Exhibit 10.7
MORTGAGE
THIS MORTGAGE is given on May 3, 2004. The borrower is WSI Industries,
Inc., a Minnesota corporation ("Borrower"). This Mortgage is given to the
Monticello Economic Development Authority, a public body corporate and politic
(the "Lender"). Borrower owes Lender the principal sum of $350,000.00. This debt
is evidenced by a promissory note dated as of even date herewith (the "Note").
This Mortgage secures to Lender: (a) the repayment of the debt evidenced by the
Note, and all renewals, extensions and modifications of the Note; (b) the
payment of all other sums, advanced to protect the security of this Mortgage;
(c) the performance of Borrower's covenants and agreements under this Mortgage
and the Note; and (d) is subject to the terms and conditions of that certain
Loan Agreement between Borrower and Lender and dated as of March 3, 2004. For
this purpose, Xxxxxxxx does hereby mortgage, grant and convey to Lender, with
power of sale, the property located in Xxxxxx County, Minnesota and fully
described in the attached Exhibit A, together with all the improvements now or
hereafter erected on the property, and all easements, appurtenances, and
fixtures now or hereafter a part of the property. All replacements and additions
shall also be covered by this Mortgage. All of the foregoing is referred to in
this Mortgage as the "Property".
BORROWER COVENANTS that Xxxxxxxx is lawfully seized of the estate
hereby conveyed and has the right to mortgage, grant and convey the Property and
that the Property is unencumbered, except for encumbrances of record and as set
forth in paragraph 19. Borrower warrants and will defend generally the title to
the Property against all claims and demands, subject to any encumbrances of
record.
Xxxxxxxx and Xxxxxx agree as follows:
1. Payment of Principal and Interest; Late Charges. Borrower
shall promptly pay when due the principal on the debt evidenced by the Note and
any late charges due under the Note.
2. Charges; Liens. Borrower shall pay all taxes, assessments,
charges, fines and impositions attributable to the Property which may attain
priority over this Mortgage, and leasehold payments or ground rents, if any.
Borrower shall pay these obligations on time directly to the person owed
payment.
Borrower shall promptly discharge any lien which has priority over this
Mortgage unless Borrower: (a) agrees in writing to the payment of the obligation
secured by the lien in a manner reasonably acceptable to Lender; (b) contests in
good faith the lien by, or defends against enforcement of the lien in, legal
proceedings which in the Lender's opinion operate to prevent the enforcement of
the lien; or (c) secures from the holder of the lien an agreement satisfactory
to Lender subordinating the lien to this Mortgage. If Lender determines that any
part of the Property is subject to a lien which may attain priority over this
Mortgage, Lender may give Borrower a notice identifying the lien. Borrower shall
satisfy the lien or take one or more of the actions set forth above within
thirty (30) days of the giving of notice. Notwithstanding the foregoing, this
Mortgage is subordinate to the first mortgage in the original principal amount
of $1,360,000 given by Borrower to Excel Bank.
3. Hazard or Property Insurance. Borrower shall keep the
improvements now existing or hereafter erected on the Property insured against
loss by fire and any other hazards for which Lender requires insurance. This
insurance shall be maintained in the amounts and for the periods that Lender
reasonably requires. The insurance carrier providing the insurance shall be
chosen by Borrower subject to Lender's approval, which shall not be unreasonably
withheld or delayed. If Borrower fails to maintain coverage described above,
Lender may, at Xxxxxx's option, obtain coverage to protect Xxxxxx's rights in
the Property in accordance with paragraph 5.
All insurance policies and renewals shall be reasonably acceptable to
Lender and shall include a standard mortgage clause. If Lender requires,
Borrower shall promptly give to Lender all receipts of paid premiums and renewal
notices. In the event of loss, Borrower shall give prompt notice to the
insurance carrier and Lender. Lender may make proof of loss if not made promptly
by Xxxxxxxx.
If under paragraph 15 the Property is acquired by Xxxxxx, Xxxxxxxx's
right to any insurance policies and proceeds resulting from damage to the
Property prior to the acquisition shall pass to Lender to the extent of the sums
secured by this Mortgage immediately prior to the acquisition.
4. Protection of the Property. Borrower shall not destroy or
damage the Property or commit waste on the Property. Borrower shall be in
default if any forfeiture action or proceeding, whether civil or criminal, is
begun that in Xxxxxx's good faith judgment could result in forfeiture of the
Property or otherwise materially impair the lien created by this Mortgage or
Xxxxxx's security interest. Borrower may cure such a default and reinstate, as
provided in paragraph 13, by causing the action or proceeding to be dismissed
with a ruling that, in Xxxxxx's good faith determination, precludes forfeiture
of the Borrower's interest in the Property or other material impairment of the
lien created by this Mortgage or Xxxxxx's security
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interest. Borrower shall also be in default if Borrower gave materially false or
inaccurate information or statements to Lender in connection with the loan
evidenced by the Note.
5. Protection of Xxxxxx's Rights in the Property. If Xxxxxxxx
fails to perform the covenants and agreements contained in this Mortgage, or
there is a legal proceeding that may significantly affect Xxxxxx's rights in the
Property (such as a proceeding in bankruptcy, condemnation or forfeiture),
Lender may do and pay for whatever is necessary to protect the value of the
Property and Xxxxxx's rights in the Property. Xxxxxx's actions may include
paying any sums secured by a lien which has priority over this Mortgage,
appearing in court, paying reasonable attorneys fees and entering on the
Property to make repairs. Although Lender may take action under this paragraph
5, Lender is not required to do so.
Any amounts disbursed by Xxxxxx under this paragraph 5 shall become
additional debt of Borrower secured by this Mortgage. Unless Borrower and Lender
agree to other terms of payment, these amounts shall bear interest from the date
of disbursement at a rate equal to the interest rate on the Note and shall be
payable, with interest, upon notice from Lender to Borrower requesting payment.
6. Inspection. Lender or its agent may make reasonable entries
upon and inspections of the Property.
7. Condemnation. The proceeds of any award or claim for damages,
direct or consequential, in connection with any condemnation or other taking of
any part of the Property, or for conveyance in lieu of condemnation, are hereby
assigned and shall be paid to Lender.
In the event of a total taking of the Property, the proceeds shall be
applied to the sums secured by this Mortgage, whether or not then due, with any
excess paid to Borrower. In the event of a partial taking of the Property in
which the fair market value of the Property immediately before the taking is
equal to or greater than the amount of the sums secured by this Mortgage
immediately before the taking, unless Xxxxxxxx and Lender otherwise agree in
writing, if any, the sums secured by this Mortgage shall be reduced by the
amount of the proceeds multiplied by the following fraction: (a) the total
amount of the sums secured immediately before the taking, divided by (b) the
fair market value of the Property immediately before the taking. Any balance
shall be paid to Borrower. In the event of a partial taking of the Property in
which the fair market value of the Property immediately before the taking is
less than the amount of the sums secured immediately before the taking, unless
Borrower and Lender otherwise agree in writing or unless applicable law
otherwise provides, the proceeds shall be applied to the sums secured by this
Mortgage whether or not the sums are then due.
8. Forbearance By Lender Not a Waiver. Any forbearance by Xxxxxx
in exercising any right or remedy shall not be a waiver of or preclude the
exercise of any right or remedy.
9. Successors and Assigns Bound. The covenants and agreements of
this Mortgage shall bind and benefit the successors and assigns of Xxxxxx and
Xxxxxxxx.
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10. Loan Charges. If the loan secured by this Mortgage is or
becomes subject to a law which sets maximum loan charges, and that law is
finally interpreted so that the interest or other loan charges collected or to
be collected in connection with the loan exceed the permitted limits, then: (a)
any such loan charge shall be reduced by the amount necessary to reduce the
charge to the permitted limit; and (b) any sums already collected from Borrower
which exceeded permitted limits will be refunded to Borrower. Lender may choose
to make this refund by reducing the principal owed under the Note or by making a
direct payment to Borrower. If a refund reduces principal, the reduction will be
treated as a partial prepayment under the Note.
11. Notices. Any notice to Borrower provided for in this Mortgage
shall be given by delivering it personally or by mailing it by first class
United States mail, postage prepaid, return receipt requested. The notice shall
be directed to the Borrower at 000 Xxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxx 00000,
with a copy to Xxxxxxxxx & Venuum, P.L.L.P. at 4200 IDS Center, 000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 Attn: Xxxxx Xxxxx, or any other address
Borrower designates by notice to Lender. Any notice to Lender shall be given or
mailed City Hall, 000 Xxxxxx Xxxxxx, Xxxxx 0, Xxxxxxxxxx, Xxxxxxxxx 00000, Attn:
Executive Director, or any other address Lender designates by notice to
Borrower. Any notice provided for in this Mortgage shall be deemed to have been
given to Borrower or Lender when given as provided in this paragraph.
12. Governing Law; Severability. This Mortgage shall be governed
by the law of the state of Minnesota. In the event that any provision or clause
of this Mortgage or the Note conflicts with applicable law, such conflict shall
not affect other provisions of this Mortgage or the Note which can be given
effect without the conflicting provision. To this end, the provisions of this
Mortgage and the Note are declared to be severable.
13. Xxxxxxxx's Right to Reinstate. If Borrower meets certain
conditions, Borrower shall have the right to have enforcement of this Mortgage
discontinued at any time prior to the earlier of: (a) 5 days before sale of the
Property pursuant to any power of sale contained in this Mortgage; or (b) entry
of a judgment enforcing this Mortgage. Those conditions are that Borrower: (a)
pays Lender all sums which then would be due under this Mortgage and the Note as
if no acceleration had occurred; (b) cures any default of any other covenants or
agreements; (c) pays all expenses incurred in enforcing this Mortgage,
including, but not limited to, reasonable attorneys fees; and (d) takes such
action as Lender may reasonably require to assure that the lien of this
Mortgage, Lender's rights in the Property and Borrower's obligation to pay the
sums secured by this Mortgage shall continue unchanged. Upon reinstatement by
Xxxxxxxx, this Mortgage and the obligations secured hereby shall remain fully
effective as if no acceleration had occurred.
14. Hazardous Substances. Borrower shall not cause or permit the
presence, use, disposal, storage, or release of any hazardous substances on or
in the Property, except those solvents, oils, cleaning materials, and other
substances as are used in the ordinary course of Borrower's business. Borrower
shall not do, and will use its best efforts not to allow anyone else to do,
anything affecting the Property that is in violation of any environmental law.
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Borrower shall promptly give Lender written notice of any
investigation, claim, demand, lawsuit or other action by any governmental or
regulatory agency or private party involving the Property and any hazardous
substance or environmental law of which Borrower has actual knowledge. If
Xxxxxxxx learns, or is notified by any governmental or regulatory authority,
that any removal or other remediation of any hazardous substance affecting the
Property is necessary, Borrower shall promptly take all necessary remedial
actions in accordance with that environmental law.
As used in this paragraph 14, "hazardous substances" are those
substances defined as toxic or hazardous substances by environmental law and the
following substances: gasoline, kerosene, other flammable or toxic petroleum
products, volatile solvents, materials containing asbestos or formaldehyde, and
radioactive materials. As used in this paragraph 14, "environmental law" means
federal or state laws that relate to environmental protection.
15. Acceleration; Remedies. Lender shall give notice to Borrower
prior to acceleration following Borrower's breach of any covenant or agreement
in this Mortgage. The notice shall specify: (a) the default; (b) the action
required to cure the default; (c) a date, not less than 30 days from the date
the notice is given to Borrower by which the default must be cured, provided,
however, if Borrower is diligently pursuing a cure, Borrower shall have such
additional time as is reasonably necessary to complete the cure; and (d) that
failure to cure the default on or before the date specified in the notice may
result in acceleration of the sums secured by this Mortgage and sale of the
Property. The notice shall further inform Xxxxxxxx of the right to reinstate
after acceleration and sale. If the default is not cured on or before the date
specified in the notice, Lender at its option may require immediate payment in
full of any sums secured by this Mortgage without further demand and may invoke
the power of sale and any other remedies permitted by law. Xxxxxx shall be
entitled to collect all expenses incurred in pursuing the remedies provided in
this paragraph 15, including, but not limited to, reasonable attorneys fees.
If Xxxxxx invokes the power of sale, Lender shall cause a copy of a
notice of sale to be served upon any person in possession of the Property.
Lender shall publish a notice of sale, and the Property shall be sold at public
auction in the manner prescribed by law. Lender or its designee may purchase the
Property at any sale. The proceeds of the sale shall be applied in the following
order: (a) to all expenses of the sale, including, but not limited to,
reasonable attorneys fees; (b) to all sums secured by this Mortgage; and (c) any
excess to the person or persons legally entitled to it.
16. RELEASE OF MORTGAGE. Upon payment of all sums secured by this
Mortgage, Lender shall discharge this Mortgage without charge to Borrower.
Borrower shall pay any recordation costs.
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WSI INDUSTRIES, INC.
By: /s/ Xxxxxxx Xxxxx
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Its: President and Chief Executive Officer
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