LEASEHOLD MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING
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LEASEHOLD MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING
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LEASEHOLD MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING
THIS LEASEHOLD MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (this “Leasehold Mortgage”) is made as of April 15, 2009, by and between MGP INGREDIENTS, INC., a Kansas corporation whose address for notice purposes is Cray Business Plaza, 100 Commercial Street, Atchison, Kansas 66002 (the “Mortgagor”), and EXCHANGE NATIONAL BANK & TRUST CO., whose address for notice purposes is 600 Commercial Street, Atchison, Kansas 66002 (the “Mortgagee”);
WHEREAS, the City of Atchison, Kansas (the “Issuer”) did issue its Taxable Industrial Revenue Bonds, Series 2006 (MGP Ingredients Project), on December 28, 2006, in an aggregate principal amount of $7,000,000 (the “Bonds”), the proceeds of which were used to pay the costs of acquiring, purchasing, constructing and equipping a project consisting of an office building and a technical center facility (the “Project”) located in Atchison County, Kansas;
WHEREAS, pursuant to a Lease dated as of the issue date of the Bonds, by and between the Issuer and the Mortgagor evidenced by a Notice of Lease filed with the Register of Deeds for Atchison County, Kansas on January 16, 2007 and recorded in Book 559, at Page 137 (collectively, the “Lease”), the Issuer has leased the Project, including the land described in Exhibit “A” attached hereto and incorporated herein by reference (the “Land”), the Improvements, Fixtures, Personal Property (as said terms are defined below) to the Mortgagor in consideration for which the Issuer, pursuant to a Trust Indenture dated as of the issue date of the Bonds (the “Indenture”), by and between the Issuer and Commerce Bank, N.A., as Trustee, has issued the Bonds;
WHEREAS, the Mortgagee has agreed to make a loan in the total principal amount of $2,800,000 (the “Loan”) to the Mortgagor as evidenced by that certain promissory note (the “Note”) in the original principal amount of the Loan, dated the date hereof, made by and between the Mortgagor in favor of the Mortgagee; and
WHEREAS, to secure the payment and performance of the Secured Obligations (as defined below) and as a condition to the making of the Loan, the Mortgagor has agreed to execute and deliver this Leasehold Mortgage in favor of the Mortgagee.
NOW, THEREFORE, the Mortgagor, for itself and its successors and assigns, in consideration of the above and foregoing recitals, all of which are material hereto and are restated and incorporated herein by reference, and for Ten Dollars ($10.00) and other valuable consideration, does hereby irrevocably GRANT, BARGAIN, SELL, ALIGN, REMISE, MORTGAGE, PLEDGE, TRANSFER, RELEASE, CONVEY, ASSIGN AND CONFIRM unto the Mortgagee, and its successors and assigns, and grants to the Mortgagee, and to its successors and assigns, a security interest in, all of the following described property, which is, except where the context otherwise requires, collectively referred to as the “Mortgaged Property,” whether now owned or held or hereafter acquired:
(a) The leasehold estate created by the Lease in the Project, together with any greater or additional estate therein as may be acquired by the Mortgagor, which includes the following property:
(i) The Land and any land within the streets, roads and alleys adjoining the Land, and all and singular the tenements, hereditaments, privileges, easements, franchises, rights, appendages and appurtenances whatsoever belonging to or in any wise appertaining to the Land;
(ii) All buildings, improvements and other structures now located, or hereafter erected, upon the Land (collectively, the “Improvements”);
(iii) All apparatus, fixtures, fittings and appliances and any additions to, substitutions for, changes in or replacements of the whole or any part thereof (but only to the extent that such additions, substitutions, changes and replacements constitute a part of the Project under the terms of the Lease), including, without limitation, such of the foregoing as may be used in connection with the generation or distribution of air, water, heat, electricity, light, fuel or refrigeration, or for ventilation or sanitary purposes, or for the removal of dust, refuse or garbage, now or at any time hereafter affixed or attached to, placed upon or used in any way in connection with the use, enjoyment, occupancy or operation of the Land and Improvements, or any portion thereof (collectively, the “Fixtures”; and
(iv) All equipment and other articles of personal property now or in the future constituting a part of the Project, and all substitutions for, changes in or replacements of the whole or any part thereof, but only to the extent that such substitutions, changes and replacements constitute a part of the Project under the terms of the Lease (collectively, the “Personal Property”);
(b) The Mortgagor’s right or option pursuant to the Lease to purchase the Project;
(c) Any and all licenses, permits, authorizations or approvals of any type or nature whatsoever which relate to the use, development, operation or occupancy of the Project or the Mortgaged Property or any portion or component thereof, and all plans and specifications, architect’s contracts, construction contracts and other contracts relating to the Project;
(d) Other than the Lease, all leases, licenses, concessions, occupancy agreements, and other agreements (written or oral, now or at any time in effect) granted to any person in possessory interest in or the right to use, all or part of the Mortgaged Property, together with all related security and other deposits, herein collectively referred to as the “Leases”;
(e) All of the rents, revenues, royalties, income, proceeds, profits, security and other types of deposits, and other benefits paid or payable by parties to any lease, license, concession or occupancy agreement, for using, leasing, licensing, possessing, operating from, residing in, selling or otherwise enjoying the Mortgaged Property, herein collectively referred to as the “Rents”;
(f) All judgments, awards of damages and settlements hereafter made as a result of or in lieu of any taking of the Mortgaged Property or any part thereof or interest therein under the power of eminent domain, or for any damage (whether caused by such taking or otherwise) to the Mortgaged Property or the improvements thereon or any part thereof or interest therein, including any award for change of grade or streets;
(g) The abstract of title and title insurance policy covering the Mortgaged Property; all insurance policies covering all or any portion of the Mortgaged Property; and all blueprints, plans, maps, documents, books and records relating to the Mortgaged Property;
(h) All books and records of the Mortgagor relating to the Mortgaged Property;
(i) All rights of the Mortgagor to plans and specifications, designs, drawings and other matters prepared for any construction on the Mortgaged Property;
(j) All rights of the Mortgagor under any contracts executed by the Mortgagor as owner with any provider of goods or services for or in connection with any construction undertaken on, or services performed or to be performed in connection with, the Mortgaged Property; and
(k) All proceeds (including claims or demands thereto) of the conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims, including, without limitation, proceeds of insurance (including unearned premiums) and condemnation awards (including interest thereon).
TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, and its successors and assigns forever, subject to the Permitted Encumbrances (defined below), for the purposes and uses as set forth in this Leasehold Mortgage, including for the purpose of securing unto the Mortgagee and its successors and assigns, the following indebtedness, obligations and liabilities (collectively, the “Secured Obligations”):
(a) All indebtedness arising pursuant to the provisions of the Note, the Pledge and Security Agreement given by Mortgagor to Mortgagee pledging Mortgagor’s interest in the Bonds, this Leasehold Mortgage and all other documents evidencing, securing or pertaining to the Loan (collectively, the “Loan Documents”) together with any and all extensions, renewals, modifications, substitutions and changes in the form thereof;
(b) The performance by the Mortgagor of each covenant, agreement and obligation of the Mortgagor contained in the Loan Documents;
(c) The payment of all extensions, renewals, substitutions, modifications, amendments and changes in form of the Secured Obligations, which extensions or renewals may be from time to time and for any term or terms, with reasonable notice to the Mortgagor;
(d) The payment by the Mortgagor to the Mortgagee of all sums of money advanced or paid by the Mortgagee to cure or correct or in consequence of any default by the Mortgagor in or failure of the Mortgagor to comply with the Loan Documents; and
(e) The payment by the Mortgagor to the Mortgagee of any and all amounts expended by the Mortgagee in exercising or attempting to exercise any right or rights, remedy or remedies, granted or otherwise available to the Mortgagee upon the default of the Mortgagor in any of the provisions of the Loan Documents, including attorneys’ fees and litigation costs.
AND TO FURTHER SECURE the payments and performance of the Secured Obligations, the Mortgagor has covenanted and agreed and does hereby covenant and agree, as follows:
Section 1. Definitions . Capitalized terms not otherwise defined in this Leasehold Mortgage shall have the meanings assigned to them pursuant to Section 1.1 of the Lease.
Section 2. Maintenance . Except as otherwise provided in the Lease, the Mortgagor shall (a) keep the Project in good operating condition and repair, (b) not remove or demolish any building constituting a part of the Project, (c) complete or restore promptly and in good and workmanlike manner any building which may be damaged or destroyed thereon, and pay when due all claims for labor performed and materials furnished therefore, (d) comply with all laws affecting the Project or requiring any alterations or improvements to be made thereon, (e) not commit or permit waste thereof, (f) not commit, suffer or permit any act upon the Project in violation of law, and (g) do all other acts which from the character or use of the Project may be reasonably necessary, the specific enumerations herein not excluding the general.
Section 3. Insurance .
(b) The Mortgagor shall maintain, with financially sound and reputable companies, insurance policies (i) insuring the buildings, improvements and other structures constituting a part of the Project, the Fixtures and the Personal Property against loss by fire, explosion, theft and such other casualties and risks as are included in a “special form” (formerly known as an “all risk” policy) policy, in an amount equal to their full replacement cost, without deduction for physical depreciation and such that the Mortgagor would not be deemed a co-insurer, and (ii) commercial general liability insurance insuring the Mortgagor and the Mortgagee against liability for personal injury and property damage with single limit coverage for personal and bodily injury and property damage of at least $2,000,000 per occurrence. All such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least thirty (30) days (or ten (10) days in the event of nonpayment of premium) after receipt by the Mortgagee of written notice thereof, (ii) include deductibles approved by the Mortgagee and (iii) contain a standard, non-contributory mortgagee clause naming the Mortgagee, its successors and assigns, as an additional insured or loss payee, as applicable.
(c) If any improvements constituting a part of the Project are located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, the Mortgagor shall maintain or cause to be maintained, flood insurance in an amount no less than the maximum limit of coverage available under the National Flood Insurance Act of 1968, as amended.
(d) The Mortgagor promptly shall comply with and conform in all material respects to (i) all provisions of each such insurance policy, and (ii) all requirements of the insurers applicable to the Mortgagor or to any of the Mortgaged Property or to the use, manner of use, occupancy, possession, operation, maintenance, alteration or repair of any of the Mortgaged Property. The Mortgagor shall not use or permit the use of the Mortgaged Property in any manner which would permit any insurer to cancel any insurance policy or void coverage required to be maintained by this Leasehold Mortgage.
(e) If the Mortgagor is in default of its obligations to insure or deliver any such prepaid policy or policies, then the Mortgagee, at its option upon five (5) days’ written notice to the Mortgagor, may effect such insurance and pay the premium or premiums therefor, and the Mortgagor shall pay to the Mortgagee on demand such premium or premiums so paid by the Mortgagee with interest from the time of payment at the rate specified in the Note after maturity.
(f) If the Mortgaged Property, or any part thereof, shall be destroyed or damaged, the Mortgagor shall give prompt notice thereof to the Mortgagee.
(g) In the event of foreclosure of this Leasehold Mortgage or other transfer of title to the Mortgaged Property, all right, title and interest of the Mortgagor in and to any insurance policies then in force shall pass to the purchaser or grantee.
Section 4. Indemnification . The Mortgagor shall appear in and defend any action or proceeding purporting to affect the security of this Leasehold Mortgage or the rights or powers of the Mortgagee; and to pay all reasonable costs, fees and expenses of the Mortgagee including, but not limited to, cost of evidence of title and attorneys’ fees incurred by the Mortgagee in any such action or proceeding.
Section 5. Payment of Taxes, Etc. The Mortgagor shall promptly pay and discharge, when due, all Impositions as provided in Article VII of the Lease, subject to the rights of the Mortgagor under Section 7.3 of the Lease to contest any Impositions.
Section 6. Compliance with Lease . The Mortgagor shall pay all Rent, Additional Rent and other sums payable under the Lease as the same become due and perform all other obligations of the Mortgagor under the Lease in the manner and within the time periods specified in the Lease.
Section 7. Time of the Essence . Time is of the essence of this Leasehold Mortgage.
Section 8. Warranty as to Title . The Mortgagor represents and warrants that (i) it has good and marketable leasehold title to the Project subject to the terms and conditions of the Lease, and title to the remainder of the Mortgaged Property so that, upon compliance with recording and filing requirements, a valid first lien on all real property interests included in the Mortgaged Property and a valid, perfected, first priority security interest in all personal property and fixtures and other interests therein which are subject to Article 9 of the Uniform Commercial Code in effect in the State of Kansas (the “Commercial Code”) then included in the Mortgaged Property shall be obtained, subject only to those matters set forth in Schedule B of that certain commitment for title insurance dated February 5, 2009 issued by O’Keefe-Wilson Abstracting Co., Inc. as agent for Chicago Title Insurance Company (the “Permitted Encumbrances”), (ii) it has full right and authority to own, occupy and operate the Mortgaged Property subject to the terms of the Lease, and (iii) at its expense it will warrant and defend to the Mortgagee such title to the Mortgaged Property and the lien and interest of the Mortgagee therein and thereon against all claims and demands whatsoever except Permitted Encumbrances and will, except as otherwise herein expressly provided, maintain the priority of the lien of, and the security interest granted by, this Leasehold Mortgage upon the Mortgaged Property until the Mortgagor shall be entitled to release as provided herein.
Section 9. Recordation; Financing Statements . The Mortgagor hereby authorizes the Mortgagee, at Mortgagor’s expense, to cause this Leasehold Mortgage, any instruments supplemental hereto or thereto and financing statements to be recorded, registered and filed, and to be keep recorded, registered and filed, in such manner and in such places as may be required in order to establish, preserve and protect (a) the lien of this Leasehold Mortgage as a valid, first lien on all real property, fixtures and interest therein then included in the Mortgaged Property and a valid perfected first priority security interest in all personal property, fixtures and interests therein and all after-acquired property included in the Mortgaged Property (including in each such case, without limitation, any such properties acquired after the execution hereto), proceeds of the foregoing and (b) the rights of Mortgagee hereunder.
Section 10. After-Acquired Property. All property of every kind acquired by the Mortgagor after the date hereof, which by the terms hereof is intended to be subject to the lien of this Leasehold Mortgage, shall immediately upon the acquisition thereof by the Mortgagor, and without further mortgage, conveyance or assignment, become subject to the lien of this Leasehold Mortgage as fully as though now owned by the Mortgagor and specifically described herein. Nevertheless, the Mortgagor shall take such actions and execute and delivery such additional instruments as the Mortgagee shall reasonably require to further evidence or confirm the subjection to the lien of this Leasehold Mortgage of any such property.
Section 11. Mechanics’ and Other Liens. The Mortgagor shall not permit any mechanics’ or other liens to be filed or to exist against the Mortgaged Property by reason of work, labor, service or materials supplied or claimed to have been supplied to, for or in connection with the Mortgaged Property or to the Mortgagor or to anyone holding the Mortgaged Property or any part thereof through or under the Mortgagor. If any such lien shall at any time be filed, the Mortgagor shall, within thirty (30) after notice of the filing thereof (subject to the right to contest as set forth herein), cause the same to be discharged of record by payment, deposit, bond, order of a court of competent jurisdiction or otherwise. Notwithstanding the foregoing, the Mortgagor shall have the right, at its own expense and after prior written notice to the Mortgagee, by appropriate proceeding duly instituted and diligently prosecuted, to contest in good faith the validity or the amount of any such lien. However, if the Mortgagee shall notify the Mortgagor that, in the opinion of the Mortgagee, by nonpayment of any such items the lien of the Leasehold Mortgage will be materially affected or the Mortgaged Property or any part thereof will be subject to imminent loss or forfeiture, the Mortgagor shall promptly cause such lien to be discharged of record.
Section 12. No Sale, Conveyance, Etc. Any sale, conveyance, assignment, or transfer of the Mortgaged Property by the Mortgagee (except for sales of items of Personal Property so long as such items are replaced with substitute items of Personal Property of equal or greater value, which are subject to the security interest granted herein) without the prior written consent of the Mortgagee, which consent may be withheld in the Mortgagee’s sole discretion, shall be null and void. Any attempted sale, conveyance, assignment or transfer of the Mortgaged Property without the Mortgagee’s consent shall, at the option of the Mortgagee, constitute an Event of Default hereunder and all indebtedness secured hereby shall, at the Mortgagee’s option, become immediately due and payable. The Mortgagor shall not directly or indirectly create or permit to remain, and will promptly discharge, any mortgage, lien, encumbrance or charge on, pledge of, security interest in or conditional sale or other title retention agreement with respect to the Mortgaged Property or any part thereof or in the interest of the Mortgagor therein or any revenues, income or profit or other sums arising from the Mortgaged Property or any part thereof (including, without limitation, any lien, encumbrance or charge arising by operation of law) other than:
(a) the lien of thi