Exhibit 10.6
THIS INSTRUMENT WAS PREPARED BY:
Lindquist & Vennum
P.L.L.P. (LLK)
4200 IDS
Center
80 South Eighth
Street
Minneapolis, MN
55402
(612)
371-3211
FUTURE ADVANCE
MORTGAGE
AND
SECURITY
AGREEMENT
AND
FIXTURE FINANCING
STATEMENT
AND
ASSIGNMENT OF LEASES
AND RENTS
MORTGAGE –
COLLATERAL REAL ESTATE MORTGAGE
THIS INDENTURE
(the “Mortgage”), made and given this [10
th ] day of August, 2007, by Great Plains Ethanol,
LLC, a South Dakota limited liability company
(“Borrower”), whose address is 27716 462 nd
Avenue, Chancellor, South Dakota 57015 to AgCountry Farm Credit
Services, FLCA (“Lender”), whose address is 1900 44
th Street South, Fargo, North Dakota 58108.
PRELIMINARY RECITALS :
A.
The Borrower is the owner in fee simple of certain real property
more fully described on Exhibit A attached hereto (the
“Land”).
B.
Pursuant to a certain Master Credit Agreement between the Borrower
and Lender dated of even date herewith (as amended, restated,
supplemented or otherwise modified from time to time and in effect
on the date hereof, “Credit Agreement”) the Lender has
agreed to make certain loans secured by this Mortgage to the
Borrower in the amount of up to One Hundred Five Million and no/100
Dollars ($105,000,000.00) (“Loan”).
C.
The Loan is evidenced by certain promissory Notes executed and
delivered by the Borrower to the Lender in the aggregate principal
sum of One Hundred Five Million and no/100 Dollars
($105,000,000.00) (collectively, the “Notes”).
D.
The Notes bear interest at a per annum rate of interest all as more
fully set forth in the Notes (“Interest Rate”) except
that during the period of and continuance of a default under
the
Notes or Credit Agreement or an Event of Default under this
Mortgage, the Notes 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 Notes and declare the entire unpaid
Indebtedness Secured Hereby due and payable as more fully set forth
in the Notes (“Default Interest”).
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 Notes are payable in installments with a final payment of
principal and interest due as set forth in the Notes (the
“Maturity Date”).
G.
As used herein, the term “Note Rate” shall mean the
rate of interest then in effect on the Notes whether the Interest
Rate or Default Interest, 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 Notes and all amounts owing under the Notes and any documents
securing the Notes:
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.
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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 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.
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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.
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 Notes 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 Notes, 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 Notes and all other
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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 Notes and any other instrument
given as security for the payment of the Notes.
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 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
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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 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 Notes.
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
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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 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
8
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 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 462 nd
Avenue
Chancellor, South
Dakota 57015
(b)
The name and address of the Debtor is:
Great Plains Ethanol,
LLC
27716 462 nd
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
1900 44 th Street South
P.O. Box 6020
Fargo, North Dakota 58108
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(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
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 Notes 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
Notes 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
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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:
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 therefor 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
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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”):
(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.
12
4.
APPLICATION OF
INSURANCE AND AWARDS
4.l
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.
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,
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.
4.3
Disbursement of Insurance and Condemnation Proceeds . Any
restoration or repair shall be done under the supervision of an
architect acceptable to Lender and pursuant to plans and
specifications approved by the Lender. In any case where Lender may
elect to apply the proceeds to repair or restoration or permit the
Borrower to so apply the proceeds they shall be held by Lender for
such purposes
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