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INTERCREDITOR AGREEMENT BETWEEN
<br /> CITY OF ELK RIVER, PREFERRED POWDER COATINC, LLC,
<br /> PREFERRED REAL ESTATE HOLDINGrS, LLC, LLOYD PETERSON,
<br /> DAN BOSSIJART, AND FIRST NATIONAL BANK OF ELK RIVER
<br /> TI IIS AGREEMENT is entered into as of the date set forth below,by and among the City of'
<br /> Elk River, a Minnesota municipal corporation (the "Subordinate Creditor"), Preferred Powder
<br /> Coating, LLC, a Minnesota limited liability company, Preferred Real Estate Holding, LLC, a
<br /> Minnesota limited liability company, Lloyd Peterson and Dan Bosshart (both collectively and
<br /> individually referred to as "Debtor"), and First National Bank of Elk River, a national bank
<br /> association (the "Bank"). In consideration of the mutual agreements set forth herein, and for other
<br /> good and valuable consideration,the receipt and sufficiency of which is hereby acknowledged by all
<br /> of the parties, the parties agree as follows:
<br /> A. Debt Subordination
<br /> 1. As used in this Agreement, the "Creditor's Claim" refers to all of the Debtor's debts,
<br /> obligations and liabilities to the Subordinate Creditor, now existing or hereafter arising, direct or
<br /> indirect, absolute or contingent,joint or several, whether as maker, endorser, surety, guarantor or
<br /> otherwise, as well as all notes and other writings now and hereafter evidencing the same, including,
<br /> without limitation, those obligations evidenced by the following:
<br /> a. Promissory Note in the principal amount of $680,695.00, made, executed and
<br /> delivered by Preferred Real Estate Holding,LLC to the order of Subordinate Creditor
<br /> on September 26, 2013 (the "Purchase Price Note");
<br /> b. Development Agreement between Preferred Real Estate Holding, LLC and
<br /> Subordinate Creditor dated September 26, 2013 (the "Development Agreement");
<br /> and
<br /> C. Guaranty of Preferred Powder Coating, LLC, Lloyd Peterson and Dan Bosshart, in
<br /> favor of Subordinate Creditor, to secure the obligations of Preferred Real Estate
<br /> Holding, LLC pursuant to the Development Agreement (the "Shortfall Guaranty"),
<br /> 2. All of the debts,obligations and liabilities of Debtor to the Bank,now existing or hereafter
<br /> arising,direct or indirect,absolute or contingent,joint or several,whether as maker,endorser,surety,
<br /> guarantor or otherwise, as well as all notes and other writings now and hereafter evidencing the
<br /> same, are herein called the "Bank's Claim." The Bank's Claim shall include, without limitation,
<br /> obligations of Debtor evidenced by the following:
<br /> a. Construction and Term Loan Agreement between Debtor and Bank dated September
<br /> 26,2013 ("Loan Agreement"),in the original amount of Five Hundred Ninety Three
<br /> Thousand and No/]00 Dollars($5,093,000.00),as amended on May_,2014 to
<br /> include additional credit extended by Bank to Debtor, increasing the total
<br />
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