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SECURITY INTEREST SUBORDINATION AGREEMENT
<br />To: First National Bank of Elk River, a national bank association (the "Bank ")
<br />For good and valuable consideration, the receipt and sufficiency of which are hereby
<br />acknowledged, and to induce the Bank to extend additional credit to, or for die benefit of, Preferred
<br />Powder Coating, LLC, a Minnesota limited liability company, and Preferred Real Estate Holding,
<br />LLC, a Minnesota limited liability company (both collectively and individually referred to as
<br />"Debtor "), the Economic Development Authority of the City of Elk River, a public body corporate
<br />and politic of the State of Minnesota (the "Subordinated Creditor "), hereby agrees that regardless of
<br />any priority otherwise available to the Subordinated Creditor by law or by agreement, those security
<br />interests held by the Subordinated Creditor in the assets of Debtor (the "Property "), evidenced by
<br />the following documents:
<br />a. Security Agreement (Microloan) executed by Debtor in favor of Subordinated Creditor on
<br />September 26, 2013, securing all indebtedness of Debtor to Subordinated Creditor,
<br />including, without limitation, obligations created under the loan agreement and promissory
<br />note in the amount of $100,000.00, payable by Debtor to the order of Subordinated Creditor
<br />dated September 26, 2013; and
<br />b. Security Agreement (Forgivable Loan Program) executed by Debtor in favor of
<br />Subordinated Creditor on September 26, 2013, securing all indebtedness of Debtor to
<br />Subordinated Creditor, including, without limitation, obligations created under the loan
<br />agreement and promissory note in the amount of $200,000.00, payable by Debtor to the
<br />order of Subordinated Creditor dated September 26, 2013;
<br />shall be and shall remain fully subordinate for all purposes to any security interest and assignment
<br />now held or at any time hereafter granted to or acquired by Bank in any portion or all of the
<br />Property, including die security interest held by the Bank, as evidenced by the following document:
<br />a. Security Agreement executed by Debtor in favor of Bank on September 26, 2013, securing
<br />obligations owed to Bank in the original amount of Five Hundred Ninety Three Thousand and
<br />No/ 100 Dollars ($5,093,000.00) pursuant to the Construction and Term Loan Agreement and
<br />Promissory Note execute in favor of Bank on September 26, 2013, as amended on or about
<br />May , 2014 to include additional credit extended by Bank to Debtor, increasing the
<br />total amount of indebtedness secured by Security Agreement to the sum Five Million
<br />Four Hundred Seventy Nine Thousand Dollars ($5,479,000.00).
<br />The Subordinated Creditor further agrees that:
<br />1. The Subordinated Creditor shall not, without the prior written consent of the Bank,
<br />commence or prosecute any action or proceeding with respect to any of the Property, exercise any
<br />collection rights with respect to any of the Property, take possession of, sell or dispose of, or
<br />otherwise deal with, any of the Property, or exercise or enforce any right or remedy which may be
<br />available to the Subordinated Creditor with respect to any of the Property upon default; provided,
<br />however, if Debtor is in default with Subordinated Creditor, then upon the occurrence of any
<br />default by Debtor of any loan agreement with the Bank, if within 180 days after such default, Bank
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