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2016-10-25 HRA Agenda PacketPLEASE TURN OFF CELL PHONES & PAGERS IN COUNCIL CHAMBERS. MOUND HOUSING & REDEVELOPMENT AUTHORITY REGULAR MEETING TUESDAY, OCT 25, 2016 6:50 P.M. MOUND CITY COUNCIL CHAMBERS Page Open the meeting 2. Action approving agenda, with any amendments Action approving minutes: October 11, 2016 regular meeting 1 - 2 4. Action approving payment of claims 3 -5 Public Hearing on proposed disposition of property: sale of Indian Knoll 6 - 8 Manor to IKM Limited Partnership, with Aeon as the General Partner 6. Catherine Pausche, Director of Finance and Administrative Services, 9-57 requesting action on a resolution to approve a loan agreement between the Mound HRA and IKM Limited Partnership Catherine Pausche, Director of Finance and Administrative Services, 58 requesting action on a resolution ending the Annual Contributions Contract (ACC) with HUD and dissolving the HRA's status as a Public Housing Authority (PHA) within HUD 8. Adjourn MOUND HOUSING AND REDEVELOPMENT AUTHORITY October 11, 2016 The Mound Housing and Redevelopment Authority in and for the City of Mound, Minnesota, met in regular session on Tuesday, October 11, 2016, at 6:55 p.m. in the Council chambers of the Centennial Building. Members present: Chair Mark Wegscheid, Kelli Giilispie, Ray Salazar, and Heidi Gesch Members absent: Jennifer Peterson Others present: City Manager and Public Works Director Eric Hoversten, Administrative Assistant Mary Mackres, Community Development Director Sarah Smith, Consultant Planner Rita Trapp, City Engineer Dan Faulkner, Assistant City Engineer Brian Simmons, City Attorney Troy Gilchrist, Director of Finance and Administrative Services Catherine Pausche, and Bolton & Menk Project Inspector Mark Onkean Public Present: Ben Bunn, Mike Dudzinski, Nicole Brodzik, Molly Emery, Shaun Tancheff, Rick Bode, Lewis Anderson, and Tom McDougal 1. Open meeting Chair Mark Wegscheid called the meeting to order at 6:55 p.m. 2. Approve agenda Hoversten added Item 4.1, request from Aeon for an early start on the Indian Knoll Manor (IKM) project prior to closing. MOTION by Salazar, seconded by Gesch, to approve the agenda as amended. All voted in favor. Motion carried. 3. Action approving minutes: Sept 27, 2016 regular meeting MOTION by Salazar, seconded by Gesch, to approve minutes from Sept 27, 2016 regular meeting. All voted in favor. Motion carried. 4.1 Approve claims MOTION by Salazar, seconded by Gesch, to approve the claims in the amount of $9,024.70. All voted in favor. Motion carried. Sarah Smith, Community Development Director, presented the early start agreement for the IKM project. She stated that Aeon is asking the HRA for permission to undertake certain activities within the existing building prior to closing and recording of final plat and development agreement. Smith added that the early start activities could commence after final plat approvals at the October 25th Council Meeting. Smith stated that the early start activities are very well defined in scope. She added these activities include the demo of units #104 and #209; excavation for footings; forming and pouring footings; building the foundation wall, and backfilling. She stated the reason for the early start is to minimize any cost increases due to seasonal issues and to keep the project on course for completion by next summer. Smith added the early start agreement was put together by staff and reviewed by legal counsel. Smith added that there are conditions in the resolution which allow the HRA attorney and Executive Director to execute the documents on behalf of the HRA and to make any required revisions in keeping with the intent of the resolution. Smith stated there are specific conditions HRA Minutes—October 11, 2016 contained in the early start agreement related to right of entry as well as requirements for Aeon to provide a certificate of insurance naming the HRA as a hold harmless agent with minimum amounts. Smith indicated that Page 2 of the agreement has a clerical error and the numbering should read 1.04, 1.05, 1.06, and 1.07. This agreement will be executed by the HRA Chair and the Executive Director and by representatives of Aeon and IKM Limited Partnership. Mayor Wegscheid asked Smith if the agreement was just put together today and Smith indicated that was correct. Wegscheid reconfirmed with Smith that all of the proper protections were in place with this early entry agreement. Smith responded that the agreement allows the project to proceed, protects the HRA's interests and also requires Aeon to obtain appropriate permits for the early start. Motion by Salazar, seconded by Gesch, to approve resolution. All voted in favor. Motion carried RESOLUTION NO. 16-10H: RESOLUTION APROVING EARLY START AGREEMENT REGARDING INDIAN KNOLL MANOR 5. Adiourn MOTION by Gesch, seconded by Salazar, to adjourn at 7:02 p.m. All voted in favor. Motion carried. Attest: Catherine Pausche, Clerk 2- Chair Mark Wegscheid AT ■ 'Ll'AT� NO , oMI&II too] M I -3- $1,379.93 CITY OF MOUND 10/20/16 1:31 PM Page 1 Payments Current Period: October 2016 Refer 2 WARNERS OUTDOOR SOLUTIONS _ -4- Batch Name 102516HRA User Dollar Amt $1,379.93 Payments Computer Dollar Amt $1,379.93 $0.00 In Balance 4 FRONTIER/CITIZE_NS COMMUNICA _ _Refer Cash Payment E 680-49800-321 Telephone, Cells, & Radi PHONE SERVICE IKM 10-13-16 TO 11-12-16 $333.00 Invoice 102516 10/13/2016 Transaction Date 10/20/2016 Wells Fargo HRA 10120 Total e.�.,.a..,.....�,.,„m,.,.��.....,,,w.m..�.�...�M.�...,..,�,.. $333.00 Refer 1 H_ARDC_O/LRCCC ,...,...�.�...,..��..�...� Cash Payment E 680-49800-440 Other Contractual Servic ON CALL MTCE SVC- RESIDENT @ IKM $6.50 #210- REPORTED NO HOT WATER- NO OTHER CALLS Invoice 131188 10/1/2016 Transaction Date 10/13/2016 Wells Fargo HRA 10120 Total .,�....�...,��.�.., $6.50 Refer 6 HOISIN_G TON KOEGLER GROUP, I_� _ Cash Payment E 680-49800-310 Other Professional Servi 2020 COMMERCE BLVD- IKM- $250.00 PP/CUP/REZONE-FINAL PLAT AEON DEVELOPMENT- MISC PLANNING SVCS SEPT 2016 Invoice 015-015-18-2 10/8/2016 Transaction Date 10/20/2016 Wells Fargo HRA 10120 Total ---- —,-- $250.00 — Refer 5 LOFFLER COMPANIES, INCORPOR _ — Cash Payment E 680-49800-202 Duplicating and copying IKM COPIER OVERAGE CHARGES BLACK & $15.49 WHITE 7-20-16 THRU 10-19-16 Invoice 2346971-2 10/10/2016 Transaction Date 10/20/2016 Wells Fargo HRA 10120 Total $15.49 7 REPUBLIC SERVICES _Refer Cash Payment E 680-49800-384 Refuse/Garbage Disposa GARBAGE SVC OCT 2016 IKM $25.81 Invoice 0894-004194141 9/25/2016 Cash Payment E 680-49800-384 Refuse/Garbage Dispose GARBAGE -BULK PICKUP SVC 8-26-16 IKM $40.00 Invoice 0894-004194141 9/25/2016 Cash Payment E 680-49800-384 Refuse/Garbage Disposa GARBAGE -APPLIANCE PICKUP SVC- QTY 3 $135.00 ON B-29-16 IKM Invoice 0894-004194141 9/25/2016 _ Transaction Date 10/20/2016 Wells Fargo HRA 10120 Total $200.81 Refer .�....-� �3 PATRIOT NEWSPAPER-CITY Cash Payment _SUN E 680-49800-351 Legal Notices Publishing LEGAL NTCE- PUB HEARING- HRA TO SELL $69.39 IKM 2020 COMMERCE BLVD PROPERTY TO IKM LIMITED PARTNERSHIP -AEON 10-8-16 Invoice 414896 10/8/2016 Transaction Date 10/20/2016 Wells Fargo HRA 10120 Total $69.39 Refer 8 TRUE VALUE MOUND (IKM) Cash Payment E 680-49800-210 Operating Supplies SCREWS, NUTS BOLTS, 3/4" BIT- IKM $11.62 Invoice 137917 9/3/2016 Cash Payment E 680-49800-210 Operating Supplies SCREWS, NUTS BOLTS - IKM. $5.12 Invoice 137918 9/3/2016 Transaction Date 10/20/2016 Wells Fargo HRA 10120 Total $16.74 Refer 2 WARNERS OUTDOOR SOLUTIONS _ -4- Cash Payment Invoice 116610 Transaction Date CITY OF MOUND Payments Current Period: October 2016 E 680-49800-440 Other Contractual Servic MOWING SVC- IKM-4X IN SEPTEMBER 2016 9/30/2016 10/13/2016 Wells Fargo HRA 10120 Total Fund Summary 10120 Wells Fargo HRA 680 HRA PUBLIC HOUSING $1,379.93 $1,379.93 Pre -Written Checks $0.00 Checks to be Generated by the Computer $1,379.93 Total $1,379.93 -5- 10/20/16 1:31 PM Page 2 $488.00 $488.00 INDIAN KNOLL MANOR APARTMENTS 2020 COMMERCE BLVD. MOUND, MINNESOTA 55364 October 20, 2016 To: Mound Housing and Redevelopment Authority Board of Commissioners From: Catherine Pausche, Director of Finance and Administrative Services Subject: Final Actions for Transfer of Indian Knoll Manor to Aeon/IKM Ltd Partnership The process to transfer ownership of Indian Knoll Manor to Aeon that began in 2015 is nearing completion and with the anticipated closing on November 21, 2016. Minnesota State Statute Section 469.029 requires a public hearing, for which notice must be published, anytime an authority plans to dispose of property. The notice of the public hearing was published in the October 8, 2016 edition of the Laker for the hearing on Tuesday, October 25, 2016 beginning at or after 6:50 pm. The final actions to complete this transfer are summarized as follows: Governing Body Date Mound HRA 10-25-16 Mound HRA 10-25-16 Mound HRA 10-25-16 Mound City Council 10-25-16 Mound City Council 10-25-16 Action Hold public hearing on disposition Action to approve loan agreement Action to dissolve Public Housing Authority Action to approve final plat Action to approve developer agreement The attached timeline is meant to demonstrate the history of official actions taken by the HRA Board of Commissioners to get to this point. To reiterate, for purposes of obtaining the tax credit funding, the Mound HRA will be "selling" Indian Knoll Manor to Aeon, or technically their tax credit partnership with Wells Fargo called "IKM Limited Partnership." The amount received from the sale will be returned for investment in the property in the form of a loan. The IRS/tax credit financing legislation does not allow this loan to be depicted as forgivable, I am told, although the City/HRA does not expect to be repaid after the 30 years. The loan will appear on our financial statements as a long-term asset (loan receivable) offset by deferred inflows so that it nets to zero. The sale and loan will be a paper entry and no cash will be exchanged in November. The loan constitutes a lien on the property to ensure the performance mandates are met (maintain affordability, make the improvements, etc.). Staff recommends approval of the loan and a resolution to terminate the Public Housing Annual Contributions Contract (ACC) with HUD. The HRA will complete the required reporting for 2016 and then effectively dissolve its Public Housing Authority (PHA) status with HUD. Please let me know if you have any questions on these matters at (952)472-0633 or via email at catherinepausche@cityofmound.com. Indian Knoll Manor RAD Conversion/Rehab and Addition Timeline March 12, 2014 RES 14-03H Mound HRA authorizes the Executive Director to execute a Rental Assistance Demonstration (RAD) Program application with the U.S. Department of Housing and Urban Development (HUD) and certifying an agreement to comply with all requirements of the program and PIH Notice 2012-32. March 25, 2015 HUD issues a Commitment to Enter into a Housing Assistance Payment (CHAP) for a Rental Assistance Demonstration Project at Indian Knoll Manor March 31, 2015 A Request for Qualifications and Interest in the Purchase of Indian Knoll Manor Apartments is issued seeking qualified non-profit development partners/long-term operators April 28, 2015 RES 15-06H Mound HRA appoints Aeon as the RAD Development Partner and ultimate owner of Indian Knoll Manor June 9, 2015 Mound HRA approves a purchase agreement between the Mound HRA and Aeon for Indian Knoll Manor that will facilitate Aeon's ability to submit competitive alternative funding applications June '15 - April '16 Aeon applies for and is granted multiple funding sources for the project, including the primary funding by Minnesota Housing Finance Agency (MHFA), Hennepin County and Metro HRA. Project fully funded by April 2016. April 7, 2016 Aeon signs a purchase agreement to aquire 5524 Spruce Road with the intention of expanding development area. April 12, 2016 Mound HRA Board of Commissioners directs Aeon to proceed with land use applications and stakeholder meetings. April 21, 2016 Third meeting held with Indian Knoll Manor residents to discuss proposed project (occupied rehab) and additional units. April 28, 2016 Neighborhood meeting held with property owners within 350 feet of Indian Knoll to discuss proposed project and additional units. July 1, 2016 Aeon contracted with Mound HRA to provide property management services on a month to month basis until closing in order to facilitate a smooth transition. November, 2016 Anticipated closing date for property to transfer Aeon and construction to begin. -7- ECM Publishers, Inc. This is the proof of your ad scheduled to run on the dates indicated below. Please proof read carefully if changes are needed, please contact us prior to deadline at Cambridge (763) 691-6000 or email at publicnotice@ecm-inc.com Date: 10/03/16 Account#: 424566 Customer: CITY OF MOUND — Address: 2415 WILSHIRE BLVD Stop: MOUND Telephone: (952) 472-0606 Fax: (952) 472-0620 Ad ID: 605795 Copy Line: HDA PH PO Number: 10.25.16PH Start: 10/08/16 Stop: 10/08/2016 Total Cost: $69.39 # of Lines: 80 Total Depth: 8.889 # of Inserts: 1 Ad Class: 150 Phone # (763) 691-6000 Email: publicnotice@ecm-inc.com Rep No: SW700 Contract -Gross Laker El Ad Proof Enlarged CITY OF MOUND NOTICE OF PUBLIC HEARING THE HOUSING AND REDEVELOPMENT AUTHORITY OF AND FOR THE CITY OF MOUND, MINNESOTA NOTICE IS HEREBY GIVEN that the Board of Commissioners (the "Board") of The Housing and Re- development Authority in and for the City of Mound, Minnesota (the "Authority") will hold a public hear- ing on Tuesday, October 25, 2016, at or after 6:50 p.m. at the Council Chambers of the Mound City Hall, located at 2415 Wilshire Boulevard, in the City of Mound, Minnesota (the "City"), with respect to a pro- posal to sell certain property in the City owned by the Authority to IKM Limited Partnership, a Minnesota limited partnership, an affiliate of Aeon, a Minnesota nonprofit cor- poration or another affiliate thereof (the "Developer"). The purpose of the hearing is to receive public testimony on the proposed sale by the Authority of its Indian Knoll Manor apartments (the "Project") to the Developer. The Project is located at 2020 Commerce Boulevard, Mound, Minnesota (the "Property"), legally described as: Lots 21, 33, 34 and 35, Block 2, Lake Side Park, A.L. Crocker's 1st Division, Mound, Minnesota, Hennepin County, Minnesota, in- cluding adjacent vacated one-half of Croker Avenue, accruing by va- cation thereof; Hennepin County, Minnesota. The proposed sale of the Prop- erty from the Authority to the De- veloper is authorized by Minnesota Statutes, Section 469.029. The proposed terms and condi- tions of the sale are available for review by the public at the office of the Executive Director of the Au- thority at City Hall on and after the date of this notice. At the time and place fixed for the public hearing, the Board will give all persons who appear at the hearing an opportunity to express their views with respect to the pro- posal. In addition, interested per- sons may direct any questions or file written comments respecting the proposal with the Executive Di- rector of the Authority, at or prior to said public hearing. Dated: October 8, 2016 BY ORDER OF THE BOARD OF COMMISSIONERS OF THE HOUS- ING AND REDEVELOPMENT AU- THORITY IN AND FOR THE CIN OF MOUND, MINNESOTA /s/ Eric Hoversten Executive Director Housing and Redevelopment Au- thority in and for the City of Mound, Minnesota Published in The Laker October 8, 2016 605795 MOUND HOUSING AND REDEVELOPMENT AUTHORITY RESOLUTION NO. 16- H RESOLUTION APPROVING THE SALE OF LAND TO AND LOAN AGREEMENT WITH IKM LIMITED PARTNERSHIP BE IT RESOLVED By the Board of Commissioners (the `Board") of the Housing and Redevelopment Authority in and for the City of Mound (the "Authority") as follows: Section 1. Recitals. 1.01. The Authority is authorized to exercise the powers of a housing and redevelopment authority, pursuant to Minnesota Statutes, Sections 469.001 to 469.047, as amended (the "HRA Act"). 1.02. The Authority and IKM Limited Partnership, a Minnesota limited partnership, an affiliate of Aeon, a Minnesota nonprofit corporation or another affiliate thereof (the "Buyer"), previously entered into a Purchase Agreement with the Buyer (the "Purchase Agreement") setting forth the terms and conditions of sale of certain property owned by the Authority, located at 2020 Commerce Boulevard, Mound, Minnesota and described on Exhibit A attached hereto and made part of this resolution (the "Property"), including the housing facility known as Indian Knoll Manor (the "Facility"). 1.03. The Authority and the Buyer will also enter into a Loan Agreement, as presented in Exhibit B which is attached hereto and made part of this resolution, (the "Contract") whereby the Buyer will agree to expand and renovate the Facility (the "Project") and continue to operate the facility as an affordable housing facility in exchange for certain financial assistance from the Authority; 1.04. Pursuant to Minnesota Statutes, Section 469.029, the Authority has on this date conducted a duly noticed public hearing regarding the sale of the Property to the Buyer, at which all interested persons were given an opportunity to be heard. 1.05. The Authority finds and determines that conveyance of the Property to the Buyer has no relationship to the City's comprehensive plan, in that no amendment or modification of the comprehensive plan is required for the conveyance or redevelopment of the Property and the Facility will continue to be operated as a rental housing facility for low -to moderate -income persons. 1.06. Pursuant to the HRA Act, the Authority is authorized to provide loans, interest rate subsidies, or assistance in any form to private development consisting of the construction or substantial rehabilitation of buildings and ancillary facilities for low -to moderate -income housing facilities. The Authority hereby finds and determines that it is in the best interests of the Authority to provide a loan (the "Loan") to the Buyer for the purpose of financing a portion of the purchase price of the Facility and the Project. 1.07. The Board finds that the sale of the Property to the Buyer, the execution of the -9- 488277v2 GAF MU195-39 1 Contract and the performance of the Authority's obligations pursuant to the Contract, including the provision of the Loan, are in the public interest and will further the objectives of its general plan of economic development and redevelopment. Section 2. Authority Approval• Further Proceedings. 2.01. (a) The sale of the Property as described in the Purchase Agreement is hereby approved. The Contract as presented to the Board, including the provision of the Loan, is hereby in all respects approved, subject to modifications that do not alter the substance of the transaction and that are approved by the Chair and Executive Director, provided that execution of the Contract by such officials shall be conclusive evidence of approval. (b) Pursuant to the Contract, the Authority will loan to the Buyer the Loan in the principal amount of $2,120,000, evidenced by a promissory note (the "Note") and a Combination Mortgage, Security Agreement and Fixture Financing Statement (the "Mortgage"), both of which will executed and delivered to the Authority by the Buyer in substantially the forms attached to the Loan Agreement and on file with the Authority. 2.02. The Chair and Executive Director are hereby authorized to execute on behalf of the Authority the Contract and any documents referenced therein or in the Purchase Agreement requiring execution by the Authority, including without limitation the deed, master subordination agreement, the bill of sale, an assignment of leases and deposits, an assignment of contract, permits, warrants and miscellaneous documents, a bring -down certificate, and a certificate of title and to carry out, on behalf of the Authority, its obligations thereunder. 2.03. Authority and City staff are authorized and directed to take all actions to implement the Contract. Section 3. Effective Date. This resolution shall be effective upon approval. Approved by the Board of Commissioners of Housing and Redevelopment Authority in and for the City of Mound this _ day of October, 2016. ATTEST: Clerk -10- 488277v2 GAF MU195-39 Chair EXHIBIT A Property Lots 23, 24, 25 and 26, Block 1; Lots 22 and 23, Block 2; and that part of Lots 24, 25 and 26, Block 2, lying North of the street as opened; and Lots 4, 5, 6, 7, 8 and the North 10 feet of Lot 9, Block 4, all in LAKE SIDE PARK: A.L. CROCKER'S IST DIVISION, MOUND, MINNETONKA. TOGETHER WITH that part of vacated Shady Lane, originally dedicated in said plat of LAKE SIDE PARK: A.L. CROCKER'S 1sT DIVISION, MOUND, MINNETONKA, which lies northerly of the easterly extension of the south line of said north 10 feet of Lot 9, and which lies southerly of a line described as beginning at the northeast corner of said Lot 4; thence easterly along the easterly extension of the north line of said Lot 4 to the centerline of said vacated Shady Lane; thence southerly along said centerline to its intersection with a line drawn perpendicular to said centerline, westerly from the most northerly northwest corner of said Lot 24, Block 1, perpendicular to said centerline; thence easterly, along said perpendicular line, to said most northerly northwest corner, and said line there terminating. Also together with that part of the northwest half of vacated Crocker Avenue which lies southwesterly of the southeasterly extension of the northeasterly line of said Lot 26, Block L Also together with that part of the southeast half of vacated Crocker Avenue which lies southwesterly of the northwesterly extension of the northeasterly line of said Lot 22, Block 2. EXCEPTING THEREFROM All that part of the following described tract Lots 4, 5, 6, 7, 8 and the North 10 feet of Lot 9, in Block 4, LAKE SIDE PARK: A.L. CROCKER'S 1ST DIVISION, MOUND, MINNETONKA, according to the map or plat thereof on file and of record in the office of the Register of Deeds in and for Hennepin County, which lies Westerly of the following described line: Beginning at a point on the North line of said Lot 4, distant 7.0 feet Easterly of the West line of said Block 4; thence run Southerly parallel with said West line for a distance of 128 feet; thence run Southeasterly to a point on a line drawn parallel with and distant 13 feet Easterly of said West line, said point being distant 57 feet Northerly of the South line of the North 10 feet of said Lot 9; thence run Southerly along said parallel line to the South line of said North 10 feet and there terminating. Together with that part of the first above tract not acquired herein, which lies Southwesterly of the following described line: Beginning at a point on the South line of said first above described tract distant 6 feet East of the above described line; thence Northwesterly to a point on said described line distant 4 feet North of the South line of said first above described tract and there terminating. Hennepin County, Minnesota -11- 488277v2 GAF MU195-39 A-1 EXHIBIT B Loan Agreement [attached hereto] -12- 48827742 CAF MU195-39 B-1 LOAN AGREEMENT THIS LOAN AGREEMENT ("Loan Agreement'), is made and entered into as of this day of , 2016 ("Effective Date") by and between the HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF MOUND, MINNESOTA, a public body corporate and politic organized and existing under the laws of the State of Minnesota (the "Lender") and IKM LIMITED PARTNERSHIP, a Minnesota limited partnership (the "Partnership" and "Borrower"). RECITALS A. The Partnership is the owner of certain real property which collectively contains Sixty -Six (66) units in Mound, Minnesota, and legally described on the attached Exhibit A (the "Property"). The Developer agrees to renovate and rehabilitate the Property, including the rehabilitation/construction of ,a 66 -unit, affordable rental housing project located at 2020 Commerce Boulevard, Mound, Minnesota (the "Project'). B. The Lender will loan Two Million One Hundred Twenty Thousand and 00/100 Dollars ($2,120,000.00) to the Partnership for use in constructing the Project under the terms and conditions stated herein. C. The parties wish to commit their agreement to writing. NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter stated, the parties hereto agree as follows: 1. The Loan. In order to make the Project financially feasible, it is necessary to provide a loan in the amount of $2,120,000 (the "Loan") to the Partnership under the terms and conditions of this Loan Agreement. The loan will be disbursed to the Partnership upon the conditions set forth below. In exchange for the Lender making the Loan, the Partnership agrees to complete the Project, to operate and maintain the Project as an affordable housing development, and to maintain the Property and the Project in good repair and condition until the -13- US,107998781.06 Termination Date as defined in Section 10. The Lender shall have no obligation to operate or maintain the Project. 2. Loan Terms / Disbursement. On the Effective Date, the Partnership shall execute and deliver this Loan Agreement to the Lender, along with a Promissory Note in the original principal amount of $2,120,000.00 in the form attached hereto as Exhibit B (the "Note") and a Combination Mortgage, Security Agreement and Fixture Financing Statement (the "Mortgage," and together with this Loan Agreement and the Note, the "Loan Documents") securing the Note against the Property. The Loan shall be due and payable on December 31, 2048. 3. Representations and Warranties. (a) The Borrower is a limited Borrower organized under the laws of the State of Minnesota and is duly authorized and empowered to execute and deliver this Agreement, perform all obligations hereunder, and to borrow money from the Lender. (b) The execution and delivery of this Agreement, and the performance by the Borrower of its obligations hereunder, do not and will not violate or conflict with any provision of law and do not and will not violate or conflict with, or cause any default or event of default to occur under, any agreement binding upon the Borrower. (c) The execution and delivery of this Agreement has been duly approved by all necessary action of the Borrower, and this Agreement has in fact been duly executed and delivered by the Borrower and constitutes its lawful and binding obligation, legally enforceable against it. (d) Borrower warrants that it has fully complied with all applicable state and federal laws pertaining to its business and will continue said compliance throughout the terms of this Agreement. If at any time Borrower receives notice of noncompliance from any governmental entity, Borrower agrees to take any necessary action to comply with the State or Federal law in question. (e) The Borrower warrants that it will use the proceeds of the Loan made by the Lender solely for the costs of the Project. 4. Non -Recourse. The Loan is nonrecourse except as follows. Notwithstanding any provisions of this Loan Agreement, the Note, the Mortgage or any other Loan Document to the contrary, neither Partnership nor its partners shall be personally liable for payment of the indebtedness evidenced by the Note, and Lender's sole recourse for payment of such indebtedness in the event of default shall be to pursue the security provided by the Mortgage and other instruments securing payment of the Note. Nothing in this section shall affect, limit or impair (i) the security provided by the Mortgage or any other document; (ii) the right, subject to the terms of the Note, to seek monetary judgment against Partnership to the extent necessary to permit foreclosure of the Mortgage by action (except that Partnership shall not be personally liable for payment of any such judgment to the extent that the judgment is for payment of the 14- US.107998781 06 indebtedness evidenced by the Note and no deficiency judgment will be sought or obtained against Partnership for payment of the indebtedness evidenced by the Note); (iii) subject to the terms of the Note, the enforcement by Lender of any other legal or equitable rights or remedies or any other provision of any instrument by which the Note is secured; or (iv) the right to assert Partnership's personal liability for payment of the indebtedness which the Note evidences as a counterclaim in any action which Partnership commences against Lender, to the extent Partnership is awarded damages against Lender. 5. Events of Default. The following shall constitute an Event of Default under the terms of this Loan Agreement: (a) If the Partnership fails to duly and punctually perform its obligations under this Loan Agreement, or it violates the covenants contained in any of the Loan Documents in any material respect, and such failure remains uncured with sixty (60) days of Partnership's receipt of written notice of such failure from Lender. If a Default is not capable of being cured within sixty (60) days, then within such longer period, up to a maximum of one hundred eighty (180) days, as may be reasonably needed to cure the Default, provided the Borrower initiates corrective action within sixty (60) days after the notice and diligently, continually and in good faith works to effect a cure as soon as possible. (b) If Partnership fails to pay any installment of principal or interest on the Note when due and such failure is not cured within thirty (30) days. (c) If Partnership makes a general assignment for the benefit of creditors, admits in writing its inability to pay its debts generally as they mature, files or has filed against it a petition in bankruptcy or a petition or answer seeking a reorganization, arrangement with creditors or other similar relief under the Federal Bankruptcy Laws or under any other applicable law of the United States of America or any state thereof, consents to the appointment of a trustee or receiver for Partnership or for its property; or takes any action for the purpose of effecting or consenting to any of the foregoing. (d) If an order, judgment or decree shall be entered appointing, without Partnership's consent, a trustee or receiver for Partnership or a substantial part of its property, or approving a petition filed against Partnership seeking a reorganization, arrangement with creditors or other similar relief under the federal bankruptcy laws or under any other applicable law of the United States of America or any state thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within one hundred eighty (180) days from the date of entry thereof. The occurrence of any of the events described in this Section 4, shall be an "Event of Default." Upon the occurrence of an Event of Default, the Lender shall provide written notice, as provided in this Section 6, to the Lender and to Wells Fargo Community Lending & Investment, the Investor Limited Partner of the Partnership (the "Investor Partner") One Wells Fargo Center, 301 S. College Street, 17th Floor, MAC D1053-170, Charlotte, NC 28288-0173, with a copy to John Nolde, Winthrop & Weinstine, P.A., 225 South Sixth Street, Suite 3500, Minneapolis, MN -15- US.107998781.06 55402. Both the Partnership and the Investor Partner shall have the right to cure any such default within the timeframes provided in the Note. If both the Partnership and the Investor Partner fail to timely cure such default, then the Lender shall have all remedies as are set forth in the Note and Mortgage or otherwise at law. 6. Costs of Enforcement of Aereement. If an Event of Default has occurred as provided herein, then upon demand by the Lender, the Borrower shall pay or reimburse the Lender for all expenses, including all attorneys' fees and expenses incurred by the Lender in connection with the enforcement of this Agreement and the Note, or in connection with the protection or enforcement of the interests and collateral security of the Lender in any litigation or bankruptcy or insolvency proceeding or in any action or proceeding relating in any way to the transactions contemplated by this Agreement. 7. Indemnification. Borrower shall and does hereby agree to indemnify against and to hold Lender, and its officers, agents, and employees, harmless of and from any and all liability, loss, or damage which it may or might incur by reason of or arising from any and all claims and demands whatsoever which may be asserted against it by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements contained herein. Should Lender, or its officers, agents, or employees incur any such liability or be required to defend against any such claims or demands, or should a judgment be entered against Lender, the amount thereof, including costs, expenses, and reasonable attorneys' fees, shall bear interest thereon at the rate then in effect on the Note, shall be added to the Loan, and Borrower shall reimburse Lender for the same immediately upon demand, and upon the failure of Borrower so to do, Lender may declare the Loan immediately due and payable. 8. Purpose of Assistance. The parties agree and understand that the purpose of the Lender's financial assistance to the Borrower is to facilitate development of affordable housing, and is not a "business subsidy" within the meaning of Minnesota Statutes §§ 116J.993 to I I6J.995. 9. Termination. This Agreement shall terminate on the date the final payment is made under the Note (the "Termination Date"). 10. Miscellaneous (a) This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties. (b) No amendment, change, waiver or modification of this Agreement shall be valid unless it is in a written document which Partnership and Lender sign (with the prior written consent of Investor Partner), and Lender's waiver of any breach or default of any of Partnership's obligations, agreements or covenants under the Loan Documents shall not be deemed to be a waiver of any subsequent breach of the Loan Documents, or any other obligation, agreement or covenant. Lender's forbearance in pursuing or enforcing a remedy for Partnership's breach of any of the obligations set forth in the Loan Documents shall not be deemed a waiver of Lender's rights and remedies with respect to such breach. -16- US. 107998781.06 (c) This Agreement may be executed simultaneously in two or more counterparts, each of which shall be an original, but all of which shall constitute one agreement. (d) This Agreement shall be governed by, interpreted, and construed in accordance with the laws of the State of Minnesota. (e) This Agreement shall remain effective so long as there are sums remaining outstanding on the Note. (f) Any notices required or contemplated hereunder shall be effective upon the placing thereof in the United States mail, certified mail, return receipt requested, postage prepaid, and addressed as follows: If to the Partnership: IKM Limited Partnership c/o Aeon 901 North Third Street, Suite 150 Minneapolis, MN 55401 With a copy to Angela M. Christy Faegre Baker Daniels LLP 90 South Seventh Street, Suite 2200 Minneapolis, Minnesota 55402 Wells Fargo Affordable Housing Community Development Corporation MAC D1053-170 301 South College Street, 17th Floor Charlotte, NC 28202-6000 Attention: Director of Asset Management Joel Hjelmaas, Counsel Wells Fargo Bank, N.A. MAC X2401 -06T 1 Home Campus, 6th Floor Des Moines, IA 56328-0001 Winthrop & Weinstine, P.A. 225 South Sixth Street, Suite 3500 Minneapolis, MN 55402 Attention: John D. Nolde, Esq. -17- US. 107998781.06 If to the Lender: The Housing and Redevelopment Authority of the City of Mound, Minnesota Executive Director 2415 Wilshire Blvd. Mound, Minnesota 55364 (g) The Partnership consents to the personal jurisdiction of the state and federal courts located in the State of Minnesota in connection with any controversy relating to this Loan Agreement, the Note and any other Loan Documents related thereto, waives any argument that venue in such forum is not convenient and agrees that any litigation initiated by Partnership against Lender in connection with this Agreement, the Note and any other Loan Documents related thereto shall be venued in either the district court of Hennepin County, Minnesota or in the United States District Court, District of Minnesota. (h) By making the Loan contemplated herein, Lender does not become a partner or joint venturer with Partnership in connection with the Property or the Project. 11. Rider. The terms of the Rider to Loan Documents attached hereto as Exhibit D are made a part hereof, and in the event of any inconsistencies, the Rider to Loan Documents shall control. 12. Master Subordination Agreement. Mortgagor, Mortgagee, the City of Mound, and The Housing and Redevelopment Authority of the City of Mound have or will enter into a Master Subordination Agreement which will be amended to include the Minnesota Housing Finance Agency after completion of the Improvements ("Master Subordination Agreement'). The terms of the Master Subordination Agreement have priority of the Loan Documents to the extent there are inconsistencies. [SIGNATURE PAGES FOLLOW] I.. US. 107998781.06 IN TESTIMONY WHEREOF, the Partnership has hereunto set its hand the day and year first above written. IKM LIMITED PARTNERSHIP Fed. I.D. #81-0962531 By: Aeon Its: Managing General Partner I: STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) Alan Arthur, President The foregoing instrument was acknowledged before me this _ day of , 2016 by Alan Arthur, the President of Aeon, a Minnesota non-profit corporation, the Managing General Partner of IKM Limited Partnership, a Minnesota limited partnership, on behalf of the corporation and limited partnership. Notary Public Signature Page to (R49Seller Loan Agreement US.] 07998781.06 IN TESTIMONY WHEREOF, the Lender has hereunto set its hand the day and year first above written. THE HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF MOUND, MINNESOTA a Minnesota public body corporate and politic In STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) Its The foregoing instrument was acknowledged before me this day of 2016 by the of the Housing and Redevelopment Authority of the City of Mound, Minnesota, a public body corporate and politic organized and existing under the laws of the State of Minnesota. Notary Public Signature Page to (R -2Q -'eller Loan Agreement US. 107998781.06 EXHIBIT A LEGAL DESCRIPTION The Land described in the referenced instrument is located in Hennepin County, Minnesota, and is described as follows: Lot 1, Block 1, Indian Knoll Manor, Hennepin County, Minnesota. -21-- US, 21_ US. 107998781,06 $2,120,000.00 Minneapolis, Minnesota .2016 FOR VALUE RECEIVED, the undersigned (the "Borrower"), promises to pay to the order of The Housing and Redevelopment Authority of the City of Mound, Minnesota, a public body corporate and politic organized under the laws of the State of Minnesota (the "Lender"), or its assigns, the sum of Two Million One Hundred Twenty Thousand and No/100 Dollars ($2,120,000.00), with simple interest at the rate of 1.90% per annum on the unpaid balance until paid. Interest on this Note shall be calculated on a 360 -day year basis. Said sum is made available to Borrower to enable Borrower to acquire and construct/rehabilitate a 66 -unit, affordable rental housing project located at 2020 Commerce Boulevard, Mound, Minnesota (the "Project"). The entire principal amount of this Note shall be due and payable on or before December 31, 2048; provided, however, that the entire outstanding balance plus accrued interest will be immediately due and payable upon the occurrence of an Event of Default under the Loan Agreement between Lender and Borrower of even date herewith. This Note may be prepaid, at any time or from time to time, in full or in part, without notice, penalty or premium. Upon the occurrence of one of the events specified above (a "Default"), the Lender shall mail notice to the Borrower at the address listed in the Mortgage specifying: (1) the Default; (2) the action required to cure such Default; (3) a date not less than sixty (60) days from the date the notice is mailed to the Borrower by which date such Default must be cured; and (4) that failure to cure such Default within sixty (60) days after the notice (or, if the Default is not capable of being cured within sixty (60) days, then within such longer period, up to a maximum of one hundred eighty (180) days, as may be reasonably needed to cure the Default, provided the Borrower initiates corrective action within sixty (60) days after the notice and diligently, continually and in good faith works to effect a cure as soon as possible) may result in acceleration of the Loan. This Note may be prepaid in whole or in part at any time without penalty or premium. If suit is instituted by Lender, its successors or assigns, to recover on this Note, the Borrower agrees to pay all costs of collection, including reasonable attorney's fees and costs. This Note is secured by a Combination Mortgage Security Agreement and Fixture Financing Statement of even date herewith (the "Mortgage") from Borrower in favor of Lender, duly filed for record in the office of the County Recorder and/or the Registrar of Titles in and for Hennepin County in the State of Minnesota, and reference is made to the Mortgage for the rights of the Lender as to the acceleration of the indebtedness evidenced by this Note. IP?A US. 107998781.06 Except in the case of fraud or willful misconduct, no recourse shall be had for the payment of principal of, or interest on, this Note against the Borrower or any partner, legal representative, heir, estate, successor or assign of any thereof The Lender agrees to look solely to the collateral given as security for the payment of this Note. Demand, protest and notice of demand and protest are hereby waived, and the undersigned waives, to the extent authorized by law, any and all homestead and other exemption rights which otherwise would apply to the debt evidenced by this Note. This Note shall be governed by and construed in accordance with the laws of the State of Minnesota. The terms of the Rider to Loan Documents attached hereto, are made a part hereof, and in the event of any inconsistencies, the Rider to Loan Documents shall control. IN FURTHERANCE WHEREOF, this Note has been duly executed by the undersigned, as of the day and year above first written. IKM LIMITED PARTNERSHIP Fed. I.D. #81-0962531 By: Aeon Its: Managing General Partner Alan Arthur, President [Signature page to Note] -2-3_ US.107998781.06 RIDER TO CITY OF MOUND LIRA LOAN DOCUMENTS This RIDER TO LOAN DOCUMENTS (the "Addendum") is made and entered into this _ day of , 2016, by and between The Housing and Redevelopment Authority of the City of Mound, Minnesota, a public body corporate and politic organized and existing under the laws of the State of Minnesota ("Lender"), and IKM Limited Partnership, a Minnesota limited partnership (`Borrower"). For purposes of this Rider, the term "Limited Partner" shall mean Wells Fargo Affordable Housing Community Development Corporation and its successors and/or assigns. WHEREAS, as of the date hereof, Borrower is executing and delivering to Lender certain documents, including without limitation, a Note, a Combination Mortgage, Security Agreement and Fixture Financing Statement ("the "Mortgage"), a Loan Agreement, and all other documents (the "Loan Documents"), evidencing a loan in the amount of $2,120,000 (the "Loan") to be made from Lender to Borrower in connection with the development of a low-income housing tax credit apartment complex located in Hennepin County, Minnesota and known as Indian Knoll Manor (the "Project"). WHEREAS, Lender and Borrower desire that the following covenants, terms, and conditions shall be part of and shall modify or supplement each of the Loan Documents, as set forth in this Rider. NOW THEREFORE, in consideration of executing and delivering the Loan Documents, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree that the Loan Documents at the time of execution will be amended by the provisions of this Rider as follows: 1. Removal and Replacement of General Partner and Property Manager. Notwithstanding anything to the contrary contained in the Loan Documents, removal, transfer, replacement, or withdrawal in lieu of removal, of Borrower's general partner(s) and property manager for cause in accordance with Borrower's Amended and Restated Agreement of Limited Partnership (as amended from time to time, the "Partnership Agreement") shall not constitute a default under the Loan Documents provided that the Limited Partner delivers prior written notice thereof to Lender and that the substituted general partner or property manager shall be reasonably acceptable to Lender. Upon the removal, transfer, replacement or withdrawal of the general partner, an affiliate of the Limited Partner may serve as the substitute general partner until such time as the Limited Partner and Lender each approve a successor general partner. 2. Assignment of Limited Partner Interest. Notwithstanding anything to the contrary contained in the Loan Documents, the interest of Borrower's Limited Partner shall be freely transferable and any amendment to Borrower's Partnership Agreement to effectuate such transfers shall not require Lender consent. 3. Notice and Cure Rights. Notwithstanding anything to the contrary contained in the Loan Documents, Lender hereby agrees that any cure of any default made or tendered by Borrower's Limited Partner shall be deemed to be a cure by Borrower and shall be accepted or rejected on the same basis as if made or tendered by Borrower. Lender agrees to send courtesy copies of all notices which are sent to Borrower under the terms of the Loan Documents to the Limited Partner at Wells Fargo Affordable Housing Community Development Corporation; MAC D 1053-170; 301 South College Street, 17`x' Floor, Charlotte, NC 28202-6000; Attention: Director of Asset Management; with a copy to: Winthrop & Weinstine, P.A., 225 South Sixth Street, Suite 3500, Minneapolis, MN 55402, Attn.: John Nolde. -24- US 107998781.06 4. Extended Use Agreement. The parties acknowledge that Borrower intends to enter into an extended use agreement with Lender, which constitutes the extended low-income housing commitment described in Section 42(h)(6)(B) of the Internal Revenue Code, as amended (the "Code"). As of the date hereof Code Section 42(h)(6)(E)(ii) does not permit the eviction or termination of tenancy (other than for good cause) of an existing tenant of any low-income unit or any increase in the gross rent with respect to such unit not otherwise permitted under Code Section 42 for a period of three (3) years after the date the building is acquired by foreclosure or by instrument in lieu of foreclosure. In the event the extended use agreement required by the Lender is recorded against the Project, Lender agrees to comply with the provisions set forth in Code Section 42(h)(6)(E)(ii). This section shall apply notwithstanding the order of recording of any of the Loan Documents and the Extended Use Agreement (as such term is defined in the Borrower's Partnership Agreement), executed in connection with the allocation of federal low income housing tax credits to the Borrower for the Project pursuant to Section 42 of the Code. 5. Agreement to Standstill. Lender acknowledges and agrees that the Loan Documents securing the Loan shall be subordinate to a bank loan secured by a first position mortgage on the property of the Project (the "Senior Loan"), which subordination shall be evidenced by a written, recorded subordination agreement in a form reasonably acceptable to Lender and to be executed by Lender. Notwithstanding anything in the Loan Documents to the contrary, if an event of default, failure, or violation occurs under the Loan Documents, and is continuing beyond any applicable cure periods, Lender agrees that, without the prior written consent of the then applicable Senior Loan lender (the "Senior Lender"), it will not accelerate the loan, commence foreclosure proceedings on the property or any other collateral for the loan, collect rents, appoint, or seek the appointment of, a receiver or institute any other collection or enforcement action. 6. Damage Destruction and Condemnation. Notwithstanding anything to the contrary contained in any Loan Document, Lender agrees to apply all insurance proceeds resulting from casualty or damage of the Property and all payments or awards resulting from a taking, for any public or quasi - public purpose by any lawful power or authority by exercise of the power of condemnations or eminent domain, toward the restoration, replacement or rebuilding of the Project, or any part thereof, as nearly as possible to its value, condition and operational character immediately prior to any such damage, destruction or taking ("Restoration"), provided sufficient funds are available from all sources to complete such Restoration. 7. Debt Service Coverage Requirements. So long as Borrower is current on all debt service payments payable under the Loan, the failure to meet any debt service coverage requirements at any time or times shall not constitute a default under the Loan. 8. Force Maieure. There shall be no default under the Loan Documents for construction or rehabilitation delays beyond the reasonable control of the Borrower. 9. Purchase Rights. The Lender consents to those purchase options, put rights and rights of first refusal in favor of the general partner of Borrower or its designee which are set forth in Borrower's Partnership Agreement, and agrees that transfer of title to the Project in accordance therewith shall not constitute a default under the Loan Documents. 10. Lender Approvals. Lender agrees that all approvals and consents of the Lender under the Loan Documents shall not be unreasonably withheld, delayed or conditioned. Further, amendments to Borrower's Partnership Agreement entered into in order to effect transfers or assignments of the Limited Partner's interest pursuant to Sections 2 and 9 above shall not require the consent or approval of the Lender; provided, written notice of the foregoing transfers are promptly provided to the Lender. -25- US.107998781.06 11. Third Party Beneficiary. Borrower's Limited Partner, and its successors and assigns, is a third party beneficiary of the rights of Borrower under the Loan Documents, as modified by this Rider and has the right to directly enforce such rights. 12. Inconsistency. In the event of any inconsistency or conflict between the covenants, terms and conditions of any of the Loan Documents and this Rider, the covenants, terms and conditions of this Rider shall control. 8. Survival. Except to the extent expressly modified, supplemented or amended in this Rider, the Loan Documents remain in full force and effect. 9. Counterparts. This Rider may be executed in any number of counterparts, each of which when executed and delivered shall be an original, but such counterparts shall together constitute one and the same instrument. The production of any executed counterpart of this Rider shall be sufficient for all purposes without producing any other counterpart thereof. 10. Non-recourse. Payment and performance of the obligations set forth in the Loan Documents shall be non-recourse to Borrower and Borrower's general and limited partners and the Lender's sole recourse with respect to repayment of the Loan shall be the right to foreclose under the Mortgage and other collateral forming part of the Loan Documents. -2 rz- US. 107998781 06 EXHIBIT C Exempt from Mortgage Registry Tax Pursuant to Minnesota Statutes § 287.04(f) COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT ei1 IN FAVOR OF THE HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF MOUND, MINNESOTA Dated as of: 92016 Relating to the: (Indian Knoll Manor) -27.- US. 107995781.06 (This Table of Contents is not a part of the Combination Mortgage, Security Agreement and Fixture Financing Statement (Indian Knoll Manor Project), but is provided only for convenience of reference) Page PARTIES...................................................................................................................................................... 1 GRANTINGCLAUSE.................................................................................................................................1 ARTICLE ONE MORTGAGOR'S COVENANTS Section1.01. Payment of the Loan.........................................................................................................2 Section 1.02. Application of Payments..................................................................................................2 Section 1.03. Payment of Taxes, Assessments and Other Charges........................................................2 Section 1.04. Payment of Utility Charges..............................................................................................3 Section1.05. Liens.................................................................................................................................3 Section1.06. Compliance with Laws.....................................................................................................4 Section1.07. Permitted Contests............................................................................................................4 ARTICLE TWO INSURANCE Section2.01. Insurance..........................................................................................................................4 Section2.02. Policy Provisions.............................................................................................................. 5 Section2.03. Delivery of Policy............................................................................................................5 Section2.04. Assignment of Policy.......................................................................................................5 Section 2.05. Notice of Damage or Destruction; Adjusting Loss.......................................................... 6 Section 2.06. Application of Insurance Proceeds...................................................................................6 Section 2.07. Reimbursement of Mortgagee's Expenses....................................................................... 6 Section 2.08. Insurance Escrow............................................................................................................. 6 ARTICLE THREE MORTGAGED PROPERTY Section 3.01. Preservation and Maintenance of Mortgaged Property .................................................... 7 Section3.02. Inspection.........................................................................................................................7 Section 3.03. Protection of Mortgagee's Security..................................................................................7 Section3.04. Condemnation.................................................................................................................. 8 Section 3.05. Financial Statements and Other Information; Books and Records...................................9 Section 3.06. Sale of Mortgaged Property ........................................................................................... 10 Section3.07. Management...................................................................................................................10 Section 3.08. Taking, Casualty, Special Provisions.............................................................................10 Section 3.09. Hazardous Substances....................................................................................................12 I". US. 107998781.06 ARTICLE FOUR EVENTS OF DEFAULT AND REMEDIES Section4.01. Events of Default.. ....... ............................................... ........ ............................... ...... 13 Section 4.02. Acceleration; Foreclosure...............................................................................................14 Section 4.03. Disposition of Funds...................................................................................................... 15 Section 4.04. Attorneys' Fees and Expenses........................................................................................ 15 Section4.05. Estoppel Certificate........................................................................................................ 15 Section 4.06. Forbearance Not a Waiver; Rights and Remedies Cumulative ...................................... 16 Section 4.07. Marshaling of Assets...................................................................................................... 16 Section 4.08. Mortgagee's Right to Cure.............................................................................................16 ARTICLE FIVE MISCELLANEOUS Section 5.01. Successors and Assigns Bound; Number; Gender; Agents; Captions ............................16 Section5.02. Notice.............................................................................................................................17 Section 5.03. Governing Law; Severability......................................................................................... 17 Section5.04. Counterparts................................................................................................................... 17 Section5.05. Limited Recourse...........................................................................................................17 Section 5.06. Construction Mortgage...................................................................................................18 Section5.07. Fixture Filing.. ........................ ................ ............................................ ......................... 18 Section 5.08. Indemnification by Mortgagor.......................................................................................18 Section 5.09. HUD -Required Provisions..............................................................................................19 TE S T IM O N IU M.................................................................................. SIGNATURES................................... ......................... I_ ..................... EXHIBIT A Land EXHIBIT B Permitted Encumbrances -29- US. 107998781.06 .. .......... ............................... 20 ........................................... 20 COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT This COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT dated as of the _ day of 2016 (the "Mortgage"), is given by IKM Limited Partnership, a Minnesota limited partnership (hereinafter referred to as the "Mortgagor"), to The Housing and Redevelopment Authority of the City of Mound, Minnesota, a public body corporate and politic organized and existing under the laws of the State of Minnesota, its successors or assigns (the "Mortgagee"). The Mortgagee has agreed to lend a principal amount of $2,120,000 (the "Loan") to Mortgagor for the rehabilitation/construction of a 66 unit residential apartment project (the "Project"). The Mortgagee requires that the Mortgagor secure advances under the Loan by a Note of even date herewith (the "Note") and this Mortgage. Therefore, in consideration of the Loan, the Mortgagor hereby mortgages, grants, bargains, sells, assigns, transfers, and conveys unto the Mortgagee forever all of Mortgagor's right, title and interest in the tracts or parcels of land (hereinafter called the "Land"), located in Hennepin County, Minnesota, and described in Exhibit A attached hereto and incorporated herein by reference, together with (i) all of the buildings, structures, and other improvements now standing or at any time hereafter constructed or placed upon the Land; (ii) all lighting, heating, ventilating, air-conditioning, sprinkling and plumbing fixtures, water and power systems, engines and machinery, boilers, furnaces, oil burners, elevators and motors, communication systems, dynamos, transformers, electrical equipment, pollution control equipment, and all other fixtures of every description located in or on, or used, or intended to be used in connection with the Land or any building now or hereafter located thereon and owned by the Mortgagor; (iii) all hereditaments, easements, appurtenances, riparian rights, rents, issues, profits, condemnation awards, mineral rights, water rights, and contract rights (including contract rights pertaining to performance bonds, fidelity bonds, or insurance contracts) now or hereafter belonging or in any way pertaining to the Land or to any building now or hereafter located thereon and all the estate, right and interest of the Mortgagor in the Land if any; (iv) all building materials, furniture, furnishings, maintenance and repair equipment, and all other personal property now or hereafter located in, or on, or used, or intended to be used in connection with the Land or any building now or hereafter located thereon and all replacements, additions, accessions, or proceeds thereto owned by the Mortgagor; (v) after-acquired property with respect to the foregoing; and (vi) all proceeds and products of the foregoing (all of the foregoing are hereinafter referred to as the "Mortgaged Property") to satisfy Mortgagor's repayment obligation under the Note, and the cost, including reasonable attorney's fees, of collecting the same. To Have and To Hold the Mortgaged Property unto the Mortgagee forever; provided, nevertheless, that this Mortgage is upon the express condition that if the Mortgagor shall, pursuant to the Note, pay to the Mortgagee as and when due and payable the principal of and interest on the Loan made to the Mortgagor pursuant to the terms of the Note, and shall also pay -30- US. 107998781.06 all other sums, with interest thereon, as may be advanced by Mortgagee in accordance with this Mortgage, and shall also keep and perform each and every covenant and agreement of Mortgagor herein contained, or contained in the Note, then this Mortgage and the estate hereby granted shall cease and be and become void and shall be released of record at the expense of the Mortgagor; otherwise this Mortgage shall be and remain in full force and effect. The Mortgagor represents, warrants, and covenants to and with the Mortgagee that it is the fee simple owner of the Mortgaged Property and that it has good right and full power and authority under all applicable provisions of law to execute this Mortgage and to mortgage the Mortgaged Property; that the Mortgaged Property is free from all liens, security interests, and encumbrances except as listed in Exhibit B attached hereto and incorporated herein by reference; that the Mortgagor will warrant and defend the title to the Mortgaged Property and the lien and priority of this Mortgage to the extent of its interest against all claims and demands of all persons whomsoever, whether now existing or hereafter arising, not listed in Exhibit B; and that all buildings and improvements now or hereafter located on the Land are or will be located entirely within the boundaries of the Land. The covenants and warranties of this paragraph shall survive foreclosure of this Mortgage and shall run with the land. The Mortgagor further covenants and agrees as follows: ARTICLE ONE MORTGAGOR'S COVENANTS Section 1.01. Payment of the Loan. The Mortgagor will duly and punctually pay the Loan in accordance with the terms of the Note. The Loan is due and payable on December 31, 2048. Section 1.02. Application of Payments. All payments received by Mortgagee from Mortgagor with respect to the Note or this Mortgage shall, until a Default under the Note or foreclosure of this Mortgage, be applied by Mortgagee in the following order or priority: (a) interest payable on advances made pursuant to Section 3.03 hereof, (b) principal of advances made pursuant to Section 3.03 hereof; (c) any other sums secured by this Mortgage not listed in this section, in such order of application as Mortgagee may determine; (d) interest payable on the obligations of the Mortgagor pursuant to the Loan as provided in the Note; (e) principal due on the obligations of the Mortgagor pursuant to the Loan as provided in the Note. Section 1.03. Payment of Taxes Assessments and Other Charges. (a) Subject to Section 1.07 relating to contests, the Mortgagor shall pay before penalty might attach for nonpayment thereof, all taxes and assessments and all other charges whatsoever levied upon or assessed or placed against the Mortgaged Property, except that assessments may be paid in installments so long as no fine or penalty is added to any installment for the nonpayment thereof. Mortgagor shall likewise pay any and all governmental levies or assessments such as maintenance charges, owner association dues, charges, or fees, levies or charges resulting from covenants, conditions, and restrictions affecting the Mortgaged 31- 05.107998781.06 Property, which are assessed or imposed upon the Mortgaged Property or any part thereof or become due and payable, and which create, may create, or appear to create a lien upon the Mortgaged Property, or any part thereof. Mortgagor shall likewise pay all taxes, assessments, and other charges, levied upon or assessed, placed, or made against, or measured by, this Mortgage, or the recordation hereof, or the indebtedness secured hereby, provided that the Mortgagor shall not be obliged to pay such tax, assessment, or charge if such payment would be contrary to law or would result in the payment of an unlawful rate of interest on the indebtedness secured hereby; and provided further that nothing herein contained shall be construed as requiring Mortgagor to pay any net income, profits, or revenue taxes of Mortgagee. Mortgagor shall promptly furnish to the Mortgagee all notices received by the Mortgagor of amounts due under this paragraph and in the event Mortgagor shall make payment directly, Mortgagor shall promptly furnish to Mortgagee receipts evidencing such payments. (b) In the event the Mortgagor fails to comply with the terms of Section 1.03(a) or an "Default" under the Note has occurred that has not been cured within the applicable cure period, then at the written direction of the Mortgagee the Mortgagor shall, on or before the first day of each month, remit to the Mortgagee the amount necessary to pay any delinquent real estate taxes and installments of special assessments, and thereafter remit to the Mortgagee on the first day of each month an amount of money equal to one -twelfth of the real estate taxes and installments of special assessments next due and payable, plus, with and in addition to the first such monthly payment any additional amount which, together with monthly payments thereafter to be paid, will be sufficient to pay such real estate taxes and installments of special assessments in full as they become due. Such amounts shall be deposited in an interest-bearing account and all interest shall be applied to satisfy the amounts required to be so deposited. Section 1.04. Payment of Utility Charges. Subject to Section 1.07 relating to contests, the Mortgagor shall pay or cause to be paid all charges made by utility companies, whether public or private, for electricity, gas, heat, water, sewer, or other utilities furnished or used in connection with the Mortgaged Property or any part thereof, and will, upon written request of Mortgagee, furnish proper receipts evidencing such payment. Section 1.05. Liens. Subject to Section 1.07 and to Section 3.06 hereof relating to contests, the Mortgagor shall not create, incur, or suffer to exist any lien, encumbrance, or charge on the Mortgaged Property or any part thereof, whether junior or prior to the lien of this Mortgage, other than (i) those set forth on Exhibit B hereto, (ii) the lien of current real estate taxes and installments of special assessments with respect to which no penalty is yet payable; and (iii) those consented to by Mortgagee. Section 1.06. Compliance with Laws. Subject to Section 1.07 relating to contests, Mortgagor shall comply with all present and future statutes, laws, rules, orders, regulations, ordinances, and agreements affecting the Mortgaged Property, any part thereof or the use thereof. -32- USA 07998781.06 Section 1.07. Permitted Contests. Except for the monthly escrows of real estate taxes and special assessments required in Section 1.03(b), the Mortgagor shall not be required to pay any tax, assessment, or other charge referred to in Section 1.03 hereof, pay any charge referred to in Section 1.04 hereof, discharge or remove any lien, encumbrance or charge referred to in Section 1.05 hereof, or comply with any statute, law, rule, regulation or ordinance referred to in Section 1.06 hereof, so long as Mortgagor shall contest, in good faith, the existence, amount, or validity thereof, the amount of damages caused thereby, or the extent of its liability therefor, by appropriate proceedings which shall operate during the pendency thereof to prevent the collection of, or other realization upon, the tax, assessment, charge or lien, encumbrance or charge so contested, the sale, forfeiture or loss of the Mortgaged Property or any part thereof, and any interference with the use or occupancy of the Mortgaged Property or any part thereof. Mortgagor shall give prompt written notice to Mortgagee of the commencement of any contest referred to in this Section 1.07. Prior to such contest, the Mortgagor shall provide to the Mortgagee or the title company a bond or other security reasonably satisfactory to the Mortgagee securing the payment of any such contested amount. ARTICLE TWO INSURANCE Section 2.01. Insurance. The Mortgagor, at its sole cost and expense, will maintain or cause to be maintained continuously in effect with respect to the Mortgaged Property policies of insurance against such risks and in such amounts as are customary for a prudent owner of property comparable to those comprising the Mortgaged Property. Without limiting the generality of the foregoing provision, the Mortgagor shall maintain, or cause to be maintained, insurance of the following character to the extent available: (a) Following completion of construction or rehabilitation, insurance on the buildings and other improvements now existing or hereafter erected on the Land and on the fixtures and personal property included in the Mortgaged Property against loss by fire, and other hazards covered by the so-called "all-risk" form of policy with no co-insurance clause in an amount equal to the actual replacement cost thereof (exclusive of foundations and excavations) without deduction for physical depreciation. Commencing with the date hereof and while any building or other improvement is in the course of being constructed or rebuilt on the Land, the Mortgagor shall provide the aforesaid hazard insurance in builder's risk completed value form, including coverage available on the so-called "all-risk" non -reporting form of policy for an amount equal to 100% of the insurable replacement value of such building or other improvement. Insurance obtained pursuant to this Section 2.01(a) shall contain both "agreed amount" and "inflation guard" endorsements. (b) If the Mortgaged Property includes steam boilers or other equipment for the generation or transmission of steam, insurance against loss or damage by explosion, rupture or bursting of steam boilers, pipes, turbines, engines and other pressure vessels and equipment, in customary amounts for similar enterprises. -33- U5.107998781.06 (c) If the Land or any part thereof is located in a designated official flood -hazardous area, flood insurance insuring the buildings and improvements now existing or hereafter erected on the Land in an amount equal to the lesser of the principal balance of the indebtedness or the maximum limit of coverage made available with respect to such buildings and improvements under the Federal Flood Disaster Protection Act of 1973, as amended, and the regulations issued thereunder. (d) Commercial general liability insurance protecting against claims arising from any accident or occurrence in or upon the Mortgaged Property in an amount of $2,000,000 for the death of or personal injury to any one person, $2,000,000 for personal injury or death for each occurrence, and $2,000,000 for property damage for each occurrence. (e) Worker's compensation insurance with statutory coverages covering all persons engaged in the construction or installation of the Project. Section 2.02. Policy Provisions. All insurance policies and renewals thereof maintained by Mortgagor pursuant to Section 2.01(a) through (d) above shall be written by a company or companies having a Best's rating of A- or better, evidence of which shall be provided to Mortgagee, and shall contain a standard mortgage clause in favor of Mortgagee, reciting Mortgagee's interest as that of a mortgagee, contain an agreement of the insurer that it will not cancel the policy or modify it materially and adversely to the interest of the Mortgagee except after at least thirty (30) days prior written notice to Mortgagee, and be reasonably satisfactory to Mortgagee in all other respects. At least annually, Mortgagor shall provide Mortgagee with a certificate of Mortgagor stating that the Mortgagor has obtained insurance policies that meet all of the requirements set forth in this Mortgage. Section 2.03. Delivery of Policy. At the written request of Mortgagee, Mortgagor will deliver to Mortgagee copies of all insurance policies required under Section 2.01. At least thirty (30) days prior to the expiration date of a required policy, Mortgagor shall deliver to Mortgagee a renewal certificate. Section 2.04. Assignment of Policy. If the Mortgaged Property is sold at a foreclosure sale or if Mortgagee shall acquire title to the Mortgaged Property, the Mortgagee shall have all of the right, title, and interest of Mortgagor in and to any insurance policies required under Section 2.01(a) through (c) hereof and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition. Section 2.05. Notice of Damage or Destruction; Adjusting Loss. If the Mortgaged Property or any part thereof shall be damaged or destroyed by fire or other casualty, Mortgagor will promptly give written notice thereof to the insurance carrier and Mortgagee and the Mortgagor will not adjust any damage or loss which is estimated by Mortgagee in good faith to exceed $5,000 unless Mortgagee shall have joined in such adjustment; but if there has been no adjustment of any such damage or loss within three months from the date of occurrence thereof or if an Event of Default shall exist, Mortgagee may alone, make proof of loss, adjust and compromise any claim under the policies and appear in and prosecute any action arising from such policies. In connection therewith, Mortgagor hereby irrevocably authorizes, empowers and -34- US.107998781.06 appoints Mortgagee as attorney-in-fact for Mortgagor (which appointment is coupled with an interest) to do any and all of the foregoing in the name and on behalf of Mortgagor, and any insurer may conclusively rely upon a statement from the Mortgagee that it is entitled to adjust or compromise an insurance claim without participation of the Mortgagor. Section 2.06. Application of Insurance Proceeds. Subject to the provisions of Section 3.08 hereof, the Rider to Loan Documents attached hereto, and the provisions of prior Permitted Encumbrances as listed on Exhibit B attached hereto, all sums paid under any insurance policy required in Section 2.01(a) through (c) shall be paid to the Mortgagee and any other required co - payee, and the Mortgagee may, at its sole and absolute discretion regardless of the adequacy of its security, apply the same (after first deducting therefrom Mortgagee's expenses in collecting the same and in paying out such proceeds, including but not limited to reasonable attorneys' fees) to the payment of the restoration, repair, replacement or rebuilding of the Mortgaged Property or to the reduction of the indebtedness, whether or not then due and in any order of priority. Any such application of insurance proceeds to the principal of the Loan shall not extend or postpone the due dates of any payments under the Loan. In the event that the Mortgagee shall apply the proceeds of such insurance to the principal of the Loan, the Mortgagor shall have the right (notwithstanding anything in the Loan to the contrary) to prepay the Loan in whole within 180 days from the initial application of such insurance proceeds, without premium or penalty. Section 2.07. Reimbursement of Mortgagee's Expenses. Mortgagor shall promptly reimburse Mortgagee upon demand for all of Mortgagee's expenses incurred in connection with the collection of the insurance proceeds and all such expenses, together with interest from the date thirty (30) days following written demand for such reimbursement at the rate of one percent (1.00%) per annum in excess of the "reference rate" publicly announced from time to time by U.S. Bank National Association (unless collection of interest from Mortgagor at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Mortgagor under applicable law) shall be additional indebtedness secured by this Mortgage. Section 2.08. Insurance Escrow. In the event Mortgagor fails to comply with the terms of Section 2.01 or an "Default" under the Note has occurred, then at the written direction of the Mortgagee, the Mortgagor shall, on or before the first day of each month, remit to the Mortgagee an amount of money equal to one -twelfth of the insurance premiums next due for all insurance premiums with respect to insurance required to be maintained by the terms of this Mortgage, plus, with and in addition to the first such monthly payment, an additional amount which, together with monthly payments thereafter to be paid, will be sufficient to pay such insurance premiums in full as they become due. Such amounts shall be deposited in an interest-bearing account and all interest shall be applied to satisfy the amounts required to be so deposited. MY oW atom i�"Is • Section 3.01. Preservation and Maintenance of Mortgaged Property. Mortgagor (a) shall keep the buildings and other improvements now or hereafter erected on the Land in safe -35- US. 107998781.06 and good repair and condition, ordinary depreciation excepted; (b) shall, upon damage to or destruction of the Mortgaged Property or any part thereof by fire or other casualty, restore, repair, replace, or rebuild the Mortgaged Property that is damaged or destroyed to the condition it was in immediately prior to such damage or destruction, whether or not any insurance proceeds are available or sufficient for such purpose; (c) shall maintain the parking and landscaped areas of the Mortgaged Property; (d) shall not commit waste or permit impairment or deterioration of the Mortgaged Property; (e) shall not remove from the Land any of the fixtures properly included in the Mortgaged Property unless the same is promptly replaced with property of at least equal value and utility, and this Mortgage becomes a valid [first] lien on such property; (f) shall generally operate and maintain the Mortgaged Property in a manner to insure rents are not below reasonable rates for the area and the type of tenant occupying the Mortgaged Property; and (g) shall not alter or permit the alteration by any tenant of the design or structural character of any building now or hereafter erected on the Land or hereafter construct, or permit any tenant to construct, additions to existing buildings or additional buildings on the Land without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. Section 3.02. Inspection. The Mortgagee, or its agents, shall have the right, at all reasonable times, but not more frequently than twice annually, upon prior written notice, to enter upon the Mortgaged Property for the purposes inspecting the Mortgaged Property or any part thereof. The Mortgagee shall, however, have no duty to make such inspection. Section 3.03. Protection of Mortgagee's Security. If the Mortgagor fails to perform any of the covenants and agreements contained in this Mortgage after receipt of notice thereof from the Mortgagee and fails to cure within sixty (60) days, or if any action or proceeding is commenced which materially and adversely affects the Mortgaged Property or the interest of the Mortgagee therein, or the title thereto, then the Mortgagee, at Mortgagee's option, may perform such covenants and agreements, defend against and/or investigate such action or proceeding, and take such other action as the Mortgagee deems necessary to protect the Mortgagee's interest. Mortgagee is hereby given the irrevocable power of attorney (which power is coupled with an interest and is irrevocable) to enter upon the Mortgaged Property as the Mortgagor's agent in its name to perform any and all covenants and agreements to be performed by the Mortgagor as herein provided after an uncured Event of Default. Any amounts or expenses disbursed or incurred by the Mortgagee pursuant to this Section 3.03, with interest thereon at a rate of one percent (1.00%) per annum in excess of the "reference rate" publicly announced from time to time by U.S. Bank National Association shall become additional indebtedness of the Mortgagor secured by this Mortgage. Unless Mortgagor and Mortgagee agree in writing to other terms of repayment, such amounts shall be immediately due and payable, and shall bear interest from the date ten (10) days following written demand for such amounts at the rate of one percent (1.00%) per annum in excess of the "reference rate" publicly announced from time to time by US Bank National Association unless collection from Mortgagor of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Mortgagor under applicable law. Mortgagee shall, at its option, be subrogated to the lien of any mortgage or other lien discharged in whole or in part by the indebtedness or by the Mortgagee under the provisions hereof, and any such subrogation rights shall be additional and cumulative security for this Mortgage. Nothing contained in this Section 3.03 shall require the Mortgagee to incur any expense or do any act hereunder, and the Mortgagee shall not be ..sS0J OS.107998781.06 liable to the Mortgagor for any damages or claims arising out of action taken by the Mortgagee pursuant to this Section 3.03. If a covenant or agreement is not capable of being cured within sixty (60) days, then within such longer period, up to a maximum of one hundred eighty (180) days, as may be reasonably needed to cure the Default, provided the Borrower initiates corrective action within sixty (60) days after the notice and diligently, continually and in good faith works to effect a cure as soon as possible. Section 3.04. Condemnation. Subject to the provisions of Section 3.08, the Rider to Loan Documents attached hereto, and the provisions of prior Permitted Encumbrances listed in Exhibit B attached hereto, Mortgagor hereby irrevocably assigns to the Mortgagee any award or payment (but not in excess of the indebtedness) which becomes payable by reason of any taking of the Mortgaged Property, or any part thereof, whether directly or indirectly or temporarily or permanently, in or by condemnation or other eminent domain proceedings or by reason of sale under threat thereof, or in anticipation of the exercise of the right of condemnation or other eminent domain proceedings or by reason of sale under threat thereof (hereinafter called "Taking"). Forthwith upon receipt by Mortgagor of notice of the institution of any proceeding or negotiations for a Taking, Mortgagor shall give notice thereof to Mortgagee. Mortgagee may appear in any such proceedings and participate in any such negotiations and may be represented by counsel. Mortgagor, notwithstanding that Mortgagee may not be a party to any such proceeding, will promptly give to Mortgagee copies of all notices, pleadings, judgments, determinations, and other papers received by Mortgagor therein. Mortgagor will not enter into any agreement permitting or consenting to the taking of the Mortgaged Property, or any part thereof, or providing for the conveyance thereof in lieu of condemnation, with anyone authorized to acquire the same in condemnation or by eminent domain unless Mortgagee shall first have consented thereto in writing, which consent will not be unreasonably withheld, conditioned or delayed. Subject to the rights of other senior lien holders, all compensation payable to Mortgagor as a result of a taking (a "Taking Award") shall be adjusted jointly by Mortgagor and Mortgagee except that at any time while an Event of Default exists, Mortgagee may alone adjust any Taking Award and the Taking authority may conclusively rely upon Mortgagee's statement that it is entitled to do so in such situation. (a) All Taking Awards payable as a result of a Taking shall be paid to Mortgagee which may, at its sole and absolute discretion, regardless of the adequacy of its security, apply them, after first deducting Mortgagee's expenses incurred in the collection thereof, to the payment of the indebtedness, whether or not due and in such order of application as Mortgagee may determine, or to the repair or restoration of the Mortgaged Property, in such manner as Mortgagee may determine. Any application of Taking Awards to principal of the Loan shall not extend or postpone the due dates of the monthly installments payable under the Loan. Any amount of a Taking Award remaining after the application set out above shall be paid to Mortgagor. (b) Subject to the provisions of Section 3.08 hereof, if the Taking involves a taking, in whole or in part, of any building or other improvement now or hereafter located on the Land, Mortgagor shall proceed, with reasonable diligence, to demolish and remove any ruins and complete repair or restoration of the Mortgaged Property as -37-. US. 107998781.06 nearly as possible to its respective size, type and character immediately prior to the Taking, whether or not the condemnation awards are available or adequate to complete such repair or restoration; provided, however, that if Mortgagee shall apply the condemnation award to payment of the indebtedness, Mortgagor shall have the option, in lieu of completing such repair or restoration, to pay in full the Loan and all other indebtedness without payment of a premium or penalty. Mortgagor shall promptly reimburse Mortgagee upon demand for all of Mortgagee's expenses (including reasonable attorney's fees) incurred in the collection of awards and their disbursement in accordance with this Section 3.04, and all such expenses, together with interest from Mortgagor at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Mortgagor under applicable law), shall be additional amounts secured by this Mortgage. Section 3.05. Financial Statements and Other Information; Books and Records. Mortgagor will prepare or cause to be prepared at its expense and deliver to Mortgagee (in such number as may reasonably be requested): (a) As soon as practicable after the end of each calendar year, and in any event within one hundred twenty (120) days thereafter, a statement of the income from and expenses incurred with respect to the Mortgaged Property for such year, compiled or reviewed by an independent certified public accountant, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and accompanied by a certificate of the Mortgagor that each such statement is true and correct. (b) Immediately upon becoming aware of the existence of any condition or event which constitutes, or which after notice or lapse of time or both would constitute, an Event of Default, written notice specifying the nature and period of existence thereof and what action Mortgagor has taken, is taking, or proposes to take with respect thereto. (c) Promptly upon request, a then current rent schedule for the Mortgaged Property, certified by Mortgagor, showing the name of each tenant, if any, and for each tenant, the space occupied, the lease expiration date, the rent payable, and the rent paid. Mortgagor shall keep and maintain at all times at Mortgagor's address stated below or at such other place as Mortgagee may approve in writing, complete and accurate books of accounts and records in sufficient detail to reflect correctly the results of the operation of the Mortgaged Property and copies of all written contracts, leases, and other instruments which affect the Mortgaged Property. Such books, records, contracts, leases, and other instruments shall be subject to reasonable examination and inspection by the Mortgagee or its representative during ordinary business hours. If the Mortgagor fails to provide the operating statements specified in subparagraph (a) above, the Mortgagee shall have the right to audit the Mortgagor's books and records at the Mortgagor's expense. so us.107998781.06 Section 3.06. Sale of Mortgaged Property. (a) The Mortgaged Property may not be assigned, sold or encumbered, as a whole or in part, by Mortgagor without the consent of the Mortgagee except as provided in the Note or the Permitted Encumbrances. (b) Notwithstanding anything in this Section 3.06 to the contrary, leases of the residential apartment units or commercial space to tenants of the Project in the ordinary course of business are hereby approved by the Mortgagee. Section 3.07. Management. The Mortgagor agrees that Mortgagee shall have and reserves the right to require Mortgagor to install new professional management of the Mortgaged Property at any time that an Event of Default has occurred hereunder that has not been cured after notice and within the applicable cure period. Such new management shall be at the sole discretion of the Mortgagee. Nothing herein shall obligate the Mortgagee to exercise its right to require Mortgagor to install professional management. The cost of such management shall be borne by Mortgagor and shall be treated as part of the Loan. Upon the curing of said Event of Default, if, in the reasonable exercise of the Mortgagee's discretion, the Mortgagee determines that professional management of the Mortgaged Property is no longer necessary, the Mortgagee shall discharge the professional management. Section 3.08. Taking, Casualty, Special Provisions. Subject in all events to the provisions of the Rider to Loan Documents attached hereto, provisions to the contrary contained in Sections 2.06 and 3.04 of this Mortgage notwithstanding, in the event that all or any part of the Mortgaged Property are taken by eminent domain, or destroyed, or damaged, Mortgagor shall proceed promptly to replace, repair, rebuild and restore the Mortgaged Property to substantially the same condition as existed before the taking or the event causing the damage or destruction, with such suitable changes, alterations and modifications (including substitution or addition of other property) as may be required and approved by Mortgagee. In such event Mortgagor shall have the right, exercisable within 90 days after the proceeds become available, to use the proceeds of any insurance or condemnation award to the extent necessary to repair, restore or replace the Mortgaged Property to the condition hereinabove described, provided that in Mortgagee's reasonable opinion, all of the following conditions have been met: (a) there is not existing Event of Default by Mortgagor under this Mortgage; and (b) there is a sufficient sum available to complete the repair, restoration or replacement, which sum can be composed of a combination of any of the following items: (1) insurance or condemnation proceeds available to Mortgagor and Mortgagee; (2) cash provided by Mortgagor with such amounts deposited with a title insurance company legally authorized to do business in the State of Minnesota pursuant to written agreements in form and substance reasonably acceptable to Mortgagee only if the cost of the work as estimated by the Mortgagee shall exceed Two Hundred Thousand and No/100 Dollars ($200,000.00); and -39-- US 107998781,06 39_ US-107998781.06 (c) if the work is structural, or if the cost of the work as estimated by the Mortgagee shall exceed Two Hundred Thousand and No/100 Dollars ($200,000.00), plans and specifications for such work will be prepared by a licensed architect reasonably satisfactory to Mortgagee which plans and specifications will be subject to approval by Mortgagee, and which approval as to architect, plans and specifications will not be withheld unreasonably; and (d) Mortgagor submits the following items to Mortgagee for its approval, which approval will not be withheld, conditioned or delayed unreasonably: (1) evidence of sufficient contractor's commercial general liability insurance, builder's risk insurance and workmen's compensation insurance, insuring Mortgagor and Mortgagee, as their interests may appear, all issued by insurance companies legally authorized to do business in the State of Minnesota; (2) if the cost of the work as estimated by the Mortgagee shall exceed Two Hundred Thousand and No/100 Dollars ($200,000.00), performance and payment bond(s) issued by an insurance company legally authorized to do business in the State of Minnesota, reasonably satisfactory to Mortgagee and naming Mortgagee, and Mortgagor as co -obligees thereon; (3) a project cost certificate itemizing the cost of the work; (4) if the cost of the work as estimated by the Mortgagee shall exceed Two Hundred Thousand and No/100 Dollars ($200,000.00), a guaranteed -maximum - cost construction contract for performance of the work, executed by an acceptable contractor; (5) if the cost of the work as estimated by the Mortgagee shall exceed Two Hundred Thousand and No/100 Dollars ($200,000.00), a guaranteed - maximum -cost architectural contract; and (6) if applicable, assignments of (4) and (5) above in favor of Mortgagee, and signed by the contractor and architect approved by the Mortgagee; and (e) If the cost of the work as estimated by the Mortgagee shall exceed Two Hundred Thousand and No/100 Dollars ($200,000.00), Mortgagor, Mortgagee and the title insurance company shall have entered into an agreement in form and substance reasonably acceptable to Mortgagee whereby all payments to be made by such title insurance company will be based upon lien waivers and completion certificates reasonably satisfactory to such title insurance company to insure that sufficient funds will be available to complete the restoration of the property, and to insure that Mortgagee will continue to have full title insurance including, without limitation, mechanic's lien insurance, during and after the construction period. In the event that all of the foregoing conditions are met within 90 days after said availability of proceeds, the Mortgagee shall make its share of the insurance or condemnation proceeds (not in excess of the amount required for repair, restoration and replacement of the property) available to, as applicable, Mortgagor or the title insurance company set forth in paragraph (b) above. Said funds shall first be applied toward repair and restoration of the portion of the Mortgaged Property not taken by any condemnation, and may then be used for the purchase of additional adjacent property, if needed, to replace land taken by any condemnation so long as the restored and replacement property will have an economic value in Mortgagee's sole discretion and opinion, at least equal to the value of the Mortgaged Property prior to any damage and/or -404 USA 07998781,06 condemnation. Any remaining insurance or condemnation proceeds, irrespective of whether or not such proceeds are made available to the title insurance company in accordance with the foregoing, shall be applied, without prepayment penalty, in the manner provided in Section 2.06 hereof insofar as said funds represent insurance proceeds, and Section 3.04 hereof insofar as said funds represent Taking Awards. The Mortgagor shall not, by reason of the payment of any costs of repair, rebuilding, replacement or restoration, be entitled to any abatement or diminution of any payments due or coming due under the Note. All buildings and improvements acquired in the repair, rebuilding, replacement or restoration of the Mortgaged Property, together with any interests in land acquired as necessary for such restoration, shall be made a part of the Mortgaged Property, and secured by this Mortgage, and any loan or security document collateral hereto, all of which shall be amended to the extent reasonably required by Mortgagee; provided that no land, interest in land, buildings or improvements shall be acquired subject to any lien or encumbrance, other than liens and encumbrances approved in writing by Mortgagee. In the event of a loss by condemnation or fire or other casualty covered by insurance, if Mortgagor does not exercise its rights to have the proceeds of said insurance or condemnation award made available for repair, restoration or replacement, the proceeds of the condemnation award or insurance claim held by the Mortgagee shall be applied in the manner provided in Sections 2.06 and 3.04 of this Mortgage. Section 3.09. Hazardous Substances. Mortgagor covenants, warrants and represents to the Mortgagee, its successors and assigns, that except as previously disclosed to Mortgagee in certain environmental reports provided by Mortgagor, (i) that except as permitted by law, including all applicable statutes, regulations, and rulings, it has not used or permitted and will not use or permit the Project to be used, whether directly or through contractors, agents or tenants, and to the best of the Mortgagor's knowledge and except as disclosed to the Mortgagee in writing, for the generating, transporting, treating, storage, manufacture, emission of, or disposal of any dangerous, toxic or hazardous pollutants, chemical wastes or substances as defined in the Federal Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"), or the Federal Resource Conservation and Recovery Act of 1976 ("FRCRA"), or the Minnesota Environmental Response Liability Act, Minnesota Statutes, Chapter 11 SA ("MERLA"), or any other federal, state or local environmental laws, statutes, regulations, requirements and ordinances ("Hazardous Materials"); (ii) that there have been no investigations or reports citing the Mortgagor or its operations as violating the foregoing by any governmental authority which in any way pertain to Hazardous Materials; (iii) that to the best of Mortgagor's knowledge, the Mortgaged Property is not listed in the United States Environmental Protection Agency's National Priorities List of Hazardous Waste Sites nor any other list, schedule, log, inventory or record of Hazardous Materials or hazardous waste sites, whether maintained by the United States Government or any other state or local agency; (iv) that the operation of the Mortgaged Property will not violate any federal, state or local law, regulation, ordinance or requirement governing Hazardous Materials; (v) that to the best of Mortgagor's knowledge, the Mortgaged Property does not contain any formaldehyde, urea -formaldehyde, or asbestos, except -41-i US.107998781,06 as may have been disclosed in writing to the Mortgagee by the Mortgagor at the time of execution and delivery of this Mortgage; and (vi) that at its expense it will take, or cause to be taken, any and all actions required to investigate, remedy, correct, or modify any adverse or potentially adverse environmental conditions at the Mortgaged Property which the so-called "Phase I" environmental report discloses exist, or which is otherwise disclosed to exist. In addition to the foregoing, the Mortgagor shall not install or maintain, or permit the installation or maintenance of any above -ground storage tanks for the storage of petroleum, petroleum byproducts, or other Hazardous Materials in, about, or under the Mortgaged Property unless (i) the Mortgagor has obtained the prior consent of the Mortgagee for such installation and maintenance, and (ii) the Mortgagor installs and maintains each such storage tank in compliance with all applicable Federal, State and local laws, including the Minnesota Petroleum Tank Release Cleanup Act, Minnesota Statutes, Chapter I I5C, as amended. The Mortgagor agrees to indemnify and reimburse the Mortgagee, its successors and assigns, for any breach of these representations and warranties and from loss, damage, expense or cost arising out of or incurred by the Mortgagee which is a result of a breach, misstatement of or misrepresentation of the above covenants, representations and warranties, together with all reasonable attorneys' fees incurred in connection with the defense of any action against the Mortgagee arising out of the above. These covenants, representations and warranties are for the benefit of the Mortgagee and any successor or assign of the Mortgagee, and shall be deemed to survive termination of the Mortgage. ARTICLE FOUR EVENTS OF DEFAULT AND REMEDIES Section 4.01. Events of Default. Each of the following occurrences shall constitute an event of default hereunder (herein called an "Event of Default"): (a) Mortgagor fails to duly and punctually pay or cause to be paid when due any installment of the principal or interest payable under the Note, and such failure shall continue for thirty (30) days after the Mortgagee has given written notice of such failure. (b) Mortgagor defaults in the performance of or breaches its agreement contained in Section 3.06 hereof. (c) Mortgagor fails to duly perform or observe any of the covenants or agreements contained in this Mortgage (other than a default specified in paragraphs (a) and (b) of this Section 4.01) or the Note and such failure continues for a period of sixty (60) days after the Mortgagee has given written notice to the Mortgagor specifying such default or breach (or, if the default is not capable of being cured within sixty (60) days, then for such longer period, up to a maximum of one hundred eighty (180) days, as may be reasonably needed to cure the default, provided the Mortgagor initiates corrective action within sixty (60) days after the t42 - US. 107998781.06 notice and diligently, continually and in good faith works to effect a cure as soon as possible). (d) An Event of Default occurs with respect to any mortgage to which this Mortgage has been subordinated and not be cured within the applicable cure period. Mortgagee agrees that a cure of an Event of Default under this Mortgage made or tendered by the Mortgagor's limited partner or its designee shall be accepted or rejected on the same basis as if such cure was made or tendered by the Mortgagor and, to the extent accepted, shall be deemed to be a cure by Mortgagor hereunder. Section 4.02. Acceleration; Foreclosure. Upon the occurrence of any Event of Default, the Mortgagee may, at its option, exercise one or more of the following rights and remedies (and any other rights and remedies available to it): (a) Mortgagee may, by written notice to the Mortgagor, declare immediately due and payable all indebtedness secured by this Mortgage, and the same shall thereupon be immediately due and payable, without further notice or demand; (b) Mortgagee shall have and may exercise with respect to all personal property and fixtures which are part of the Mortgaged Property, all the rights and remedies accorded upon default to a secured party under the Uniform Commercial Code, as in effect in the State of Minnesota and if notice to the Mortgagor of intended disposition of such property is required by law in a particular instance, such notice shall be deemed commercially reasonable if given to Mortgagor (in the manner specified in Section 5.02) at least ten (10) calendar days prior to the date of intended disposition and Mortgagor shall pay on demand all costs and expenses incurred by Mortgagee in exercising such rights and remedies, including without limitation, reasonable attorneys' fees and legal expenses; and (c) Mortgagee may (and is hereby authorized and empowered to) foreclose this Mortgage by action or advertisement, pursuant to the statutes of the State of Minnesota is such case made and provided, power being expressly granted to sell the Mortgaged Property at public auction and convey the same to the purchaser in fee simple and, out of the proceeds arising from such sale, to pay all indebtedness secured hereby with interest, and all legal costs and charges of such foreclosure and the maximum attorneys' fees permitted by law, which costs, charges, and fees the Mortgagor agrees to pay. MORTGAGOR HEREBY: EXPRESSLY CONSENTS TO THE FORECLOSURE AND SALE OF THE MORTGAGED PROPERTY BY ACTION PURSUANT TO MINNESOTA STATUTES CHAPTER 581 OR, AT THE OPTION OF MORTGAGEE, BY ADVERTISEMENT PURSUANT TO MINNESOTA STATUTES CHAPTER 580, WHICH PROVIDES FOR SALE AFTER SERVICE OF NOTICE THEREOF UPON THE OCCUPANT OF THE MORTGAGED PROPERTY AND PUBLICATIONS OF SAID NOTICE FOR SIX WEEKS IN THE COUNTY IN MINNESOTA WHERE THE MORTGAGED PROPERTY IS SITUATED AND ACKNOWLEDGES THAT SERVICE NEED NOT BE MADE UPON MORTGAGOR PERSONALLY UNLESS MORTGAGOR IS AN OCCUPANT AND THAT -43 US. 107998781.06 NO HEARING OF ANY TYPE IS REQUIRED IN CONNECTION WITH THE SALE AND EXCEPT AS MAY BE PROVIDED IN SAID STATUTES, EXPRESSLY WAIVES ANY AND ALL RIGHT TO PRIOR NOTICE OF SALE OF THE MORTGAGED PROPERTY AND ANY AND ALL RIGHTS TO A PRIOR HEARING OF ANY TYPE IN CONNECTION WITH THE SALE OF THE MORTGAGED PROPERTY. MORTGAGOR ACKNOWLEDGES THAT IT IS REPRESENTED BY LEGAL COUNSEL; THAT BEFORE SIGNING THIS MORTGAGE THIS SECTION AND MORTGAGOR'S CONSTITUTIONAL RIGHTS WERE FULLY EXPLAINED BY SUCH COUNSEL; AND THAT MORTGAGOR UNDERSTANDS THE NATURE AND EXTENT OF THE RIGHTS WAIVED HEREBY AND THE EFFECT OF SUCH WAIVER. Section 4.03. Disposition of Funds. Any amounts collected pursuant to action taken under Section 4.02 shall be applied in such order as the Mortgagee may determine; provided that in the event that the Mortgagee advances sums in protecting the lien of this mortgage, in payment of taxes on the Mortgaged Property, in payment of principal and interest on prior liens against the Mortgaged Property, and in payment of expenses and attorneys' fees herein provided for, the Mortgagor on demand shall pay all such costs and expenses so incurred and advances so made to the Mortgagee together with interest at the rate of one percent (1.00%) per annum in excess of the "reference rate" publicly announced from time to time by U.S. Bank National Association (unless payment of such rate would be contrary to applicable law, in which event such sums shall bear interest at the highest rate permitted by applicable law). Such sum shall become additional indebtedness of the Mortgagor secured by this Mortgage. Section 4.04. Attorneys' Fees and Expenses. In the event the Mortgagor should default under any of the provisions of this Mortgage and the Mortgagee should employ attorneys or incur other expenses for the collection of amounts due hereunder or the enforcement of performance of any obligation or agreement on the part of the Mortgagor contained in this Mortgage, or any other instrument securing the Note, Mortgagor will pay to the Mortgagee on demand the reasonable fees of such attorneys and such other reasonable expenses so incurred. Section 4.05. Estoppel Certificate. Mortgagor agrees at any time and from time to time, upon not less than fifteen (15) days' prior notice by Mortgagee, to execute, acknowledge, and deliver, without charge, to Mortgagee or to any person designated by Mortgagee, a statement in writing certifying that this Mortgage is unmodified (or if there have been modifications, identifying the same by the date thereof and specifying the nature thereof), the principal amount then secured hereby and the unpaid balance of the Loan, that Mortgagor has not received any notice of default or notice of acceleration or foreclosure of this Mortgage (or if Mortgagor has received such a notice, that it has been revoked, if such be the case), that no Event of Default or state of facts, which with the giving of notice or passage of time, or both, will constitute an Event of Default, exists hereunder (or if any such Event of Default does exist, specifying the same and stating that the same has been cured, if such be the case), that Mortgagor to its knowledge has no claims or offsets against Mortgagee (or if Mortgagor has any such claims, specifying the same), and the dates to which the interest and the other sums and charges payable by Mortgagor pursuant to the Loan have been paid. EM US. 107998781.06 Section 4.06. Forbearance Not a Waiver; Rights and Remedies Cumulative. No delay by the Mortgagee in exercising any right or remedy provided herein or otherwise afforded by law or equity shall be deemed a waiver of or preclude the exercise of such right or remedy, and no waiver by the Mortgagee of any particular provision of this Mortgage shall be deemed effective unless in writing signed by the Mortgagee. Any failure by Mortgagee to insist, or any election by the Mortgagee not to insist, upon the Mortgagor's strict performance of any of the terms, provisions, or conditions of this Mortgage shall not be deemed to be a waiver of same or of any other term, provision, or condition hereof and Mortgagee shall have the right at any time thereafter to insist upon strict performance by the Mortgagor of any and all of same. All such rights and remedies provided for herein or which the Mortgagee may have otherwise, at law or in equity, shall be distinct, separate, and cumulative and may be exercised concurrently, independently, or successively in any order whatsoever, and as often as the occasion therefor arises. The Mortgagee's taking action pursuant to Section 3.03 or receiving proceeds, awards, or damages pursuant to Sections 2.01 to 2.07 or 3.04 shall not impair any right or remedy available to the Mortgagee under Section 4.02 hereof. Section 4.07. Marshaling of Assets. Mortgagor, on its own behalf and on behalf of its successors and assigns, hereby expressly waives all rights to require a marshaling of assets by Mortgagee or to require Mortgagee, upon a foreclosure, to first resort to the sale of any portion of the Mortgaged Property which might have been retained by Mortgagor before foreclosing upon and selling any other portion as may be conveyed by Mortgagor, subject to this Mortgage. Section 4.08. Mortgagee's Right to Cure. Upon the occurrence of one of the Events of Default as defined in Section 4.01(e) hereof, Mortgagor shall give written notice to Mortgagee specifying: (i) the Event of Default; and (ii) the action required to cure the event. ARTICLE FIVE MISCELLANEOUS Section 5.01. Successors and Assigns Bound; Number; Gender; Agents; uaptnons. The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to, the respective successors and assigns of the Mortgagee, and the Mortgagor subject to Section 3.06. The term "Mortgagee" shall include any successors or any assigns of the Mortgagee. Wherever used, the singular number shall include the plural, and the plural the singular, and the use of any gender shall apply to all genders. In exercising any rights hereunder or taking any actions provided for herein, Mortgagee may act through its employees, agents, or independent contractors as authorized by Mortgagee. The captions and headings of the paragraphs of this Mortgage are for convenience only and are not to be used to interpret or define the provisions hereof. Section 5.02. Notice. Any notice from the Mortgagee to the Mortgagor under this Mortgage shall be deemed to have been given by the Mortgagee and received by the Mortgagor when mailed by certified mail by the Mortgagee to the Mortgagor at the following address: (-45- US. 107998781.06 IKM Limited Partnership c/o Aeon 901 North Third Street, Suite 150 Minneapolis, MN 55401 Phone: (612) 341-3148 Attention: Blake Hopkins With copies to: Wells Fargo Affordable Housing Community Development Corporation MAC D1053-170 301 South College Street, 17th Floor Charlotte, NC 28202-6000 Attention: Director of Asset Management Winthrop & Weinstine, P.A. 225 South Sixth Street, Suite 3500 Minneapolis, MN 55402 Attn: John Nolde Tel.: (612) 604-6400 Fax: (612) 604-6841 or at such other address as the Mortgagor may designate in writing to the Mortgagee. Any notice from the Mortgagor to the Mortgagee under this Mortgage shall be deemed to have been given by the Mortgagor when delivered to the Mortgagee as follows: The Housing and Redevelopment Authority of the City of Mound, Minnesota Department of Community Development 2415 Wilshire Boulevard Mound, MN 55364 Phone: (952) 472-0600 Attention: City Manager or at such other address as the parties hereto may designate in writing to the other. Section 5.03. Governing Law; Severability. This Mortgage shall be governed by the substantive laws of the State of Minnesota. In the event that any provision or clause of this Mortgage conflicts with applicable law, such conflict shall not affect other provisions of this Mortgage that can be given effect without the conflicting provisions and to this end the provisions of the Mortgage are declared to be severable. Section 5.04. Counterparts. This Mortgage may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. US. 107998781.06 Section 5.05. Limited Recourse. Except in the case of fraud or willful misconduct, neither the Mortgagor, nor any partner, officer, director, shareholder, employee or agent of the Mortgagor, shall have any personal liability for the Mortgagor's obligations hereunder, it being recognized by Mortgagee that the obligations of the Mortgagor hereunder are nonrecourse obligations and that the remedies of Mortgagee are limited to the security provided hereunder. Section 5.06. Construction Mortgage. THIS MORTGAGE SECURES AN OBLIGATION INCURRED FOR THE CONSTRUCTION OF AN IMPROVEMENT ON LAND AND IS BOTH A CONSTRUCTION MORTGAGE AND A MORTGAGE. Section 5.07. Fixture Filing. From the date of its recording, this Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all goods constituting part of the Mortgaged Property (as more particularly described in item (ii) of the granting clause of this Mortgage) which are or are to become fixtures related to the real estate described herein. For this purpose, the following information is set forth: (a) Name and Address of Debtor and Record Owner of Real Estate: IKM Limited Partnership c/o Aeon 901 North Third Street, Suite 150 Minneapolis, MN 55401 Attention: Blake Hopkins the City of Mound, Minnesota Name and Address of Secured Party: The Housing and Redevelopment Authority of the City of Mound, Minnesota 2415 Wilshire Boulevard Mound, MN 55364 Attention: City Manager (c) This document covers goods that are or are to become fixtures. Section 5.08. Indemnification by Mortgagor. Except to the extent arising from or related to the gross negligence or willful misconduct of Mortgagee or its agents, Mortgagor will protect, indemnify, and save harmless Mortgagee from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) imposed upon or incurred by or asserted against Mortgagee by reason of (a) ownership of a mortgage interest in the Mortgaged Property, or receipt of any rent or other sum therefrom; (b) any accident, injury to, or death of persons or loss of or damage to property occurring on or about the Mortgaged Property or any part thereof or the adjoining sidewalks, curbs, vaults, and vault space, if any; (c) any use, non-use, or condition of the Mortgaged Property or any part thereof or the adjoining sidewalks, curbs, vaults, and vault space, if any; (d) any failure on the part of Mortgagor to perform or comply with any of the terms -47-. US. 107998781.06 of this Mortgage; (e) performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof, (f) any negligence or tortious act on the part of Mortgagor or any of its agents, contractors, sublessees, licensees, or invitees; or (g) exercise by Mortgagee of any remedy provided hereunder or at law or equity, provided, however, that nothing herein shall be construed to obligate Mortgagor to protect, indemnify, and save Mortgagee and its officers and employees harmless from and against liabilities, losses, damages, costs, expenses (including attorney's fees) arising from the negligent or tortious acts of Mortgagee, or any of its agents, employees or officers. Any amounts payable to Mortgagee under this section which are not paid within ten (10) days after written demand therefor by Mortgagee shall bear interest at the rate of one percent (1.00%) per annum in excess of the "reference rate" publicly announced from time to time by U.S. Bank National Association (unless collection from Mortgagor of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Mortgagor under applicable law) from the date of such demand, and shall be secured by this Mortgage. If any action, suit, or proceeding is brought against Mortgagee by reason of any such occurrence, Mortgagor upon Mortgagee's request will at Mortgagor's expense resist and defend such action, suit, or proceeding, or will cause the same to be resisted and defended by counsel for the insurer of the liability or by counsel designated by Mortgagor approved by Mortgagee. Section 5.09. Rider. The terms of the Rider to Loan Documents attached hereto as Exhibit C'are made a part hereof, and in the event of any inconsistencies, the Rider to Loan Documents shall control. [Signature page follows.] US. 107998781.06 IN WITNESS WHEREOF, the parties hereto have duly executed this Mortgage as of the day and year first above written. IKM LIMITED PARTNERSHIP Fed. I.D. #81-0962531 By: Aeon Its: Managing General Partner Alan Arthur, President STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this _ day of 2016 by Alan Arthur, the President of Aeon, a Minnesota non-profit corporation, the Managing General Partner of IKM Limited Partnership, a Minnesota limited partnership, on behalf of the corporation and limited partnership. Notary Public [Execution page of Combination Mortgage, Security Agreement and Fixture Financing Statement] US. 107998781.06 EXHIBIT A TO COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT THE LAND (Indian Knoll Manor Project) The Land described in the referenced instrument is located in Hennepin County, Minnesota, and is described as follows: Lot 1, Block 1, Indian Knoll Manor, Hennepin County, Minnesota. US.107998781.06 EXHIBIT B TO COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT PERMITTED ENCUMBRANCES A. Liens for taxes and special assessments not then delinquent, or delinquent but being contested by the Mortgagor pursuant to Section 1.07 hereof. B. Utility, access and other easements and rights-of-way, restrictions and exceptions that the Mortgagor certifies will not interfere with or impair the operation of the Project. C. Any mechanic's, laborer's, materialman's, supplier's, or vendor's lien or right in respect thereof if payment is not yet due under the contract in question or if such lien is being contested in accordance with Section 1.07 hereof. D. Any building, zoning and subdivision ordinances and any other applicable development, pollution control, water conservation and other laws, regulations, rules and ordinances of the Federal Government and State of Minnesota and respective agencies thereof and the political subdivisions in which the Project is located. E. Other encumbrances listed in the Master Subordination Agreement or as agreed to by Mortgagee. X51 US. 107998781.06 EXHIBIT C TO COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT RIDER TO CITY OF MOUND HRA LOAN DOCUMENTS This RIDER TO LOAN DOCUMENTS (the "Addendum") is made and entered into this _ day of , 2016, by and between the City of Mound Housing and Redevelopment Authority, a Minnesota public body corporate and politic ("Lender"), and IKM Limited Partnership, a Minnesota limited partnership (`Borrower"). For purposes of this Rider, the term "Limited Partner" shall mean Wells Fargo Affordable Housing Community Development Corporation and its successors and/or assigns. WHEREAS, as of the date hereof, Borrower is executing and delivering to Lender certain documents, including without limitation, a Note, a Combination Mortgage, Security Agreement and Fixture Financing Statement ("the "Mortgage"), a Loan Agreement, and all other documents (the "Loan Documents"), evidencing a loan in the amount of $2,120,000 (the "Loan") to be made from Lender to Borrower in connection with the development of a low-income housing tax credit apartment complex located in Hennepin County, Minnesota and known as Indian Knoll Manor (the "Project"). WHEREAS, Lender and Borrower desire that the following covenants, terms, and conditions shall be part of and shall modify or supplement each of the Loan Documents, as set forth in this Rider. NOW THEREFORE, in consideration of executing and delivering the Loan Documents, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree that the Loan Documents at the time of execution will be amended by the provisions of this Rider as follows: 1. Removal and Replacement of General Partner and Property Manager. Notwithstanding anything to the contrary contained in the Loan Documents, removal, transfer, replacement, or withdrawal in lieu of removal, of Borrower's general partner(s) and property manager for cause in accordance with Borrower's Amended and Restated Agreement of Limited Partnership (as amended from time to time, the "Partnership Agreement") shall not constitute a default under the Loan Documents provided that the Limited Partner delivers prior written notice thereof to Lender and that the substituted general partner or property manager shall be reasonably acceptable to Lender. Upon the removal, transfer, replacement or withdrawal of the general partner, an affiliate of the Limited Partner may serve as the substitute general partner until such time as the Limited Partner and Lender each approve a successor general partner. 2. Assignment of Limited Partner Interest. Notwithstanding anything to the contrary contained in the Loan Documents, the interest of Borrower's Limited Partner shall be freely transferable and any amendment to Borrower's Partnership Agreement to effectuate such transfers shall not require Lender consent. 3. Notice and Cure Rights. Notwithstanding anything to the contrary contained in the Loan Documents, Lender hereby agrees that any cure of any default made or tendered by Borrower's Limited Partner shall be deemed to be a cure by Borrower and shall be accepted or rejected on the same basis as if made or tendered by Borrower. Lender agrees to send courtesy copies of all notices which are sent to Borrower under the terms of the Loan Documents to the Limited Partner at Wells Fargo Affordable Housing Community Development Corporation; MAC D 1053-170; 301 South College Street, 17`n Floor, Charlotte, NC 28202-6000; Attention: Director of Asset Management; with a copy to: -52-i US, 107998781.06 Winthrop & Weinstine, P.A., 225 South Sixth Street, Suite 3500, Minneapolis, MN 55402, Arm.: John Nolde. 4. Extended Use Agreement. The parties acknowledge that Borrower intends to enter into an extended use agreement with Lender, which constitutes the extended low-income housing commitment described in Section 42(h)(6)(B) of the Internal Revenue Code, as amended (the "Code"). As of the date hereof Code Section 42(h)(6)(E)(ii) does not permit the eviction or termination of tenancy (other than for good cause) of an existing tenant of any low-income unit or any increase in the gross rent with respect to such unit not otherwise permitted under Code Section 42 for a period of three (3) years after the date the building is acquired by foreclosure or by instrument in lieu of foreclosure. In the event the extended use agreement required by the Lender is recorded against the Project, Lender agrees to comply with the provisions set forth in Code Section 42(h)(6)(E)(ii). This section shall apply notwithstanding the order of recording of any of the Loan Documents and the Extended Use Agreement (as such term is defined in the Borrower's Partnership Agreement), executed in connection with the allocation of federal low income housing tax credits to the Borrower for the Project pursuant to Section 42 of the Code. 5. Agreement to Standstill. Lender acknowledges and agrees that the Loan Documents securing the Loan shall be subordinate to a bank loan secured by a first position mortgage on the property of the Project (the "Senior Loan"), which subordination shall be evidenced by a written, recorded subordination agreement in a form reasonably acceptable to Lender and to be executed by Lender. Notwithstanding anything in the Loan Documents to the contrary, if an event of default, failure, or violation occurs under the Loan Documents, and is continuing beyond any applicable cure periods, Lender agrees that, without the prior written consent of the then applicable Senior Loan lender (the "Senior Lender"), it will not accelerate the loan, commence foreclosure proceedings on the property or any other collateral for the loan, collect rents, appoint, or seek the appointment of, a receiver or institute any other collection or enforcement action. 6. Damage Destruction and Condemnation. Notwithstanding anything to the contrary contained in any Loan Document, Lender agrees to apply all insurance proceeds resulting from casualty or damage of the Property and all payments or awards resulting from a taking, for any public or quasi - public purpose by any lawful power or authority by exercise of the power of condemnations or eminent domain, toward the restoration, replacement or rebuilding of the Project, or any part thereof, as nearly as possible to its value, condition and operational character immediately prior to any such damage, destruction or taking ("Restoration"), provided sufficient funds are available from all sources to complete such Restoration. 7. Debt Service Coverage Requirements. So long as Borrower is current on all debt service payments payable under the Loan, the failure to meet any debt service coverage requirements at any time or times shall not constitute a default under the Loan. 8. Force Maieure. There shall be no default under the Loan Documents for construction or rehabilitation delays beyond the reasonable control of the Borrower. 9. Purchase Rights. The Lender consents to those purchase options, put rights and rights of first refusal in favor of the general partner of Borrower or its designee which are set forth in Borrower's Partnership Agreement, and agrees that transfer of title to the Project in accordance therewith shall not constitute a default under the Loan Documents. -53-7 US 107998781.06 10. Lender Approvals. Lender agrees that all approvals and consents of the Lender under the Loan Documents shall not be unreasonably withheld, delayed or conditioned. Further, amendments to Borrower's Partnership Agreement entered into in order to effect transfers or assignments of the Limited Partner's interest pursuant to Sections 2 and 9 above shall not require the consent or approval of the Lender; provided, written notice of the foregoing transfers are promptly provided to the Lender. 11. Third Party Beneficiary. Borrower's Limited Partner, and its successors and assigns, is a third party beneficiary of the rights of Borrower under the Loan Documents, as modified by this Rider and has the right to directly enforce such rights. 12. Inconsistency. In the event of any inconsistency or conflict between the covenants, terms and conditions of any of the Loan Documents and this Rider, the covenants, terms and conditions of this Rider shall control. . 8. Survival. Except to the extent expressly modified, supplemented or amended in this Rider, the Loan Documents remain in full force and effect. 9. Counterparts. This Rider may be executed in any number of counterparts, each of which when executed and delivered shall be an original, but such counterparts shall together constitute one and the same instrument. The production of any executed counterpart of this Rider shall be sufficient for all purposes without producing any other counterpart thereof. 10. Non-recourse. Payment and performance of the obligations set forth in the Loan Documents shall be non-recourse to Borrower and Borrower's general and limited partners and the Lender's sole recourse with respect to repayment of the Loan shall be the right to foreclose under the Mortgage and other collateral forming part of the Loan Documents -54; US107998781.06 Lwfff - •:011 RIDER TO CITY OF MOUND HRA LOAN DOCUMENTS This RIDER TO LOAN DOCUMENTS (the "Addendum") is made and entered into this _ day of , 2016, by and between The Housing and Redevelopment Authority of the City of Mound, Minnesota, a public body corporate and politic organized and existing under the laws of the State of Minnesota ("Lender"), and IKM Limited Partnership, a Minnesota limited partnership (`Borrower"). For purposes of this Rider, the term "Limited Partner" shall mean Wells Fargo Affordable Housing Community Development Corporation and its successors and/or assigns. WHEREAS, as of the date hereof, Borrower is executing and delivering to Lender certain documents, including without limitation, a Note, a Combination Mortgage, Security Agreement and Fixture Financing Statement ("the "Mortgage"), a Loan Agreement, and all other documents (the "Loan Documents"), evidencing a loan in the amount of $2,120,000 (the "Loan") to be made from Lender to Borrower in connection with the development of a low-income housing tax credit apartment complex located in Hennepin County, Minnesota and known as Indian Knoll Manor (the "Project"). WHEREAS, Lender and Borrower desire that the following covenants, terms, and conditions shall be part of and shall modify or supplement each of the Loan Documents, as set forth in this Rider. NOW THEREFORE, in consideration of executing and delivering the Loan Documents, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree that the Loan Documents at the time of execution will be amended by the provisions of this Rider as follows: I. Removal and Replacement of General Partner and Property Manager. Notwithstanding anything to the contrary contained in the Loan Documents, removal, transfer, replacement, or withdrawal in lieu of removal, of Borrower's general partner(s) and property manager for cause in accordance with Borrower's Amended and Restated Agreement of Limited Partnership (as amended from time to time, the "Partnership Agreement") shall not constitute a default under the Loan Documents provided that the Limited Partner delivers prior written notice thereof to Lender and that the substituted general partner or property manager shall be reasonably acceptable to Lender. Upon the removal, transfer, replacement or withdrawal of the general partner, an affiliate of the Limited Partner may serve as the substitute general partner until such time as the Limited Partner and Lender each approve a successor general partner. 2. Assignment of Limited Partner Interest. Notwithstanding anything to the contrary contained in the Loan Documents, the interest of Borrower's Limited Partner shall be freely transferable and any amendment to Borrower's Partnership Agreement to effectuate such transfers shall not require Lender consent. 3. Notice and Cure Rights. Notwithstanding anything to the contrary contained in the Loan Documents, Lender hereby agrees that any cure of any default made or tendered by Borrower's Limited Partner shall be deemed to be a cure by Borrower and shall be accepted or rejected on the same basis as if made or tendered by Borrower. Lender agrees to send courtesy copies of all notices which are sent to Borrower under the terms of the Loan Documents to the Limited Partner at Wells Fargo Affordable Housing Community Development Corporation; MAC D 1053-170; 301 South College Street, 17th Floor, Charlotte, NC 28202-6000; Attention: Director of Asset Management; with a copy to: Winthrop & Weinstine, P.A., 225 South Sixth Street, Suite 3500, Minneapolis, MN 55402, Attn.: John Nolde. -55- US.107998781.06 4. Extended Use Agreement. The parties acknowledge that Borrower intends to enter into an extended use agreement with Lender, which constitutes the extended low-income housing commitment described in Section 42(h)(6)(B) of the Internal Revenue Code, as amended (the "Code"), As of the date hereof Code Section 42(h)(6)(E)(ii) does not permit the eviction or termination of tenancy (other than for good cause) of an existing tenant of any low-income unit or any increase in the gross rent with respect to such unit not otherwise permitted under Code Section 42 for a period of three (3) years after the date the building is acquired by foreclosure or by instrument in lieu of foreclosure. In the event the extended use agreement required by the Lender is recorded against the Project, Lender agrees to comply with the provisions set forth in Code Section 42(h)(6)(E)(ii). This section shall apply notwithstanding the order of recording of any of the Loan Documents and the Extended Use Agreement (as such term is defined in the Borrower's Partnership Agreement), executed in connection with the allocation of federal low income housing tax credits to the Borrower for the Project pursuant to Section 42 of the Code. 5. Agreement to Standstill. Lender acknowledges and agrees that the Loan Documents securing the Loan shall be subordinate to a bank loan secured by a first position mortgage on the property of the Project (the "Senior Loan"), which subordination shall be evidenced by a written, recorded subordination agreement in a form reasonably acceptable to Lender and to be executed by Lender. Notwithstanding anything in the Loan Documents to the contrary, if an event of default, failure, or violation occurs under the Loan Documents, and is continuing beyond any applicable cure periods, Lender agrees that, without the prior written consent of the then applicable Senior Loan lender (the "Senior Lender"), it will not accelerate the loan, commence foreclosure proceedings on the property or any other collateral for the loan, collect rents, appoint, or seek the appointment of, a receiver or institute any other collection or enforcement action. 6. Damage, Destruction and Condemnation. Notwithstanding anything to the contrary contained in any Loan Document, Lender agrees to apply all insurance proceeds resulting from casualty or damage of the Property and all payments or awards resulting from a taking, for any public or quasi - public purpose by any lawful power or authority by exercise of the power of condemnations or eminent domain, toward the restoration, replacement or rebuilding of the Project, or any part thereof, as nearly as possible to its value, condition and operational character immediately prior to any such damage, destruction or taking ("Restoration"), provided sufficient funds are available from all sources to complete such Restoration. 7. Debt Service Coverage Requirements. So long as Borrower is current on all debt service payments payable under the Loan, the failure to meet any debt service coverage requirements at any time or times shall not constitute a default under the Loan. 8. Force Maieure. There shall be no default under the Loan Documents for construction or rehabilitation delays beyond the reasonable control of the Borrower. 9. Purchase Rights. The Lender consents to those purchase options, put rights and rights of first refusal in favor of the general partner of Borrower or its designee which are set forth in Borrower's Partnership Agreement, and agrees that transfer of title to the Project in accordance therewith shall not constitute a default under the Loan Documents. 10. Lender Approvals. Lender agrees that all approvals and consents of the Lender under the Loan Documents shall not be unreasonably withheld, delayed or conditioned. Further, amendments to Borrower's Partnership Agreement entered into in order to effect transfers or assignments of the Limited Partner's interest pursuant to Sections 2 and 9 above shall not require the consent or approval of the Lender; provided, written notice of the foregoing transfers are promptly provided to the Lender. -56-1 US. 107998781.06 11. Third Party Beneficiary. Borrower's Limited Partner, and its successors and assigns, is a third party beneficiary of the rights of Borrower under the Loan Documents, as modified by this Rider and has the right to directly enforce such rights. 12. Inconsistency. In the event of any inconsistency or conflict between the covenants, terms and conditions of any of the Loan Documents and this Rider, the covenants, terms and conditions of this Rider shall control. 8. Survival. Except to the extent expressly modified, supplemented or amended in this Rider, the Loan Documents remain in full force and effect. 9. Counterparts. This Rider may be executed in any number of counterparts, each of which when executed and delivered shall be an original, but such counterparts shall together constitute one and the same instrument. The production of any executed counterpart of this Rider shall be sufficient for all purposes without producing any other counterpart thereof. 10. Non-recourse. Payment and performance of the obligations set forth in the Loan Documents shall be non-recourse to Borrower and Borrower's general and limited partners and the Lender's sole recourse with respect to repayment of the Loan shall be the right to foreclose under the Mortgage and other collateral forming part of the Loan Documents -57- US.107998781.06 MOUND HOUSING AND REDEVELOPMENT AUTHORITY RESOLUTION NO 16- H RESOLUTION ENDING THE ANNUAL CONTRIBUTIONS CONTRACT (ACC) WITH HUD AND DISSOLVING THE HRA'S STATUS AS A PUBLIC HOUSING AUTHORITY WITHIN HUD WHEREAS, the Mound Housing and Redevelopment Authority of Mound, Minnesota (the "HRA") operates a 50 -unit low rent public housing project known as Indian Knoll Manor (the "Project") in the city of Mound; and WHEREAS, the HRA maintained its status as a Public Housing Authority with the U.S. Department of Housing and Urban Development ("HUD") and entered into an Annual Contributions Contract ("ACC') with HUD; and WHEREAS, the Project was approved for a HUD Rental Assistance Demonstration ('RAD") project conversion; and WHEREAS, the RAD program allows the conversion of public housing to long-term, project -based Section 8 rental assistance to achieve certain goals, including the preservation and improvement of these properties through enabling access to private debt and equity to address immediate and long-term capital needs; and WHEREAS, the HRA has entered into a purchase agreement to sell the Project to Aeon, a non-profit developer and operator of affordable housing and its tax credit limited partnership, IKM Limited Partnership; and WHEREAS, the HRA has executed a loan agreement with Aeon and its tax credit limited partnership that will ensure that the agreed upon improvements to the Project will be made and the Project will remain affordable; NOW THEREFORE, BE IT RESOLVED, by the Board of the Mound Housing and Redevelopment Authority that the Public Housing ACC contract with the US Department of Housing and Urban Development (HUD) is terminated upon completion of the required annual reporting for fiscal year ending December 31, 2016. BE IT FURTHER RESOLVED that the Mound Housing and Redevelopment Authority hereby dissolves its status as a Public Housing Authority (PHA) with regard to HUD programs effective December 31, 2016. Adopted this 25th day of October, 2016 Attest: Catherine Pausche, Clerk no Chair Mark Wegscheid