Commercial Mortgage

COMMERCIAL MORTGAGE


THIS IS A FUTURE ADVANCE MORTGAGE


THIS MORTGAGE is made on January 1, 2005 by and between the Grantor, as herein defined, and Star Insurance Company, a Michigan corporation ("Lender"), whose address is 26255 American Drive, Southfield, Michigan 48034.


IN CONSIDERATION of loans, advances or other financial accommodations from the Lender to the Grantor and/or the Borrower, Grantor does hereby covenant, promise and agree to and with the Lender, which covenants, promises and agreements shall, to the extent permitted by law, be deemed to run with the land, as follows:


1. DEFINITIONS. The following terms shall have the following
meanings when used in this Mortgage:


a. "Borrower" or "GRANTOR" means Meadowbrook Insurance Group,
Inc., a Michigan corporation organized under the laws of the
State of Michigan, whose chief executive office or residence
is located at 26255 American Drive, Southfield, Michigan
48034.


b. "LEASE(S)" means and includes all leases and rental agreements
(including, without limitation, oil and gas leases and any
specific lease(s) described in an attachment to this
Mortgage), written or unwritten, now or hereafter demising the
Property in whole or in any part, and all amendments,
modifications, extensions, renewals, substitutions and
replacements for any of the foregoing.


c. "LIABILITIES" means all loans, advances or other financial
accommodations, including any renewals or extensions thereof,
from the Lender to Grantor and/or the Borrower and any and all
liabilities and obligations of any and every kind and nature
heretofore, now or hereafter owing from Grantor and/or the
Borrower to the Lender, however incurred or evidenced, whether
primary, secondary, contingent or otherwise, whether arising
under the Note, and any and all extensions and renewals
thereof, this Mortgage, under any other security agreement(s),
promissory note(s), guaranty(s), mortgage(s), lease(s),
instrument(s), document(s), contract(s), letter(s) of credit
or similar agreement(s) heretofore, now or hereafter executed
by Grantor and/or Borrower and delivered to the Lender, or by
oral agreement or by operation of law plus all interest,
costs, expenses and reasonable attorney fees which may be made
or incurred by the Lender in the disbursement, administration
or collection of such liabilities and obligations and in the
protection, maintenance and liquidation of the Property and
the performance of the covenants and conditions of this
Mortgage, and ANY FUTURE ADVANCES, WITH INTEREST THEREON, made
to Grantor and/or the Borrower by the Lender which are secured
by this Mortgage pursuant to the provisions hereof.


d. "NOTE" means a promissory note from the Borrower to the Lender
in the principal amount of Ten Million Six Hundred Seven
Thousand Nine Hundred Fifty-Three Dollars ($10,607,953) of
even date herewith.


e. "PROPERTY" means the premises situated in the State of
Michigan described in Exhibit "A" attached hereto, together
with (1) all the estate, title, interest and rights of Grantor
in such premises and all buildings and improvements of every
kind and description now or hereafter placed on such premises,
(2) all of the rents, profits, and leases of such premises,
and the tenements, hereditaments, easements, privileges and
appurtenances with respect to such premises, including
heretofore or hereafter vacated alleys and streets abutting
the premises, (3) all goods (including furniture, fixtures,
equipment and appliances), accounts, books and records and
general intangibles now owned or hereafter acquired by Grantor
and now or at any time hereafter related to, affixed to,
attached to, placed upon or used in any way in connection with
the ownership, use, occupancy or operation of such premises
(except leased equipment and trade fixtures which, in either
case, are readily removable without damaging or reducing the
value or utility of the premises or the improvements thereto),
including, but not limited to, all lighting, heating, cooling,
ventilating, air conditioning, plumbing, sprinkling,
communicating and electrical systems, and machinery,
appliances, fixtures and equipment pertaining thereto,
awnings, stoves, refrigerators, dishwashers, disposals,
incinerators, carpeting and drapes, and all other furniture,
fixtures, equipment and appliances of every type, nature and
description, (4) any and all awards or payments, including
interest thereon, and the right to receive the same, which may
be made with respect to the premises as a result of (a) the
exercise of the right of eminent domain, (b) the alteration of
the grade of any street, (c) any loss of or damage to any
building or other improvement on the premises, (d) any other
injury to or decrease in the value of the premises or (e) any
refund due on account of the payment of real estate taxes,
assessments or other charges levied against or imposed upon
the premises, to the extent of all amounts which may be
secured by this Mortgage at the date of receipt of any such
award or payment by the Lender, and of the reasonable counsel
fees, costs and disbursements incurred by the Lender in
connection with the collection of such award or payment, (5)
all of Borrower's rights, title and interest in, to and under
all present and future land contracts, sales agreements and/or
option agreements relating to the premises or any portion
thereof and Borrower's rights under all construction contracts
and all plans and specifications relating to the premises, and
(6) all of Borrower's rights, title and interest in, to and
under all present and future permits, licenses, liquor
licenses, authorizations, franchises, management agreements
used or intended to be used in connection with the ownership
or operation of the premises or any portion thereof, and all
names, trade names, trademarks, logos and material used to
advertise the premises and all variations thereof.


2. GRANT OF MORTGAGE. Grantor does hereby MORTGAGE and WARRANT to the Lender and its successors and assigns forever the Property and grants to the Lender and its successors and assigns a continuing security interest in the Property to secure the timely repayment and performance of the Liabilities, to have and to hold the Property, with all of the tenements, hereditaments, easements, appurtenances and other rights and privileges thereunto belonging or in any manner now or hereafter appertaining thereto, for the use and benefit of the Lender upon the conditions hereinafter set forth.


3. FUTURE ADVANCES. Upon request of Grantor, the Lender at the Lender's option prior to release of this Mortgage, may make future advances to Grantor. Such future advances, with interest thereon, shall be secured by this Mortgage when evidenced by promissory notes stating that they are secured hereby.


4. COVENANT TO PAY LIABILITIES. Grantor shall promptly pay and perform all Liabilities for which it is liable or obligated in accordance with the terms thereof. Grantor acknowledges and agrees that this Mortgage shall not be extinguished and the priority of this Mortgage shall not be altered in any way until a Mortgage discharge has been executed by the Lender and recorded in the proper county, even if the Liabilities are reduced to a balance of zero at any time or from time to time.


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5. COVENANT OF TITLE. At the time of the execution and delivery of this Mortgage, Grantor is the owner of the Property in fee simple, free of all easements, liens and encumbrances whatever (other than those easements of record as of the date hereof, the rights of the public in any part of the Property used or taken for road purposes and any other mortgages, liens or encumbrances to which the Lender has consented in writing), and will forever warrant and defend the same against any and all other claims whatever, and the lien created hereby is and will be kept as a valid lien upon the Property and every part thereof, subject only to the foregoing exceptions.


6. MAINTENANCE OF PROPERTY. Grantor shall at all times preserve and maintain the Property in good repair, working order and condition and shall make all necessary improvements and repairs so the value and efficiency of the Property is at all times maintained and Lender's security is not impaired. Lender shall have the right to enter upon and inspect the Property at all reasonable times and if, upon inspection of the Property, Lender determines the Property or any part thereof requires repair, maintenance, or care of any kind which the Grantor, after notice from Lender, fails to perform, Lender may declare Grantor to be in default under this Mortgage and may, at Lender's option, by its agent, enter, repair and care for the Property, paying such amount therefor as the Lender deems appropriate, and all costs incurred by Lender shall be added to the Liabilities secured by this Mortgage.


7. PAYMENT OF TAXES, LIENS AND INSURANCE. Grantor shall pay when due all taxes, assessments, and governmental charges levied upon the Property and all claims, liens, encumbrances, levies, judgments and charges which are at any time levied, recorded, placed upon, or assessed against the Property, and shall promptly deliver to Lender receipts evidencing such payment; provided, however, that Grantor will not be required to pay any tax, assessment, governmental charge, claim, lien, encumbrance, levy, judgment or charge if Grantor is in good faith contesting the validity thereof and has provided for payment of the entire amount of any such contested tax, assessment, governmental charge, claim, lien, encumbrance, levy, judgment or charge in a cash reserve deposited with Lender or in such other manner as is satisfactory to Lender. Unless Lender and Grantor otherwise agree in writing, Grantor shall pay to Lender with Grantor's payments of principal and interest, a pro rata portion of the taxes, assessments, and insurance premiums next to become due, as estimated by Lender, so Lender has sufficient funds on deposit to enable Lender to pay in full all taxes, assessments, and insurance premiums thirty (30) days before the due date thereof. All money so held by Lender will not bear interest, may be commingled by Lender with other funds, and after the occurrence of any default by Grantor may be applied by Lender to the Liabilities.


8. INSURANCE. Until the Liabilities are fully satisfied, Grantor will keep the Property continuously insured against loss by fire, windstorm and other hazards, casualties and contingencies, including vandalism and malicious mischief, in such amounts and for such periods as may be required by the Lender. Grantor shall pay promptly when due all premiums for such insurance and deliver to the Lender, upon request, receipts showing such payment. All insurance shall be carried in companies approved by the Lender and the policies and renewals thereof shall be held by, and pledged to, the Lender (unless the Lender shall direct or permit otherwise) as additional security hereunder, and shall have attached thereto a mortgagee clause acceptable to the Lender, making all loss or losses under such policies payable to the Lender, its successors and assigns, as its or their interest may appear. In the event of loss or damage to the Property, Grantor shall give immediate notice in writing by mail to the Lender, who may make proof of loss if not made promptly by Grantor.


In the event the amount of the loss is an amount equal to twenty percent (20%) of the principal amount of the Liabilities or less, the insurance proceeds shall be released to the Grantor, upon request by the Grantor. Grantor shall be obligated to use such proceeds to restore or repair the Property unless the Lender otherwise specifies in writing.


In the event the amount of the loss is greater than an amount equal to twenty percent (20%) of the principal amount of the Liabilities each insurance company concerned is hereby authorized and directed upon request by the Lender, to make payment for such loss, to the extent of the Liabilities, directly to the Lender instead of to Grantor and the Lender jointly. Provided there has occurred no Event of Default hereunder nor any event which with notice or the passage of time or both would become an Event of Default hereunder and further provided that the Lender shall


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reasonably determine that sufficient funds are available from insurance proceeds and any funds to be provided by Grantor to repair or restore the Property within a reasonable time and that such repair or restoration is economically feasible, the Lender agrees, upon request by the Grantor, to apply the insurance proceeds to repair or restore the Property, after reimbursement of all costs and expenses of the Lender in collecting such proceeds, subject to the following terms and conditions:


a. The Lender shall retain all insurance proceeds in a non-interest bearing escrow account to be disbursed to pay the costs of repair or restoration in accordance with procedures reasonably established by the Lender.


b. All plans and specifications for repair or restoration shall be approved by the Lender prior to the commencement of any repair or restoration.


c. All repair or restoration shall be done by or under the direction of Grantor, shall be in accordance with the approved plans and specifications, shall be in a workmanlike manner free from all defects, shall be in compliance with all statutes, ordinances, rules and regulations applicable thereto and shall be completed free of all construction liens except those being contested in good faith by appropriate proceedings and with respect to which Grantor shall have provided the Lender satisfactory security.


d. The Lender shall have the right, at Grantor's expense, to inspect all repairs and restoration and, if the Lender reasonably determines that any work or materials are not in conformity with the approved plans and specifications or other requirements of sub-paragraph (c) above, to stop the work and order replacement or correction thereof by Grantor.


e. The Lender shall not be obligated to make disbursements more frequently than monthly and the remaining undisbursed proceeds shall always be sufficient to meet the total estimated remaining costs to complete the repair or restoration.


f. All insurance proceeds in excess of the amounts necessary to repair or restore the Property may be applied, at the Lender's option, to the Liabilities (without penalty for prepayment), to fulfill any other covenant herein or any other obligation of Grantor to the Lender, or released to Grantor.


In the event all of the conditions to the use of the insurance proceeds to repair or restore the Property which are outlined above are not satisfied, the Lender, at its option, may apply the insurance proceeds or any part thereof, first, toward reimbursement of all costs and expenses of the Lender in collecting such proceeds, and then, to the Liabilities (without any penalty for prepayment), to fulfill any other covenant herein or any other obligation of Grantor to the Lender, or to the restoration or repair of the Property. Application by the Lender of any insurance proceeds to the Liabilities shall not excuse, extend or reduce the regularly scheduled payments due thereunder. In the event of foreclosure of this Mortgage or other transfer of title to the Property in extinguishment of the Liabilities, all right, title and interest of Grantor in and to any insurance policies then in force shall pass to the purchaser or grantee and Grantor hereby appoints the Lender its attorney-in-fact, in Grantor's name, to assign and transfer all such policies and proceeds to such purchaser or grantee.


If at any time the Property is identified by the Director of the Federal Emergency Management Agency or any other person or entity designated with such responsibility under the National Flood Insurance Act of 1968, Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994, all as amended (collectively called the "Flood Act"), as being located in a flood hazard area, Grantor shall keep the Property covered by flood insurance in such amount as is required by Lender and in at least the amount required by the Flood Act and all regulations issued thereunder.


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9. EMINENT DOMAIN. In the event the entire Property is taken under the power of eminent domain, the entire award or payment in lieu of condemnation, to the full extent of the Liabilities, shall be paid to the Lender. The Lender shall apply such award or payment, first, toward reimbursement of all of the Lender's costs and expenses incurred in connection with collecting such award or payment, and then, at the Lender's option, to the Liabilities (without any penalty for prepayment), to fulfill any other covenant herein or to any other obligation of Grantor to the Lender.


In the event of a partial taking of the Property under the power of eminent domain, the entire award or payment in lieu of condemnation, to the full extent of the Liabilities, shall be paid over to the Lender. Provided there has occurred no Event of Default hereunder, nor any event which with notice or the passage of time or both would become an Event of Default hereunder, and the Lender shall reasonably determine that sufficient funds are available from the award or payment and any funds to be provided by Grantor to repair or restore the remaining portion of the Property within a reasonable time and that such repair or restoration is economically feasible, the Lender agrees, upon request by the Grantor, to apply the award or payment to repair or restore the remaining portion of the Property, after reimbursement of all costs and expenses of the Lender in collecting the award or payment, subject to the following terms and conditions:


a. The Lender shall retain the award or payment in a non-interest bearing escrow account to be disbursed to pay the costs of repair or restoration in accordance with procedures reasonably established by the Lender.


b. All plans and specifications for repair or restoration shall be approved by the Lender prior to the commencement of any repair or restoration.


c. All repair or restoration shall be done by or under the direction of Grantor, shall be in accordance with the approved plans and specifications, shall be in a workmanlike manner free from all defects, shall be in compliance with all statutes, ordinances, rules and regulations applicable thereto and shall be completed free of all construction liens except those being contested in good faith by appropriate proceedings and with respect to which Grantor shall have provided the Lender satisfactory s ...