Exhibit 10.5

 

ASSIGNMENT OF LEASES AND RENTS 

 

THIS ASSIGNMENT is made as of this 8th day of September, 2015, by Pro-Dex
Sunfish Lake, LLC, a Delaware limited liability company (“Assignor”), in favor
of Fortitude Income Funds, LLC, a Delaware limited liability company
(“Lender”). 

 

RECITALS

 

Assignor desires to borrow from Lender the sum of Five Hundred Thousand and
00/100 Dollars ($500,000.00), evidenced by a Promissory Note of even date
herewith (the “Note”), and will execute and deliver to Lender to secure the
Note, a Combination Mortgage, Security Agreement and Fixture Financing Statement
of even date herewith (the “Mortgage”), covering, in part, real estate situated
in the County of Anoka, State of Minnesota, described in Exhibit A attached
hereto and made a part hereof, and certain fixtures and equipment owned by
Assignor now or hereafter located thereon (the “Mortgaged Property”), all as
more fully described in the Mortgage. 

 

Assignor may, from time to time, during such time as the Obligations Secured
Hereby (as hereinafter defined) remain outstanding, enter into leases and other
agreements under which Assignor is entitled to Rents (as hereinafter defined)
with respect to all or part of the Mortgaged Property (all of which leases and
agreements are collectively referred to herein as the “Leases”) with various
persons or entities (hereinafter referred to as “Lessees”).

 

Lender, to further secure the Obligations Secured Hereby, has required execution
of this Assignment. 

 

NOW, THEREFORE, in consideration of the premises, and for further good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Assignor does hereby grant, transfer and assign to Lender all of
Assignor’s right, title and interest in and to any Leases or any future Leases
or subleases covering all or any part of the Mortgaged Property together with
any and all security deposits made thereunder and all extensions, modifications
and renewals, if any, thereof, and any guarantees of Lessees’ obligations under
any thereof. In addition to the foregoing, Assignor does further hereby grant,
transfer and assign to Lender all of the rents, income, issues and profits (the
“Rents”), now or hereafter accruing or owing from any

 

 

 

 

Leases or any future Leases or otherwise as a result of any use, possession or
occupancy of the Mortgaged Property or any part thereof, whether accruing before
or after foreclosure of the Mortgage or during the period of redemption thereof.
The Rents are being hereby granted, transferred and assigned for the purpose of
securing (collectively referred to as the “Obligations Secured Hereby”): 

 

(1)Payments of all indebtedness evidenced by the Note (including any extensions
or renewals thereof);

 

(2)Payment of all other sums, with interest thereon, becoming due and payable to
Lender pursuant to covenants and agreements contained herein and in the Note and
in the Mortgage; and

   

(3)Performance and discharge of each and every obligation, covenant and
agreement of Assignor contained herein and in the Note and the Mortgage.

 

ASSIGNOR WARRANTS AND COVENANTS that Assignor is and will remain the absolute
owner of the Rents and Leases free and clear of all liens and encumbrances other
than the lien granted herein and those encumbrances set forth in Exhibit B to
the Mortgage (the “Permitted Encumbrances”); that Assignor has not heretofore
assigned or otherwise encumbered its interest in any of the Rents or Leases to
any person other than as set forth in the Permitted Encumbrances; that Assignor
has the right under applicable law, under the Leases and otherwise to execute
and deliver this Assignment and keep and perform all of Assignor’s obligations
hereunder; that Assignor will warrant and defend the Leases and Rents against
all adverse claims, whether now existing or hereafter arising.

 

AND TO PROTECT THE SECURITY OF THIS ASSIGNMENT, ASSIGNOR AGREES:

 

1.          Performance of Leases. To faithfully abide by, perform and discharge
each and every obligation, covenant and agreement under any Leases to be
performed by the lessor thereunder; to observe and comply with all provisions of
law applicable to the operation and ownership of the Mortgaged Property,
including without limitation, all applicable provisions of Minnesota Statute,
Chapter 504B with respect to any security deposits received by Assignor and all
covenants and obligations required of Assignor by the provisions of Minnesota
Statutes, Chapter 504B; to enforce or secure the performance of each and every
obligation, covenant, condition and agreement of any Leases by Lessees to be
performed; not to further borrow against, pledge or assign any Rents, or
anticipate the Rents or reduce the amount of Rents or other payments under any
Lease, or to waive, excuse, condone or in any manner release or discharge a
Lessee of or from the obligations, covenants, conditions and agreements by a
Lessee to be performed, including the obligation to pay the rental called for
thereunder in the manner and at the place and time specified therein unless
Assignor has the prior written permission of Lender;

 

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and not to terminate any lease or accept a surrender thereof except by reason of
the expiration of the stated term of the Lease or unless the prior written
permission of Lender has been obtained.

  

2.          Protect Security. At Assignor’s sole cost and expense, to appear in
and defend any action or proceeding arising under, growing out of or in any
manner connected with any Lease or the obligations, duties or liabilities of
Assignor and Lessees, and to pay all costs and expenses of Lender, including
attorneys’ fees in a reasonable sum, in any such action or proceeding in which
Lender may appear. Assignor represents and warrants that Assignor is now and
will be the absolute owner of any lease with full right and title to assign the
same and the Rents, that there is no outstanding assignment or pledge of any
lease or of the Rents; that no Rents have been waived, anticipated, discounted,
compromised or released. During any period of time the Mortgaged Premises is not
occupied by Assignor, Assignor agrees to use Assignor’s best efforts to keep the
Mortgaged Property fully leased at rentals equivalent to or greater than rentals
achieved from comparable properties.  

 

3.          Present Assignment of Rents. This Assignment shall constitute an
actual and present assignment, provided, Assignor shall have the right to
collect, but not prior to accrual, all of the Rents, and to retain, use and
enjoy the same unless and until a default shall occur in the payment or
performance of the Obligations Secured Hereby. 

 

4.          Remedies. During any period of time in which the Mortgaged Premises
is occupied or leased to parties other than Assignor, and upon or at any time
after default by Assignor in the payment or performance of any Obligations
Secured Hereby, Lender may, at its option and subject to the provisions of the
Mortgage, without notice: 

 

a.In the name, place and stead of Assignor, (i) enter upon, manage and operate
the Mortgaged Property, or retain the services of an independent contractor to
manage and operate the same, (ii) make, enforce, modify and accept surrender of
any Lease, (iii) obtain or evict Lessees, collect, sue for, fix or modify rents
and enforce all rights of Assignor under any Lease, and (iv) perform any and all
other acts that may be necessary or proper to protect the security of this
Assignment; or

  

b.Apply for, and Assignor hereby consents to, the appointment of a receiver of
the Mortgaged Property, whether or not proceedings for the foreclosure of the
Mortgage have been commenced, and if such proceedings have been commenced,
whether or not a foreclosure sale has occurred.

 

The exercise of any of the foregoing rights or remedies shall not cure or waive
any default under the Note or the Mortgage or invalidate any act done by virtue
of such default.

 

5.          Application of Rents. All Rents collected by Lender, or by a
receiver, if any, shall be held and applied to the following items in the manner
determined by Lender or the receiver to preserve the value of the Mortgaged
Premises:

 

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a.To payment of all reasonable fees of the receiver, if any, approved by the
court;

 

b.To the repayment when due of all Lessee security deposits, with interest
thereon, pursuant to the provisions of Minnesota Statutes, Section 504B.178;

 

c.To payment of all delinquent or current real estate taxes and special
assessments payable with respect to the Mortgaged Property;

 

d.To payment of all premiums then due for the insurance required by the
provisions of the Mortgage;

 

e.To payment of expenses incurred for normal maintenance of the Mortgaged
Property;

 

f.To payment of expenses incurred by Lender or its agents for the management and
operation of the Mortgaged Property, including the cost of any independent
contractor retained by Lender to manage and operate the Mortgaged Property;

 

g.All sums remaining shall be applied to the Obligations Secured Hereby;

 

h.If the Mortgaged Property, shall be foreclosed and sold pursuant to a
foreclosure sale, then:

  

(i)If Lender is the purchaser at the foreclosure sale, the rents shall be paid
to Lender to be applied to the extent of any deficiency remaining after the
sale, the balance to be retained by Lender, and if the Mortgaged Property be
redeemed by Assignor or any other party entitled to redeem, to be applied as a
credit against the redemption price with any remaining excess rents to be paid
to Assignor, provided, that if the Mortgaged Property not be redeemed, any
remaining excess rents to belong to Lender, whether or not a deficiency exists.

 

(ii)If Lender is not the purchaser at the foreclosure sale, the rents shall be
paid to Lender to be applied first, to the extent of any deficiency remaining
after the sale, the balance to be retained by the purchaser, and if the
Mortgaged Property be redeemed by Assignor or any other party entitled to
redeem, to be applied as a credit against the redemption price with any
remaining excess rents to be paid to Assignor, provided, if the Mortgaged
Property not be redeemed any remaining excess rents shall be paid first to the
purchaser at the foreclosure sale in an amount equal to the interest accrued
upon the sale price pursuant to Minn. Stat. 580.23 or 581.10, then

 

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to Lender to the extent of any deficiency remaining unpaid and the remainder to
the purchaser.

 

The rights and powers of Lender under this Assignment, and the application of
the Rents pursuant to this paragraph 5, shall continue and remain in full force
and effect both before and after commencement of any action or procedure to
foreclose the Mortgage, after the foreclosure sale of the Mortgaged Property in
connection with the foreclosure of the Mortgage, and until expiration of the
period of redemption from any such foreclosure sale, whether or not any
deficiency from the unpaid balance of the Obligations Secured Hereby exists
after such foreclosure sale.

  

6.          No Liability for Lender. Lender shall not be obligated to perform or
discharge, nor does it hereby undertake to perform or discharge any obligation,
duty or liability under any Lease, nor shall this Assignment operate to place
responsibility for the control, care, management or repair of the Mortgaged
Property upon Lender, nor for the carrying out of any of the terms and
conditions of any Lease; nor shall it operate to make Lender responsible or
liable for any waste committed on the Mortgaged Property by a Lessee or any
other party, or for any dangerous or defective condition of the Mortgaged
Property or for any negligence in the management, upkeep, repair or control of
the Mortgaged Property resulting in loss or injury or death to any Lessee,
licensee, employee or stranger.

 

7.          Assignor to Hold Lender Harmless. Assignor shall and does hereby
agree to indemnify and to hold Lender harmless of and from any and all
liability, loss or damage which it may or might incur under any Lease or under
or by reason of this Assignment and of and from any and all claims and demands
whatsoever which may be asserted against it by reason of any alleged obligations
or undertakings on its part to perform or discharge any of the terms, covenants
or agreements contained in any Lease. Should Lender incur such liability, loss
or damage under any Lease or under or by reason of this Assignment, or in the
defense of any such claims or demands, the amount thereof, including costs,
expenses, and reasonable attorneys’ fees, shall be secured hereby and Assignor
shall reimburse Lender therefor immediately upon demand, and upon the failure of
Assignor so to do Lender may declare all Obligations Secured Hereby immediately
due and payable.

 

8.          Specific Assignment of Subsequent Lease. Assignor covenants, and
agrees promptly upon request of Assignee, to transfer and assign to Lender any
specific Lease of all or any part of the Mortgaged Property upon the same terms
and conditions as are herein contained. 

 

9.          Remedies not Exclusive. This Assignment shall in no way operate to
prevent Lender from pursuing any remedy which it now has or hereafter may have
under the terms or conditions of the Note or the Mortgage, or any other
instrument securing the same, or by law, but shall be deemed an additional
remedy and shall be cumulative with the remedies granted therein.

 

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10.          Authorization to Lessees. Lessees are hereby irrevocably authorized
and directed to recognize the claims of Lender, or its assigns, hereunder
without investigating the reason for any action taken by Lender, or the validity
or the amount of indebtedness owing to Lender, or the existence of any default
in the Note, the Mortgage, or under or by reason of this Assignment, or the
application of the Rents to be made by Lender. Assignor hereby irrevocably
directs and authorizes Lessees to pay to Lender all sums due under any Lease and
consents and directs that said sums shall be paid to Lender without the
necessity for a Judicial determination that a default has occurred hereunder or
under the Note, or the Mortgage, or that Lender is entitled to exercise its
rights hereunder, and to the extent such sums are paid to Lender, Assignor
agrees that Lessees shall have no further liability to Assignor for the same.
The sole signature of Lender shall be sufficient for the exercise of any rights
under this Assignment and the sole receipt of Lender for any sums received shall
be a full discharge and release therefor to Lessees.

 

11.          Notices. All notices, demands or other communications which are
required or permitted to be given or served by either party hereunder shall be
deemed given when deposited in the United States Mail, certified mail, return
receipt requested, postage prepaid, addressed as follows: 

 

 

If to Assignor:

Pro-Dex Sunfish Lake, LLC       2361 McGaw Ave       Irvine, CA 92614          
  If to Lender: Fortitude Income Fund, LLC      

701 Washington Ave North, Suite 550

    Minneapolis, MN 55401  

 

Such addresses may be changed from time to time by either party by at least ten
days’ prior written notice to the other party. 

 

12.          Successors and Assigns. This Assignment and each and every
covenant, agreement and other provision hereof shall be binding upon Assignor
and its successors and assigns, including without limitation each and every from
time to time record owner of the Mortgaged Property or any other person having
an interest therein, and shall inure to the benefit of Lender and its successors
and assigns. 

 

13.          Governing Law. This Assignment is made and executed in the State of
Minnesota and shall be governed by the laws of such State with respect to
procedures and remedies available to Lender in the event of a default. It is the
intention of the parties hereto that this Assignment shall confer upon Lender
the fullest rights, remedies and benefits available pursuant to Minnesota
Statutes, Sections 576.25 and 559.17. 

 

14.          Severability. The unenforceability or invalidity of any provision
hereof shall not render any other provisions herein contained unenforceable or
invalid.

  

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15.          No Mortgagee in Possession. Nothing herein contained and no action
taken pursuant to this Assignment, shall be construed as constituting Lender as
“Mortgagee in Possession”.

 

IN WITNESS WHEREOF, Assignor has caused this Assignment of Leases and Rents to
be duly executed as of the day and year first above written. 

        Pro-Dex Sunfish Lake, LLC,   a Delaware limited liability company      
  By: /s/ Richard L. Van Kirk     Its: President

 

A notary public or other officer completing
this certificate verifies only the identity of
the individual who signed the document to
which this certificate is attached, and not the
truthfulness, accuracy, or validity of that
document. 

 

State of California

 

County of Orange

 

On September 8, 2015 before me, notary public Mark Nava Fernandez (here insert
name and title of officer), personally appeared Richard Lee Jr. Van Kirk, who
proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument. 

 

I certify under PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct. 

 

WITNESS my hand and official seal. 

      /s/ Mark Nava Fernandez   (Seal) Signature    

 

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THIS INSTRUMENT DRAFTED BY:

 

BARNA, GUZY & STEFFEN, LTD. 

400 Northtown Financial Plaza 

200 Coon Rapids Boulevard 

Minneapolis, MN 55433 

(763) 780-8500 (MFH)

 

663308-v1

 

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EXHIBIT A

  

Legal Description

 

The East 500 feet of the South 200 feet (as measured along the East and South
lines respectively) of the Northeast Quarter (NE ¼ of SE ¼) of Section numbered
Twenty-seven (27), Township Thirty-two (32) North of Range Twenty-five(25) West,
Anoka County, Minnesota.