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HomeMy WebLinkAboutHigh Ave/Campus Pl t ~ <':,--e'; U1~ ." DEVELOPMENT AGREEMENT THIS DEVELOPMENT AGREEMENT (the "Agreement"), is made as of the 31st day of July, 2006, by and between the City of Oshkosh, Wisconsin, a Wisconsin Municipal Corporation, (hereinafter referred to as the "City"), and Hiwisca LLC, a Wisconsin limited liability company (hereinafter referred to as "Developer"). WITNESSETH: WHEREAS, the Developer owns that certain real property located at 539-551 High Avenue and 530-532 Campus Place, City of Oshkosh, Winnebago County, Wisconsin, legally described in Exhibit A attached hereto and incorporated herein by reference (hereinafter referred to as the "Development Area"), which property the Developer intends to rehabilitate as commercial and/or retail space, thereby providing jobs and adding to the tax base of the City; and WHEREAS, the City approved and created a tax increment finance district and a project plan in connection therewith (the "District" and "Plan" respectively) which District includes the Development Area; and WHEREAS, within the Plan, the City has targeted the Development Area for redevelopment; and WHEREAS, Developer desires to rehabilitate all of the existing improvements located within the Development Area (the "Development"), which Development will include exterior rehabilitation, interior rehabilitation, structural repair and parking lot and site improvements; and WHEREAS, the Developer has entered into a construction contract with CS SMET Construction Corp. (the "Contractor") for the rehabilitation and renovation of the Development, which Construction Contract is evidenced by the Proposal from the Contractor dated May 18, 2005, as supplemented by the Proposal dated September 16, 2005, and as further amended by Change Order No.1 dated June 29, 2005, Change Order No.2 dated December 20, 2005, Change Order No.3 dated December 20, 2005, Change Order No.4 dated September 16,2005, Change Order No.5 dated September 16, 2005, Change Order No. 6 dated September 16, 2005 and Change Order No. 7 dated September 16, 2005 (collectively the "Construction Contract"); and WHEREAS, the City is desirous of assisting and inducing the Developer to undertake the rehabilitation of the existing improvements located within the Development Area, consistent with the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the promises and obligations herein set forth, it is mutually agreed~. +.....~~e~.th.a ..CU' Y[i..a;~ ~:v..:...o~:o....~... er as f.OIl.O~~;"-:;~._'_""'_'_f' f.p. f?~.'.'''''''...'~......l f I '~ If:J-'' d ,4 Ir'" fr....\ ff)' iF fL. 'i wf r~", ! "'''l.\ I Ii I r-" '.'. - ..::;:1;" l, ,1 ...~ \. ... ." V L~::l\" \ \ ,lk}" -'--"--lil Ii i r--'~-'-'~-"'ljl HI I~ L~~ 82006 1[0 ~ru\ AUG _2 5 2o~l0\ CITY CLE~~ICE \ erN C~!"RK'S O~E j ') .'\ I. DEFINITIONS. Capitalized terms shall have the meanings set forth in the body of this Agreement. II. DESCRIPTION OF DEVELOPMENT AND PARTIES' UNDERTAKING. A. The Development. The Development involves the rehabilitation of the existing improvements located in the Development Area. Developer shall use its reasonable efforts to complete the Development substantially in accordance with Developer's plans and specifications prepared by DorschnerlAssociates, Inc. (the "Plans and Specifications") and described as follows: DESCRIPTION DATE OS/25/2005 06/03/2005 08/15/2005 REVISED DATE 06/21/2005 N/A N/A 1) Roof Repair Package 2) Interior White Box Package 3) Design Review The Plans and Specifications have been reviewed and approved by the City. Any material changes to such plans and specifications shall be approved by the City. B. Grant of Tax Increment FinancinQ. In order to induce Developer to undertake the Development within the Development Area, the City agrees to grant Developer Tax Increment Financing of not more than $463,000.00 for the purpose of implementing this Agreement (the "Grant"), which Grant will be repaid through increased tax increment guaranteed by the Developer. The Grant is made purslJant to Section 66.1105(2)(f) of the Wisconsin Statutes. The Grant shall be made in accordance with the terms of Paragraph II(C), below. C. Payment of Grant to Developer. The proceeds of the Grant shall be used to reimburse the Developer for rehabilitation and development costs incurred by Developer in connection with the Development. Upon final completion of the work set forth and described in the Plans and Specifications and Construction Contract, as certified in writing by the Developer's architect, and provided Developer is not otherwise in default of any term or condition of this Agreement, the Grant shall be promptly dispersed by the City to Developer to reimburse the Developer for the Developer's rehabilitation and development costs for the Development Area. D. Insurance. Developer, its successors and assigns, on the Closing Date,as that term is defined below, and continuously thereafter, until the District is closed under applicable law, shall purchase, at Developer's sole cost and expense, and continuously maintain in effect, insurance against such risks, both generally and specifically with respect to any building owned by Developer or its successors and assigns in the Development Area, as are customarily insured against in developments of like size and character. The Developer or its successors and assigns, shall maintain 2 --"" ...., , } or cause to be maintained replacement cost coverage on any building constructed within the Development Area. Certificates evidencing such insurance shall be provided to the City on the Closing Date, and from time-to-time thereafter. Such certificates shall indicate that the insurance may not be cancelled or terminated except upon 30 days advance written notice to the City. The City shall be named as an additional insured under the terms of any such insurance policies, but the interests of the City in any such insurance or proceeds received on account of such insurance policies, shall at all times be subject and subordinate to the interests of the Developer's first mortgage lender (the "Lender") in and to such insurance policies, proceeds and payments derived therefrom. In the event the Development is damaged or destroyed, in whole or in part, by fire or other casualty, the Developer shall give prompt notice thereof to the City and shall promptly use the proceeds of any insurance to the extent necessary to repair, restore, or replace the Development to its condition immediately prior to said loss. If any insurance proceeds shall remain after completion of the restoration, repair and rebuilding of the Development, and payment of amounts due and owing the first mortgage lender for the Development, such funds shall be disbursed to the City and used to repay the Developer's obligations to the City in accordance with this Agreement, the Note or the Mortgage. E. The City agrees to uniformly apply tax assessment procedures and practices with respect to the Development Area in accordance with state law regarding property tax assessments. Notwithstanding the foregoing and in consideration of the City's Grant, at all times during the term of this Agreement, the Development Area shall guarantee minimum incremental taxes, as allocated by the City, equal to or greater than the City's annual debt service payment required to fully amortize the City's Grant to the Developer over the amortization period set by the terms of the City's borrowing for the Grant. Such amortization includes the actual principal amount and interest rate of the City borrowing to fund the City's Grant to the Developer. Incremental taxes equals the full equalized value (real estate and personal property) of the Development Area minus the full equalized base value of the Development Area ($611,427.00 is the agreed upon amount of the full equalized base value of the Development Area) multiplied by the equalized tax rate for that calendar year. If in any calendar year the incremental taxes generated by the Development Area are less than the City's required debt service payment for that year, the Developer shall pay to the City the difference ("Differential Payment"). The Differential Payment shall be paid by March 1st of the year in which the debt service payment is due and made in the following manner: 1. By January 15th, starting with calendar year 2007, the City shall provide the Developer with an itemization of the actual real estate tax payment to be received from the Development Area in such calendar year, and a calculation of the Differential Payment amount, if any, required to meet the City's debt service obligations for that calendar year. 2. If in any prior year the Developer shall have been required to make a Differential Payment, then in any subsequent year in which the actual property tax payment exceeds the minimum incremental tax payment (the "Excess Tax 3 . , Payment") required to meet that year's debt service payment by the City to amortize its borrowing, the Excess Tax Payment shall be applied to reimburse the Developer for any prior Differential Payment. 3. Unpaid Differential Payments shall be treated as delinquent taxes, assessments and special charges per Section 8-88 of the Oshkosh Municipal Code, III. OTHER DEVELOPMENT MATTERS. A. Security, As security for the Developer's obligations hereunder, the Developer shall deliver to the City, at the closing of the Grant described herein, a promissory note in the amount of $463,000,00 (the "Note"), which Note shall earn interest at the rate same rate paid by the City to the State of Wisconsin for such funds., Subject to paragraph IV(A) below, the Note shall be secured by a second mortgage on the Development Area (the "Mortgage"). The form of the Note shall be as set forth in Exhibit B attached hereto and the form of the Mortgage shall be as set forth in Exhibit C attached hereto. The Note and Mortgage are to be fully subordinated to the mortgage securing the existing permanent financing (the "Initial Financing") of the Development with the Lender. Developer may, from time-to-time, refinance or renew the Initial Financing (a "Refinance"). The Note and Mortgage shall be subordinated to any such Refinance. If Developer seeks a Refinance in an amount exceeding the amount of the Initial Financing, then the Note and Mortgage may only be subordinated if the amount of the Refinance does not exceed 80% of the Fair Market Value of the Development Area. In the event the Developer seeks a Refinance in excess of 80% of the Fair Market Value of the Development Area, such Refinance shall require the prior written consent of the City, which consent shall not be unreasonably withheld "Fair Market Value" shall be defined as the value of the real property and improvements subject to the Mortgage to be subordinated, as established by an appraisal performed in accordance with USPAP standards by an MAl appraiser selected by the first mortgagee, or, if none, by the City, but paid for at Developer's sole cost and expense. The Note, and the Mortgage which secures the Note, shall be non-recourse to Developer, That is, except as provided paragraph III(C) below, the Note shall be secured by the Developer's interest in the real estate only, and Developer shall not be personally liable for repayment of the Note. The Note shall bear interest at the same rate paid by the City to the State of Wisconsin for such funds and, provided the incremental taxes levied on the Development Area through December 31, 2026, are in an amount equal to or greater than the principal amount of the Note and interest thereon, the indebtedness evidenced by the Note shall be forgiven with no payment by the Developer, the Mortgage shall be satisfied of record the guarantee described in Exhibit E released. Assumption of the Note and Mortgage shall be permitted only with the advance written consent of the City. B. Construction Costs, As of August 1, 2006, Developer will have expended acquisition and construction costs for improvements within the Development Area in the total, cumulative amount of not less than $1,775,000,00 (the "Budgeted Amount"), as described in the budget attached hereto as Exhibit D, Developer shall 4 . , '- provide a final written certification of Developer's rehabilitation and development costs upon final completion of the work described in the Construction Contract. In the event the actual costs of the Development are less than the Budgeted Amount, then the principal amount of the Grant and Note shall be reduced proportionately to the reduction in the Budgeted Amount. C. Guarantee of Note. The Developer shall provide a personal guarantee of the Note in the form attached as Exhibit E. A copy of the guarantor's certified financial statement is attached hereto as Exhibit F. IV. CONDITIONS PRECEDENT TO A TIF GRANT. As a condition precedent to the TIF Grant, Developer shall comply with the following: A. Consent of First Mortaaae Lender. The Developer shall have obtained the consent of the Lender to the TIF Grant, the Mortgage and all documents ancillary thereto, B. Second Mortaaae to State Bank of Cross Plains. As set forth and contemplated in the Mortgage, after the execution of this Agreement, and prior to the City's obligation to fund the Grant under Paragraph II(C), above, the Developer intends to finance the cost of the improvements described in the Plans and Specification and Construction Contract, by borrowing the principal sum of approximately $463,000 from the State Bank of Cross Plains, which borrowing shall be secured by an interim second mortgage on the Development Area in the amount of $463,000.00 (the "Interim Second Mortgage"), The City hereby consents to the Interim Second Mortgage and its recording in the Winnebago County Register of Deeds Office. The Developer acknowledges and agrees that prior to the City's payment of the Grant to the Developer, the Developer shall provide written evidence, reasonably satisfactory to the City, that the Grant shall be used to first pay in full the outstanding principal and interest and any other cost or charges due and owing the State Bank of Cross Plains in satisfaction of the Interim Second Mortgage and then to reimburse the Developer for costs and expenses incurred by the Developer in conjunction with the work described in the Plans and Specifications. V. NONDISCRIMINATION. Developer agrees not to discriminate on the basis of race, color, religion, sex, ancestry, age, handicap, marital status or national origin in the sale, lease or rental or in the use or occupancy of the property or improvements located thereon, in violation of any applicable law or regulation; provided, however, that a violation of said covenant will not result in a reversion of forfeiture of title, but will entitle the City to such injunctive relief or other remedies as may be available at law. VI. ASSIGNMENT, A. Assianment. Developer shall not be permitted to sell, assign, convey, lease, transfer, mortgage or encumber its interest in the Development, without the prior written approval of the City, except that no consent shall be required for any 5 . . ... assignment, to an entity of which Developer, or Developer's principal, Eric M, Schwartz, is a member, shareholder or partner of the assignee and upon request acknowledges to City in writing that such assignment has not and will not affect Developer's obligations hereunder. B. Developer Financina. Developer may pledge, mortgage, encumbelr or place a lien against the Development and the Development Area, and may make such collateral assignments as may be required in connection therewith, to the Lendelr for the purpose of securing, from time-to-time, first mortgage financing for the Development (the "Developer Financing"). Subject to the terms of Section III(B), above, the Note, Mortgage and all terms of this Agreement, shall, at the time of their inception and at all times thereafter, be and remain subject and subordinate to the Developer Financing, and any renewals, refinances, or replacements of said Developer Financing (a "Refinance"), This subordination provision shall contain the limitation described in paragraph I II (A) , above, be specifically stated in the Mortgage to be provided by Developer to the City, and shall be self-operative, That is, no further evidence of such subordination shall be required in order to effectuate the subordination of the Note and Mortgage to the rights of the Lender, and any Refinance. Notwithstanding the foregoing, from time to time, upon request of the Lender, or any successor or assign of Lender, the City agrees to provide to the Lender or its successor or assign, a written subordination agreement in form and substance acceptable to the Lender and the City, in confirmation of this Agreement. In addition, upon request of the Lender or its successors or assigns, the City shall provide to the Lender an estoppel certificate in form and substance acceptable to the Lender and the City each in the reasonable exercise of their discretion, stating that to the City's knowledge the Developer is not in default hereunder or under any other obligation to the City, or, if the foregoing not be true, specifying the default of the Developer, and containing such other information as the Lender may reasonably require in connection therewith, C. Leases and Other Conveyances. The execution of such leases in the ordinary course of business in the rental and operation of the Development shall be and hereby are expressly permitted, as shall be the execution and delivery of any easement, covenant, condition, or restriction which Developer may deem necessary or desirable pursuant to this Agreement or to further the purposes of the Development which do not materially diminish the City's security under the Mortgage, D. Conversion to Non-Taxable Entitv. If prior to the closure of the District under applicable TIF law the Developer or any successor in interest intends to sell, lease transfer or convey (a "Sale") the Development to any person or in any manner, or takes any action other than a Sale (a "Conversion") which would render the Development, in whole or in part, exempt from property taxation, the Developer shall first secure the express, written consent of the City for such Sale or Conversion, and in connection with such Sale or Conversion, the Purchaser shall expressly agree to annually pay the City an amount equal to all property taxes which would have been paid by the Development if it were subject to property taxation. This provision shall be included in the Mortgage described in Section III (B), above, 6 . . VII. INDEMNIFICATION. The Developer, and its successors and assigns, shall indemnify, save harmless and defend the City and its respective officers, agents and employees from any and all liability suits, actions, claims, demands, losses, costs, damages and expenses of every kind and description, including attorney costs and fees, for claims of any character including liability and expenses in connection with the loss of life, personal injury or damage to property, or any of them brought because of any injuries or damages received or sustained by any persons or property on account of or arising out of the construction of the Development occasioned wholly or in part by any act or omission on the Developer's part or on the part of its agents, contractors, subcontractors, invitees or employees, at any time occurring on, at or in the Development. VIII. REMEDIES. A. In General. In the event of any default in, or breach of, this Agreement or any of its terms or conditions by either party hereto, or any successor in interest to such party, such party (or successor) shall have the right to cure or remedy such default or breach within thirty (30) days of written notice thereof unless a longer term is specified, or, in the event a non-monetary default, if such default or breach cannot reasonably be cured or remedied within such 30-day period, no default or breach shall be deemed to exist if the party alleged to be in default commences to cure within such 30-day period or takes and diligently and continuously takes such reasonable action as is necessary to cure such alleged default thereafter. The financial condition of a party shall not be a reason for extending the 30-day time period for curing a default. In case such action is not taken or is not pursued, as described in the previous sentence, the aggrieved party may institute such proceedings as may be necessary or desirable in its opinion to cure the default or breach including, but not limited to, proceedings to compel specific performance by the party in default or breach of its obligations. B. Force Maieure. For the purposes of any provisions of the Agreement, neither the Developer nor any successor in interest nor the City shall be considered in breach or default of its obligations herein if the performance of such obligations is prevented or delayed because of unforeseeable causes beyond its control and without its fault, or negligence, including but not restricted to Acts of God, changes, acts of public enemy, acts of the Federal government, fires, floods, epidemics, quarantine restrictions,labor disputes, strikes, embargoes and unusually severe weather or delays of subcontractors due to such causes, unusual delays in deliveries, unavoidable casualties beyond the party's control, it being the purpose and intent of this provision that in the event of the occurrence of any such delay, the time or times of performance of any of the obligations of the Developer with respect to construction of the improvements shall be extended for the period of the delay; provided that the party seeking the benefit of the beginning of any such delay shall have first notified the other parties thereof in writing and of the cause or causes thereof and requested an extension for the period of the delay. IX. REPRESENTATIONS AND WARRANTIES OF DEVELOPER. 7 , . A. Developer. 1. Developer represents and warrants to the City that it is a Wisconsin limited liability company duly organized and existing under the laws of the State of Wisconsin and that all proceedings of Developer necessary to authorize the negotiation and execution of this Agreement, and the consummation of the transaction contemplated by this Agreement, have been taken in accordance with applicable law. 2. Developer represents and warrants to the City that this Agreement and all of the documents required to be executed and delivered by Developer by closing have been duly and validly authorized, executed and delivered by Developer, and will be enforceable against Developer in accordance with their terms except as limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditor's rights. 3. Developer represents and warrants to the City that the execution and delivery of this Agreement, the consummation of the transactions contemplated in this Agreement and the execution and delivery of the documents required to be executed, delivered or acknowledged by Developer at the closing will not violate any provision of Developer's articles or operating agreement or any other applicable statute, rule, regulation, judgment, order or decree of the State of Wisconsin, local government or a court having jurisdiction over Developer or its properties, B. City. 1. City represents and warrants to the Developer that this Agreement has been duly authorized by all appropriate, necessary and legally required action of the City, and the consent of no other person or entity is necessary or required in order to make this Agreement a valid and binding obligation of the City, 2. City represents and warrants to the Developer that the consummation of the transactions contemplated by this Agreement, shall not violate or be in contravention of any provision of the City's charter, or any other ordinance, law, rule or regulation to which the City is bound or subject to. X. APPLICABLE LAW; ENTIRE AGREEMENT. This Agreement shall be governed by and construed in accordance, with the laws of the State of Wisconsin governing agreements made and fully performed in Wisconsin. This Agreement sets forth the entire understanding between the City, and Developer with respect to its subject matter, there being no terms, conditions, warranties, or representations with respect to its subject matter other than that contained herein. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors and assigns. XI. AMENDMENTS TO AGREEMENT. This Agreement may not be changed orally, but only by agreement in writing and signed by the parties hereto. 8 , . XII. NO PARTNERSHIP CREATED. This Agreement specifically does not create any partnership or joint venture between the parties hereto, or render any party liable for any of the debts or obligations of any other party. No representation shall be made to any third party contrary to the provisions of this Article XII. XIII. FORMALITIES, The headings set forth in this Agreement are for convenience and reference only, and in no way define or limit the scope of content of this Agreement or in any way affect its provisions. XIV. NOTICES AND DEMANDS. A notice, demand, or other communication under this Agreement shall be sufficiently given or delivered if it is (1) deposited in the United States mail, registered or certified mail, postage prepaid, return receipt requested or (2) delivered personally, or (3) sent by facsimile, with confirmation copy sent postage prepaid, via the United States mail, no later than the next business day; and addressed to the party at the following address: TO DEVELOPER: Hiwisca LLC Attn: Eric M. Schwartz 1612 North High Point Road Suite 201 Middleton, WI 53562 Fax No.: (608) 831-2255 TO THE CITY: City of Oshkosh Attn: City Clerk 215 Church Street Oshkosh, WI 54903-1130 Fax No,: (920) 236-5053 . With respect to changes of address, notice shall be sent to such other address, within the United States, as a party may from time to time designate in writing and forward to the other as provided in this Section. A copy of any notice, demand, or other communication under this Agreement given by a party under this Agreement to any other party under this Section shall be given to each other party to this Agreement. The failure to give a courtesy copy as specified above shall not be deemed a failure of notice, XV. NON-MERGER AND SURVIVAL. Any provision in this Agreement which has not been fully performed prior to transfer or possession shall not be deemed to have terminated, but shall, unless expressly waived in writing, survive such transfer of possession and be in force and effect until performed, XVI. APPROVALS AND CONSENTS. Except for legislative actions to be undertaken by the City, whenever any party to this Agreement must give its approval or consent to any other party, on account of any thing or matter to be performed or done by the other party, such approval or consent shall not be unreasonably withheld or delayed by the party required to give such approval or consent. 9 . . XVII. TERMINATION. Once the City receives any and all payments due and owing under the Note, this Agreement shall automatically terminate. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the date first above written. SEE ATTACHED SIGNA TURE PAGES 10 . . SIGNATURE PAGE FOR THE CITY OF OSHKOSH ~ qz?aA,1r'~ ~a~A-l Attest APr\ved as to Form: ~. THE CITY OF OSHKOSH, A Wisconsin municipal corporation Approved: ~A~~QfI.~J}h/ Finance Director 11 J . . SIGNATURE PAGE FOR DEVELOPER I d liability company By: 12 , . EXHIBIT "A" LeQal Description of Development Area Lots Three (3), Four (4), Sixteen (16), Seventeen (17) and Eighteen (18), all in Block ilK" in the Plat of the Western Addition to Oshkosh, in the First Ward, City of Oshkosh, Winnebago County, Wisconsin, EXHIBIT "8" Form of Note Attached . ~ , PROMISSORY NOTE For value received, Hiwisca LLC, a Wisconsin Limited Liability Company, 1612 North High Point Road, Suite 201, Middleton, Wisconsin 53562 ("Maker") hereby promises to pay to the order of the City of Oshkosh, Attn: City Clerk, 215 Church Street, Oshkosh, Wisconsin 54903-1130 ("Payee"), at Payee's address, the sum of Four Hundred Sixty Three Thousand and no/100th ($463,000.00) Dollars (the "Principal Sum") in accordance with the terms of this Note. This Note is secured by a Second Lien Real Estate Mortgage (the "Mortgage") on the Property. The Principal Sum shall earn interest at the same rate paid by the Payee to the State of Wisconsin for such funds. There shall be no payments due and owing under this Note, unless payment is due by the Maker to the Payee in accordance with the provisions of Section II(E) of the Development Agreement by and between the Maker and Payee of even date herewith (the "Development Agreement"). The remaining balance and any and all interest due and owing under this Note shall be repaid through tax increment collected on the Property owned by Maker and located at 539-551 High Avenue and 530-532 Campus Place, City of Oshkosh, Winnebago County, Wisconsin (the "Property"), as described in the Development Agreement. Payee's sole recourse against Maker for the failure of the Property to generate the tax increment required shall be pursuant to the provisions of the Development Agreement, the Mortgage or the Guaranty of Specific Transaction executed by one or more members of the Maker. This Note may be prepaid in full or in part at any time without penalty. This Note shall be payable in full in the event there is a sale or other transfer of the Property in violation of the terms of the Mortgage or the Development Agreement. This Note shall be in default in the event (i) Maker fails to pay any payment due hereunder on or before its due date or is in default under any term, covenant or condition of the Mortgage or Development Agreement; (ii) Payee has given Maker written notice of such default and a period of time, to be not less than thirty (30) days, in which Maker may cure the default; and (iii) Maker has failed to cure said default within said time period after notice. In such event, Payee may accelerate the entire Principal Sum due hereunder, charge interest on the Principal Sum at the rate of 8% per annum from the date of default to the date of payment, and proceed to collect the same pursuant to the terms of the Mortgage. Payee may add to the Principal Sum all actual costs of collection, including actual attorney fees. Maker hereby waives presentment, demand, notice of dishonor and dishonor. Hiwisca LLC Dated: July 31,2006 By: Eric M. Schwartz, Member . f EXHIBIT "C" Form of MortQaQe Attached . . SECOND LIEN REALESTATE MORTGAGE Hiwisca LLC, a Wisconsin limited liability company ("Mortgagor") mortgages, conveys, assigns, grants a security interest in and warrants to the City of Oshkosh, a Wisconsin municipal corporation ("Mortgagee") in consideration of the obligations of the Mortgagor as set forth in the Development Agreement dated of even date herewith (the "Development Agreement") and the Promissory Note (the "Note") bearing an even date executed by Mortgagor to Mortgagee, and any amendments and modifications of the Development Agreement or Note and the payment of all other sums, with interest, advanced to protect the security of this Mortgage, the real estate described below, together with all privileges, hereditaments I easements and appurtenances, all rents, leases, issues and profits, all claims, awards and payments made as a result of the exercise of the right of eminent domain, and all existing and future improvements and fixtures (all called the "Property") to secure the Obligations described in paragraph 2 below, including, but not limited to, repayment of the Note plus certain other debts, obligations and liabilities arising out of past, present, and future credit granted by Mortgagee. Record this document with the Reoister of Deeds City of Oshkosh AUn: City Clerk 215 Church Street Oshkosh, WI 54903-1130 Legal Description of Development Area Lots Three (3), Four (4), Sixteen (16), Seventeen (17) and Eighteen (18), all in Block UK" in the Plat of the Western Addition to Oshkosh, in the First Ward, City of Oshkosh, Winnebago County, Wisconsin, 1. This is not homestead property, 901-0333-000 (Parcel Identification Number) 2. This Mortgage secures prompt payment to Mortgagee of (a) the obligations of Mortgagor under the Note, plus interest and charges, according to the terms of the Note identified above, and any extensions, renewals or modifications of such Note; plus (b) all obligations of Mortgagor under the Development Agreement; plus (c) all costs and expenses of collection or enforcement (all called the "Obligations"). This Mortgage also secures the performance of all covenants, conditions and agreements contained in this Mortgage. 3. MORTGAGOR'S COVENANTS. (a) COVENANT OF TITLE. Mortgagor warrants title to the Property, except restrictions and easements of record, if any and except a first mortgage to State Bank of Cross Plains in the amount stated on the face of said Mortgage recorded in the Winnebago County Register of Deeds Office prior to the date of recording of this Second Lien Real Estate Mortgage (the "First Mortgagee"). In addition, Mortgager has granted a second mortgage to State Bank of Cross Plains in the stated amount of $463,000 (the "Interim Second Mortgage") which Interim Second Mortgage shall be permitted by the Mortgagee provided the Interim Second Mortgage is satisfied prior to the Mortgagee's funding of any monies under the Development Agreement. (b) TAXES. Mortgagor promises to pay when due all taxes and assessments levied on the Property or upon Mortgagee's interest in it and to deliver to Mortgagee on demand receipts showing such payment. (c) INSURANCE. Mortgagor shall keep the improvements on the Property insured against a loss or damage occasioned by fire, extended coverage perils and such other hazards. as Mortgagee may require, through insurers approved by Mortgagee in such amounts as Mortgagee shall require, but Mortgagee shall not require coverage in an amount more than the balance of the debt without co-insurance, and Mortgagor shall pay the premiums when due, The policies shall contain the standard mortgage clause in favor of Mortgagee. Mortgagor shall promptly give notice of loss to insurance companies and Mortgagee. Subject to the rights of the First Mortgagee, all insurance proceeds shall be payable to Mortgagee. Insurance proceeds shall be applied to restoration or repair of the Property damages, provided no default or event of default exists under the Development Agreement or the Note and the Mortgagee deems the restoration or repair to be economically feasible, Mortgagee's rights hereunder are subject and subordinate to the rights of the First Mortgagee. (d) OTHER COVENANTS. Mortgagor covenants not to commit waste nor suffer waste to be committed on the Property, to keep the Property in good condition and repair, to comply with all laws ordinances and regulations affecting the Property, and to keep the Property from liens and encumbrances superior to the lien of this Mortgage and the Mortgage described in paragraph 3(a) above, 4. DEFAULT; ACCELERATION; REMEDIES. If (a) there is a default under any Obligation secured by this Mortgage, or (b) Mortgagor fails to timely observe or perform any of Mortgagor's covenants or duties contained in this Mortgage, then, at the option of Lender each Obligation will become immediately due and payable unless notice to Mortgagor or Borrower and an opportunity to cure are required by 9425,105, Wis, Stats., if applicable, or the document evidencing the Obligation and, in that event, the Obligation will become due and payable if the default is not cured as provided in that statute or the document evidencing the Obligation or as otherwise provided by law, If Lender exercises its option to accelerate, the unpaid principal and interest owed on the Obligation, together with all sums . paid by Lender as authorized or required under this Mortgage or any Obligation, shall be collectible in a suit at law or by foreclosure of this Mortgage by action, or both, or by the exercise of any other remedy available at law or equity. 5. WAIVER. Lender may waive any default without waiving any other subsequent or prior default by Mortgagor, 6. POWER OF SALE. In the event of foreclosure, Lender may sell the Property at public sale and execute and deliver to the purchasers deeds of conveyance pursuant to statute. 7. FORECLOSURE WITHOUT DEFICIENCY. Mortgagor agrees to the provisions of Section 846.101 and 846,103(2) of the Wisconsin Statutes, as may apply to the property and as may be amended, permitting Mortgagee in the event of foreclosure to waive the right to judgment for deficiency and to hold the foreclosure sale within the time provided in such applicable Section, 8. RECEIVER. Upon default or during the pendency of any action to foreclose this Mortgage, Mortgagor consents to the appointment of a receiver of the Property, to collect the rents, issues, and profits of the Property, during the pendency of such an action, and such rents, issues, and profits when so collected, shall be held and applied as the court shall direct. 9. MORTGAGEE MAY CURE DEFAULTS. In the event of any default by Mortgagor of any kind under this Mortgage, the Note or the Development Agreement, Mortgagee may cure the default and all sums paid by Mortgagee for such purpose shall immediately be repaid by Mortgagor with interest at the rate then in effect under either the Note or the Development Agreement. Any amounts advanced by Mortgagee pursuant to this paragraph 10 shall be secured by this Mortgage. 10. CONSENT REQUIRED FOR TRANSFER. Mortgagor shall not transfer, sell or convey any legal or equitable interest in the Property (by deed, land contract, option, long-term lease or in any other way) without the prior written consent of Mortgagee, unless either the indebtedness secured by this Mortgage (including, without limitation, all amounts due under the Note and the Development Agreement) is first paid in full. The entire indebtedness due under the Note and the Development Agreement shall become due and payable in full, at the option of Mortgagee without notice, upon any transfer, sale or conveyance made in violation of this paragraph, or in violation of the Development Agreement. The terms and conditions of the Development Agreement shall control with respect to any refinance of the First Mortgage. 11. ASSIGNMENT OF RENTS. Mortgagor hereby transfers and assigns absolutely to Mortgagee, as additional security, all rents, issues and profits which become or remain due (under any form of agreement for use or occupancy of the Property or any portion thereof), or which were previously collected and remain subject to Mortgagor's control, following any default under this Mortgage, the Note or the Development Agreement secured hereby and delivery of notice of exercise of this assignment by Mortgagee to the tenant or other user(s) of the Property. This assignment shall be enforceable with or without appointment of a receiver and regardless of Mortgagee's lack of possession of the Property. Dated this 31st day of July, 2006, ACKNOWLEDGMENT HIWISCA LLC STATE OF WISCONSIN DANE COUNTY By: Eric M. Schwartz, Member Personally came before me this 31st day of July, 2006, the above named Eric M. Schwartz, to me known to be the person who executed the foregoing instrument and acknowledge the same. THIS INSTRUMENT WAS DRAFTED BY John W. Van Note Mohs, MacDonald, Widder & Paradise signature type or print name: John W, Van Note Notary Public Dane County, Wisconsin My commission is permanent. ., .- EXHIBIT "0" BudQet Attached . , ACQUISITION & DEVELOPMENT PROFILE 539-551 HIGH AVE, 530-532 CAMPUS PL, OSHKOSH, WI ACQUISITION Purchase Price $ 725,000 Due Diligence & Closing Costs: Appraisal Arch itect Buyer's Broker 3,00% Environmental Inspection Legal Survey Misc/Title/Closing Costs Contingency Operating Start-Up Acquisition Fees 2,500 2,500 21,750 1,650 2,500 5,000 2,400 5,000 5,000 5,000 40,200 RE-DEVELOPMENT Existing 11575 square feet vacant 18610 square feet total Construction Exterior Revovation (fa<;:ade, windows, etc) Parking Lot Repair/Replacement Structural Repairs/Fire Damage I nteriorl mprovementslWhite-box HVAC, Electrical & Plumbing Vacant Units Architect Construction Contingency TI Allowance $6.00 Lease Commissions Legal/Professional Fees Holding Cost Allowance Loan/Title/ClosinglDraw Fees Holding & Soft Cost Contingency Construction Mgmt General Conditions Development Fees 10.00% $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 239,993 57,860 127,950 101,340 75,000 20,000 50,000 69,450 32,800 15,000 104,000 5,000 10,000 30,000 5,000 94,339 S:\John\Schwartz Work\Osh Kosh II - High Avenue and Campus Place\Exhibit D to Development AgreementExhibit D . . ~ EXHIBIT "E" Form of Guarantee Attached . . ~- GUARANTY OF SPECIFIC TRANSACTION GUARANTY. For value received, and to induce the City of Oshkosh, Wisconsin, a Wisconsin municipal corporation ("Lender") to extend credit to Hiwisca LLC ("Debtor"), and to enter into a Development Agreement of even date herewith (the "Development Agreement"), the undersigned, Eric M. Schwartz (whether one or more "Guarantor"), unconditionally guarantee payment of the Obligations defined below when due, whether by acceleration or otherwise, or, at the time any Debtor becomes the subject of bankruptcy or other insolvency proceedings. "Obligations" means all indebtedness and obligations evidenced by a Promissory Note ("Note") payable to Lender dated July 31, 2006 executed by Debtor in the principal amount of $463,000 plus interest, charges and fees provided for in the Note or any agreement securing the Note, and any extensions, renewals, deferrals, modifications or consolidations of any of the foregoing and all obligations of the Debtor arising out of or relating to the Development Agreement. Obligations include the amount of any payments made to Lender or another by, or on behalf of Debtor, which are recovered from Lender by a trustee, receiver, creditor or other party pursuant to applicable federal or state law, and all costs, expenses and attorneys!' fees at any time paid or incurred before and after judgment in endeavoring to collect all or part of any of the above, or to realize upon this Guaranty, or any collateral securing any of the above, including those incurred incident to any action or proceeding brought pursuant to the United States Bankruptcy Code. This Guaranty is valid and enforceable against Guarantor even though any Obligation is invalid or unenforceable against Debtor. WAIVER. Guarantor expressly waives notice of the acceptance of this Guaranty, the creation of any present or future Obligation, default under any Obligation, proceedings to collect from Debtor .or anyone else, and all diligence of collection and presentment, demand, notice, and protest and any right to disclosures from Lender regarding the financial condition of any Debtor or guarantor of the Obligations or the enforceability of the Obligations and all other legal and equitable defenses of suretyship and impairment of collateral. No claim, including a claim for reimbursement, subrogation, contribution or indemnification which Guarantor may, as a guarantor of the Obligations, have against a co-guarantor of any of the Obligations or against any Debtor shall be enforced nor any payment accepted until the Obligations are paid in full and no payments to or collections by Lender are subject to any right of recovery. PERSONS BOUND. This Guaranty benefits Lender, its successors and assigns, and binds the undersigned,.- the undersigned's heirs, personal representatives, successors and assigns. This Guaranty shall continue in full force and effect notwithstanding any change in structure or status of Debtor, whether by merger, consolidation, reorganization or otherwise. CONSENT. With respect to any of the Obligations, Lender may from time to time without notice to the undersigned and without affecting the liability of the undersigned (a) release, substitute, exchange, impair, sell or otherwise dispose of any security or collateral for the Obligations, (b) release or agree not to sue any guarantor or surety, (c) fail to perfect its security interest in or realize upon any security or collateral, (d) fail to realize upon any of the Obligations or to proceed against the Debtor or any guarantor or . . surety, (e) renew or extend the time of payment, (f) increase or decrease the rate of interest, (g) accept additional security or collateral, (h) determine the allocation and application of payments and credits and accept partial payments, (i) apply the proceeds of disposition of any collateral for the Obligations to any obligation of Debtor secured by such collateral in such order and amounts as it elects, U) determine what, if anything, may at any time be done with reference to any security or collateral, and (k) settle or compromise the amount due or owing or claimed to be due or owing from any Debtor, guarantor or surety, which settlement or compromise shall not affect the undersigned's liability for the full amount of the Obligations. The undersigned expressly consents to and waives notice of all of the above. Guarantor consents to and authorizes Lender or its agents to obtain information concerning Guarantor's financial condition, including credit reports. Nothing contained in this Guaranty shall require Lender to first seek or exhaust any remedy against Debtor or to first proceed against any collateral or security for any of the Obligations or this Guaranty. REPRESENTATION. The undersigned Guarantor acknowledges and agrees that Lender (a) has not made any representations or warranties with respect to, (b) does not assume any responsibility to the undersigned for, and (c) has no duty to provide information to the undersigned regarding the enforceability of any of the Obligations or the financial condition of any Debtor or guarantor. The undersigned has independently determined the creditworthiness of Debtor and the enforceability of the Obligations and until the Obligations are paid in full will independently and without reliance on lender continue to make such determinations. TERMINATION OF GUARANTY. This Guaranty shall terminate on the payment in full of all of Debtor's obligations under the Note and the Development Agreement. PAYMENT. If the Debtor fails to pay all or any part of the Obligations when due, according to the terms of the Note and the Development Agreement, the undersigned, immediately upon the written demand of Lender, will pay to Lender the amount due and unpaid by the Debtor. INTERPRETATION. The validity, construction and enforcement of this Guaranty are governed by the internal laws of Wisconsin except to the extent such laws are preempted by federal law. All terms not otherwise defined have the meanings assigned to them by the Wisconsin Uniform Commercial Code. Invalidity of any provision of this Guaranty shall not affect the validity of any other provision. JURISDICTION. Guarantor irrevocably consents with respect to any suit, action or proceeding relating to this Guaranty or any of the other loan documents relating to the Obligations, that venue for any legal proceeding relating to the collection of this Guaranty shall be, at Lender's option, the county in which Lender has its principal office in Wisconsin, the county and state in which any Guarantor resides or the county and state in which this Guaranty was executed by Guarantor, and Guarantor waives any objection it, she or he may have at any time to the venue of any such proceeding brought in any such court, waives any claim that any such proceeding has been brought in an inconvenient forum and waives the right to object, with respect to any such proceeding that such court does not have jurisdiction over such party. ENTIRE AGREEMENT. This Guaranty is intended by the undersigned and Lender as a final expression of this Guaranty and as a complete and exclusive statement of its terms, there being no conditions to the full effectiveness of this Guaranty. This Guaranty may not be supplemented or modified except in writing. NOTICE TO GUARANTOR You are being asked to guarantee the Obligations of Debtor identified above. If Debtor does not pay, you will have to, You may also have to pay collection costs. Lender can collect the Obligations from you without first trying to collect from Debtor or another ,auarantor. X Eric M. Schwartz (SEAL) Address 1612 N, Hiah Point Road. Ste 201 Middleton, WI 53562 For Wisconsin Married Residents Only: Each guarantor who signs above represents that this obligation is incurred in the interest of his or her marriage or family. X Eric M. Schwartz .. '- EXHIBIT "F" Guarantors Financial Statement Attached Ii'_ .' me Real