Intercreditor Agreement James Madison, LLC Loan PropertyMasterpiece on the Mississippi
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: James Madison, LLC Loan /Priority
DATE: July 24, 2013
Dubuque
band
AI- America City
1
2007 • 2012 • 2013
City Attorney Barry Lindahl recommends City Council approval of an Intercreditor
Agreement with Premier Bank to clarify the relationship between mortgages for the
German Bank Building in favor of Premier Bank and the City. At the present time,
Premier Bank's mortgage has a first security position and the City's mortgage is
subordinate to the Premier mortgage. There could be an issue with respect to the
amount of Premier's $1,000,000 mortgage which has priority over the City's $300,000
mortgage. The Intercreditor Agreement does not change the City's position and, in fact,
may be advantageous to the City in terms of clarifying the amount of the Premier
mortgage which has priority over the City mortgage. Under the Intercreditor Agreement,
only $375,000 of the Premier mortgage would have priority over the City's mortgage.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
itit)t v:-117),45
Michael C. Van Milligen
MCVM:jh
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Teri Goodmann, Assistant City Manager
THE CITY OF
DUB UE MEMORANDUM
Masterpiece on the Mississippi
BARRY LIND
CITY ATTOR E
To:
City Manager
DATE: July 22, 2013
RE: James Madison, LLC Loan /Priority
Michael C. Van Milligen
Attached is a copy of a letter from Attorney D. Flint Drake on behalf of James Madison,
LLC requesting City approval of an Intercreditor Agreement, a copy of which is also
attached. A resolution for that purpose is also attached.
The purpose of the request and the Intercreditor Agreement is to clarify the relationship
between mortgages in favor of Premier Bank and the City. At the present time, Premier
Bank's mortgage has a first security position with respect to the German Bank Building
and the City's mortgage is subordinate to the Premier mortgage. There could be an
issue with respect to the amount of Premier's $1,000,000 mortgage which has priority
over the City's $300,000 mortgage. The Intercreditor Agreement does not change the
City's position and in fact may be advantageous to the City in terms of clarifying the
amount of the Premier mortgage which has priority over the City mortgage. Under the
Intercreditor Agreement, only $375,000 of the Premier mortgage would have priority
over the City's mortgage.
Attorney Bill Noth and I have reviewed the Intercreditor Agreement and approve the
form of the Agreement.
I would request that the resolution and Intercreditor Agreement be submitted to the City
Council for consideration and approval.
BAL:tls
Attachment
cc: Phil Wagner, Acting Economic Development Director
F:\ USERS \tsteckle \Lindahl\ Memos\ MVM_ JamesMadisonLLCLoanPriority _072213.doc
OFFICE OF THE CITY ATTORNEY DUBUQUE, IOWA
SUITE 330, HARBOR VIEW PLACE, 300 MAIN STREET DUBUQUE, IA 52001 -6944
TELEPHONE (563) 583 -4113 / FAx (563) 583 -1040 / EMAIL balesq @cityofdubuque.org
D. Flint Drake*
fdrakeCadrakelawpe.com
Drake Law Firm, P.C.
ATTORNEYS
300 Main Street, Suite 323 Samuel M. DeGree
Dubuque, IA 52001 sdegree@drake lawpc.com
Both admitted in Iowa Telephone: (563) 582 -2000
*Also admitted in Wisconsin Facsimile: (563) 583 -5225
July 19, 2013
Mr. Barry Lindahl, Esquire
City Attorney
300 Main St. Suite 330
Dubuque, Iowa 52001
Re: James Madison, LLC Loan/Priority
Dear Barry:
We represent Premier Bank in connection with a loan made by Premier to James
Madison, LLC in connection with acquisition of the German Bank Building. As we discussed, in
2007 Premier Bank loaned to German Bank Building LLLP in excess of $1,000,000.00 for the
rehabilitation of the German Bank Building. That loan was secured by a mortgage securing up to
$1,200,000.00, later amended to secure loans up to $1,600,000.00. In 2008 the City, pursuant to
a Development Agreement with that entity, loaned $300,000.00 to German Bank Building
LLLP. The city loan was secured by a mortgage in favor of the City. The City's mortgage is, by
virtue of the filing dates of the mortgages, subordinate to the bank's mortgage. Over time
German Bank Building, LLLP paid down the Premier loan.
Late last year James Madison, LLC purchased the German Bank building from German
Bank Building, LLLP and as part of that acquisition acquired a loan from Premier in the amount
of $375,000.00. As it was imperative, for certain tax reasons, that the transaction close prior to
year end, the Economic Development office advised that there was not time for a Council
meeting to approve a subordination agreement which would have subordinated the City mortgage
to the new Premier mortgage from James Madison, LLC. Therefore, German Bank Building,
LLLP hypothecated its mortgage to Premier (essentially allowing Premier to secure the loan to
James Madison, LLC by the original 2007 mortgage). Premier has other loans to James
Madison and those were also secured by the 2007 mortgage which, as noted above, secures debt
up to $1,600,000.00. While the Premier security now secures more than the $375,000.00 the
intent of the parties was that Premier would be in a first security position with respect to the
$375,000.00, the City second as to its $300,000.00 loan and then Premier would be in a third
position on any other James Madison debt. It is important to Premier that there be no issues
between the bank and the City in the future related to the above loans and security. Therefore,
Premier requests that the parties enter into an Intercreditor Agreement establishing that Premier
is in a first position with respect to the $375,000.00 loan only (not with respect to the full amount
of the mortgage), the City is in a second position with respect to the $300,000.00 loan and
Premier is then in a third position as to any other debt. We attach a draft Intercreditor Agreement
for the city's consideration. We look forward to hearing from you. Thank you.
Best regards,
Drake La Firm, P.C.
By: /(2
D. Flint Drake
DFD
Prepared by Barry A Lindahl 300 Main Street Suite 330 Dubuque IA. 52001 563 583 -4113
RESOLUTION NO. 241 -13
APPROVING ANINTERCREDITOR AGREEMENT BETWEEN THECITYOF DUBUQUE,
IOWA AND PREMIER BANK
WHEREAS, Premier Bank (Bank) has entered into a Promissory Note and
related loan documents with James Madison, LLC, Mathew J. Kluesner and Sarah E.
Kluesner (Borrower), pursuant to which Bank agreed to make a loan to Borrower with
respect to the German Bank Building, which bank loan is secured by a mortgage in
favor of Bank; and
WHEREAS, City has made a loan to German Bank Building LLLP which loan has
been assumed by Borrower and is also secured by a mortgage on the German Bank
Building; and
WHEREAS, City and Bank wish to set forth their agreement for the purpose of
establishing the priorities of their respective mortgages, as set out in the attached
Intercreditor Agreement; and
WHEREAS, the City Council of the City of Dubuque, Iowa finds that it is in the
best interests of the City to approve the Intercreditor Agreement.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF
DUBUQUE, IOWA AS FOLLOWS:
Section 1. The Intercreditor Agreement attached hereto is hereby approved.
Section 2. The City Manager is hereby authorized and directed to sign the
Intercreditor Agreement on behalf of the City of Dubuque.
Passed, approved and adopted this 51h day of August, 2013.
Roy D. ' oI, Mayor
Attest:
Trish L. Gleason, Assistant City Clerk
F:\ USERS \tsteckle\Lindahi\ Resolutions\ ApprovinglntercreditorAgreement _JamesMadisonLLC_072413.doc
IJ 111111111 111 IIi!!I1II1 ll!1 11111111111111111111
Doc ID: 007773910008 Type: GEN
'Kind AGREEMENT
]Recorded: 08/14/2013 at 02:57:41 PM
Fee Amt: $52.00Page 1 of 8
Dubuque County
Iowa
Kathy Flynn Thurlow Recorder
Fi1e2013-00013649
INTERCREDITOR AGREEMENT
Recorder's Cover Sheet
Preparer Information: D. Flint Drake, 300 Main Street, Suite 323, Dubuque, IA 52001, Phone: (563) 582-
2000
Taxpayer Information: JAMES MADISON, LLC, 10911 GOLFVIEW DRIVE, GALENA, IL 61036
Return Address DRAKE LAW FIRM, P.C., 300 MAIN STREET, SUITE 323,
DUBUQUE, IA 52001
Grantors: CITY OF DUBUQUE
Grantees: PREMIER BANK
Legal Description: Lot 10A in the City of Dubuque, Iowa, according to the United States
Commissioner's Map of the City of Dubuque, Iowa
Document or instrument number if applicable:
INTE-RCRCDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (this "Agreement"), dated as of the S- day of
,,, , 2013, is by .and between the CITY OF DUBUQUE, IOWA, a municipal
corporation organized .and existing under the laws of the State of Iowa (the "City") and
PREMIER BANK, an Iowa state banking corporation (the "Bank").
RECITALS
WHEREAS, the Bank has entered into that certain Promissory Note and related loan
documents dated as of February 1, 2013 (as the same may' be amended, modified, restated,
supplemented or extended, the "Bank Loan Documents"), with,among others, Jaynes Madison,
LLC,.Mathew J. Kluesner and Sarah E. Kluesner (together, the "Borrower"); pursuant to which
the Bank agreed to make a loan in the amount of up to $375,000.00 to the Borrower (the "Bank
Loan"); and
WHEREAS, the Bank Loan is secured by a mortgage recorded -July 13, 2007 as
Instrument No, 2007-00010548 in the records of the Dubuque County Recorder (and a
Hypothecation Agreement dated December 31, 2013 executed by German Bank Building
L.L.L.P.) and January 11, 2013 as `Instrument No. 2013-00000871 (the "Existing First
Mortgage"), executed by the Borrower and German Bank,Building LLLP in favor of the Bank,
pursuant to which the Borrower has granted the Banka first priority lien in certain property
located in Dubuque, Iowa, more particularly described therein (the "Project"); and
WHEREAS, the City has made a loan to .German Bank Building LLLP in the amount of
$300,000.00, which loan has been assumed.by Borrowers (the "City Loan") and the City Loan is
secured by that certain .Mortgage recorded September 22, 2008 as Instrument No, 2008-
00013388 in the records of the Du'bugue .County Recorder (the "City Mortgage" and together
with the City Loan and all related notes, agreements and documents, as. the same may be
amended from time to time, the "City Loan Documents"); and
WHEREAS, subsequent to the recording of the City Mortgage, the Bank made other
loans to or for the benefit of Borrower which are secured by the Project; and
• WHEREAS, the parties hereto wish to set forth their agreement for the purpose of
establishing the priorities oftheir respective security interests in the assets of the Borrower.
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the parties hereby agree as follows:
Section 1. Priorities, The Bank and the City agree at all times,
whether before., during or after the pendency of any bankruptcy, reorganization or
other insolvency proceeding, and notwithstanding the priorities that ordinarily
would result under the Uniform Commercial Code and other applicable law from
the order of granting or perfecting of any security interests referred to herein, that
the parties shall have the following priorities:
(a) The Bank's security interest in the Project pursuant to the Bank Loan and the
Existing First Mortgage shall constitute a first priority lien and security interest in the Project to
the extent of the sums due under the Bank Loan ($375,000.00) and any accrued interest or costs
related thereto.
(b) The City's security interest in the Project pursuant to the City Loan and the City
Mortgage shall constitute a second lien and security interest in the Project to the extent of the
sums due under the City Loan and any accrued interest or costs related thereto, ,junior only to the
lien and security interest of the Bank described in subparagraph (a) of this Section 1.
(c) Any and all other interests of Bank in the Project by virtue of other loans or
security Bank may hold with respect to the Borrower are subject and subordinate to the City
Loan and the City Mortgage, and ,junior to the lien and security. interest held by the City under
the City Loan Documents.
(d) The parties shall cooperate to effect the agreement expressed in this paragraph,
and from time to time shall execute such other and further documents, including subordination
agreements, assignments of claim, and otherwise as may be necessary or appropriate to
implement the provisions of this Agreement.
Section 2, Exercise of Remedies.
The Bank may take any action permitted by the terms of any of the Bank Loan
Documents and foreclose and realize on the Project, without the prior consent of City.
Section 3. Continuing Agreement. The subordinations, agreements
and priorities set forth hereinabove shall remain in full force and effect regardless
of whether either party hereto in the future seeks to rescind, amend, assign,
terminate, or reform, by litigation or otherwise, its agreements with the Borrower.
Section 4. Priority Not Conditioned- on Perfection; Limitation on
Actions. The relative priority agreements set forth above are not conditioned
upon the perfection of the security interests described herein. Each party hereto
agrees for the benefit of each other party that it will not institute any proceeding
in law or in equity in which it seeks to set aside any lien or security interest
created by the Bank Loan or the City Loan, as the case may be, and each party
hereto irrevocably waives any right now existing or which may hereafter accrue to
it to assert that any such pledge constitutes a fraudulent conveyance or fraudulent
transfer within the meaning of the United States Bankruptcy Code, the Uniform
Fraudulent Transfer Act as in effect in the State of Iowa or other applicable law.
No party hereto shall contest the validity, perfection, priority or enforceability of
any lien or security interest granted to any other party, and each hereby agrees to
cooperate in the defense of any action contesting the validity, perfection, priority
or enforceability of any such liens or security interests.
Section 5. Amendment of Bank Loan Documents. The Bank Loan
Documents may be amended, extended, replaced or renewed by the Bank without
-2-
the prior written consent of the City, provided that the Bank contemporaneously
delivers copies of all 'executed amendments to the City.
Section 6. Relationship of Parties. This Agreement is entered into
solely for the purposes set forth herein, and except as expressly provided herein,
no party assumes any other duties or responsibilities to any other regarding the
financial condition of the Borrower, or regarding any collateral, or regarding any
other circumstance bearing upon the risk of nonpayment of the obligations of the
Borrower under any of the agreements hereinabove referred to. Each party shall
be responsible for managing its credit relationships with the Borrower, and no
party shall be deemed to be the agent of the other for any purpose.
Section'7. Benefit of Agreement. This Agreement is entered into
solely for the benefit of the Bank and the City and their respective successors and
assigns, and none of the Borrower or any other persons or entities whatsoever
shall have any right, benefit, priority or interest under or because of the existence
of this Agreement
Section 8. Notices. Any notices required to be given hereunder shall
be given by certified mail, return receipt, postage prepaid, to the addresses of such
parties set forth in the signature blocks of this Agreement; or as to any party, at
such other address as that party may designate by notice given as provided herein
to the other parties. Notice .shall be deemed to have been given on the second
business day after the date of mailing.
Section 9. Miscellaneous.
(a) This Agreement may be amended, modified or terminated only by a written
instrument signed by both parties hereto. No waiver of any term or provision of this Agreement
shall be effective unless it is in writing and signed by the party against whom such waiver is
sought to be enforced.
(b) To the extent any part of this Agreement shall conflict with any of the terms of the
Bank Loan documents or the. City Loan documents, whether existing as of the date hereof, or
hereafter arising or amended, the teams of this Agreement shall control,
(c) This Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof,
(d) This Agreement shall be binding upon the parties hereto and their respective
heirs, legal representatives, successors and assigns.
(e) This Agreement shall be governed by and construed in accordance with the laws
of the State of Iowa, without regard to principles of conflicts of laws of such state.
(0 TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY TO
THIS AGREEMENT HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY WITH
RESPECT TO ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
-3-
RIGHTS UNDER THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
14755.2
6766750v4
-4-
CITY:
THE CITY OF DUBUQUE, IOWA, a
municipal corporation organized and
existing under ilk laws of the State of Iowa
By:
Michae C, Van Milligen
Its City Manager
BANK:
PREMIER. BANK, an Iowa state banking
corporation
By:'�.
Its S , v .p.
STATE OF IOWA
COUNTY OF DUBUQUE ) ss:
On this � day of A141U 2013, before me, a Notary Public in
and for the State of Iowa, personally appeared MATHEW L. LANGENBERG, to me
personally known, who being by me duly sworn did say that he is the SENIOR VICE
PRESIDENT/SENIOR LOAN OFFICER of said Premier Bank, that no seal has been
procured by Premier Bank and that said instrument was signed on behalf of said
Premier Bank by authority of its board of directors and the said MATHEW L.
LANGENBERG acknowledged the execution of said instrument to be the voluntary act
and deed of said Premier Bank, by it voluntarily executed.
r aP SARA L. LEIBFRIED
Commission Numb 75 4 0
,owe My Comm. Exp.
(� fi1)l
Notary Public in and for Stat Wf Iowa
STATE OF IOWA
SS
COUNTY O.F DUBUQUE
On this (c day of /;'t- c_,S+- , 2013, before me, the undersigned, a
Notary Public in and for the State of Iowa, personally appeared Michael C. Van
Milligen, to me personally known, did say that he is the City Manager of the City
of Dubuque, Iowa, a municipal corporation, and that the instrument was signed
on behalf of the corporation, by authority of its City Council, on the 5th day of
August, 2013, and Michael C. Van Milligen acknowledged the execution of the
instrument to be his voluntary act.
ins*
h
"1'pISH L. (11LASON
Commission Number719986
My Commission Expires
)3,)--e)./4-1
Notary Public in and for Dubuque County, Iowa