesota Portfolio, Minnesota

AEGON Loan No. 10514231 and 10514235

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particular instance of the requirement that any Obligation be performed shall be
construed as a waiver with respect to any other Obligation or instance. 

25.31

No Obligation to Marshal Assets

No holder of any mortgage, security interest or other encumbrance affecting all
or any portion of the Real Property, which encumbrance is inferior to the
mortgage and security interest of this Mortgage, shall have any right to require
the Lender to marshal assets.

25.32

Transfer of Ownership

The Lender may, without notice to the Borrower, deal with any person in whom
ownership of any part of the Real Property has vested, without in any way
vitiating or discharging the Borrower from liability for any of the Obligations.

25.33

Application of Proceeds to Notes

With respect to any provision in this Mortgage, or in any other Loan Document,
that permits Lender to apply the proceeds of any security for the Loan to the
Notes, or that permits the Lender to apply any payments made (other than monthly
principal and interest payments under the Notes) to reduction of the
Indebtedness under the Notes, Lender may apply such proceeds or payments to
either of the Notes in its discretion.

[SIGNATURE APPEARS ON THE NEXT PAGE]

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Mortgage and Security Agreement

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IN WITNESS WHEREOF, the Borrower has caused this Mortgage to be duly executed on
the date of the acknowledgement of the Borrower’s signature below, to be
effective as of the Effective Date.

 

 

 

 

 

 

 

STERLING GEORGETOWN, LLC, a Minnesota
limited liability company

 

 

 

 

 

 

 

By:

 

 

 

 

Bradley J. Swenson

 

 

 

President and Chief Manager

 

 

 

 

 

STATE OF NORTH DAKOTA

)

 

 

 

) ss.

 

 

COUNTY OF CASS

)

 

 

 

The foregoing instrument was acknowledged before me this             day of
December, 2014, by Bradley J. Swenson, the President and Chief Manager of
Sterling Georgetown, LLC, a Minnesota Limited Liability Company, on behalf of
the limited liability company.

 

 

 

 

 

 

 

 

 

 

(SEAL)

 

Notary Public

 

 

 

 

This instrument was drafted by:

James C. Wine, Esq.
Nyemaster Goode, P.C.
700 Walnut Street, Suite 1600
Des Moines, Iowa 50309-3956

After recording, return to above address.

 

 

 

 

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EXHIBIT A

Ramsey County Property:

TRACT 697000-1 (Tract 1)

Lot 2, Block 1, Maple Woods Estates, recorded April 14, 1973, as Documents No.
1850577, according to the plat thereof on file and of record in the office of
the Register of Deeds, Ramsey County, Minnesota.

(Abstract Property)

TRACT 697000-2 (Tract 2)

Parcel A (Abstract Property)

The East Quarter of the Southeast Quarter of Section 1, Township 29 North, Range
23 West, Ramsey County, except the South 1649.59 feet thereof, and except the
West 30 feet thereof, and except the North 160 feet of the South 18009.59 feet
of the East 295 feet thereof.

Parcel B:

Non-exclusive easement for driveway purposes as conveyed in the Warranty Deed,
dated January 2, 1971, recorded January 27, 1971, in the office of the Ramsey
County Recorder as Doc. No. 1792059.

TRACT 697000-3 (Tract 3)

Parcel 1:

That part of the SE ¼ of the SW ¼ of Section 32, Township 30 North, Range 23
West, Ramsey County, Minnesota, except North 156 feet all lying Northerly of the
following described line: Commencing at the Sou8thwest corner of the SE ¼ of the
SW ¼ of Section 32, Township 30 North, Range 23 West, Ramsey County, Minnesota;
thence on an assumed bearing of North along the West line of the SE ¼ of the SE
¼ a distance of 33.00 feet to the Northerly right-of-way line of County Road
“D”; thence continuing North along the West line of the SE ¼ of the SW ¼ a
distance of 591.23 feet to the point of beginning; thence East a distance of
374.55 feet; thence South 28 degrees 00 minutes 00 seconds East a distance of
353.00 feet; thence South 83.00 feet; thence South 89 degree 38 minutes 00
seconds East a distance of 118.43 feet; thence North 51 degrees 26 minutes 15
seconds East a distance of 262.12 feet; thence North 65 degrees 27 minutes 10
seconds East a distance of 290.75 feet to the Westerly right-of-way line of
State Highway No. 8; and there terminating;

 

 

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Except that part described as follows:

Commencing at the Southwest corner of said SE 1/4 of the SW 1/4 of said Section
32; thence due North on an assumed bearing along the West line of said SE 1/4 of
the SW 1/4 a distance of 33.00 feet to the Northerly right-of-way line of 37th
Avenue Northeast; thence South 89 degrees 38 minutes 00 seconds East along said
Northerly right-of-way of said 37th Avenue Northeast and parallel to the South
line of said SE 1/4 of the SW 1/4 a distance of 477.00 feet; thence North 0
degrees 22 minutes 00 seconds East a distance of 200.00 feet; thence South 89
degrees 38 minutes 00 seconds East a distance of 180.43 feet; thence North 51
degrees 26 minutes 15 seconds East a distance of 262.12 feet; thence North 65
degrees 27 minutes 10 seconds East a distance of 230.75 feet to the point of
beginning of the tract to be described; thence continuing North 65 degrees 27
minutes 10 seconds East a distance of 60.00 feet to the Westerly right-of-way
line of state Highway No. 8; thence North 26 degrees 36 minutes 00 seconds East
along said Westerly right-of-way line a distance of 255.53 feet; thence North 0
degrees 01 minutes 30 seconds West along said Westerly right-of-way line a
distance of 407.66 feet to a point 156.00 feet Southerly of the North line of
said SE 1/4 of the SW 1/4; thence North 89 degrees 36 minutes 00 seconds West
and parallel to the North line of said SE 1/4 of the SW 1/4 a distance of 497.63
feet; thence due South a distance of 335.74 feet; thence South 45 degrees 00
minutes 00 seconds East a distance of 465.00 feet to the point of beginning,
according to the United States Government Survey thereof, Ramsey County,
Minnesota.

ABSTRACT PROPERTY.

Parcel 2:

Non-exclusive easements as contained in Declaration of Easements dated September
15, 1970, filed November 5, 1970 as Document Number 1786083 in the office of the
County Recorder, Ramsey County, Minnesota.

TRACT 697000-6 (Tract 6)

The North 603 feet of the South 1489.59 feet of the East 295 feet of the
Southeast Quarter of Section 1, Township 29, Range 23; and

The North 763 feet of the South 1649.59 feet of the East Quarter of the
Southeast Quarter of Section 1, Township 29, Range 23, except the East 295 feet
thereof, and except the West 30 feet thereof.

(Abstract property)

 

 

 

 

 

 

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Anoka County Property:

TRACT 697000-4 (Tract 4)

Parcel A (Abstract property):

Lots 1 and 2, Block1, Robinwood Plat 2, recorded May 8, 1970, as Document
No.334820 in the office of the County Recorder, Anoka County, Minnesota,
together with that part of the west half of adjoining vacated Flora Street NW
lying north of the easterly projection of the south line of said Lot1.

Parcel B:

Non-exclusive easement for driveway purposes over part of vacated Flora Street
NW, as contained in the Agreement, dated September 29, 1971, recorded October
26, 1971, in the office of the Anoka County Recorder as Doc. No.357564.

TRACT 697000-5 (Tract 5)

Parcel A (Certificate of Title No. 38026):

Tracts A, B, and C, Registered Land Survey No. 38, files of the Registrar of
Titles, recorded November 9, 1972, as Document No. 76593, County of Anoka,
Minnesota.

Parcel B (Certificated of Title No.85725):

Tracts D and E, Registered Land Survey No. 38, files of the Registrar of Titles,
recorded November 9, 1972, as Document No.76593, County of Anoka, Minnesota.

 

 

 

 

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