creditors trust agreement steven f meldahl creditors trust

EXHIBIT A

CREDITORS TRUST AGREEMENT FOR STEVEN F. MELDAHL CREDITORS TRUST

DATED: ____________________________, 2014

Case 12-46965 Doc 191 Filed 12/19/13 Entered 12/19/13 13:38:37 Desc Main Document of 53

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TABLE OF CONTENTS ARTICLE 1 DEFINITIONS 2 1.1 Terms Used in the Plan 2 1.2 General Construction 2 ARTICLE 2 THE TRUST 3 2.1 Creation and Name 3 2.2 Objectives and Purposes 3 2.3 Acceptance 3 2.4 Further Assurances 3 2.5 Nature of Trust Assets 4 2.6 Ownership by Creditors Trustee 5 2.7 Incidents of Ownership 5 ARTICLE 3 THE CREDITORS TRUSTEE 5 3.1 Number and Qualifications 5 3.2 Action by Creditors Trustee 6 3.3 Binding Nature of Creditors Trustee’s Action 6 3.4 Term of Service 6 3.5 Resignation 6 3.6 Removal 6 3.7 Appointment of Successor Creditors Trustee 6

3.7.1 Appointment of Successor Creditors Trustee 6 3.7.2 Vesting of Rights in Successor Creditors Trustee. 7

3.8 Continuance of Trust. 7 3.9 Compensation 7 3.10 Standard of Care; Indemnification; Exculpation 7 3.11 Reliance by Creditors Trustee 8 3.12 Reliance by Persons Dealing With the Trust 8 3.13 Discharge of Creditors Trustee 9

3.13.1 Statement of Discharge 9 3.13.2 Approval of Statement of Discharge 9 3.13.3 Costs Relating to Statement of Discharge 9

ARTICLE 4 OVERSIGHT COMMITTEE 9 4.1 Appointment of the Oversight Committee. 9 4.1.1 Term of Oversight Committee Members 9

4.1.2 Confidentiality of Information and Conflicts of Interest. 10 4.2 Powers and Duties of Oversight Committee. 10 4.2.1 Reliance by Oversight Committee Members 10 4.3 Resignation of Oversight Committee Members 10 4.4 Removal of Oversight Committee Members 10 4.5 Compensation of Oversight Committee 11 ARTICLE 5 POWERS OF THE CREDITORS TRUSTEE 11


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5.1 Title 11 5.2 Management Power 11 5.3 Commingling of Trust Assets 14 5.4 Employment and Compensation of Professionals 14 5.5 Dispute Resolution 14 ARTICLE 6 OBLIGATIONS OF THE CREDITORS TRUSTEE 14 6.1 Reports and Records 14

6.1.1 Consultation 14 6.1.2 Budget 14 6.1.3 Quarterly and Annual Reports 15 6.1.4 Distribution of Reports 15 6.1.5 Records 15

6.2 Eligible Investments 15 6.3 Access to Information by Beneficiaries 16 6.4 Settlement of Claims. 16 ARTICLE 7 BENEFICIAL INTERESTS 16 7.1 Allocation of Class F Beneficial Interests 16 7.1.1 Determination of Unsecured Interest Rate 16 7.2 Register Entries Regarding Beneficial Interests 17 7.3 Allocation of Beneficial Interests to Holders of Disputed Claims 17 7.4 Representation of Beneficial Interest 17 7.5 Trust Register and Registrar 17

7.5.1 Appointment of Registrar 17 7.5.2 Register of Beneficial Interests 17 7.5.3 Access to Register by Beneficiaries 17 7.5.4 Absolute Owners 18

7.6 Beneficial Interest Not Transferrable 18 ARTICLE 8 ADMINISTRATION OF THE TRUST ESTATE 18 8.1 Establishment of Available Cash. 18 8.2 Establishment of Reserves and Payment of Creditor Claims 18

8.2.2 Operating Reserve. 18 8.2.3 Disputed Claims Reserve for Beneficiaries. 19

8.3 Distributions to Holders of Beneficial Interests. 19 8.3.1 Distributions Generally 19 8.3.2 Distributions to Class F Beneficiaries 19

8.4 Place and Manner of Payments or Distributions 19 8.5 Minimum Distributions. 19 8.6 Unclaimed or Undeliverable Distributions. 20 8.7 Tax Matters. 20

8.7.1 Certain Income Tax Matters 20 8.7.2 Treatment of Trust Assets for Tax Purposes 21 8.7.3 Withholding. 21 8.7.4 Tax Reporting. 22


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8.7.5 Interest. 22 8.7.6 Allocation of Income and Losses 22

ARTICLE 9 TERMINATION 23 ARTICLE 10 MISCELLANEOUS 23 10.1 Notices 23 10.2 Amendment. 24 10.3 Counterparts. 24 10.4 Governing Law; Severability. 24 10.5 Headings. 24 10.6 Relationship to Plan. 24 10.7 Consent to Jurisdiction. 24 10.8 Waiver of Jury Trial. 25 10.9 References to Oversight Committee. 25


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CREDITORS TRUST AGREEMENT FOR THE DEBTOR CREDITORS TRUST

THIS TRUST AGREEMENT (the “Trust Agreement”) is made as of this _____day of

April ____ , 2013, by and between and The Platinum Group as trustee (the “Creditors Trustee”) and Steven F. Meldahl (“Debtor”) for the benefit of the Beneficiaries (as defined below) entitled to the Trust Assets (as defined in the Plan of Reorganization of Debtor Under Chapter 11 of the Bankruptcy Code confirmed on ______________, 2013 (the “Plan”).

RECITALS

On December 12, 2012, Debtor filed with the Bankruptcy Court a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (the “Case”). On _______, 2013, Debtor filed a proposed plan of reorganization. On _________2013, the plan of reorganization, as amended, was confirmed by the Bankruptcy Court. This confirmed plan of reorganization is the Plan. This Trust Agreement is executed to facilitate implementation of the Plan. Under the terms of the Plan, the Trust Assets will be transferred to the Trust created and evidenced hereby so that (i) the Trust Assets can be held in trust for the benefit of the Beneficiaries entitled thereto as a Creditors trust in accordance with Treasury Regulation Section 301.7701-4(d) for the objectives and purposes set forth herein and in the Plan:

(i) of collecting and liquidating the assets transferred to it with no objective to continue or engage in the conduct of a trade or business, except to the extent reasonably necessary to, and consistent with, the liquidating purpose of the trust;

(ii) for Claims to be resolved;

(iii) to make distributions in accordance with the Plan; (iv) to liquidate the Trust Assets; and (v) administrative services relating to the activities of the Trust and relating to

the implementation of the Plan can be performed by the Creditors Trustee.

The Creditors Trustee will make continuing efforts to dispose of the Trust Assets as expeditiously as possible, make timely and annual distributions, and not unduly prolong the duration of the Trust.

DECLARATION OF TRUST

NOW, THEREFORE, to declare the terms and conditions hereof, and in consideration of the confirmation of the Plan pursuant to the Bankruptcy Code and other good and valuable


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consideration, the receipt of which is hereby acknowledged, Debtor and the Creditors Trustee have executed this Trust Agreement for the benefit of the Beneficiaries entitled to the Trust Assets. The Grantors of this Trust are the Beneficiaries and they will be treated as the owners of the Trust and, the Debtor, at the direction of such Beneficiaries (because the transfer of title to undivided interests in each of the Trust Assets to such Beneficiaries, and the transfer of such interests by such Beneficiaries to the Trust, would be impractical), does absolutely and irrevocably grant and assign to the Creditors Trustee and to its successors or assigns, all right, title, and interest in and to the Trust Assets in the form and manner provided for in the Plan;

TO HAVE AND TO HOLD unto the Creditors Trustee and its successors in trust and its successors and assigns;

IN TRUST NEVERTHELESS, under and subject to the terms and conditions of the Plan and this Trust Agreement for the benefit of the Beneficiaries of the Trust (as their respective interests may appear in accordance with the Plan and this Trust Agreement);

PROVIDED, HOWEVER, that upon termination of the Trust in accordance with Article 8 hereof, this Trust Agreement shall cease, terminate, and be of no further force and effect.

IT IS HEREBY FURTHER COVENANTED AND DECLARED, that the Trust Assets are to be held and applied by the Creditors Trustee subject to the further covenants, conditions, and terms set forth below.

ARTICLE 1 DEFINITIONS

1.1 Terms Used in the Plan. If not defined in this Trust Agreement, capitalized

terms have the meanings assigned to them in the Disclosure Statement and Plan.

1.2 General Construction. As used in this Trust Agreement, the masculine, feminine and neuter genders, and the plural and singular numbers shall be deemed to include the others in all cases where they would apply. “Includes” and “including” are not limiting, and “or” is not exclusive. References to “Articles,” “Sections” and other subdivisions, unless referring specifically to the Plan or provisions of the Bankruptcy Code, the Bankruptcy Rules, or other law, statute or regulation, refer to the corresponding Articles, Sections, and other subdivisions of this Trust Agreement, and the words “herein,” “hereafter,” and words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section, or subdivision of this Trust Agreement.

1.3 Beneficiaries. The Beneficiaries of the Trust shall be the holders of claims

scheduled as undisputed or filed with the Bankruptcy Court as general unsecured claims and classified by the Plan of Reorganization as Class 1 Claimants. For the purposes of determining the amount of the beneficial interest held by the claimant, the amount of any filed claim shall be the allowed claim unless and until an objection to the claim is made and determined by a court of competent jurisdiction.


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ARTICLE 2 THE TRUST

2.1 Creation and Name. There is hereby created the Trust, which shall be known as

the “Steven F. Meldahl Creditors Trust.”

2.2 Objectives and Purposes. The purpose of the Trust is to provide a mechanism for the collection and liquidation of the Trust Assets, and to distribute the proceeds of the liquidation, net of all claims, expenses, charges, liabilities, and obligations of the Trust, to the holders of Beneficial Interests and certain Allowed Claims in accordance with the terms of the Plan. No business activities will be conducted by the Trust other than those associated with or related to the liquidation of the Trust Assets. It is intended that the Trust be classified for federal income tax purposes as a “liquidating trust” within the meaning of section 301.7701-4(d) of the Treasury Regulations. In furtherance of this objective, the Creditors Trustee shall make continuing best efforts to (i) dispose of the Trust Assets, (ii) make timely Distributions, and (iii) not unduly prolong the duration of the Trust, in accordance with this Trust Agreement. The purposes of the Trust include, but are not limited to the following:

(a) to marshal, liquidate, and distribute the Trust Assets in an expeditious but orderly manner;

(b) to perform the functions and take the actions provided for or permitted by

this Trust Agreement and the Plan and in any other agreement executed by the Creditors Trustee for the Trust pursuant to the Plan; and

(c) to reconcile, object to, prosecute, or settle all Claims by or against Debtor

for purposes of determining the appropriate amount of Contributions to or Distributions to be made hereunder to the Beneficiaries and payments to other claimants under the terms and conditions set forth in this Trust Agreement. The Creditors Trust shall be deemed a party in interest for all purposes of the Case.

(d) to enforce all of Debtor’s obligations to the Beneficiaries, including but

not limited to managing, enforcing and or releasing any mortgage, instrument or other claim arising under the Plan in favor of the Beneficiaries.

2.3 Acceptance. The Creditors Trustee accepts the trust terms imposed under this

Trust Agreement and agrees to manage the Trust in accordance with this Trust Agreement and subject to the terms and conditions of the Plan.

2.4 Further Assurances. Debtor (and any successors thereto) will, upon reasonable request of the Creditors Trustee, execute, acknowledge, and deliver such further instruments and


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do such further acts as may be necessary or proper to transfer to the Creditors Trustee any portion of the Trust Assets intended to be conveyed hereby in the form and manner provided for in the Plan and to vest in the Creditors Trustee the powers, instruments, or funds in trust hereunder.

2.5 Nature of Trust Assets. The Trust shall not receive transfers of any listed stock or securities or any readily marketable assets, or any operating assets of a going business. Furthermore, the Trust shall not receive transfers of any unlisted stock of a single issuer that represents 80 percent or more of the stock of such issuer, and shall not receive transfers of any general or limited partnership interests.

The Trust Assets will be from four funding sources. The Debtor’s contribution to the

Trust from all sources will be made until all Class 1 claims are paid in full. (1) The Trust will receive contributions of $8,000.00 from the Debtor on the first day of each month commencing on the first month following the Effective Date. (2) The Trust will also receive the net sales proceeds from the sales of any rental properties listed on Exhibit 2 or from the foreclosure of any properties pursuant to the mortgages granted to the Trust as set forth below. (3) The Trust will also receive the net recoveries from any avoidance actions. (4) The Trust will also receive 50% of the Net Operating Profits from the business operations of the Debtor. The Debtor will make an initial contribution to the Trust of $250,000.00 on the Effective Date. The Debtor must make minimum contributions from all the sources listed above every six (6) months after the Effective Date as set forth below: $300,000.00 ($250,000.00 from the initial contribution plus $50,000.00 from other sources) on the six month anniversary of the Effective Date, ________________, 2014; $100,000.00 on the twelve month anniversary of the Effective Date, _______________, 2015; $100,000.00 on the eighteen month anniversary of the Effective Date, ___________, 2015; $100,000.00 on the twenty-four month anniversary of the Effective Date, ______________, 2016; $100,000.00 on the thirty month anniversary of the Effective Date, ______________, 2016; and,


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The remaining amount necessary, if any, to pay all Class 1 claims in full on the thirty-six month anniversary of the Effective Date, _______________2017.

To secure payment of the amounts due to the Trust, the Debtor will execute notes and grant mortgages in favor of the Trust on all rental properties which are not encumbered by an existing mortgage. Those mortgages shall be granted by the Debtor within 30 days after the Effective Date and shall recorded by the Trust with the appropriate government agency. A specimen copy of the note and mortgage are attached as Exhibit 3.

The mortgages granted will be divided among the rental properties to secure the amounts due on each anniversary date as listed on Exhibit 2. The Debtor will execute notes in the amounts due on each date. All contributions made by the Debtor during the six month period will be used to reduce the note securing that minimum contribution. To the extent the Debtor makes contributions in excess of the amount due as a minimum contribution on each anniversary date, the amount in excess shall be applied to reduce the amount due as a minimum contribution on the next anniversary date. The mortgages will be as follows:

a. Tier One – Note in the amount of $300,000.00 secured by a mortgage on the properties as listed on Exhibit 2: b. Tier Two – Note in the amount of $100,000.00 secured by a mortgage on the properties as listed on Exhibit 2: c. Tier Three – Note in the amount of $100,000.00 secured by a mortgage on the properties as listed on Exhibit 2: d. Tier Four – Note in the amount of $100,000.00 secured by a mortgage on the properties as listed on Exhibit 2: e. Tier Five – Note in the amount of $100,000.00 secured by a mortgage on the properties as listed on Exhibit 2: f. Tier Six – Note in the amount of $600,000.00 secured by a mortgage on the all remaining rental properties as listed on Exhibit 2 .

Upon the satisfaction of each note by the Debtor, the Trust will release the properties secured by the corresponding mortgage. The Trust will release those mortgages for the sale of those properties by the Debtor as provided in the Plan, provided the amount to be received by the Trust from the sale is equal to or greater than the release amount listed on Exhibit 2 or the Trustee consents to the sale for a lesser amount. The proceeds of any sale of the properties secured by a mortgage will first be used to satisfy the minimum amount due on the next anniversary date. Any proceeds in excess of that amount will be deposited in an escrow account established by the Debtor and subject to a lien in favor of the Class 1 claimants to secure payment in full of all allowed claims in that class. The Trustee shall have the right, in his or her sole discretion, to authorize the Debtor to use those


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funds for the payment of business expenses at the written request of the Debtor specifying the use to which the funds will be put.

2.6 Ownership by Creditors Trustee. The Creditors Trustee shall promptly record or register in its name, as Creditors Trustee, or in the name or names of any nominee or Person in accordance with Section 4.1 hereof, ownership of and title to all Trust Assets received by it as Creditors Trustee and comply with all provisions of law that may bear on the evidencing of ownership of and title to any portion of the Trust Assets as are necessary and appropriate and that the Creditors Trustee determines are in the best interests of the Trust.

2.7 Incidents of Ownership. The Beneficiaries shall be the sole beneficiaries of the Trust and the Creditors Trustee shall retain only such incidents of ownership as are necessary to undertake the actions and transactions authorized herein.

ARTICLE 3 THE CREDITORS TRUSTEE

3.1 Number and Qualifications. Except as otherwise provided herein, there shall be

one Creditors Trustee of the Trust, who shall be the person or entity nominated and approved by the Bankruptcy Court as provided in the Plan. The Creditors Trustee shall give a bond or other surety in an amount to be approved by the Bankruptcy Court, as applicable. All costs and expenses of procuring any such bond shall be paid as a Trust Cost (as defined herein). The Creditors Trustee shall be entitled to engage in such other activities as the Creditors Trustee deems appropriate, so long as such activities are not in conflict with the interests of the Trust and the Creditors Trustee devotes such time as is necessary to fulfill all of the Creditors Trustee’s duties as Creditors Trustee.

3.2 Action by Creditors Trustee. The Trust shall be managed by the Creditors Trustee as set forth in this Trust Agreement.

3.3 Binding Nature of Creditors Trustee’s Action. All actions taken and determinations made by the Creditors Trustee in accordance with the provisions of the Plan or this Trust Agreement shall be final and binding upon any and all Persons holding Beneficial Interests in the Trust.

3.4 Term of Service. The Creditors Trustee shall serve as the Creditors Trustee for the duration of the Trust, subject to earlier death, resignation, or removal as provided herein.

3.5 Resignation. The Creditors Trustee may resign as Creditors Trustee of the Trust by an instrument in writing delivered to the Oversight Committee at least 60 days before the proposed effective date of resignation. The Creditors Trustee shall continue to serve as Creditors Trustee after the delivery of the Creditors Trustee’s resignation until the proposed effective date of the Creditors Trustee’s resignation, unless the Oversight Committee consents by majority vote to an earlier effective date of the Creditors Trustee’s resignation, which shall be the date of


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appointment of a successor Creditors Trustee in accordance with Section 3.7 hereof becomes effective, but nothing in this Section 3.5 shall restrict the right to remove the Creditors Trustee as provided in Section 3.6 hereof.

3.6 Removal. The Creditors Trustee may be removed from office for (i) fraud or willful misconduct in connection with the affairs of the Trust, (ii) for such physical or mental disability as substantially prevents the Creditors Trustee from performing the duties of Creditors Trustee hereunder, or (iii) for cause, which shall include a breach of fiduciary duty or an unresolved conflict of interest, in each case, upon a unanimous vote of the Oversight Committee.

3.7 Successor Creditors Trustee.

3.7.1 Appointment of Successor Creditors Trustee. In the event of a vacancy by reason of the death or removal of the Creditors Trustee or prospective vacancy by reason of resignation, a successor Creditors Trustee shall be appointed by the Oversight Committee upon a majority vote. The Oversight Committee may appoint a successor Creditors Trustee as soon as practicable, but in any event within 30 days after the occurrence of the vacancy or, in the case of resignation, at least 30 days before the proposed resignation. If the Oversight Committee fails to appoint a successor Creditors Trustee within the prescribed period or cannot select a successor by a majority vote, any member of the Oversight Committee or any Beneficiary may nominate a successor Creditors Trustee and seek Bankruptcy Court approval of the proposed successor Creditors Trustee.

3.7.2 Vesting of Rights in Successor Creditors Trustee. Every successor

Creditors Trustee shall execute, acknowledge, and deliver to the Trust, the Oversight Committee, and the retiring Creditors Trustee, if any, an instrument accepting such appointment subject to the terms and provisions hereof. The successor Creditors Trustee shall provide a bond or surety as provided in Section 3.1. The successor Creditors Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Creditors Trustee, except that the successor Creditors Trustee shall not be liable for the acts or omissions of the retiring Creditors Trustee.

3.8 Continuance of Trust. The death, resignation, or removal of the Creditors

Trustee shall not operate to terminate the Trust created by this Trust Agreement or to revoke any existing agency (other than any agency of the Creditors Trustee as the Creditors Trustee) created pursuant to the terms of this Trust Agreement or invalidate any action taken by the Creditors Trustee, and the Creditors Trustee agrees that the provisions of this Trust Agreement shall be binding upon and inure to the benefit of the Creditors Trustee and the Creditors Trustee’s heirs, legal and personal representatives, successors or assigns, as the case may be. In the event of the resignation or removal of the Creditors Trustee, the Creditors Trustee shall promptly (i) execute and deliver by the effective date of resignation or removal such documents, instruments, and other writings as may be reasonably requested by the successor Creditors Trustee to effect the


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termination of the resigning or removed Creditors Trustee’s capacity under this Trust Agreement and the conveyance of the Trust Assets then held by the resigning or removed Creditors Trustee to the successor Creditors Trustee; (ii) deliver to the successor Creditors Trustee all documents, instruments, records, and other writings relating to the Trust as may be in the possession or under the control of the resigning or removed Creditors Trustee; and (iii) otherwise assist and cooperate in effecting the assumption of the resigning or removed Creditors Trustee’s obligations and functions by the successor Creditors Trustee. The resigning or removed Creditors Trustee hereby irrevocably appoints the successor Creditors Trustee as its attorney-in-fact and agent with full power of substitution for it and its name, place and stead to do any and all acts that such resigning or removed Creditors Trustee is obligated to perform under this Section 3.8. Such appointment shall not be affected by the subsequent disability or incompetence of the Creditors Trustee making such appointment.

3.9 Compensation. As compensation for services as Creditors Trustee, and under any other agreements to which the Creditors Trustee is a party as contemplated by the Plan, the Creditors Trustee shall receive the compensation provided for in a separate compensation arrangement approved by the Committee, and the Bankruptcy Court at the time of Plan Confirmation. Compensation of any successor Creditors Trustee shall be determined and approved by majority vote of the Oversight Committee.

3.10 Standard of Care; Indemnification; Exculpation. The Creditors Trustee, acting in the capacity as the Creditors Trustee or in any other capacity contemplated by this Trust Agreement or the Plan, and the members of the Oversight Committee shall not be personally liable in connection with the affairs of the Trust to the Trust or to any Person except for such of the Creditors Trustee’s or Oversight Committee member’s acts or omissions that constitute fraud, willful misconduct, or gross negligence. The Creditors Trustee shall not be personally liable to the Trust or to any Person for the acts or omissions of any officer, employee, or agent of the Trust unless the Creditors Trustee acted with gross negligence or willful misconduct in the selection, retention, or supervision of such officer, employee, or agent of the Trust. Except in those situations in which the Creditors Trustee is not exonerated of personal liability in accordance with the foregoing, the Creditors Trustee (including each former Creditors Trustee) shall be indemnified by the Trust against and held harmless by the Trust from any losses, claims, damages, liabilities or expenses (including, without limitation, attorney fees, disbursements, and related expenses) to which the Creditors Trustee may become subject in connection with any action, suit, proceeding, or investigation brought or threatened against the Creditors Trustee in the Creditors Trustee’s capacity as Creditors Trustee, or in any other capacity contemplated by this Trust Agreement or the Plan or in connection with any matter arising out of or related to the Plan, this Trust Agreement, or the affairs of the Trust. If the Creditors Trustee becomes involved in any action, proceeding, or investigation in connection with any matter arising out of or in connection with the Plan, this Trust Agreement or the affairs of the Trust, the Trust shall periodically advance or otherwise reimburse on demand the Creditors Trustee’s reasonable legal and other expenses (including, without limitation, the cost of any investigation and preparation and attorney fees, disbursements, and related expenses) incurred in connection therewith, but the Creditors Trustee shall be required to repay promptly to the Trust the amount of any such advanced or reimbursed expenses paid to the Creditors Trustee to the extent that it shall be ultimately determined by Final Order that the Creditors Trustee engaged in fraud, willful


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misconduct, or gross negligence in connection with the affairs of the Trust with respect to which such expenses were paid. The Trust may indemnify and hold harmless the employees and agents of the Trust, including the members of the Oversight Committee, to the same extent as provided in this Section 3.10 for the Creditors Trustee. The provisions of this Section 3.10 shall remain available to and be binding on any former Creditors Trustee or the estate of any decedent Creditors Trustee.

3.11 Reliance by Creditors Trustee. The Creditors Trustee may rely, and shall be fully protected in acting or refraining from acting, on any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order, or other instrument or document that the Creditors Trustee has no reason to believe to be other than genuine and to have been signed or presented by the proper party or parties or, in the case of facsimiles, to have been sent by the proper party or parties, and the Creditors Trustee may conclusively rely as to the truth of the statements and correctness of the opinions expressed therein, but the Creditors Trustee shall be under a duty to have examined, or caused to be examined, the same to determine whether or not such writings conform to the requirements of this Trust Agreement. The Creditors Trustee may consult with counsel, and any opinion of counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Creditors Trustee in accordance therewith. The Creditors Trustee shall have the right at any time to seek instructions from the Bankruptcy Court (or any other court of competent jurisdiction after the chapter 11 case is finally closed) concerning the Trust Assets, this Trust Agreement, the Plan, or any other document executed in connection therewith, and any such instructions given shall be full and complete authorization in respect of any action taken or suffered by the Creditors Trustee in accordance therewith.

3.12 Reliance by Persons Dealing With the Trust. In the absence of actual knowledge to the contrary, any person dealing with the Trust shall be entitled to rely on the authority of the Creditors Trustee to act in connection with the acquisition, management, or disposition of Trust Assets and shall have no obligation to inquire into the existence of such authority. Upon the sale by the Creditors Trustee of any portion of the Trust Assets, such Trust Assets shall be delivered to the purchaser thereof free and clear of any liens or other encumbrances, claims, or interests of the Creditors Trustee or the Beneficiaries, except as may otherwise be agreed to by the purchaser.

3.13 Discharge of Creditors Trustee.

3.13.1 Statement of Discharge. The Creditors Trustee shall upon termination of the Trust or upon the Creditors Trustee’s resignation, removal, or death (in which case the Creditors Trustee’s estate shall) render a statement of charge and discharge containing the following information: (i) all assets and funds of the Trust originally charged under the Creditors Trustee’s control, (ii) a summarized accounting, in sufficient detail, of all purchases, sales, gains, losses, and income in connection with the Trust during the Creditors Trustee’s term of service, and (iii) the ending balance of all assets and funds of the Trust as of the date of discharge. At the discretion of the Creditors Trustee and Oversight Committee, such statement may be


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audited by independent accountants in accordance with generally accepted auditing standards.

3.13.2 Approval of Statement of Discharge. The statement of charge and

discharge required by Section 3.13.1 shall be presented to the Oversight Committee. Unless a majority of the Oversight Committee requests that such statement of charge and discharge not be approved within 30 days after the date on which such statement of charge and discharge was presented to the Oversight Committee, the withdrawing Creditors Trustee shall be discharged from all liability to the Trust or any Person who has had or may then or thereafter have an interest in the Trust for acts or omissions in the Creditors Trustee’s capacity as the Creditors Trustee or in any other capacity contemplated by this Trust Agreement or the Plan.

3.13.3 Costs Relating to Statement of Discharge. The expenses of any

accounting, including, but not limited to any statement of charge or discharge, shall be paid by the Trust as a Trust Cost.

ARTICLE 4

OVERSIGHT COMMITTEE

4.1 Appointment of the Oversight Committee. Upon the Effective Date the Oversight Committee shall be appointed. The Oversight Committee shall consist of 3 members of the Committee or their delegates, appointees, agents or proxies. The number of members of the Oversight Committee may be permanently reduced pursuant to either 4.1.1(ii) or 4.1.1(y).

4.1.1 Term of Oversight Committee Members. Oversight Committee

members appointed by the Committee shall serve until the later of (i) the effective date of the resignation or removal of such member; (ii) the date on which the Creditors Trustee has finally determined that all Class F Beneficial Interests and all Claims held by such Beneficiaries holding Class F General Unsecured Claims have been satisfied in full, including any applicable interest; (iii) the termination of the Creditors Trust pursuant to the terms of this Trust Agreement.

4.1.2 Confidentiality of Information and Conflicts of Interest. Upon appointment to the Oversight Committee, each member shall execute and

deliver to the Creditors Trustee a confidentiality agreement in substantially the form attached hereto as Exhibit 1 (the “Confidentiality Agreement”). The Creditors Trustee shall have authority to exclude any Oversight Committee member from any deliberations, or withhold any information from any Oversight Committee member, regarding matters affecting the Trust or Trust Assets in which such excluded member is encumbered by a conflict of interest. The non-conflicted members of the Oversight Committee may overrule the Creditors Trustee’s decision to exclude or withhold information from a conflicted member by unanimous


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vote.

4.2 Powers and Duties of Oversight Committee. The Oversight Committee shall review the activities and performance of and advise the Creditors Trustee as set forth in this Trust Agreement, and will have authority to replace the Creditors Trustee as set forth in Section 3.7.1. Neither the Oversight Committee nor its respective members shall exercise any control or authority over the Creditors Trust or the Trust Assets that is inconsistent with the powers and duties of the Creditors Trustee as set forth in this Trust Agreement.

4.2.1 Reliance by Oversight Committee Members. The Oversight Committee

members may rely, and shall be fully protected in acting or refraining from acting, on any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order, or other instrument or document that the Oversight Committee member has no reason to believe to be other than genuine and to have been signed or presented by the proper party or parties or, in the case of facsimiles, to have been sent by the proper party or parties, and the Oversight Committee members may conclusively rely as to the truth of the statements and correctness of the opinions expressed therein. The Oversight Committee members may consult with any counsel employed by the Trust, and any opinion of counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Oversight Committee in accordance therewith.

4.3 Resignation of Oversight Committee Members. A member of the Oversight

Committee may resign at any time. Upon the resignation of a member of the Oversight Committee appointed by the Committee, the remaining members of the Oversight Committee appointed by the Committee shall nominate a replacement member from either (i) the former members of the Committee or (ii) if no former member of the Committee accepts such nomination, then from among the Beneficial Interest holders.

4.4 Removal of Oversight Committee Members. A member of the Oversight Committee may be removed from office upon the unanimous vote of the Creditors Trustee and the other members of the Oversight Committee for (i) fraud or willful misconduct in connection with the affairs of the Trust; (ii) such physical or mental disability as substantially prevents such Oversight Committee member from performing the duties of a member of the Oversight Committee; (iii) for cause, including breach of fiduciary duty or an unresolved conflict of interest. Any Oversight Committee member removed under this Section 4.4 will be replaced in accordance with Section 4.3 of this Agreement.

4.5 Compensation of Oversight Committee. The Oversight Committee shall not be compensated for services rendered to the Trust. However, the Oversight Committee members shall be reimbursed for all reasonable out-of-pocket expenses incurred by serving on the Oversight Committee, except fees and expenses of counsel to individual members of the Oversight Committee.


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ARTICLE 5 POWERS OF THE CREDITORS TRUSTEE

5.1 Title. Legal title to all Trust Assets shall be vested in the Creditors Trustee,

except that the Creditors Trustee, upon approval by a majority of the Oversight Committee, shall have the power to cause legal title (or evidence of title) to any of the Trust Assets to be held by any nominee or Person, on such terms, in such manner, and with such powers as the Creditors Trustee hereunder may determine.

5.2 Management Power. Except as otherwise expressly limited in this Trust Agreement or the Plan, the Creditors Trustee shall have control and authority over the Trust Assets and any other causes of action transferred and assigned to the Trust under the Plan as Trust Assets, over the management and disposition thereof (including any transfer of Trust Assets that does not constitute a disposition) over the management of the Trust to the same extent as if the Creditors Trustee were the sole owner thereof in its own right. Except as provided in the Plan, or otherwise specified in the Trust Agreement, the Creditors Trustee need not obtain the order or approval of any court in the exercise of any power or discretion conferred hereunder, or account to any court in the absence of a breach of trust. The Creditors Trustee shall exercise its judgment for the benefit of the Beneficiaries in order to maximize the value of Distributions, giving due regard to the cost, risk, and delay of any course of action. In connection with the management and use of the Trust Assets, the Creditors Trustee’s powers, except as otherwise expressly limited in this Trust Agreement, or the Plan, shall include, but shall not be limited to, the following:

(i) to accept the Trust Assets, to pursue the liquidation and marshaling of the Trust Assets, and to preserve and protect the Trust Assets;

(ii) subject to Section 6.5 of this Trust Agreement, and in accordance with

Section 1123(b)(3)(B) of the Bankruptcy Code and the Plan, to engage in, intervene in, prosecute, join, defend, compound, settle, compromise, abandon or adjust, by arbitration or otherwise, any actions, suits, proceedings, disputes, claims, controversies, demands or other litigation relating to the Plan, the Trust, the Trust Assets or the Trust’s affairs, to enter into agreements relating to the foregoing, whether or not any suit is commenced or claim accrued or asserted and, in advance of any controversy, to enter into agreements regarding arbitration, adjudication or settlement thereof, all in the name of the Creditors Trust if necessary or appropriate, and institute or continue actions which were or otherwise could have been brought by the Debtor, and prosecute or defend all litigation or appeals on behalf of the Debtor and, when appropriate, settle such actions and claims;

(iii) subject to Section 6.5 of this Trust Agreement, and in accordance with

Section 1123(b)(3) of the Bankruptcy Code and the Plan, to own and retain, and prosecute, enforce, compromise, settle, release, or otherwise dispose of and any and all other claims, defenses, counterclaims, setoffs,


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and recoupments transferred and assigned to the Trust under the Plan as Trust Assets;

(iv) to make or cause to be made Distributions of Available Cash at least

quarterly in accordance with the terms of this Trust Agreement and the Plan;

(v) to liquidate and distribute Trust Assets or any part thereof or any interest

therein, and to dispose of the Trust Assets for Cash or upon such terms and for such consideration as the Creditors Trustee deems proper;

(vi) to engage in all acts that would constitute ordinary performance of the

obligations of a trustee under a Creditors trust and to file all returns of the Trust as a grantor trust for the Beneficiaries pursuant to Treasury Regulation Section 1.671-4(a) or (b);

(vii) to enforce the payment of notes or other obligations of any Person or to

make contracts with respect thereto;

(viii) to purchase insurance with such coverage and limits as it deems desirable consistent with the budget referred to in Section 6.1.2, including, without limitation, insurance covering liabilities of the Creditors Trustee or employees or agents of the Trust incurred in connection with their services to the Trust;

(ix) to appoint, engage, employ, supervise, and compensate officers,

employees, and other Persons as may be necessary or desirable, including managers, consultants, accountants, technical, financial, real estate, or investment advisors or managers, attorneys, agents or brokers, corporate fiduciaries, or depositories and the Registrar;

(x) subject to the limitations in Section 6.2, to the extent reasonably required

to meet claims and contingent liabilities (including Disputed Claims) or to maintain the value of assets during liquidation, to invest and reinvest Cash available to the Trust, pending distribution, and to liquidate such investments (however, during its existence, the Trust shall not receive or retain cash or cash equivalents in excess of a reasonable amount necessary to meet claims and contingent liabilities (including Disputed Claims) or to maintain the value of its assets during liquidation);

(xi) to execute, deliver, and perform any closing agreement made with the

IRS;

(xii) to determine the manner of ascertainment of income and principal, and the apportionment of income and principal, and the apportionment between


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income and principal of all receipts and disbursements, and to select an annual accounting period;

(xiii) change the state of domicile of the Trust;

(xiv) establish such funds, reserves and accounts within the Trust estate, as

deemed by the Creditors Trustee in its discretion to be useful in carrying out the purposes of the Trust;

(xv) sue and be sued and participate, as a party or otherwise, in any judicial,

administrative, arbitrative or other proceeding;

(xvi) delegate any or all of the discretionary power and authority herein conferred at any time with respect to all or any portion of the Trust estate to any one or more reputable individuals or recognized institutional advisers or investment managers without liability for any action taken or omission made because of any such delegation, except for such liability as is provided in Section 3.10;

(xvii) consult with the Oversight Committee at such times and with respect to

such issues relating to the conduct of the Trust as the Creditors Trustee considers desirable and in accordance with the terms of the Trust Agreement;

(xviii) undertake any duties or obligations and exercise any rights concerning the

treatment of Claims or Equity Interests under the Plan;

(xix) execute, deliver and perform such other agreements and documents and to take or cause to be taken any and all such other actions as it may deem necessary or desirable to effectuate and carry out the purposes of this Trust Agreement; and

(xx) as soon as is practicable, request that the Bankruptcy Court enter a final

decree fully and finally closing the Chapter 11 Case; (xxi) on behalf of the Beneficiaries, take all steps necessary to ensure the

Debtor complies with the provisions of the confirmed Plan and this Trust Agreement; and,

(xxii) undertake any action or perform any obligation provided for or required

by the Plan.

5.3 Commingling of Trust Assets. The Creditors Trustee shall not commingle any of the Trust Assets with its own property or the property of any other Person.

5.4 Employment and Compensation of Professionals. The Creditors Trustee shall


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have the authority to employ and compensate attorneys, accountants, investment advisors and other professionals, including a Registrar and a disbursing agent to make Distributions (collectively, the “Creditors Trustee Professionals”) as determined from time to time by the Creditors Trustee. The Creditors Trustee may pay the reasonable fees and expenses of such professionals as a Trust Cost without application to the Bankruptcy Court. Upon request by any member of the Oversight Committee, the Creditors Trustee will provide copies of any invoices or billing summaries relating to professional fees incurred by the Trust.

5.5 Dispute Resolution. In the event of a dispute between the Creditors Trustee and the Oversight Committee involving an allegation that either party has failed to act in a manner consistent with the Plan or the Trust Agreement, or is in breach of any applicable fiduciary duty, the parties shall meet and confer and attempt to reach a consensual resolution of the dispute. Should a consensual resolution not be reached, the Creditors Trustee or any member of the Oversight Committee may seek appropriate relief from the Bankruptcy Court, and the Bankruptcy Court shall retain jurisdiction to resolve such disputes.

ARTICLE 6 OBLIGATIONS OF THE CREDITORS TRUSTEE

6.1 Reports and Records.

6.1.1 Consultation. The Creditors Trustee shall consult with the Oversight Committee in good faith regarding all material issues affecting the Trust, including the resolution of Claims objections, the pursuit, prosecution, settlement or abandonment of any litigation claims or other causes of action exceeding $10,000and the disposition of Trust Assets, except to the extent the Oversight Committee or an individual Oversight Committee member is encumbered by a conflict of interest, as provided in Section 4.1.2. In addition, the Creditors Trustee shall seek the advice of the Oversight Committee regarding proposed budgets for the Trust, setting forth expected receipts and disbursements for litigation, operations, and other purposes.

6.1.2 Budget. The Creditors Trustee shall cause to be prepared within 30 days

before the end of each fiscal year, budget and cash flow projections covering the next fiscal year and each succeeding fiscal year for which estimates are feasible. On or before 30 days after the Effective Date, the Creditors Trustee shall prepare a budget and cash flow projection for the current fiscal year. Such budget and cash flow projections shall be prepared by the Creditors Trustee in consultation with the Oversight Committee.

6.1.3 Quarterly and Annual Reports. The Creditors Trustee shall cause to be

prepared (a) within 45 days after the end of each of the first three quarters of a fiscal year (for such quarter) and (b) within 90 days after the end of each fiscal year (for such fiscal year), financial statements of the Trust as


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of the end of and for such periods, including (i) a balance sheet, (ii) a statement of operations, (iii) a statement of cash flows, (iv) a schedule, summarizing by type of investment and asset, all acquisitions and dispositions, and (v) a summary listing of the status of the resolution of Claims by category and Claim, and (vi) a summary of pending litigation. In addition, such financial statements shall contain the following supplementary information, (A) a statement of changes in the number of Beneficial Interests outstanding, including Distributions and cancellations from whatever source, (B) a schedule of investments acquired directly by the Trust after the Effective Date, including the number of shares or principal amount, the name, a description, the cost, the date disposed of, proceeds of disposition, and gain or loss, and (C) a schedule of expenses of the Trust, including accrued and paid administrative expenses. The financial statements prepared as of the end of the fiscal year may be reviewed by independent public accountants in accordance with generally accepted auditing standards.

6.1.4 Distribution of Reports. Within ten business days after the end of the

relevant report preparation period, the Creditors Trustee shall distribute any information listed in Section 6.1.3 above to the Oversight Committee, and shall file the same with the Clerk of the Bankruptcy Court. Upon request, the Creditors Trustee shall provide copies of any quarterly or annual reports to any Beneficiary of record.

6.1.5 Records. The Creditors Trustee shall maintain records and books of

account relating to the Trust Assets, the management thereof and all transactions undertaken by the Creditors Trustee consistently applied, except to the extent that any change is approved by the Trust’s independent public accountants. The Creditors Trustee shall also maintain records and books of account relating to all Distributions contemplated under the Plan.

6.2 Eligible Investments. Cash held pending distribution, including Cash held in

Reserves, shall, to the extent permitted by applicable law, be invested by the Creditors Trustee in (i) direct obligations of, or obligations guaranteed by, or obligations secured by, the United States of America (including without limitation United States Treasury Bills); (ii) obligations of any agency or corporation that is or may hereafter be created by or pursuant to an Act of the Congress of the United States as an agency or instrumentality thereof, or (iii) demand deposits or short-term certificates of deposit at any bank or trust company that has, at the time of the acquisition by the Creditors Trustee of such investments, capital stock and surplus aggregating at least $100 million and whose short-term debt obligations are rated by at least two nationally recognized statistical rating organizations in one of the two highest categories therefore but the scope of any such permissible investments shall be limited to include only those investments, or shall be expanded to include any additional investments, as the case may be, that a Creditors trust, within the meaning of Treasury Regulation Section 301.7701-4(d) may be permitted to hold, pursuant to any amendment or addition to the Internal Revenue Code or to the Treasury


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Regulations, or any modification in IRS guidelines whether set forth in IRS rulings, other IRS pronouncements, or otherwise. Such investments shall mature in such amounts and at such times as, in the judgment of the Creditors Trustee at the times such investments are made, are necessary, or are desirable with a view to providing funds when needed to make payments from the Trust Assets. Any investment purchased with the Trust Assets shall be deemed a part of the Trust Assets. All interest, distributions, dividends and proceeds received by the Creditors Trustee in respect of such investments shall be a part of the Trust Assets.

6.3 Access to Information by Beneficiaries. Each Beneficiary shall have access to the business records of the Trust for the purpose of obtaining information relating to the management of Trust Assets for any purpose reasonably related to the interests generally of the Beneficiaries, so long as access is reasonably exercised during normal business hours (after at least two business days’ notice to the Creditors Trustee), does not constitute an undue burden on the Creditors Trustee, and is not detrimental to the Trust. Nothing herein contained is intended to restrict any Beneficiary from access to the business records of the Creditors Trustee, which the Creditors Trustee, in its discretion elects to provide.

6.4 Settlement of Claims. The Creditors Trustee may compromise and settle Disputed Claims subject to the following conditions precedent:

(i) if the proposed allowed amount of the Disputed Claim is equal to or less than $10,000.00 , the Creditors Trustee may compromise and settle such Disputed Claim (after consultation with the Oversight Committee) by submitting a proposed order to the Bankruptcy Court, without notice to or consent of any party in interest or the Oversight Committee;

(ii) if the proposed allowed amount of the Disputed Claim exceeds

$10,000.00, the Creditors Trustee may compromise and settle such Disputed Claim only upon motion approved by the Bankruptcy Court following notice to, and opportunity to object by, the Oversight Committee.

ARTICLE 7

BENEFICIAL INTERESTS

7.1 Allocation of Beneficial Interests. Within 60 days of the Effective Date, the Trust shall allocate as of the Effective Date to each holder of a Class 1 General Unsecured Claim, a Class 1 Beneficial Interest (the “Class 1 Beneficial Interest”) in the Trust equal to the ratio that the amount of such holder’s Class 1 General Unsecured Claim, including any applicable interest, bears to the total amount of all Class 1 General Unsecured Claims. The allocation of Class 1 Beneficial Interests shall be made as if all Disputed Claims were Allowed Claims as of the Effective Date.

7.1.1 Determination of Unsecured Interest Rate. The Unsecured Interest Rate applicable to each Class 1 General Unsecured Claim shall be


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three percent (3%) annually from the Effective Date until all claims are paid in full.

7.2 Register Entries Regarding Beneficial Interests. The Creditors Trustee or the Registrar shall make the following notations in the Trust Register:

(i) a notation reflecting the Class 1 Beneficial Interest and Claim held by each Beneficiary holding an Allowed Class 1 General Unsecured Claim; and,

(ii) a notation reflecting the Class 1 Beneficial Interest and Claim held by each Beneficiary holding a Disputed Class 1 General Unsecured Claim (a “Reserved Beneficial Interest”).

7.3 Allocation of Beneficial Interests to Holders of Disputed Claims. The

allocation of any Beneficial Interest on account of a Disputed Claim pursuant to Section 7.1 of this Trust Agreement, shall be reserved on the Trust Register maintained by the Registrar and shall become a Reserved Beneficial Interest. Any Claim filed, in whole or in part, in an unknown or undetermined amount may be estimated by the Creditors Trustee, subject to approval by the Bankruptcy Court, and such Claim as estimated shall be deemed a Disputed Claim until otherwise allowed. To the extent all or a portion of a Disputed Claim is ultimately disallowed, the Trust shall reallocate among the remaining Beneficial Interests, the Reserved Beneficial Interest that relates to the portion of the Disputed Claim that was disallowed. To the extent all or a portion of a Disputed Claim ultimately becomes an Allowed Claim, the Reserved Beneficial Interest that relates to the portion of the Disputed Claim that was allowed, shall be removed from the reserve.

7.4 Representation of Beneficial Interest. The Beneficial Interests shall be uncertificated. The Beneficial Interests shall be represented by appropriate book entries in the Trust Register.

7.5 Trust Register and Registrar.

7.5.1 Appointment of Registrar. The Creditors Trustee shall appoint a Registrar for the purpose of registering Beneficial Interests as herein provided. The Registrar may be a duly qualified institution or the Creditors Trustee. For its services hereunder, the Registrar, unless it is the Creditors Trustee, shall be entitled to receive reasonable compensation from the Trust as a Trust Cost.

7.5.2 Register of Beneficial Interests. The Creditors Trustee shall cause the

Trust Register to be kept at the office of the Registrar or at such other place or places that shall be designated by the Creditors Trustee from time to time.

7.5.3 Access to Register by Beneficiaries. Beneficiaries and their duly

authorized representatives shall have the right, upon reasonable prior written notice to the Registrar and the Creditors Trustee, and in


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accordance with reasonable regulations prescribed by the Registrar and the Creditors Trustee, to inspect and at the expense of the Beneficiary make copies of the Trust Register, in each case for a purpose reasonable and related to such Beneficiary’s Beneficial Interest in the Trust.

7.5.4 Absolute Owners. The Creditors Trustee may deem and treat the

Beneficiary of record as determined pursuant to Section 7.1 or Section 7.2 of this Trust Agreement as the absolute owner of such Beneficial Interests for the purpose of receiving Distributions and payment thereon or on account thereof and for all other purposes whatsoever.

7.6 Beneficial Interests Non-Transferable. Beneficial Interests shall not be transferred other than by operation of law.

ARTICLE 8 ADMINISTRATION OF THE TRUST ESTATE

8.1 Establishment of Available Cash. Prior to making any Distributions, the

Creditors Trustee shall determine the total amount of Available Cash, taking into account any reserves created pursuant to this Article 8.

8.2 Establishment of Reserves and Payment of Creditor Claims.

8.2.1 Claim Reserve Before making any Distributions, the Creditors Trustee

shall establish, fund and segregate a reserve account with Trust Cash sufficient to pay the claimed amount of all unpaid administrative Claims and any Disputed Class 1 Claims, including any applicable interest accruing from the Effective Date to the Allowance Date (the “Claim Reserve”). Any unpaid administrative Claims shall be fully and completely satisfied by the payment of Trust Assets.

8.2.2 Operating Reserve. Before making any Distributions, the Creditors

Trustee shall establish, fund and segregate a reserve account (the “Operating Reserve”) with Trust Cash in the amount of $50,000.00 for the payment of Trust Costs, including, but not limited to (i) the unpaid liabilities, debts or obligations of the Trust; (ii) all fees associated with the retention of either Creditors Trustee Professionals or Oversight Committee Professionals; (iii) the costs of pursuing, litigating, settling or abandoning any litigation Claims or any other causes of action transferred and assigned to the Trust under the Plan as Trust Assets; and (iv) any and all other costs associated with the liquidation or preservation of the Trust Assets. The Operating Reserve may be funded from time to time with additional Trust cash in an amount determined by the Creditors Trustee, in consultation with the Oversight Committee, to be reasonably necessary to pay anticipated Trust Costs, fund litigation, fund contingent liabilities, and otherwise conduct the affairs of the Trust.


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8.2.3 Disputed Claims Reserve for Beneficiaries. Within thirty (30) days

from the Effective Date, the Trust shall establish, fund with Trust Cash and segregate funds sufficient to satisfy all Disputed Claims as though such Disputed Claims were Allowed Claims as of the Effective Date (the “Disputed Claims Reserve”). The Creditors Trustee shall deposit into the Disputed Claims Reserve any Distribution payable to a Beneficiary holding a Reserved Beneficial Interest.

8.3 Distributions to Holders of Beneficial Interests.

8.3.1 Distributions Generally. The Creditors Trustee shall only make

Distributions from Available Cash, except as otherwise provided in Article 9 of this Trust Agreement. Interest shall accrue beginning on the Effective Date on the unpaid balance of a Beneficiary’s Allowed Claim at either the Unsecured Interest Rate or the applicable Contractual Default Rate as determined under Section 7.1.2 of this Trust Agreement. Distributions of Available Cash received by a Beneficiary shall be applied first to pay the principal amount of such Beneficiary’s Allowed Claim and then to accrued and unpaid interest. The Creditors Trustee shall have authority to make Distributions of Available Cash at least quarterly and at such other time or times as the Creditors Trustee believes there is sufficient Available Cash to warrant a Distribution. The Trust shall not, in any event, retain Trust Cash in excess of what is reasonably necessary to fund the Reserves.

8.3.2 Distributions to Class 1 Beneficiaries. A Beneficiary who is the holder

of a Class 1 General Unsecured Claim shall receive on a Distribution Date its share of Available Cash based on such Beneficiary’s Class 1 Beneficial Interest, until such Beneficiary’s Class 1 Allowed General Unsecured Claim is paid in full with applicable interest.

8.4 Place and Manner of Payments or Distributions. The Creditors Trustee shall

make Distributions to the Beneficiaries of record as of the Distribution Record Date by mailing such Distribution to the Beneficiary at the address of such Beneficiary as listed in the Schedules of Assets and Liabilities, or any proof of claim filed by the Beneficiary, or as listed in the Trust Register, or at such other address as such Beneficiary shall have specified for payment purposes in a written notice to the Creditors Trustee and the Registrar at least 20 days before such Distribution Record Date. The Creditors Trustee shall distribute any Cash by wire, check, or such other method as the Creditors Trustee deems appropriate under the circumstances. Prior to receiving any Distributions, all Beneficiaries, at the Creditors Trustee’s request, must provide to the Creditors Trustee written notification of their respective Federal Tax Identification Numbers or Social Security Numbers.

8.5 Minimum Distributions. Notwithstanding any other provision of this Trust Agreement or the Plan to the contrary, there will be no Distributions of Available Cash unless the aggregate amount to be distributed on such date is at least $100.00 (other than in connection


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with a final Distribution.

8.6 Unclaimed or Undeliverable Distributions. In the event (i) a Beneficiary fails to provide to the Creditors Trustee its Federal Tax Identification Number or Social Security Number within forty-five (45) days after the date of the Creditors Trustee’s written request, (ii) a check issued to a Beneficiary remains uncashed for sixty (60) days after its issuance date, or (iii) a Distribution is returned as undeliverable, then the Distribution and any Claim related to such Beneficiary shall be deemed waived, such Beneficiary shall no longer be entitled to receive Distributions, and such unclaimed or undeliverable Distribution shall be distributed on the next Distribution Date to the holders of Beneficial Interests as if such Distribution were Available Cash.

8.7 Tax Matters.

8.7.1 Certain Income Tax Matters. The Trust established pursuant to this Trust Agreement is established for the purpose of satisfying claims by Creditors the Trust Assets transferred to it and the Trust shall have no objective of continuing or engaging in any trade or business except to the extent reasonably necessary to, and consistent with, the Creditors purpose of the Trust. The purpose of the Trust is to provide a mechanism for the liquidation of the Trust Assets of the Debtor, and to distribute the proceeds of the liquidation, net of all claims, expenses, charges, liabilities, and obligations of the Trust, to the holders of Beneficial Interests in accordance with the terms of the Plan. No business activities will be conducted by the Trust other than those associated with or related to the liquidation of the Trust Assets. It is intended that the Trust be classified for federal income tax purposes as a “liquidating trust” within the meaning of section 301.7701-4(d) of the Treasury Regulations. All parties hereto shall treat the transfers in trust described herein as transfers to the Beneficiaries for all purposes of the Internal Revenue Code of 1986, as amended (including, sections 61(12), 483, 1001, 1012, and 1274). All the parties hereto shall treat the transfers in trust as if all the transferred assets, including all the Trust Assets, had been first transferred to the Beneficiaries and then transferred by the Beneficiaries to the Trust. The Beneficiaries shall be treated for all purposes of the Internal Revenue Code of 1986, as amended, as the grantors of the Trust and the owners of the Trust. The Creditors Trustee shall file returns for the Trust as a grantor trust pursuant to Treasury Regulations section 1.671-4(a) or (b). The parties hereto, including the Creditors Trustee and the Beneficiaries shall value the property transferred to the Trust consistently and such valuations shall be used for all federal income tax purposes. The Beneficiaries (except to the extent a Beneficiary is the Internal Revenue Service) shall be responsible for payment of any taxes due with respect to the operations of the Trust. During its existence, the Trust shall not receive or retain cash or cash equivalents in excess of a reasonable amount necessary to meet claims and contingent liabilities (including Disputed


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Claims) or to maintain the value of its assets during liquidation. The Creditors Trustee shall use its continuing best efforts to dispose of the Trust assets, make timely distributions, and shall not unduly prolong the duration of the Trust. The Creditors Trustee is authorized to take any action as may be necessary or appropriate to minimize any potential tax liability of the Trust and, thereafter, the Beneficiaries arising out of the operations of the Trust. The Creditors Trustee is directed to allocate all costs, charges, expenses and deductions, or any of them in whole or in part, to income or principal at such time and in such a manner as the Creditors Trustee shall determine will reduce or eliminate the Trust’s taxes, if any. The Creditors Trustee shall file in a timely manner all such tax returns as are required by applicable law by virtue of the existence and operations of the Trust. The Trust shall distribute, at least annually, all Trust income and gain, Cash (whether or not allocable to income or principal, including all capital gains allocable to principal), any other property the Creditors Trustee in its discretion determines is properly distributable (whether out of income or principal), and liquidation proceeds to the Beneficiaries, after payment of expenses and liabilities, less the Reserves and reasonably necessary reserves for expenses and other Trust Costs. In addition, the Creditors Trustee shall, not less often than annually, provide to Beneficiaries such information as is appropriate or necessary, to enable the Beneficiaries to determine their respective tax obligations, if any, arising out of the operations of the Trust. The Beneficiaries (except to the extent the Internal Revenue Service is a Beneficiary) shall each report their share of the net income of the Trust as reported to them by the Creditors Trustee and pay any tax owing thereon on a current basis. All income of the Trust, including amounts retained in a Disputed Claims Reserve, will be taxed either to the Beneficiaries (except to the extent the Internal Revenue Service is a Beneficiary) or to the Trust (in the case of amounts allocated to a Disputed Claims Reserve) each taxable year. No Beneficiary shall have any claim to or with respect to any specific property held in trust and shall have no claim to or for a distribution of property in kind.

8.7.2 Treatment of Trust Assets for Tax Purposes. The value of the Trust

Assets shall be consistently reported for federal income tax purposes by Debtor, the Trust, and the Beneficiaries.

8.7.3 Withholding. The Creditors Trustee may withhold from the amount

distributable from the Trust at any time to any Person (except with respect to the Internal Revenue Service) such sum or sums as may be sufficient to pay any tax or taxes or other charge or charges that have been or may be imposed on such Person or upon the Trust with respect to the amount distributable or to be distributed under the income tax laws of the United States or of any state or political subdivision or entity by reason of any Distribution provided for in this Article 8, whenever such withholding is


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determined by the Creditors Trustee in its discretion to be required by any law, regulation, rule, ruling, directive or other governmental requirement, and the Creditors Trustee, in the exercise of its discretion and judgment, may enter into agreements with taxing or other authorities for the payment of such amounts as may be withheld in accordance with the provisions of this Section 8.7.3. Notwithstanding the foregoing but without prejudice to the Creditors Trustee’s rights hereunder, such Person shall have the right with respect to the United States, or any state, or any political subdivision of either, to contest the imposition of any tax or other charge by reason of any Distribution hereunder.

8.7.4 Tax Reporting. To the extent that any Beneficiary may be able to use the

installment method of reporting income with respect to an Distribution, the Creditors Trustee will annually compile and disseminate to Beneficiaries who request such information all available tax return information with respect to interest (stated or unstated) and otherwise necessary or useful in reporting under the installment method.

8.7.5 Interest. In the Creditors Trustee’s discretion, interest received with

respect to principal distributed pursuant to this Trust Agreement shall be distributed along with the underlying principal.

8.7.6 Allocation of Income and Losses. Unless otherwise determined by the

Creditors Trustee in its reasonable discretion, allocations between Beneficiaries of taxable income of the Trust for each of its tax years shall be determined by reference to the manner in which an amount of Cash equal to the amount of such taxable income would be distributed (without regard to any restrictions on Distributions described in the Plan) if, immediately before such deemed Distribution, the Trust had distributed all its other assets (valued for this purpose at their tax book value) in respect of the Beneficial Interests (treating the Disputed Claims Reserve for this purpose as Beneficiaries entitled to Distributions), taking into account all prior and concurrent Distributions from the Trust made in accordance with the Plan. Similarly, taxable loss generally will be allocated by reference to the manner in which an economic loss would be borne immediately after a Creditors Distribution of the remaining assets of the Trust. The tax book value of assets for purpose of Articles 8 and 9 of this Trust Agreement means their fair-market value on the Effective Date or, if later, the date on which such assets were acquired by the Trust, adjusted in either case in accordance with applicable tax accounting principles. Taxes payable in respect of taxable income of the Trust allocated to the Disputed Claims Reserve shall be paid as a Trust Cost. With regard to transfers of Beneficial Interests in accordance with Article 7 hereof the Creditors Trustee shall promptly establish a standard convention for allocating and apportioning taxable income and loss between a transferor and its transferee and shall not be required to so allocate and apportion based on


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the actual Trust activities prior and subsequent to the date of any transfer. The Creditors Trustee shall notify the Beneficiaries of the convention adopted promptly after such adoption. The Creditors Trustee shall use its sole discretion to establish a fair and equitable convention to apply and may, but is not required to, adopt a monthly, quarterly, or similar Distribution Record Date convention.

ARTICLE 9 TERMINATION

The Trust shall terminate upon the earlier of (i) the date which is 5 years after the

Effective Date when this Trust is created, (ii) payment in full of all Class 1 Allowed General Unsecured Claims, including applicable interest, or (iii) a final distribution of all remaining Trust Assets. Notwithstanding the foregoing, with Bankruptcy Court approval, the Creditors Trustee may extend the term of the Trust for one or more finite terms based upon the particular facts and circumstances at that time, if it is in the best interest of the Beneficiaries and an extension is necessary to the purpose of the Trust. If permitted under applicable law and not contrary to the classification of the Trust as a Creditors trust and a pass-through entity under applicable income tax law, and if in the best interests of the Beneficiaries, the Creditors Trustee may distribute interests in the Trust Assets or distribute the Trust Assets to another Person and then distribute interests in such Person to the Beneficiaries. Trust Assets to be distributed in kind shall be valued by the Creditors Trustee in its reasonable discretion at their tax book value. After all liabilities of the Trust have been satisfied or duly provided for, such remaining Trust Assets shall be distributed to Beneficiaries as a final Distribution. The Trust may not be terminated at any time by the Beneficiaries.

ARTICLE 10 MISCELLANEOUS

10.1 Notices. Any notice required to be given by this Trust Agreement to all

Beneficiaries shall be in writing and shall be sent by first class mail, or in the case of mailing to a non-United States address, air mail, postage prepaid. All other notices, requests or other communications required or permitted to be made in accordance with this Trust Agreement shall be in writing and shall be delivered by U.S. certified mail, return receipt requested, to:

(a) If to the Creditors Trustee:

[TO BE INSERTED] Attention: ____________________ (b) if to any Beneficiary in such Beneficiary’s capacity as a Beneficiary, at such Beneficiary’s address as listed in the Trust Register or as identified in a written request for notice delivered to the Creditors Trustee.


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(c) If to the Oversight Committee:

_______________________

_______________________ _______________________ _______________________

Attention: _________________

(d) If to Debtor: with a copy to:

Notice mailed shall be effective on the date mailed. All other notices shall be effective on the date of delivery. Any Person may change the address at which it is to receive notices under this Trust Agreement by furnishing written notice pursuant to the provisions of this Section 10.1 to the entity to be charged with knowledge of such change.

10.2 Amendment. Material amendments to this Trust Agreement require Bankruptcy Court approval after notice to the Oversight Committee and Beneficiaries. This Trust Agreement may be amended by the Creditors Trustee without Bankruptcy Court approval to correct typographical errors or if such amendment is not material and does not adversely affect the interests of any Beneficiary, but such amendment shall not be effective until 45 days after the Beneficiaries and the Oversight Committee shall have been given notice of such amendment. The Creditors Trustee shall consult with the Oversight Committee before making any non-material amendment and before seeking Bankruptcy Court approval of any material amendment.

10.3 Counterparts. This Trust Agreement may be executed in one or more Counterparts, all of which shall taken together to constitute one and the same instrument.

10.4 Governing Law; Severability. This Trust Agreement shall be governed by construed under and interpreted in accordance with the laws of the State of Minnesota. If a court of competent jurisdiction determines that any provision of this Trust Agreement is invalid or unenforceable under such applicable law, such invalidity or unenforceability shall not invalidate the entire Trust Agreement. In that case, this Trust Agreement shall be construed so as to limit any term or provision so as to make it enforceable or valid within the requirements of applicable law, and, if such term or provision cannot be so limited, this Trust Agreement shall be construed to omit such invalid or unenforceable provisions, provided that such construction, to the maximum extent possible, shall give effect to the purposes of the Plan.

10.5 Headings. Sections, subheadings and other headings used in this Trust Agreement are for convenience only and shall not affect the construction of this Trust Agreement.


EXHIBIT A

26

10.6 Relationship to Plan. The principal purpose of this Trust Agreement is to aid in

the implementation of the Plan and therefore this Trust Agreement is incorporated into the Plan. To that end, the Creditors Trustee shall have full power and authority to take any action consistent with the purpose and provisions of the Plan and shall be bound by the terms of the Plan. If any provision of this Trust Agreement is found to be inconsistent with the provisions of the Plan, the provisions of this Trust Agreement shall control.

10.7 Consent to Jurisdiction. Each of the parties hereto (and each Beneficiary by its acceptance of the benefits of the Trust created hereunder) (i) consents and submits to the jurisdiction of the Courts of the State of Minnesota and of the Courts of the United States for the District of Minnesota for all purposes of this Trust Agreement, including, without limitation, any action or proceeding instituted for the enforcement of any right, remedy, obligation, or liability arising under or by reason hereof, and (ii) consents and submits to the venue of such action or proceeding in the City of Minneapolis (or such Judicial District of a Court of the United States as shall include the same).

10.8 Waiver of Jury Trial. ANY AND ALL RIGHT TO TRIAL BY JURY IS HEREBY WAIVED, AND THERE SHALL BE NO RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS TRUST AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

10.9 References to Oversight Committee. If the Oversight Committee no longer exists at any time during the terms of this Trust, then the Creditors Trustee shall take all actions under this Trust Agreement without regard to requirements that it meet with, consult with, or seek approval from the Oversight Committee.

IN WITNESS WHEREOF, the parties hereto have executed this Trust Agreement or have caused this Trust Agreement to be duly executed by duly authorized officers as of the day and year first above written.

CREDITORS TRUSTEE

By:

Print :

Title: Trustee

STEVEN F. MELDAHL

By:


EXHIBIT A

27

Print:


EXHIBIT A

EXHIBIT 1

CONFIDENTIALITY AGREEMENT


CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT

This Confidentiality and Nondisclosure Agreement (the “Agreement”) is between STEVEN F. MELDAHL CREDITORS TRUST (“Trust”) and the undersigned member of the Oversight Committee, ____________________________ (“Member”) and is entered into as of _______________________, 20____,.

Member understands that during the course of his or her work with the Trust, he or she will acquire or may have access to information pertaining to the rental property business of Steven F. Meldahl (“Debtor”) that is confidential or which, under the circumstances should be treated as confidential. This confidential information includes, but is not limited to, any and all information that derives independent economic value from not being generally known. Specifically, confidential information includes, without limitation:

trade secrets; financial information of the Debtor; the nature and content of all customer and prospective

customer lists and files; information pertaining to the nature of customers’ and

prospective customers’ business; systems and software utilized by Debtor in its business; and the method and means of financing and marketing under which Debtor

operates. Confidential information shall not include any information which is available in the

public domain, is disclosed by the Debtor to someone who is not subject to a confidential information restriction, or information which the Debtor has chosen not to treat as confidential.

In consideration for the opportunity to serve with the Trust, Member hereby agrees that he or she shall not at any time directly or indirectly use or disclose confidential information, without the prior written consent of Trust and the Debtor, in any manner inconsistent with the provisions of this Agreement. The obligation of non-disclosure shall continue following termination of your membership on the Oversight Committee for any reason, with or without cause. Member further agrees that upon termination of membership, regardless of who initiated the termination and whether it was with cause or without cause, voluntary or involuntary, he or she will return to the Trust all confidential information in his/her possession, including but not limited to, lists of customers and potential customers, financial information and all other property, including access to any systems used by Debtor which Member may have obtained while employed by Trust. Member will not keep copies of or notes regarding any data pertaining to any of the above.


IN WITNESS WHEREOF, the Trust and Member have caused this Agreement to be executed and effective as of the day and year first above written. Dated: _____________________

STEVEN F. MELDAHL CREDITOR TRUST ______________________________________ By: _____________________________ Its: Trustee

Dated: _____________________

(“MEMBER”) ______________________________________ By:


COMBINATION MORTGAGE, SECURITY AGREEMENT AND

FIXTURE FINANCING STATEMENT

BY

STEVEN F. MELDAHL

AS MORTGAGOR,

TO

STEVEN F. MELDAHL CREDITORS TRUST AS MORTGAGEE,

TO SECURE $ REAL ESTATE TERM NOTE

Dated: ______________, 2014

NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE MAXIMUM PRINCIPAL AMOUNT SECURED BY THIS MORTGAGE IS $____________ TOGETHER WITH SUCH ADDITIONAL AMOUNTS AS MAY BE ADVANCED BY LENDER AND FOR WHICH NO MORTGAGE REGISTRATION TAX IS PAYABLE PURSUANT TO MINNESOTA STATUTES § 287.05, SUBD.4. Tax statements for the real This instrument was drafted by: property described in this instrument should be sent to: Foley & Mansfield PLLP 250 Marquette Ave, #1200 Steven Meldahl Minneapolis, MN 55401


COMBINATION MORTGAGE, SECURITY AGREEMENT AND

FIXTURE FINANCING STATEMENT THIS COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT (the “Mortgage”) is made as of the ________ day of ____________, 2014, by Steven F. Meldahl, an individual resident of Hennepin County, Minnesota (the “Mortgagor”), in favor of the Steven F. Meldahl Creditors Trust, a trust created in accordance with Treasury Regulation Section 301.7701-4(d) (the “Mortgagee”).

W I T N E S S E T H:

WHEREAS, the Mortgagor has agreed to make satisfy his obligations to the unsecured creditors under the confirmed Plan of Reorganization in the bankruptcy case # BKY 12-46965 by making contributions to a creditors trust established to carry out that Plan of Reorganization pursuant to the terms and subject to the conditions set forth in that certain creditors trust agreement dated ____________________________, 2014 herewith by and between the Mortgagee and the Mortgagor (as amended from time to time, the “Trust Agreement”); and

WHEREAS, the Mortgagor has executed and delivered that certain real estate term note dated _____________________________, 2014 and payable to the order of Mortgagee in the maximum principal amount of $_____,000.00 (the “Note”), which Note is due and payable in full on ________________201_, or such earlier date as set forth in the Trust Agreement;

WHEREAS, the Mortgagee has required as an express condition to agreeing to the Plan of Reorganization and Trust Agreement that the Mortgagor secure the Note by this Mortgage.

NOW THEREFORE, THIS MORTGAGE FURTHER WITNESSETH, that in consideration of the Mortgagee’s obligations under the Plan of Reorganization and Trust Agreement in the aggregate principal amount of up to ______________________Thousand and 00/100 Dollars ($___,000.00) (the “Mortgage Amount”) and other good and lawful consideration, the receipt and sufficiency of which are hereby acknowledged, and to secure, and as security for, the payment of principal of interest and other premiums, penalties and charges on the Note and the performance and observance by the Mortgagor of all of the covenants, agreements, representations, warranties and conditions contained herein, the Mortgagor does hereby grant,


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bargain, sell, convey, assign, transfer, pledge, set over and confirm unto the Mortgagee, its successors and assigns, and does hereby grant a mortgage lien and security interest to the Mortgagee, its successors and assigns, in and to the tracts of land legally described in Exhibit A attached hereto and made a part hereof (hereinafter collectively referred to as the “Land”);

Together with (a) all of the buildings, structures and other improvements now standing or at any time hereafter constructed or placed upon the Land; (b) all heating, plumbing and lighting apparatus, elevators and motors, engines and machinery, electrical equipment, incinerator apparatus, air-conditioning apparatus, water and gas apparatus, pipes, water heaters, refrigerating plant and refrigerators, water softeners, carpets, carpeting, storm windows and doors, window screens, screen doors, storm sash, window shades or blinds, awnings, locks, fences, trees, shrubs, and all other furniture, fixtures, machinery, equipment, appliances and personal property of every kind and nature whatsoever now or hereafter owned by the Mortgagor and located on, attached or affixed to the Land and/or any improvements located thereon, including all extensions, additions, improvements, betterments, renewals and replacements of any of the foregoing; (c) all hereditaments, easements, rights, privileges and appurtenances now or hereafter belonging, attached or in any way pertaining to the Land or to any building, structure or improvement now or hereafter located thereon; (d) the immediate and continuing right to receive and collect all rents, income, issues and profits now due and which may hereafter become due under or by virtue of any lease or agreement (oral or written) for the leasing, subleasing, use or occupancy of all or part of the Land now, heretofore or hereafter made or agreed to by the Mortgagor; (e) all of the leases and agreements described in (d) above, together with all guarantees therefor and any renewals or extensions thereof; and (f) all insurance and other proceeds of, and all condemnation awards with respect to, the foregoing (all of the foregoing is hereinafter collectively referred to as the “Mortgaged Property”).

This Mortgage constitutes an absolute, irrevocable, currently effective assignment of rents and profits within the meaning of Minnesota Statutes §§ 559.17 and 576.01, and is intended to comply fully with the provisions thereof, and to afford Mortgagee, to the fullest extent allowed by law, the rights and remedies of a mortgage lender or a secured lender pursuant thereto; provided, however, that, prior to the occurrence of an Event of Default, Mortgagor shall have a conditional license and opportunity to collect (but no more than one [1] month in advance) all such rents and profits, and to use the same for payment of all sums which Mortgagor is required to pay by the terms hereof and the Obligations, before using the same for any purpose.

This Mortgage also constitutes a security agreement within the meaning of the Uniform Commercial Code as in effect in the State of Minnesota, as the same may be amended from time to time (the “UCC”), with respect to all property described herein as to which a security interest may be granted and/or perfected pursuant to the UCC, and is intended to afford Mortgagee, to the fullest extent allowed by law, the rights and remedies of a secured party under the UCC. The filing of this Mortgage shall constitute a fixture filing in the office where it is filed and a carbon, photographic or other reproduction of this document may also be filed as a financing statement:

Name and Address of Steven F. Meldahl Debtor and Record 18407 Bearpath Trail Owner of Real Estate: Eden Prairie MN 55347


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Name and Address of Trustee Secured Party: ____________________ ______________________ Description of the Types See above (or items) of property covered by this financing statement: Description of real estate See Exhibit “A” attached hereto. to which all or a part of the collateral is attached or upon which it is located:

This financing statement is to be filed for record in the public real estate records.

AND THE MORTGAGOR, for itself, its successors and assigns, does covenant with the Mortgagee, its successors and assigns, that it is lawfully seized of the Mortgaged Property and have good right to sell and convey the same; that the Mortgaged Property is free from all encumbrances except as may be further stated in this Mortgage; that the Mortgagee, its successors and assigns, shall quietly enjoy and possess the Mortgaged Property; and that the Mortgagor will WARRANT AND DEFEND the title to the same against all lawful claims not specifically excepted in this Mortgage.

PROVIDED, NEVERTHELESS, that if the Mortgagor shall pay the principal balance of the Note in full, plus interest at the rate set forth in the Note, as the same changes from time to time and is adjusted in the manner set forth in the Note, on the unpaid principal balance, as computed in accordance with the terms and conditions of the Note, and any other sums due and owing under the Note and the Plan of Reorganization (as defined in the Trust Agreement) and shall also pay or cause to be paid all other sums, with interest thereon, as may be advanced by the Mortgagee in accordance with this Mortgage either to protect the lien of this Mortgage, or by way of additional loan or for any other purpose, and shall also keep and perform all and singular the covenants herein, required on the part of the Mortgagor to be kept and performed (the Note, including any and all renewals, amendments, extensions and modifications thereof, and all such sums, together with interest thereon, and such covenants herein collectively referred to as the “Indebtedness Secured Hereby”), then this Mortgage shall be null and void, in which event the Mortgagee will execute and deliver to the Mortgagor in form suitable for recording a full satisfaction of this Mortgage; otherwise this Mortgage shall remain in full force and effect.

ARTICLE I.

GENERAL COVENANTS, AGREEMENTS, WARRANTIES

SECTION 1.1. PAYMENT OF INDEBTEDNESS; OBSERVANCE OF COVENANTS. The Mortgagor shall duly and punctually pay each and every payment of principal, interest and all prepayment premiums and late charges, if any, required by the Note or the Trust Agreement and


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all other Indebtedness Secured Hereby, as and when the same shall become due, and shall duly and punctually perform and observe all of the covenants, agreements and provisions contained herein, in the Trust Agreement or in any other instrument given as security for the payment of the Indebtedness secured hereby.

SECTION 1.2. MAINTENANCE; REPAIRS. Subject to the provisions of Section 2.3 hereof, the Mortgagor shall keep and maintain the Mortgaged Property in good condition, repair and operating condition free from any waste or misuse, and will comply with all requirements of law, municipal ordinances and regulations, restrictions and covenants affecting the Mortgaged Property and its use, and will promptly repair or restore any building, improvements or structures now or hereafter located on the Land which may become damaged or destroyed to their condition prior to any such damage or destruction. The Mortgagor shall not acquiesce in any rezoning classification, modification or restriction affecting the Land, without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. The Mortgagor shall not vacate or abandon the Mortgaged Property.

SECTION 1.3. PAYMENT OF UTILITY CHARGES, TAXES AND ASSESSMENTS. The Mortgagor shall, before any penalty attaches thereto, pay or cause to be paid all charges made for electricity, gas, heat, water, sewer and other utilities furnished or used in connection with the Mortgaged Property, and all taxes, assessments and levies of every nature heretofore or hereafter assessed against the Mortgaged Property and upon demand will furnish the Mortgagee receipted bills evidencing such payment.

Nothing in this Section 1.3 shall require the payment or discharge of any obligations imposed upon the Mortgagor by this Section so long as the Mortgagor shall diligently and in good faith and at their own expense contest the same or the validity thereof by appropriate legal proceedings which shall operate to prevent the collection thereof or other realization thereon and the sale or forfeiture of the Mortgaged Property or any part thereof to satisfy the same; provided, however, that during such contest the Mortgagor shall, at the reasonable request of the Mortgagee, provide security satisfactory to the Mortgagee, assuring the discharge of the Mortgagor obligation under this Section and of any additional charge, penalty or expense arising from or incurred as a result of such contest; and provided further, however, that if at any time payment of any obligation imposed upon the Mortgagor by this Section shall become necessary to prevent the delivery of a tax deed conveying the Land or any portion thereof because of nonpayment, then the Mortgagor shall pay the same in sufficient time to prevent the delivery of such tax deed.

SECTION 1.4. LIENS. Except for liens and encumbrances, if any, listed on Exhibit B attached hereto or consented to in writing by or granted to the Mortgagee (“Permitted Encumbrances”), the Mortgagor will keep the Mortgaged Property free from all liens (other than liens for taxes, assessments and mechanics’ liens not yet due and payable) and encumbrances of every nature whatsoever heretofore or hereafter arising and, upon written demand of the Mortgagee, the Mortgagor will pay and procure the release of any such lien or encumbrances.

Nothing in this Section 1.4 shall require the payment or discharge of any obligations imposed upon Mortgagor by this Section so long as Mortgagor shall diligently and in good faith and at its own expense, contest the same or the validity thereof by appropriate legal proceedings which


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shall operate to prevent the collection thereof or other realization thereon and the sale or forfeiture of the Mortgaged Property or any part thereof to satisfy the same; provided, however, that during such contest, Mortgagor shall, at the reasonable request of Mortgagee, provide security satisfactory to Mortgagee (including, without limitation, an agreement from the title company issuing title insurance with respect to this Mortgage to issue subsequent policies of title insurance “insuring over” such lien or encumbrance), assuring the discharge of Mortgagor’s obligation under this Section and of any additional charge, penalty or expense arising from or incurred as a result of such contest; and provided further, however, that if at any time payment of any obligation imposed upon Mortgagor by this Section shall become necessary to prevent the sale or forfeiture of the Land or any portion thereof because of non-payment, then Mortgagor shall pay the same in sufficient time to prevent the delivery of such sale or forfeiture.

SECTION 1.5. COMPLIANCE WITH LAW. The Mortgagor will promptly comply with all present and future laws, ordinances, rules and regulations of any governmental authority affecting the Mortgaged Property unless the same is being diligently contested by the Mortgagor in good faith and by proper proceedings.

SECTION 1.6. RIGHT OF MORTGAGEE TO ENTER. The Mortgagor will permit the Mortgagee and its agents to enter, and to authorize others to enter, upon any or all of the Land, at any time and from time to time, during normal business hours, to inspect the Mortgaged Property to perform or observe any covenants, conditions or terms hereunder which the Mortgagor shall fail to perform, meet or comply with, or for any other purpose in connection with the protection or preservation of the Mortgagee’s security, without thereby becoming liable to the Mortgagor or any person in possession under the Mortgage.

SECTION 1.7. RIGHT OF THE MORTGAGEE TO PERFORM. If the Mortgagor fail to pay all and singular any taxes, assessments, levies or other similar charges or encumbrances heretofore or hereafter assessed against the Mortgaged Property or fail to obtain the release of any lien or encumbrance (other than a Permitted Encumbrance) of any nature heretofore or hereafter arising upon the Mortgaged Property or fail to perform any other covenants and agreements contained in this Mortgage or if any action or proceeding is commenced which adversely affects or questions the title to or possession of the Mortgaged Property or the interest of the Mortgagor or the Mortgagee therein, then the Mortgagee, at the Mortgagee’s option, without notice to the Mortgagor, may perform such covenants and agreements, investigate and defend against such action or proceeding, and take such other action as the Mortgagee reasonably deems necessary to protect the Mortgagee’s interest. Any amounts disbursed by the Mortgagee pursuant to this Section 1.7, including without limitation court costs and expenses and attorneys’ fees, with interest thereon, shall become additional indebtedness of the Mortgagors and shall be secured by this Mortgage. Such amount shall be payable upon written notice from the Mortgagee to the Mortgagor requesting payment thereof, and shall bear interest from the date of disbursement at a rate equal to the greater of the rate of interest then in effect under the Note, or eighteen percent (18%) per annum or, if such rate is illegal or usurious, at the maximum rate then permitted by law. Nothing contained in this Section 1.7 shall require the Mortgagee to incur any expense or to do any act or thing hereunder.

SECTION 1.8. SALE, TRANSFER, ENCUMBRANCE. Except as expressly permitted pursuant to the Trust Agreement, the Mortgagor shall not sell, transfer, assign, lease, convey,


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mortgage or otherwise encumber or dispose of either the legal or equitable title or both to all or any portion of the Mortgaged Property or any other interest therein without the prior written consent of the Mortgagee, which may be given or withheld by Mortgagee in its sole and absolute discretion. Mortgagee may condition any consent hereunder upon modification of the Plan of Reorganization, an increase in the interest rate and/or payment of fees. For purposes of this Section 1.8, the sale, transfer, assignment or other conveyance of any ownership interest in the Mortgagor without the prior written consent of Mortgagee shall be conclusively deemed a sale or transfer of the Mortgaged Property.

SECTION 1.9. ASSIGNMENT OF RENTS. The Mortgagor does hereby sell, assign and transfer unto the Mortgagee the immediate and continuing right to receive and collect all rents, income, issues and profits now due and which may hereafter become due under or by virtue of any lease or agreement (oral or written) for the leasing, subleasing, use or occupancy of all or any part of the Mortgaged Property now, heretofore or hereafter made or agreed to by the Mortgagor, and all of such leases and agreements, together with all guarantees therefor and any renewals or extensions thereof, for the purpose of securing payment of the indebtedness of the Mortgagor under the Notes and the documents related thereto.

The Mortgagor does hereby irrevocably appoint the Mortgagee its true and lawful attorney in its name, place and stead, with or without taking possession of the Mortgaged Property, to rent, lease, sublease, let or sublet all or any portion of the Mortgaged Property to any party or parties at such rental and upon such terms, as it in its discretion may determine, and to collect all of said avails, rents, income, issues and profits arising from or accruing at any time hereafter under each and all of such leases and agreements, with the same rights and powers and subject to the same immunities, exoneration of liability and rights of recourse and indemnity as the Mortgagee would have upon taking possession of the Mortgaged Property.

The Mortgagor represents and agrees that no rent has been or will be paid in advance by any persons in possession of all or any portion of the Mortgaged Property for a period of more than one month and that the payment of none of the rents to accrue for all or any portion of the Mortgaged Property has or will be waived, released, reduced or discounted, or otherwise discharged or compromised, by the Mortgagor. The Mortgagor waives any right of setoff against any person in possession of all or any portion of the Mortgaged Property. The Mortgagor represents that it has not assigned any of said rents or profits to any third party and agrees that it will not so assign any of said rents or profits without the prior written consent of the Mortgagee.

Nothing contained herein shall be construed as constituting the Mortgagee “a mortgagee in possession” in the absence of the taking of actual possession of the Mortgaged Property by the Mortgagee. In the exercise of the powers herein granted to the Mortgagee, no liability shall be asserted or enforced against the Mortgagee, all such liability being expressly waived and released by the Mortgagor.

The Mortgagor further agrees to assign and transfer to the Mortgagee all rents from future leases or subleases upon all or any part of the Mortgaged Property and to execute and deliver, immediately upon request of the Mortgagee, as such further assurances and assignments in the Mortgaged Property as the Mortgagee from time to time shall require.


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Although it is the intention of the parties that this Assignment of Rents shall be a present assignment, it is expressly understood and agreed that, anything herein contained to the contrary notwithstanding, the Mortgagee shall not exercise any of the rights and powers conferred upon it herein unless and until an Event of Default occurs and nothing herein contained shall be deemed to affect or impair any rights which the Mortgagee may have under the Notes, the Trust Agreement, this Mortgage or any other document or agreement related hereto or thereto.

The Mortgagor acknowledges and agrees that this assignment of leases of rents, and the Mortgagee’s rights and remedies hereunder, may be enforced by the Mortgagee throughout the entire redemption period provided by applicable law following any foreclosure sale of all or any portion of the Mortgaged Property.

At any time after the occurrence of an Event of Default, the Mortgagee, without in any way waiving such default, may:

I. at the Mortgagee’s option without notice to the Mortgagor and without regard to the adequacy of the security for the Notes, either in person or by agent, with or without any action or proceeding, or by a receiver appointed by a court of competent jurisdiction pursuant to Minnesota Statutes, Section 559.17, Subd. 2, peaceably take possession of the Mortgaged Property and have, hold, manage, lease, sublease and operate the same as a mortgagee in possession; or

II. the Mortgagee, without taking possession of the Mortgaged Property, may sue for or otherwise collect and receive all rents, income and profits from the Mortgaged Property to which the Mortgagor would otherwise be entitled, including those past due and unpaid with full power to make from time to time all adjustments thereto, as may seem proper to the Mortgagee.

The Mortgagee shall not be obligated to perform or discharge, nor does it hereby undertake to perform or discharge, any obligation, duty or liability under any leases, sublease or rental agreements relating to the Mortgaged Property, and the Mortgagor shall and does hereby agree to indemnify and hold the Mortgagee harmless from and against any and all liability, loss or damage which it may or might incur under any such lease, sublease or agreement or under or by reason of the assignment of the rents thereof and from and against 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 in any of such leases, provided that the Mortgagor shall not indemnify and hold harmless the Mortgagee from any liability, loss or damage resulting from acts or omissions of the Mortgagee which occur on or after the date the Mortgagee takes possession of the Mortgaged Property. Should the Mortgagee incur any liability, loss or damage by reason of this assignment of leases and rents, or in the defense of any claim or demand, the Mortgagor agrees to reimburse the Mortgagee for any reasonable amount thereof, including costs, expenses and attorney’s fees, immediately upon demand.

The Mortgagee, or such agent or receiver, in the exercise of the rights and powers conferred upon it by this assignment of leases and rents shall have the full power to use and apply the avails, rents, issues, income and profits of the Mortgaged Property to which the Mortgagor


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would otherwise be entitled to the payment of or on account of the following in the order listed below:

I. Reasonable receiver’s fees;

II. Application of tenant security deposits as required by Minnesota Statutes, Section 504.20;

III. Payment, when due, of prior or current real estate taxes or special assessments with respect to the Mortgaged Property, or the periodic escrow for the payment of the taxes or special assessments;

IV. Payment, when due, of premiums for insurance of the type required by this Mortgage, or the periodic escrow for the payment of the premiums; and

V. All expenses for normal maintenance of the Mortgaged Property;

provided, however, that nothing herein shall prohibit the Mortgagor’s right to reinstate pursuant to Minnesota Statutes, Section 580.30, or the Mortgagor’s right to redeem granted pursuant to Minnesota Statutes, Sections 580.23 and 581.10.

Any excess cash remaining after paying the expenses listed in clauses (I) through (V) above shall be applied to the payment of the Notes in such manner as Mortgagee shall determine and shall be deemed to be credited to the amount required to be paid to effect a reinstatement or redemption or, if the period of redemption ends without redemption, such remaining amounts shall be paid to the purchaser at the foreclosure sale, its successors or assigns.

The Mortgagor does further specifically authorize and instruct each and every present and future lessee, sublessee, tenant or subtenant of the whole or any part of the Mortgaged Property to pay all unpaid rental agreed upon in any lease or sublease to the Mortgagee upon receipt of demand from the Mortgagee so to pay the same.

Any tenants, subtenants or other occupants of all or any part of the Mortgaged Property are hereby authorized to recognize the claims of the Mortgagee hereunder without investigating the reason for any action taken by the Mortgagee, or the validity or the amount of indebtedness owing to the Mortgagee, or the occurrence or existence of any Event of Default, or the application to be made by the Mortgagee of any amounts to be paid to the Mortgagee. The sole signature of any officer or attorney of the Mortgagee shall be sufficient for the exercise of any rights under this assignment of leases and rents and the sole receipt of the Mortgagee for any sums received by such tenants, subtenants or other occupants shall be a full discharge and release therefor. Checks for all or any part of the rentals collected under this Assignment of Leases and Rents shall be drawn to the exclusive order of the Mortgagee.

SECTION 1.10. FURTHER ASSURANCES. At any time and from time to time, upon request by the Mortgagee, the Mortgagor will make, execute and deliver or cause to be made, executed and delivered, to the Mortgagee, any and all other further instruments, certificates and other documents as may, in the reasonable opinion of the Mortgagee, be necessary or desirable in order to effectuate, complete or perfect, or to continue and preserve, the obligations of the


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Mortgagor hereunder and under the Notes, the Trust Agreement and the mortgage and security interest granted by this Mortgage. Upon any failure by the Mortgagor so to do, the Mortgagee may make, execute and record any and all such instruments, certificates and documents for and in the name of the Mortgagor and the Mortgagor hereby irrevocably appoints the Mortgagee its agent and attorney in fact of the Mortgagor so to do.

SECTION 1.11. EXPENSES. The Mortgagor will pay or reimburse the Mortgagee for all reasonable attorney’s fees, costs and expenses incurred by the Mortgagee in any legal proceeding or dispute of any kind in which the Mortgagee is made a party, or appears as party plaintiff or defendant, affecting the Indebtedness Secured Hereby, this Mortgage, the interest created herein or the Mortgaged Property, including but not limited to the exercise of the power of sale set forth in this Mortgage, any condemnation action involving the Mortgaged Property or any action to protect the security hereof and any such reasonable amounts paid by the Mortgagee shall be added to the indebtedness secured by this Mortgage.

SECTION 1.12. BOOKS AND RECORDS; FINANCIAL STATEMENTS. The Mortgagor will keep and maintain full, true and accurate books of account adequate to reflect correctly the results of the operation of the Mortgaged Property, all of which books and records relating thereto shall be open to inspection by the Mortgagee or its representative during normal business hours.

SECTION 1.13. HAZARDOUS SUBSTANCES. The Mortgagor warrants, covenants and represents that to the best of the Mortgagor’s knowledge, (a) there does not exist in or under the Mortgaged Property any pollutant, toxic or hazardous waste or substance, or any other material the release or disposal of which is regulated by any law, regulation, ordinance or code related to pollution or environmental contamination, (b) the Mortgaged Property presently complies, in all material respects, with all applicable federal, state and local environmental, health and safety statutes and regulations, and (c) no part of the Mortgaged Property was ever used for any industrial or manufacturing purpose or as a dump, sanitary landfill, or gasoline service station, and that there exists on the Mortgaged Property no storage tanks, electrical transformers or other equipment containing PCBs or material amounts of asbestos. The Mortgagor represents that it has received no summons, citations, directives, letters or other communications, written or oral, from any federal, state or local agency or department concerning the storing, releasing, pumping, pouring, emitting, emptying or dumping of any pollutant, toxic or hazardous waste or substance on the Mortgaged Property.

The Mortgagor covenants and agrees that it shall not, nor shall it permit others to, use the Mortgaged Property for the business of generating, transporting, storing, treating or disposing of any pollutant, toxic or hazardous waste or substance, nor shall it either take or fail to take any action which may result in a release of any hazardous substance from or onto the Mortgaged Property. In addition to all rights of access granted the Mortgagee pursuant to Section 1.6 hereof, during the term of the loan contemplated hereby, the Mortgagee, or any authorized agent, contractor or representative of the Mortgagee, is hereby irrevocably authorized to enter upon the Mortgaged Property at any reasonable time and from time to time for the purpose of performing inspections, taking soil borings or other borings, or conducting any other tests or procedures on, in or about the Mortgaged Property as the Mortgagee reasonably deems necessary or appropriate


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to determine whether any hazardous or toxic substances, including without limitation asbestos or PCBs, are present on, under or about the Mortgaged Property.

The Mortgagor agrees to indemnify and to hold the Mortgagee harmless from any and all claims, causes of action, damages, penalties, and costs (including, but not limited to, attorneys’ fees, consultants’ fees and related expenses) which may be asserted against, or incurred by, the Mortgagee resulting from or due to release of any hazardous substance or waste on the Mortgaged Property or arising out of any injury to human health or the environment by reason of the condition of or past activity upon the Mortgaged Property. The Mortgagor’s duty to indemnify and hold harmless includes, but is not limited to, proceedings or actions commenced by any person (including, but not limited to, any federal, state, or local governmental agency or entity) before any court or administrative agency. The Mortgagor further agrees that, pursuant to its duty to indemnify under this section, the Mortgagor shall indemnify the Mortgagee against all expenses incurred by the Mortgagee as they become due and not waiting for the ultimate outcome of the litigation or administrative proceeding. The Mortgagor’s obligations to indemnify and hold the Mortgagee harmless hereunder shall survive repayment of the Mortgage Amount and satisfaction or foreclosure of this Mortgage.

Mortgagee, or any authorized agent or representative of Mortgagee is irrevocably authorized to enter upon the Mortgaged Property or any portion thereof at any time and from time to time during the term of this Mortgage and at any time thereafter for the purpose of performing inspections, taking soil borings or other borings, or conducting any other tests or procedures on, in or about the Mortgaged Property as Mortgagee deems necessary or appropriate to determine whether any hazardous or toxic substances, including without limitation, petroleum products, asbestos or PCB’s, are present on, under or about the Mortgaged Property.

SECTION 1.14. WETLANDS. The Mortgaged Property is in compliance with all federal laws relating to “Wetlands” (as defined in 33 C.F.R. § 328.3, as hereafter amended), and in any comparable state and/or local law, statute or ordinance, rule or regulation pertaining to such Wetlands, and Mortgagor shall not perform or cause to be performed any excavation or fill activity or other acts which would in any way destroy, eliminate, alter, obstruct, interfere with or otherwise affect any Wetlands in violation of any such laws, statutes, ordinances, rules or regulations.

ARTICLE II.

INSURANCE, CONDEMNATION AND USE OF PROCEEDS

SECTION 2.1. INSURANCE. Until the Indebtedness Secured Hereby has been paid in full, the Mortgagor shall obtain and maintain the following (in addition to any insurance required under the Trust Agreement):

(a) The Mortgagor shall keep any buildings, structures, fixtures and other improvements now existing or hereafter erected on the Land insured against loss by fire, vandalism, and malicious mischief, perils of extended coverage, and such other hazards, casualties and contingencies as may be specified by the Mortgagee on a full replacement


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cost basis, in an amount not less than the full insurable value thereof, which in no event shall be less than the amount of Indebtedness Secured Hereby, with an agreed amount endorsement and a waiver of co-insurance, and naming the Mortgagee as mortgagee and loss payee.

(b) All insurance shall be carried in companies licensed to do business in the State of Minnesota and approved by the Mortgagee and the policies and renewals thereof shall contain a waiver of defense based on coinsurance, be constantly assigned and pledged to and held by the Mortgagee as additional security for the Indebtedness Secured Hereby, have attached thereto loss-payable clauses in favor of and in form acceptable to the Mortgagee, and provide that the Mortgagee shall receive at least thirty (30) days’ prior written notice of cancellation or any substantial modification of the policy. In default thereof, the Mortgagee may effect any insurance required to be maintained by the Mortgagor pursuant to this Section 2.1 and the amount paid therefor shall become immediately due and payable with interest at a rate equal to the greater of (i) the rate of interest then in effect under the Note, or (ii) eighteen percent (18%) per annum or, if such rate is illegal or usurious, at the maximum rate permitted by law, and shall be secured by this Mortgage. In the event of loss or damage to the Mortgaged Property, the Mortgagor will give immediate written notice thereof to the Mortgagee, who may make proof of loss or damage if not made promptly by the Mortgagor. The Mortgagor hereby authorizes the Mortgagee to settle and compromise all claims on such policies and hereby authorizes and directs each insurance company concerned to make payment for any such loss to the Mortgagor and the Mortgagee jointly. In the event of foreclosure of this Mortgage, all right, title and interest of the Mortgagor in and to any property insurance policies then in force shall pass to the purchaser at the foreclosure sale.

SECTION 2.2. CONDEMNATION. The Mortgagor shall give the Mortgagee immediate written notice of the actual or threatened commencement of any proceedings under condemnation or eminent domain affecting all or any part of the Mortgaged Property or any easement therein or appurtenance thereof. If all or any part of the Mortgaged Property is damaged, taken or acquired, either temporarily or permanently, in any condemnation proceeding, or by exercise of the right of eminent domain, the amount of any award or other payment for such taking, acquisition or damages made in consideration thereof, to the extent of the full amount of the remaining unpaid indebtedness secured by this instrument, is hereby assigned to the Mortgagee, who is empowered to collect and receive the same and to give proper receipts therefor in the name of the Mortgagor and the same shall be paid forthwith to the Mortgagee, to be applied to the Indebtedness Secured Hereby, and any excess shall be paid to the Mortgagor.

SECTION 2.3. MORTGAGOR TO REPAIR, REPLACE, REBUILD OR RESTORE. If any Indebtedness Secured Hereby is outstanding when all or any part of the Mortgaged Property is destroyed or damaged, unless the Mortgagee elects, at its option, which option is hereby irrevocably granted by the Mortgagor to the Mortgagee, to apply such proceeds as a prepayment of the Note in such order of application as the Mortgagor shall determine in its sole discretion:

(a) the Mortgagor shall either prepay the Note in full or proceed promptly and diligently pursue to completion, subject to the provisions of subsection (b) of this Section 2.3, to replace, repair, rebuild and restore the Mortgaged Property to substantially


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the same condition as existed before the taking or event causing the damage or destruction;

(b) all proceeds of any insurance claim shall be deposited in escrow with the Mortgagee. The Mortgagee shall apply the proceeds, less such sum, if any, required for payment of all expenses incurred in collecting the same (“Net Proceeds”), to payment of the costs of repair, replacement, rebuilding or restoration of the Mortgaged Property upon compliance with such construction and disbursement terms as the Mortgagee may deem reasonably necessary, including deposit by the Mortgagor with the Mortgagee of such funds of the Mortgagor as may be required to insure payment of all costs of rebuilding, restoration, repair or replacement. If such deposit is not made when requested by the Mortgagee, or if an Event of Default occurs while the Mortgagee is retaining the Net Proceeds, the Mortgagee may apply the Net Proceeds to the Indebtedness Secured Hereby. The balance of the Net Proceeds remaining after payment of all costs of any repair, rebuilding, replacement or restoration of the Mortgaged Property shall be applied as a prepayment of the Indebtedness Secured Hereby, and any excess shall be paid to the Mortgagor; and

(c) the Mortgagor shall not, by reason of the payment of any costs of repair, rebuilding, replacement or restoration, be entitled to any reimbursement from the Mortgagee or any abatement or diminution of the amounts payable under the Note, the Trust Agreement or on any other Indebtedness Secured Hereby.

ARTICLE III.

REMEDIES

SECTION 3.1. REMEDIES. Upon the occurrence of an Event of Default or at any time thereafter, the Mortgagee may, at its option, exercise any and all of the following rights and remedies (and any other rights and remedies available to it under applicable law or the Trust Agreement or any other document related hereto):

(a) the Mortgagee shall be entitled to the immediate appointment of a receiver of the Mortgaged Property by a court of competent jurisdiction; and

(b) the Mortgagee may foreclose this Mortgage by action or advertisement upon written notice thereof to the Mortgagor, and the Mortgagor hereby authorizes the Mortgagee to do so, power being herein expressly granted to sell the Mortgaged Property at public auction without any prior hearing thereof, as one (1) tract or otherwise at the sole option of the Mortgagee, and to convey the same to the purchaser, in fee simple, pursuant to the statutes of Minnesota in such case made and provided 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 attorney’s fees permitted by law, which costs, charges and fees the Mortgagor herein agrees to pay, and to pay the surplus, if any, to the Mortgagor, its successors or assigns; and


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(c) the Mortgagee may exercise any of the remedies made available to a secured party under the Uniform Commercial Code in effect in the State of Minnesota, or other applicable law, with respect to any of the Mortgaged Property which constitutes personal property, including without limitation the right to take possession thereof, proceeding without judicial process or by judicial process (without a prior hearing or notice thereof, which the Mortgagor hereby waives), and the right to sell, lease or otherwise dispose of or use any or all of such personal property. The Mortgagee may require the Mortgagor to assemble such personal property and make it available to the Mortgagee at a place designated by the Mortgagee which is reasonably convenient to both the Mortgagor and the Mortgagee. If notice to the Mortgagor of any intended disposition of any of the Mortgaged Property constituting personal property or any other intended action is required by law in a particular instance, such notice shall be deemed commercially reasonable if given (in the manner specified in Section 4.2 hereof) at least ten (10) calendar days prior to the date of intended disposition or other action.

In the event of a sale under this Mortgage, whether by virtue of judicial proceedings or otherwise, the Mortgaged Property may, at the option of the Mortgagee, be sold as one parcel and as an entirety or in such parcels, manner and order as the Mortgagee in its sole discretion may reasonably elect.

SECTION 3.2. PURCHASE OF MORTGAGED PROPERTY. In case of any sale of the Mortgaged Property pursuant to any judgment or decree of any court or otherwise in connection with the enforcement of any of the terms of this Mortgage, the Mortgagee, its successors and assigns, may become the purchaser, and for the purpose of making settlement for or payment of the purchase price, shall be entitled to turn in and use the Notes and any claims for interest, late charges and prepayment premiums matured and unpaid thereon, together with any other Indebtedness Secured Hereby, if any, in order that there may be credited as paid on the purchase price the sum, or any part thereof, then due under the Note, including principal thereof and interest, late charges and prepayment premiums, if any, thereon, and any other Indebtedness Secured Hereby.

ARTICLE IV.

MISCELLANEOUS

SECTION 4.1. SUCCESSORS AND ASSIGNS. The covenants and agreements contained herein, including, without limitation, the provision of Section 1.8 hereof, shall bind, and the rights hereunder shall inure to, the respective successors and assigns of the Mortgagor and the Mortgagee, including among the Mortgagor’s assigns any purchasers or transferees of the Mortgaged Property.

SECTION 4.2. NOTICES. Any notice, request, demand or other communication permitted or required hereunder shall be deemed duly given if delivered or mailed postage prepaid, certified or registered, addressed to the address of such party on page 2 of this Mortgage.


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SECTION 4.3. HEADINGS. The headings of the sections contained herein are for convenience only and are not to be construed to be a part of or limit or affect the terms hereof.

SECTION 4.4. EXPENSES. The Mortgagor shall reimburse the Mortgagee, upon demand, for all costs and expenses, including without limitation attorneys’ fees, as provided in the Note or Trust Agreement and for the enforcement by the Mortgagee during the term hereof or thereafter of any of the rights or remedies of the Mortgagee or any participant hereunder or under any of the foregoing documents, instruments or agreements.

SECTION 4.5. CONSTRUCTION MORTGAGE. This Mortgage shall constitute a construction mortgage and shall be entitled to all of the rights and benefits provided to such mortgages under applicable Minnesota law.

SECTION 4.6. DEFINITION. As used herein, the term “Event of Default” shall have the meaning assigned to such term in the Trust Agreement.

IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly executed and delivered to the Mortgagee as of the day and year first above written.

MORTGAGOR: STEVEN F. MELDAHL, Individually

____________________________________ STATE OF MINNESOTA ) ) ss COUNTY OF ) The foregoing instrument was acknowledged before me this ____ day of __________, 2014, by Stephen F. Meldahl.

Notary Public


EXHIBIT A

(Legal Description of Property)


EXHIBIT B

(Permitted Encumbrances)

None


EXHIBIT 2 TO MELDAHL TRUST AGREEMENT Properties Release Amount TIER ONE: 1715 Thomas Ave N. 50000 3115 Thomas Ave. N. 30000 1518 Thomas Ave. N. 50000 3019 Upton Ave. N. 20000 3111 Upton Ave. N. 35000 1425 Upton Ave N 25000 3743 Bryant Ave. N. 30000 3313 Lyndale Ave. N. 30000 2411 Irving Ave. N. 25000 1411 24th Ave. N. 25000 3335 Oliver Ave. N. 40000 2946 Colfax Ave. N. 30000 TIER TWO: 1714 Queen Ave. N. 60000 2931 Oliver Ave N. 30000 2923 Olive Ave. N. 30000 2805 Oliver Ave. N. 25000 3611 Queen Ave. N. 30000 2958 Russell Ave. N. 30000 TIER THREE: 3455 James Ave. N. 50000 2807 Knox Ave N. 30000 2306 James Ave N. 25000 3215 Knox Ave. N. 30000 2622 Irving Ave. N. 25000 3451 James Ave. N. 25000 2955 Colfax Ave N. 30000 TIER FOUR: 2634 13th Ave N. 40000 2634 13th Ave N. 40000 1415 14th Ave. N. 30000 916 30th Ave.N. 35000 323 30th Ave N. 35000 1110 27th Ave. N. 25000


2

TIER FIVE: 2942 Dupont Ave N. 40000 2610 Irving Ave N. 30000 421 Morgan Ave N. 30000 819 Newton Ave. N 30000 2735 Queen Ave. N 35000 1000 Logan Ave. N. 25000 TIER SIX: 317 23rd Ave. N. 25000 1646 Washburn Ave. N. 30000 810 Newton Ave N. 30000 1523 Morgan Ave. N. 30000 4220 Irving Ave N. 40000 2539 12th Ave S. 30000 2315 Aldrich Ave. N. 35000 3507 Morgan Ave. N. 20000 3019 Colfax Ave. N. 30000 1223 26th Ave. N 5000 3015 Colfax Ave. N. 25000 1410 Newton Ave N. 30000 3906 Emerson Ave. N. 30000 2711 Fremont Ave. N. 30000 2819 Fremont Ave. N 25000 2322 Irving Ave. N. 35000 2623 Irving Ave.N. 35000 1711 25th Ave. N 35000 3345 6th St. N. 30000 3701 6th St. N. 35000 3725 6th St. N. 25000 3111 Newton Ave. N. 31500 3210 Upton Ave. N. 8000 2926 Oliver Ave. N. 30000 2500 Humboldt Ave. N. 10000 1118 24th Ave. N. 22500 3723 Fremont Ave. N. 30000 2900 Queen Ave. N. 35000 723 Newton Ave. N. 30000 3446 Oliver Ave. N. 30000 2811 Newton Ave. N. 28000 2417 24th Ave N. 35500 2219 29th Ave. N. 30000


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