D.                                     The Note bears interest at a per annum rate of interest all as more fully set forth in the Note (“Interest Rate”) except that during the period of and continuance of a default under the Note or Credit Agreement or an Event of Default under this Mortgage, the Note shall bear interest at a per annum rate of interest of 200 basis points (2.0%) greater than the Interest Rate whether or not the Lender has exercised its option to accelerate the maturity of the Note and declare the entire unpaid Indebtedness Secured Hereby due and payable as more fully set forth in the Note (“Default Rate”).

 

E.                                       As a requirement to making the Loan the Lender requires among other things that the Borrower execute and deliver this Mortgage on the fee simple title to the Land and the building, buildings and other improvements located and/or to be constructed upon the Land.

 

F.                                       The Note is payable in installments with a final payment of principal and interest due not later than October 1, 2013 (the “Maturity Date”).

 

G.                                      As used herein, the term “Note Rate” shall mean the rate of interest then in effect on the Note whether the Interest Rate or Default Rate, as the case may be.

 

H.                                     The Borrower is executing and delivering this Mortgage for the purpose of subjecting and subordinating all of its right, title and interest in and to the Premises (as defined below) to the lien of this Mortgage.  It is expressly understood and agreed by acceptance of this Mortgage by the Lender that the Borrower has executed this Mortgage for the purpose of mortgaging, granting, bargaining, selling and conveying to the Lender and granting to the Lender a security interest in all of its right, title and interest in the Premises as security for the performance of the obligations which are secured hereby.

 

NOW, THEREFORE, in consideration of the debt hereinafter described and the sum of One and 00/100 Dollars ($1.00) to Borrower in hand paid by Lender, the receipt whereof is hereby acknowledged, Borrower does hereby GRANT, BARGAIN, SELL, CONVEY AND CONFIRM, MORTGAGE AND WARRANT unto Lender, its successors and assigns, AND GRANTS TO LENDER A SECURITY INTEREST IN all of the following properties now or hereafter owned by the Borrower and hereinafter set forth (all of the following being hereafter collectively referred to as the “Premises”), WITH POWER OF SALE, to secure payment of the Note and all amounts owing under the Note and any documents securing the Note:

 

A
LAND

 

All right, title and interest in the tracts or parcels of real property lying and being in the County of Turner, State of South Dakota, all as more fully described in Exhibit A attached hereto and made a part hereof, together with all the estates and rights in and to the real property and in and to lands lying in streets, alleys and roads adjoining the real property and all buildings, structures, improvements, fixtures and annexations, access rights, easements, rights of way or use, servitudes, licenses, tenements, hereditaments and appurtenances now or hereafter belonging or pertaining to the real property, and all water, mineral and oil rights now or hereafter belonging or pertaining to the Land and all proceeds and products derived therefrom whether now owned, leased or hereafter acquired.

 

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B
BUILDINGS

 

All buildings and improvements now or hereafter built, erected on, or existing on the Land.

 

C
PERSONAL PROPERTY

 

All buildings, improvements, personal property, fixtures, fittings and furnishings, now or hereafter attached to, located at, or placed in the improvements on the Land described herein including, without limitation all machinery, fittings, fixtures, apparatus, equipment or articles used to supply heating, gas, electricity, air conditioning, water, light, waste disposal, power, refrigeration, ventilation, and fire and sprinkler protection; all maintenance supplies and repair equipment; all draperies, carpeting, floor coverings, screens, storm windows and window coverings, blinds, awnings, shrubbery and plants; all elevators, escalators and shafts, motors, machinery, fittings and supplies necessary for their use; all building materials and supplies now or hereafter delivered to the Premises (it being understood that the enumeration of any specific articles of property shall in no way be held to exclude any items of property not specifically enumerated), as well as renewals, replacements, proceeds, additions, accessories, increases, parts, fittings, insurance payments, awards and substitutes thereof, together with all interest of Borrower in any such items hereafter acquired, as well as the Borrower’s interest in any lease, or conditional sales agreement under which the same is acquired, all of which personal property mentioned herein shall be deemed fixtures and accessory to the freehold and a part of the realty and not severable in whole or in part without material injury to the Premises.

 

D
RENTS, INCOME, LEASES AND PROFITS

 

All rents, income, contract rights, leases and profits now due or which may hereafter become due under or by virtue of any lease, sublease, license or agreement, whether written or verbal, for the use or occupancy of the Premises or any part thereof together with all tenant security deposits.

 

E
INSURANCE PROCEEDS

 

All awards, payments, proceeds now or hereafter payable under any policy of insurance insuring the Premises including but not limited to the proceeds of casualty insurance, title insurance, business interruption/rents insurance or other insurance maintained with respect to the Premises.

 

F
JUDGMENTS AND AWARDS

 

All awards, compensation and settlements in lieu thereof made as a result of the taking by power of eminent domain of the whole or any part of the Premises, including any awards for

 

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damages sustained to the Premises, for a temporary taking, change of grade of streets or taking of access.

 

G
INTANGIBLES

 

All contracts, licenses, permits, management records, files, consents, governmental approvals and intangibles used, useful or required in the ownership and management of the Premises together with all soil reports, building permits, variances, licenses, utility permits and other permits and agreements relating to the construction or equipping of the improvements on the Premises, or the operation or maintenance of the Premises, including, without limitation, all warranties and contract rights.

 

H
CONSTRUCTION CONTRACTS

 

Each contract or agreement for the design, construction and equipping of the improvements to be constructed on the Premises, together with all rights, title and interest of Borrower in and to any existing or future changes, extensions, revisions, modifications, guarantees or performance, or warranties of any kind thereunder.

 

I
PLANS AND SPECIFICATIONS

 

All plans and specifications, all surveys, site plans, working drawings and papers, relating to the Premises and the construction and equipping of the improvements on the Premises, including without limitation, all architectural and site plans prepared.

 

J
BUILDING SUPPLIES

 

All building supplies and materials ordered or purchased for use in connection with the construction and equipping of the improvements on the Premises.

 

K
SERVICE AGREEMENTS

 

All rights and interests of Borrower in and under any and all service and other agreements relating to the operation, maintenance, and repair of the Premises or the buildings and improvements thereon.

 

It is specifically understood that the enumeration of any specific articles of property shall not exclude or be held to exclude any items of property not specifically mentioned.  All of the Premises hereinabove described, real, personal and mixed, whether affixed or annexed or not, and all rights hereby conveyed and secured are intended to be as a unit and are hereby understood and agreed and declared to be appropriated to the use of the Premises, and shall for the purposes of this Mortgage be deemed to be part of the Premises and conveyed and secured hereby.

 

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TO HAVE AND TO HOLD THE SAME, together with the possession and right of possession of the Premises, unto the Lender, its successors and assigns, forever.

 

PROVIDED NEVERTHELESS, that if the Borrower, its successors or assigns, shall:

 

i)                                          pay to the Lender all amounts owing under the Note and the Loan Documents (as defined in the Credit Agreement) according to the terms thereof, the terms and conditions of which are incorporated herein by reference and made a part hereof, together with any extensions or renewals thereof, due and payable with interest thereon at the Note Rate, the balance of said principal sum together with interest thereon being due and payable in any event on the Maturity Date; and

 

ii)                                       pay to the Lender, its successors or assigns, at the times demanded and with interest thereon at the Note Rate, all sums advanced (a) in protecting the lien of this Mortgage, (b) in payment of taxes on the Premises, (c) in payment of insurance premiums covering improvements thereon, (d) in payment of principal and interest on prior liens, in payment of expenses and attorney’s fees herein provided for and (e) all sums advanced for any other purpose authorized herein; and

 

iii)                                    keep and perform all of the covenants and agreements herein contained; and

 

iv)                                   keep and perform all of the terms and conditions of any instrument given as collateral for the Loan; and

 

v)                                      keep and perform all of the terms and conditions of the Credit Agreement;

 

then this Mortgage shall become null and void, and shall be released at Borrower’s expense.  The Note, all such sums and all such obligations, together with interest thereon, are herein collectively referred to as the “Indebtedness Secured Hereby”.

 

AND IT IS FURTHER COVENANTED AND AGREED AS FOLLOWS:

 

1.
GENERAL COVENANTS, AGREEMENTS, WARRANTIES

 

1.1                                  Payment of Indebtedness:  Observance of Covenants .  Borrower shall duly and punctually pay each and every installment of principal and interest on the Note and all other Indebtedness Secured Hereby, as and when the same shall become due, and shall duly and punctually perform and observe all of the covenants, agreements and provisions contained herein, in the Note and any other instrument given as security for the payment of the Note.

 

1.2                                  Maintenance:  Repairs .  Borrower shall not abandon the Premises, shall keep and maintain the Premises in good condition, repair and operating condition, normal wear and tear excluded, free from any waste or misuse, and shall promptly repair or restore any buildings, improvements or structures now or hereafter on the Premises which may become damaged or destroyed to their condition prior to any such damage or destruction.  Borrower further agrees that excepting the requirements imposed upon it under the Credit Agreement to complete the

 

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improvements as defined therein it will not expand any improvements on the Premises, erect any new improvements or make any material alterations in any improvements which shall alter the basic structure, adversely affect the market value or change the existing architectural character of the Premises, nor remove or demolish any improvements without suitable replacement thereof, and shall complete within a reasonable time any buildings now or at any time in the process of remodeling on the Premises; provided nothing herein shall preclude Borrower from constructing improvements necessary or desirable to the use of the Premises for Borrower’s business purposes which are non-structural in nature and which do not constitute material alterations to the Premises or affect the nature of use, structure or utility of the Premises or decrease the market value of the Premises.

 

1.3                                  Compliance with Laws . Borrower shall comply with all requirements of law, municipal ordinances and regulations affecting the Premises, shall comply with all private restrictions and covenants affecting the Premises and shall not acquiesce in or seek any rezoning classification affecting the Premises.

 

1.4                                  Payment of Operating Costs: Prior Mortgages and Liens .  Borrower shall pay all operating costs and expenses of the Premises, shall keep the Premises free from levy, attachment, mechanics’, materialmen’s and other liens (“Liens”) and shall pay when due all indebtedness which may be secured by mortgage, lien or charge on the Premises.

 

1.5                                  Payment of Impositions .  Borrower shall pay when due (or with respect to real estate taxes, prior to becoming delinquent) and in any event before any penalty attaches all taxes, assessments, governmental charges, water charges, sewer charges, and other fees, taxes, charges and assessments of every kind and nature whatsoever assessed or charged against or constituting a lien on the Premises or any interest therein (“Impositions”) and will upon demand furnish to the Lender proof of the payment of any such Impositions.  In the event of a court decree or an enactment after the date hereof by any legislative authority of any law imposing upon a mortgagee the payment of the whole or any part of the Impositions herein required to be paid by the Borrower, or changing in any way the laws relating to the taxation of mortgages or debts secured by mortgages or a lender’s interest in the Premises, so as to impose such Imposition on the Lender or on the interest of the Lender in the Premises, then, in any such event, Borrower shall bear and pay the full amount of such Imposition, provided that if for any reason payment by Borrower of any such Imposition would be unlawful, or if the payment thereof would constitute usury or render the Indebtedness Secured Hereby wholly or partially usurious, Lender, at its option, may declare the whole sum secured by this Mortgage with interest thereon to be immediately due and payable, without prepayment premium, or Lender, at its option, may pay that amount or portion of such Imposition as renders the Indebtedness Secured Hereby unlawful or usurious, in which event Borrower shall concurrently therewith pay the remaining lawful and non-usurious portion or balance of said Imposition.

 

1.6                                  Contest of Impositions, Liens and Levies .  Borrower shall not be required to pay, discharge or remove any Imposition or any Lien so long as the Borrower shall in good faith contest the same or the validity thereof by appropriate legal proceedings which shall operate to prevent the collection of the Lien or Imposition so contested and the sale of the Premises, or any part thereof, to satisfy the same, provided that the Borrower shall, prior to the date such Lien or Imposition is due and payable, have given such reasonable security as may be demanded by the

 

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Lender to insure such payments plus interest or penalties thereon, and prevent any sale or forfeiture of the Premises by reason of such nonpayment.  Any such contest shall be prosecuted with due diligence and the Borrower shall promptly after final determination thereof pay the amount of any such Lien or Imposition so determined, together with all interest and penalties which may be payable in connection therewith.  Notwithstanding these provisions Borrower shall (and if Borrower shall fail so to do, Lender, may but shall not be required to) pay any such Lien or Imposition notwithstanding such contest if in the reasonable opinion of the Lender, the Premises shall be in jeopardy or in danger of being forfeited or foreclosed.

 

1.7                                  Protection of Security .  Borrower shall promptly notify Lender of and appear in and defend any suit, action or proceeding that affects the Premises or the rights or interest of Lender hereunder and the Lender may elect to appear in or defend any such action or proceeding.  Borrower agrees to indemnify and reimburse Lender from any and all loss, damage, expense or cost arising out of or incurred in connection with any such suit, action or proceeding, including costs of evidence of title and reasonable attorney’s fees and such amounts together with interest thereon at the Note Rate shall become additional “Indebtedness Secured Hereby” and shall become immediately due and payable.

 

1.8                                  Annual Statements .  Borrower shall furnish to the Lender the financial statements, and such other information, as may be required by the Credit Agreement.

 

1.9                                  Additional Assurances .  Borrower agrees upon reasonable request by the Lender to execute and deliver such further instruments, deeds and assurances including financing statements under the Uniform Commercial Code and will do such further acts as may be necessary or proper to carry out more effectively the purposes of this Mortgage and without limiting the foregoing, to make subject to the lien hereof any property agreed to be subjected hereto or covered by the granting clause hereof, or intended so to be.  Borrower agrees to pay any recording fees, filing fees, taxes, or other charges arising out of or incident to the filing or recording of this Mortgage, such further assurances and instruments and the issuance and delivery of the Note.

 

1.10                            Title .  Borrower is the lawful owner of and has a good and marketable fee simple absolute title to the Premises and will warrant and defend its title to the same free of all liens and encumbrances, other than the Permitted Encumbrances set forth on attached Exhibit B and has good right and lawful authority to grant, bargain, sell, convey, mortgage and grant a security interest in the Premises as provided herein.

 

1.11                            Credit Agreement .  This Mortgage secures an obligation incurred for the construction of an improvement on land and is a “Construction Mortgage” as that term is used in the Uniform Commercial Code.  This Mortgage is the Mortgage referred to in and is also given as security for the due and punctual performance, observance and payment by the Borrower of the terms and conditions set forth in the Credit Agreement, the terms and conditions of which are incorporated herein by reference.  In addition to its remedies hereunder, the Lender may, but shall not be required to, avail itself of any or all of the rights and remedies available to it under the Credit Agreement, and any sums expended by the Lender in availing itself of such rights and remedies shall bear interest thereon at the rate specified in the Credit Agreement and shall be so much additional Indebtedness Secured Hereby, and shall be payable to the Lender immediately

 

7

 

upon demand; provided that, no such payment by the Lender shall be considered as waiving the event of default.

 

2.
UNIFORM COMMERCIAL CODE SECURITY AGREEMENT

 

2.1                                  Security Agreement .  This Mortgage shall constitute a security agreement as defined in the Uniform Commercial Code (“Code”) in the items described in the Granting Clauses of this Mortgage (“Collateral”).  Any Collateral installed in or used in the Premises are to be used by the Borrower solely for Borrower’s business purposes or as the equipment and fixtures leased or furnished by the Borrower, as landlord, to tenants of the Premises and such Collateral will be kept at the buildings on the Premises and will not be removed therefrom without the consent of the Lender and may be affixed to such buildings but will not be affixed to any other real estate.  The remedies of the Lender hereunder are cumulative and separate, and the exercise of any one or more of the remedies provided for herein or under the Uniform Commercial Code shall not be construed as a waiver of any of the other rights of the Lender including having any Collateral deemed part of the realty upon any foreclosure thereof.  If notice to any party of the intended disposition of the Collateral is required by law in a particular instance, such notice shall be deemed commercially reasonable if given at least ten (10) days prior to such intended disposition and may be given by advertisement in a newspaper accepted for legal publications either separately or as part of a notice given to foreclose the real property or may be given by private notice if such parties are known to Lender.  Neither the grant of a security interest pursuant to this Mortgage nor the filing of a financing statement pursuant to the Code shall ever impair the stated intention of this Mortgage that all Collateral comprising the Premises and at all times and for all purposes and in all proceedings both legal or equitable shall be regarded as part of the real property conveyed and secured hereunder irrespective of whether such item is physically attached to the real property or any such item is referred to or reflected in a financing statement.  Borrower will on demand deliver all financing statements that may from time to time be required by Lender to establish, perfect and continue the priority of Lender’s security interest in the Collateral and shall pay all expenses incurred by Lender in connection with the renewal or extensions of any financing statements executed in connection with the Premises; and shall give advance written notice of any proposed change in Borrower’s name, identity or structure and will execute and deliver to Lender prior to or concurrently with such change all additional financing statements that Lender may require to establish and perfect the priority of Lender’s security interest.

 

2.2                                  Maintenance of Property .  Subject to the provisions of this section, in any instance where Borrower in its sound discretion determines that any Collateral subject to a security interest under this Mortgage has become inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary for the operation of the Premises, Borrower may, at its expense, remove and dispose of it and substitute and install other items not necessarily having the same function, provided, that such removal and substitution shall not impair the operating utility and unity of the Premises.  All substituted items shall become a part of the Premises and subject to the lien of the Mortgage.  Any amounts received or allowed Borrower upon the sale or other disposition of the removed items of Collateral shall be applied first against the cost of acquisition and installation of the substituted items.  Nothing herein contained shall be construed to prevent any tenant from removing from the Premises trade fixtures, furniture and equipment installed by the tenant and

 

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removable by the tenant under its terms of the lease, on the condition, however, that the tenant shall at its own cost and expense, repair any and all damages to the Premises resulting from or caused by the removal thereof.

 

2.3                                  Fixture Filing .  THIS MORTGAGE SHALL BE EFFECTIVE AS A FINANCING STATEMENT FILED AS A FIXTURE FILING WITH RESPECT TO ALL GOODS CONSTITUTING A PART OF THE COLLATERAL WHICH ARE OR ARE TO BECOME FIXTURES RELATED TO THE PREMISES.  FOR PURPOSES OF THE UNIFORM COMMERCIAL CODE THE FOLLOWING INFORMATION IS FURNISHED:

 

(a)                                   The name and address of the record owner of the real estate described in this instrument is:

 

Great Plains Ethanol, LLC

27716 – 462nd Avenue

Chancellor, South Dakota  57015

 

(b)                                  The name and address of the Debtor is:

 

Great Plains Ethanol, LLC

27716 – 462nd Avenue

Chancellor, South Dakota  57015

 

(c)                                   Debtor’s Federal Tax ID No. 46-0459188

 

(d)                                  The name and address of the Secured Party is:

 

AgCountry Farm Credit Services, FLCA
1749 38 ^th Street Southwest
P.O. Box 6020
Fargo, North Dakota 58108

 

(e)                                   Information concerning the security interest evidenced by this instrument may be obtained from the Secured Party at its address above.

 

(f)                                     This document covers goods which are or are to become fixtures.

 

3.
INSURANCE AND ESCROWS

 

3.1                                  Insurance .  Borrower shall obtain, pay for and keep in full force and effect during the term of this Mortgage at its sole cost and expense the following policies of insurance:

 

(a)                                   All risk/open perils special form property insurance with extended coverages including any building contents, sprinkler coverage, Ordinance of Law coverage (including demolition cost, loss to undamaged portions of any buildings and increased cost of construction) with limits of 100% replacement cost and with no

 

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co-insurance provision or if the insurance carrier requires, co-insurance provisions with an agreed amount endorsement in amount acceptable to Lender;

 

(b)                                  Insurance against loss or damage from (i) leakage of sprinkler systems and (ii) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in any improvements on the Premises and including broad form boiler and machinery insurance (without exclusion for explosion) covering all boilers or other pressure vessels, machinery and equipment (including electrical equipment, sprinkler systems, heating and air conditioning equipment, refrigeration equipment and piping) located in, on or about the Premises and any improvements thereon in an amount at least equal to the full replacement cost of such equipment and the building or buildings housing the same;

 

(c)                                   Flood insurance if any part of the Premises now (or subsequently determined to be) is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968 (and amendment or successor act thereto) in an amount at least equal to the lesser of the full replacement cost of all buildings and equipment on the Premises, the outstanding principal amount of the Note or the maximum limits of coverage available with respect to the buildings and equipment under said Act;

 

(d)                                  Sinkhole insurance, if available in the area where the Premises are located, in an amount at least equal to principal balance of the Note or the maximum limit of coverage available, whichever is less;

 

(e)                                   Rents Loss or Business Interruption insurance covering risk of loss due to the occurrence of any hazards insured against under the required fire and extended coverage insurance in an meant equal to one (1) year’s loss of income as such income may change from time to time due to changes in income from the Premises;

 

(f)                                     Commercial general public liability insurance (including product liability, completed operations, contractual liability, host liquor liability, broad form property damage, and personal injuries, including death resulting therefrom) and with single limit coverage for personal and bodily injury and property damage of at least $5,000,000.00 for each occurrence;

 

(g)                                  Such other coverages appropriate to the Premises, its location and use as Lender may from time to time require such as earthquake, mine subsidence, sinkhole, personal property supplemental liability, or coverages of other property - specific risks.

 

and while any improvements are in the process of construction on the Premises:

 

10

 

aa)                                 Builder’s Risk Insurance written on a completed value basis in an amount equal to the full replacement cost of the Improvements at the date of completion with coverage available on the so-called non-reporting “all risk” form of  policy, including coverage against collapse and water damage, with standard non-contributing mortgagee clauses, such insurance to be in such amounts and form and written by such companies as shall be approved by Lender, and the originals of such policies (together with appropriate endorsement thereto, evidence of payment of premiums thereon and written agreements by the insurer or insurers therein to give Lender ten (10) days’ prior written notice of any intention to cancel).

 

bb)                               Contractor’s Comprehensive General Liability Insurance including operations, product liability, contingent liability operations, operations of subcontractors, completed operations, contractual liability insurance and comprehensive automobile liability insurance (including hired and non-owned liability) and with single limit coverage for personal and bodily injury and property damage of at least $5,000,000.00 for each occurrence.

 

cc)                                 Statutory workmen’s compensation coverage in the required amounts.

 

Such insurance policies shall be written on forms and with insurance companies satisfactory to Lender, shall be in amounts sufficient to prevent the Borrower from becoming a co-insurer of any loss thereunder, and shall bear a satisfactory mortgagee clause in favor of the Lender with loss proceeds under any such policies to be made payable to the Lender.  Blanket policies must include limits by property location.  All required policies of insurance or acceptable certificates thereof together with evidence of the payment of current premiums therefore shall be delivered to and be held by the Lender.  The Borrower shall, within thirty (30) days prior to the expiration of any such policy, deliver other original policies or certificates of the insurer evidencing the renewal of such insurance together with evidence of the payment of current premiums therefor.  In the event of a foreclosure of this Mortgage or any acquisition of the Premises by the Lender all such policies and any proceeds payable therefrom, whether payable before or after a foreclosure sale, or during the period of redemption, if any, shall become the absolute property of the Lender to be utilized at its discretion.  In the event of foreclosure or the failure to obtain and keep any required insurance the Borrower empowers the Lender to effect the above insurance upon the Premises at Borrower’s expense and for the benefit of the Lender in the amounts and types aforesaid for a period of time covering the time of redemption from foreclosure sale, and if necessary therefor, to cancel any or all existing insurance policies.  Borrower agrees to pay Lender such fees as may be permitted under applicable law for the costs incurred by Lender in determining, from time to time, whether the Premises are located within an area having special flood hazards.  Such fees shall include the fees charged by any organization providing for such services.

 

3.2                                  Escrows .  Upon demand, Borrower shall deposit with the Lender, or at Lender’s request, with its servicing agent, on the first day of each and every month hereafter as a deposit to pay the costs of taxes, assessments and insurance premiums next due (“Charges”):

 

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(a)                                   Initially a sum such that the amounts to be deposited pursuant to (b) next and such initial sum shall equal the estimated Charges for the next due payment; and

 

(b)                                  Thereafter an amount equal to one-twelfth (1/12th) of the estimated annual Charges due on the Premises.

 

Lender will, upon the presentation to the Lender by the Borrower of the bills therefor, pay the Charges from such deposits or will upon presentation of receipted bills therefor, reimburse the Borrower for such payments made by the Borrower.  In the event the deposits on hand shall not be sufficient to pay all of the estimated Charges when the same shall become due from time to time, or the prior deposits shall be less than the currently estimated monthly amounts, then the Borrower shall pay to the Lender on demand any amount necessary to make up the deficiency.  The excess of any such deposits shall be credited to subsequent payments to be made for such items.  If a default or an event of default shall occur under the terms of this Mortgage the Lender may, at its option, without being required so to do, apply any deposits on hand to the Indebtedness Secured Hereby, in such order and manner as the Lender may elect.  When the Indebtedness Secured Hereby has been fully paid any remaining deposits shall be returned to the Borrower as its interest may appear.  All deposits are hereby pledged as additional security for the Indebtedness Secured Hereby, shall be held for the purposes for which made as herein provided, may be held by Lender or its servicing agent and may be commingled with other funds of the Lender, or its servicing agent, shall be held without any allowance of interest thereon and shall not be subject to the decision or control of the Borrower.  Neither Lender nor its servicing agent shall be liable for any act or omission made or taken in good faith.  In making any payments, Lender or its servicing agent may rely on any statement, bill or estimate procured from or issued by the payee without inquiry into the validity or accuracy of the same.  If the taxes shown in the tax statement shall be levied on property more extensive than the Premises, then the amounts escrowed shall be based on the entire tax bill and Borrower shall have no right to require an apportionment and Lender or its servicing agent may pay the entire tax bill notwithstanding that such taxes pertain in part to other property and the Lender shall be under no duty to seek a tax division or apportionment of the tax bill.

 

4.
APPLICATION OF INSURANCE AND AWARDS

 

4.1                                  Damage or Destruction of the Premises .  Borrower shall give the Lender prompt notice of any damage to or destruction of the Premises and in case of loss covered by policies of insurance the Lender is hereby authorized at its option to settle and adjust any claim arising out of such policies and collect and receipt for the proceeds payable therefrom; provided, that the Borrower may itself adjust and collect for any losses arising out of a single occurrence aggregating not in excess of Twenty-five Thousand and 00/100 ($25,000.00) Dollars.  Any expense incurred by the Lender in the adjustment and collection of insurance proceeds (including the cost of any independent appraisal of the loss or damage on behalf of Lender) shall be reimbursed to the Lender first out of any proceeds.  The proceeds or any part thereof shall be applied to reduction of the Indebtedness Secured Hereby then most remotely to be paid, whether due or not, without the application of any prepayment premium, or to the restoration or repair of the Premises, the choice of application to be solely at the discretion of Lender.

 

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4.2                                  Condemnation .  Borrower shall give the Lender prompt notice of any actual or threatened condemnation or eminent domain proceedings affecting the Premises and hereby assigns, transfers, and sets over to the Lender the entire proceeds of any award or claim for damages or settlement in lieu thereof for all or any part of the Premises taken or damaged under such eminent domain or condemnation proceedings, the Lender being hereby authorized to intervene in any such action and to collect and receive from the condemning authorities and give proper receipts and acquittances for such proceeds.  Borrower will not enter into any agreements with the condemning authority permitting or consenting to the taking of the Premises or agreeing to a settlement unless prior written consent of Lender is obtained.  Any expenses incurred by the Lender in intervening in such action or collecting such proceeds, including reasonable attorney’s fees, shall be reimbursed to the Lender first out of the proceeds.  The proceeds or any part thereof shall be applied upon or in reduction of the Indebtedness Secured Hereby then most remotely to be paid, whether due or not,