HomeMy WebLinkAbout11-14-01 2. LOAN AGREEMENT CITY OF ORONO,MINNESOTA
SENIOR HOUSING REVENUE BONDS
(ORONO WOODS APARTMENT PROJECT)
SERIES 2001A
and
CITY OF ORONO,MINNESOTA
SENIOR HOUSING REVENUE BONDS
(ORONO WOODS APARTMENT PROJECT)
TAXABLE SERIES 2001B
and
CITY OF ORONO,MINNESOTA
SENIOR HOUSING REVENUE BONDS
(ORONO WOODS APARTMENT PROJECT)
SUBORDINATE SERIES 2001C
LOAN AGREEMENT
Dated as of November 1, 2001
by and between
CITY OF ORONO, MINNESOTA,
and
ORONO SENIOR HOUSING, LLC
LOAN AGREEMENT
TABLE OF CONTENTS
PARTIES AND RECITALS PAGE
Parties 1
Recitals 1
ARTICLE I DEFINITIONS AND INTERPRETATION 5
Section 1.01 Definitions 5
Section 1.02 Characteristics of Certificate or Opinion. +0-11
Section 1.03 Additional Provisions as to Interpretation. 11
ARTICLE II REPRESENTATIONS, ETC i-2-13
Section 2.01 Representations by the City. +2-13
Section 2.02 Representations, Warranties and Covenants by the Borrower. X13
Section 2.03 Tax Representations and Covenants of the Borrower +4-15
ARTICLE III ISSUANCE OF THE SERIES 2001 BONDS; PROJECT AND
PROJECT FUND 120
Section 3.01 Completion of Project. +9-20
Section 3.02 Agreement to Issue Bonds; Application of Bond Proceeds. 20 21
Section 3.03 Disbursements from the Project Fund 20 21
Section 3.04 Obligation of the Borrower to Cooperate in Furnishing Documents to the
Trustee 222
Section 3.05 Establishment of Disbursing Agreement. 2-1-22
Section 3.06 Borrower Required to Provide Funds in Event Project Fund Insufficrt22
Section 3.07 Investment of Moneys in the Project Fund. 2-1-22
Section 3.08 Inspection of Project Facilities. 24-22
Section 3.09 Abandonment of Project. 2-1-22
Section 3.10 Establishmcnt 3.10Establishment of Completion Date 22 23
ARTICLE IV LOAN PAYMENTS AND DEPOSITS 2-4-25
Section 4.01 The Loan. 24-25
Section 4.02 Repayment of Loan; Pledge of Monthly Net Project Revenues. 24 and
Tax Increment Revenues 25
Section 4.03 Additional Payments 25 26
Section 4.04 No Set-Off; Borrower's Obligations Unconditional 26 27
Section 4.05 Interest on Loan Repayments and Other Overdue Payments. 228
Section 4.06 Options to Prepay Loan. 27 28
Section 4.07 Additional Tax-Related Payments. 28 29
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Section 4.08 Investment of Funds, Credits. 29 30
Section 4.09. Pledge of Tax Increment Revenues 29 31
ARTICLE V PROJECT FACILITIES 332
Section 5.01 Use of Project Facilities; Compliance with Laws 3+32
Section 5.02 Ownership, Maintenance, Operation and Disposition of Project Facilities
by Borrower. 3+32
Section 5.03 Liens 32 33
Section 5.04 Taxes and Other Governmental Charges. 32 33
Section 5.05 Alterations to Project Buildings. 33 34
Section 5.06 Installation of Equipment. 3-3-34
Section 5.07 Removal of Equipment. 33 34
Section 5.08 Release of Real Property 34-35
Section 5.09 Insurance. 3-6-37
Section 5.10 Damage or Destruction. 33-38
Section 5.11 Condemnation. 3-9-40
ARTICLE VI SPECIAL COVENANTS 42-43
Section 6.01 No Warranty of Condition or Suitability; Indemnification 42-43
Section 6.02 Financial Statements and other Reports. 42-43
Section 6.03 Annual Budget. 4-3-44
Section 6.04 Borrower to Maintain its Existence; Conditions Under Which Exceptions
Permitted. 4=4-45
Section 6.05 Records and Inspection. 45-46
Section 6.06 Further Assurances, Financing Statements, Maintenance of Lien. 4.5-46
Section 6.07 Assignment; Trust Funds Exempt 45-46
Section 6.08 Observance of Indenture Covenants and Terms. 45-46
Section 6.09 Nondiscrimination 45-46
Section 6.10 Environmental Matters. 45-46
Section 6.11 Sole Business of Borrower. 48-49
Section 6.12 Matters Related to Management Contracts. 4-8-49
Section 6.13 Rate Covenant 4-8-49
Section 6.14 Limitations on Indebtedness. 4-9-50
Section 6.15 Short-Term Indebtedness. 49-50
Section 6.16 Interim Indebtedness 49-50
Section 6.17 Additional Senior Indebtedness. 49-50
Section 6.18 Calculation of Debt Service. 5+52
Section 6.19 Subordinate Debt. 52-53
Section 6.20 Restrictions on Transfers and Payments. 52-53
Section 6.21 Additional Indemnities. 53-
54
Section 6.22 Continuing Disclosure 54
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ARTICLE VII EVENTS OF DEFAULT AND REMEDIES 54-56
Section 7.01 Events of Default. 54-56
Section 7.02 Remedies on Default 5-5-57
Section 7.03 Remedies Cumulative, Delay Not to Constitute Waiver. 5-5-57
Section 7.04 Agreement to Pay Attorneys' Fees and Expenses 56-58
Section 7.05 Advances 56-58
Section 7.06 Notice and Borrower's Remedial Plans. 56-58
ARTICLE VIII MISCELLANEOUS 57-59
Section 8.01 Amounts Remaining in Funds 559
Section 8.02 Notices. 5+59
Section 8.03 Reference to Bonds Ineffective after Bonds Paid. 5 -59
Section 8.04 Binding Effect 58-60
Section 8.05 Amendments, Changes and Modifications. 58-60
Section 8.06 Counterparts. 5-8-60
Section 8.07 Severability. 5-8-60
Section 8.08 Nonrecourse Liability of Borrower 5-8-60
Section 8.09 Benefit of Bondholders. 59-61
Section 8.10 Limitation on Liability of the City. 5-9-61
Section 8.11 Term of Agreement 60-62
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LOAN AGREEMENT
THIS LOAN AGREEMENT,made as of the 1 S`day of November,2001,between
the CITY OF ORONO, MINNESOTA, a Minnesota municipal corporation (the "City"), and
ORONO SENIOR HOUSING,LLC,a limited liability company organized under the laws ofthe
State of Minnesota (the "Borrower"), with capitalized terms in the Recitals below being used
with the meanings ascribed thereto in Section 1.01.
RECITALS:
WHEREAS,City is authorized pursuant to Minnesota Statutes,Chapter 462C,as
amended (the "Act"), to issue and sell revenue bonds and lend the proceeds thereof for the
purpose of financing multifamily housing developments; and
WHEREAS, the Borrower and Wedum Foundation, a nonprofit corporation
organized under the laws of the State of Minnesota and an organization described in Section
501(c)(3) of the Internal Revenue Code of 1986, as amended(the "Sole Member"),which is the
sole corporate member of the Borrower, have requested that the City authorize the issuance of
revenue bonds under the Act to finance the acquisition, development, construction, and
equipping by the Borrower of a 62-unit senior housing development to be located in the City(the
"Project"); and
WHEREAS, at the request of the Borrower, pursuant to the Indenture, the City
is issuing$ in aggregate principal amount of its Senior Housing Revenue Bonds(Orono
Woods Apartment Project), Series 2001A(the "Series 2001A Bonds"), $ in aggregate
principal amount of its Senior Housing Revenue Bonds (Orono Woods Apartment Project),
Taxable Series 2001B (the "Series 2001B Bonds", and together with the Series 2001A Bonds,
the"Senior Bonds"),and$ in aggregate principal amount of its Senior Housing Revenue
Bonds(Orono Woods Apartment Project),Subordinate Series 2001 C(the"Subordinate Bonds",
and together with the Senior Bonds, the "Series 2001 Bonds" or the "Bonds"); and
WHEREAS, the City has agreed to loan the proceeds of the Series 2001 Bonds
to the Borrower pursuant to the terms of this Loan Agreement; and
WHEREAS, the proceeds of the loan will be applied to the following purposes:
(i) to finance the costs of acquiring, developing, constructing, equipping and financing the
Project, (ii)to fund the debt service reserve fund for the Senior Bonds, (iii)to pay certain costs
of issuing the Series 2001 Bonds,and(iv)to fund a portion of the interest accruing on the Series
2001 Bonds during construction and lease-up of the Project; and
WHEREAS, simultaneously with the execution and delivery of this Loan
Agreement, the Borrower proposes to execute and deliver to the City (a) a Combination
Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Rents and
Leases, dated as of November 1, 2001 (the "Mortgage"), and the City intends to assign its
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interest therein to the Trustee to provide security for the payment of the Senior Bonds and for
the performance of the Borrower's obligations under this Agreement; and (b) a Subordinate
Combination Mortgage, Security Agreement, Fixture Financing Statement and Assignment of
Rents and Leases, dated as of November 1, 2001 (the "Subordinate Mortgage"), and the City
intends to assign its interest therein to the Trustee to provide security for the payment of the
Subordinate Bonds and for the performance of the Borrower's obligations under this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01 Definitions. Capitalized terms used but not defined herein and not required
to be otherwise capitalized are used with the meanings,if any,ascribed thereto in the Indenture or Mortgage.
Unless the context otherwise requires,the terms defined in this Article I and in the succeeding Articles hereof
shall,for all purposes of this Agreement,including the Recitals,and of any agreement supplemental hereto,
have the meanings herein specified,such definitions to be equally applicable to both the singular and plural
forms of any of the terms defined.
"Agreement"means this Loan Agreement between the City,the Borrower and the
Sole Member, dated as of November 1, 2001, as from time to time amended or supplemented.
"Assignment of TIF Note"means the assignment of the Tax Increment Note from
the Borrower to the Trustee.
"Authorized City-Borrower Representative" means the-any person at the time
designated to act on behalf of the City Borrower by written certificate furnished to the Borrower
City and the Trustee, containing the specimen signature of such person and signed on behalf of
the City by its Mayor or its City Administrator. Such certificate by the Chief Manager of the
Borrower. Such Certificate may designate an alternate or alternates.
"Authorized Borrower-City Representative" means any the person at the time
designated to act on behalf of the Borrower City by written certificate furnished to the C--ity
Borrower and the-Trustee;containing the specimen signature of such person and signed brthe
Chief-Manager of the Borrower. Such Certificate on behalf of the City by its Mayor or its City
Administrator. Such certificate may designate an alternate or alternates.
"Balloon Indebtedness" shall have the meaning set forth in Section 6.18 hereof.
"Borrower" means Orono Senior Housing, LLC, a Minnesota limited liability
company, its successors and assigns.
"Budget" means the Budget so named in Section 6.03.
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"Certificate" means a certification in writing required or permitted by the
provisions of this Agreement or the Indenture, signed and delivered to the Trustee or other
proper person or persons. If and to the extent required by the provisions of Section 1.02 hereof,
each Certificate shall include the statements provided for in said Section 1.02.
"City" means the City of Orono, a Minnesota municipal corporation.
"Closing Date" means the date of issuance and initial delivery to the Original
Purchaser of the Series 2001 Bonds.
"Collateral" means the Collateral defined in Section 8.08.
"Completion Date" means the date on which all acquisition, construction and
equipping of the Project is substantially completed,as evidenced pursuant to Section 3.10 hereof.
"Continuing Disclosure Agreement"means the Continuing Disclosure Agreement,dated as
of November 1, 2001, between the Trustee and the Borrower.
"Default" means any event or condition, which, with the passage of time, notice
or both, will constitute an Event of Default.
"Debt Service Coverage Ratio" means for any or all Series of Bonds and for any
period the ratio of Net Revenues Available for Debt Service to the actual Debt Service
Requirement for any or all Series of Bonds.
"Debt Service Requirement" means, with respect to any period, the aggregate
principal and interest due on Indebtedness, including amounts due with respect to sinking fund
or similar scheduled payments.
"Development Agreement" means the Development Agreement, dated as of
November 1,2001 between the City,the Orono Housing and Redevelopment Authority,and the
Borrower, as amended from time to time.
"Disbursing Agreement"means the Disbursing Agreement,dated as ofNovember
1, 2001, between the Borrower, the Trustee and Universal Title Company, as
disbursing agent.
"Equipment" means all items of furnishings, furniture, equipment, and other
tangible personal property.
"Event of Default" means an event of default described in Section 7.01 of this
Agreement which has not been cured.
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"Fiscal Year" means the fiscal year of the Borrower designated from time to time
in writing to the Trustee,and shall initially mean the 12-month period commencing each January
1.
"501(c)(3)Organization"means an organization described in Section 501(c)(3)of
the Code whose income is exempt from taxation under Section 501(a) of the Code.
"Force Majeure" means any one or more of the following: acts of God; strikes,
lockouts or other economic disturbances; acts of public enemies;orders or restraints of any kind
of the government of the United States or of the State or any of their departments, agencies, or
officials, or any civil or military authority; insurrections; riots; landslides; earthquakes; fires;
storms; droughts, floods or other adverse weather conditions; explosions;breakages or accident
to machinery, transmission pipes or canals; temporary inability to obtain supplies or materials
or governmental permits or licenses (other than licenses and permits necessary to commence
construction of the Project); or any other cause or event not reasonably within the control of the
Borrower.
"Governmental Unit" means any state or any political subdivision of a state.
"Gross Revenues" means, for any period, (i) all Project Revenues, (ii) all
investment income of the Borrower or on amounts held by the Trustee(other than in the Project
Fund or the Rebate Fund) under the terms of this Indenture, (iii) all contributions to the
Borrower that are available to pay all principal and interest on all Indebtedness of the Borrower
and all Operating Expenses, (iv) all Tax Increment Revenues received from the City under the
Tax Increment Note or from any other source, and (v) all other non-operating income of the
Borrower, excluding unrealized gains on investments, income from the forgiveness of
Indebtedness, proceeds of any borrowing, proceeds from the sale of any asset not occurring in
the ordinary course of business, and any item of an extraordinary or nonrecurring nature.
"Ground Lease" means the Ground Lease between the Borrower and the Orono
Housing and Redevelopment Authority(the "HRA"), dated as of November 1, 2001, by which
the HRA has conveyed a leasehold interest in the Land to the Borrower.
"Improvements" means any additions, enlargements, improvements, extensions,
alterations, or renovations of or to the Project Facilities as they then exist, and any fixtures,
structures or other facilities acquired or constructed by the Borrower and located on the Land.
"Indebtedness" means (i) all indebtedness,whether or not represented by bonds,
debentures,notes or other securities,for the repayment of money borrowed,(ii)all indebtedness
for the payment of the purchase price of property or assets purchased, (iii) all guaranties,
endorsements, assumptions and other contingent obligations with respect to, or to purchase or
to otherwise acquire, indebtedness of others, (iv) all indebtedness secured by any mortgage,
pledge or lien existing on property owned, subject to such mortgage,pledge or lien,whether or
not indebtedness secured thereby shall have been assumed, and (v) installment purchase
contracts, loans secured by purchase money security interests, lease-purchase agreements or
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capital leases(including leases of real property),entered into by the Borrower in connection with
the acquisition of property not previously owned by the Borrower and computed in accordance
with generally accepted accounting principles;provided,however,that"Indebtedness"does not
include: (a) debt up to the amount of the aggregate cash equivalents and marketable securities
(valued at market) held in the funds of the Borrower which have been pledged and designated
by the Borrower (consistent with the restriction attendant to such funds), to satisfy a specified
debt of the Borrower, (b) trade accounts payable and accrued expenses incurred in the normal
course of business, or (c) Permitted Purchase Money Security Interests. For purposes of this
definition,no single evidence of indebtedness shall be counted more than once even though more
than one of the clauses (i) - (v) above may apply. Indcbtedncss shall not includc thc Operating
Loan as dcfined in thc Indcnturc.
"Indenture" means the Indenture of Trust between the City and U.S. Bank Trust
National Association, as Trustee, of even date herewith, under which the Bonds are authorized
to be issued, and including any amendments or supplements thereto.
"Independent Engineer" means an Independent engineer or engineering firm or
an Independent architect or architectural firm qualified to practice the profession of engineering
or architecture under the laws of Minnesota.
"Inspecting Architect" means
"Insurance Consultant" means a representative of a nationally or regionally
recognized insurance company or other consultant selected by the Borrower and experienced in
matters pertaining to insurance coverage for multifamily residential housing projects,including
the selection and maintenance of insurance coverage in such matters as public liability insurance,
hazard insurance, workers compensation, flood insurance, and business interruption or loss of
rents insurance.
"Interim Indebtedness"means any Indebtedness incurred,assumed or guaranteed
by the Borrower on an interim basis to provide temporary financing as permitted by Section 6.16
hereof.
"Land" means the land and interests in land constituting the site of the Project, as
described in Exhibit A to the Mortgage and the Subordinate Mortgage.
"Loan" means the loan from the City to the Borrower of the gross proceeds of
issuance of the Bonds, made pursuant to this Agreement.
"Loan Documents" means this Agreement, the Mortgage, the Subordinate
Mortgage, the Ground Lease, the Continuing Disclosure Agreement, the Development
Agreement, the Tax Increment Note, the Assignment of TIF Note, the Disbursing Agreement,
the Assignment of Construction Agreement, the Assignment of Architect's Agreement, each
assignment to the Trustee as security for any Bonds of the Project Plans or any architectural,
engineering, design, construction, equipment or other contract for the purchase of material or
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labor for the Project,the assignment of any Management Contract,the Development Agreement,
and the assignment of the Development Agreement to the Trustee.
"Loan Repayments" means amounts required to be paid under Section 4.02(a)to
pay when due the principal of and interest on outstanding Bonds.
"Long-Term Indebtedness" means any Indebtedness of the Borrower other than
Short-Term Indebtedness or Interim Indebtedness.
"Management Consultant"means an Independent person,experienced in the study
of operations of senior housing facilities and having a favorable reputation therefor throughout
the United States or the State of Minnesota for skill and expertise in such work and, unless
otherwise specified in the Loan Agreement or the Indenture, as selected and engaged by the
Borrower.
"Monthly Net Project Revenues" means as defined in the Indenture.
"Monthly Repair and Replacement Fund Deposit"means for each month the amount of$775
(1/12 of the product of$150 multiplied by the number of Project units(62)).
"Mortgage" means the Combination Mortgage Security Agreement, Fixture
Financing Statement and Assignment of Rents and Leases, dated as of November 1, 2001, from
the Borrower to the City and as assigned to the Trustee as security for the Senior Bonds.
"Mortgaged Property" means the Mortgaged Property described in the granting
clauses to the Mortgage and the Subordinate Mortgage.
"Net Revenues Available for Debt Service" means, for any period, the excess of
Gross Revenues over Operating Expenses.
"Operating Expenses" means the same as defined in the Indenture.
"Operating Reserve Fund" means the fund established under Section 5.11 of this
the Indenture.
"Operating Reserve Requirement" means an amount equal to $250,000, which
amount may be funded by cash, a bank letter of credit, or any combination thereof.
"Permitted Encumbrances" means, as of any particular time: (i) liens for ad
valorem taxes and special assessments not then delinquent, (ii) utility, access and other
easements and rights-of-way, mineral rights, restrictions and exceptions that an Independent
Engineer certifies will not interfere with or impair the use of or operations being conducted in
the Project Buildings,(iii)such minor defects,irregularities,encumbrances,easements,rights-of-
way and clouds on title as normally exist with respect to properties similar in character to the
Project Facilities and as do not in the aggregate, in the opinion of Independent Counsel,
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materially impair the property affected thereby for the purposes for which it was acquired or is
held by the Borrower, (iv) the Mortgage, (v) any mortgage lien subordinate to the lien of the
Mortgage to be granted after the date hereof by the Borrower in connection with incurring any
indebtedness in respect of borrowed funds provided, however, that the terms of any such
indebtedness shall require that no remedies may be exercised with respect thereto unless and
until all amounts due in respect of Senior Indebtedness have been fully paid or provided for,
(vi)Permitted Purchase Money Security Interests,(vii)security interests in accounts receivable
securing Short-Term Indebtedness permitted under Section 6.15, (viii) the Ground Lease, and
(ix)those additional encumbrances identified in Exhibit B to the Mortgage and the Subordinate
Mortgage.
"Permitted Purchase Money Security Interests" means any security interest,
retention of title, financing lease, or installment purchase or similar contract whereby a seller of
personal property retains a right of repossession, provided that the aggregate purchase price of
all outstanding Permitted Purchase Money Security Interests may not exceed $50,000.
"Program" means a program within the meaning of the Act authorizing the
issuance of the Series 2001 Bonds.
"Project"means the development,design,acquisition,construction,equipping and
financing of a senior multifamily housing facility located on the Land containing 62 units for
independent living by senior residents and related and subordinated facilities thereto.
"Project Buildings" means all improvements or buildings financed in whole or in
part with proceeds of the Bonds or other amounts disbursed under the Loan Agreement or the
Disbursing Agreement and now or hereafter located on the Land, as the same may be improved
or expanded from time to time, and including all related building service equipment and other
fixtures incorporated therein or attached thereto.
"Project Costs" means the same as that term is defined in the Indenture.
"Project Equipment" means all Equipment located in the Project Buildings or
otherwise on the Land or elsewhere, to the extent financed in whole or part with proceeds of
Bonds or amounts disbursed under the Indenture or the Disbursing Agreement.
"Project Facilities" means the Land and all Project Buildings and Project
Equipment to be acquired, constructed or installed as part of the Project or which is otherwise
located on the Land as the same may exist at any time.
"Project Plans"means the plans and specifications for the acquisition,construction
and equipping the Project to be kept on file by the Borrower for inspection by the City, the
Trustee and the Inspecting Architect and any modifications thereof and additions thereto
permitted hereunder.
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"Project Revenues" means, for a period, as determined in accordance with
generally accepted accounting principles, all operating revenues received by or on behalf of the
Borrower for the ownership, lease or other operation of the Project Facilities, from any source,
including all rent, charges or fees derived from the use or occupancy thereof, and proceeds of
business or rent interruption insurance, excluding security deposits from tenants, proceeds of
insurance (other than from business or rent interruption insurance), interest income, gain from
the sale of any investment, and any item of an extraordinary or nonrecurring nature.
"Repair and Replacement Fund"means the fund so named in Section 4.01 of the Indenture.
"Senior Bonds" means the Series 2001A Bonds and the Series 2001B Bonds.
"Series 2001A Bonds" means the$ in aggregate principal amount of the
City of Orono, Minnesota Senior Housing Revenue Bonds (Orono Woods Apartment Project),
Series 2001A.
"Series 2001B Bonds" means the$ in aggregate principal amount of the
City of Orono, Minnesota Senior Housing Revenue Bonds (Orono Woods Apartment Project),
Taxable Series 2001B.
"Series 2001 Bonds" means the Senior Bonds and the Subordinate Bonds.
"Series 2001 Tax-Exempt Bonds" means the Series 2001A Bonds and the
Subordinate Bonds.
"Short-Term Indebtedness"means any unsecured Indebtedness incurred,assumed
or guaranteed by the Borrower maturing not more than twelve months after it is incurred, but
shall not include Interim Indebtedness,trade accounts payable, accrued payroll or payroll taxes.
"Sole Member"means Wedum Foundation,a Minnesota nonprofit corporation and
501(c)(3) Organization.
"State" means the State of Minnesota.
"Stated Maturity"when used with respect to any Bonds,means the date specified
in such Bond as the fixed date on which the principal of such Bond is due and payable.
"Subordinate Bonds" means the $ in aggregate principal amount of its
Senior Housing Revenue Bonds(Orono Woods Apartment Project), Subordinate Series 2001 C.
"Subordinate Mortgage"means the Subordinate Combination Mortgage Security
Agreement, Fixture Financing Statement and Assignment of Rents and Leases, dated as of
November 1, 2001, from the Borrower to the City and as assigned to the Trustee as security for
the Subordinate Bonds.
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"Tax Increment Note" means the Tax Increment Revenue Note of 2001, dated as of
November 1, 2001, from the HRA to the Borrower; .
"Tax Increment Revenue"means all collections of tax increments which the HRA
is required under the Tax Increment Note to pay to the Borrower and which are pledged and
assigned by the Borrower under the Assignment of TIF Note and directed to be transmitted to
the Trustee for deposit in the Revenue Fund; .
"Term" means the duration of this Agreement as specified in Section 8.11.
"Variable Rate Indebtedness" shall have the meaning set forth in Section 6.18
hereof.
Section 1.02 Characteristics of Certificate or Opinion. Every certificate or opinion with
respect to compliance with a condition or covenant provided for in the Indenture or this Agreement, shall
include:(i)a statement that the person or persons making such certificate or opinion have read such covenant
or condition and the definitions herein relating thereto;(ii)a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in such certificate or opinion
are based; (iii) a statement that, in the opinion of the signers, they have made or caused to be made such
examination or investigation as is necessary to enable them to express an informed opinion as to whether or
not such covenant or condition has been complied with; and(iv)a statement as to whether, in the opinion
of the signers, such condition or covenant has been complied with.
Any Certificate made or given by an officer of the City or the Borrower or by an
Independent engineer, architect, consultant or other person may be based, insofar as it relates to
legal matters, upon an Opinion of Counsel, unless such person knows that the Opinion with
respect to the matters upon which his or her Certificate may be based as aforesaid is erroneous,
or,in the exercise of reasonable care,should have known that the same was erroneous. Any such
Certificate or Opinion of Counsel may be based, insofar as it relates to factual matters or
information with respect to which is in the possession of the City or the Borrower, upon a
supporting Certificate of an officer or officers of the City or the Borrower, unless the signer
knows that the supporting Certificate with respect to the matters upon which his or her
Certificate or opinion may be based as aforesaid is erroneous, or, in the exercise of reasonable
care, should have known that the same was erroneous.
Section 1.03 Additional Provisions as to Interpretation. This Agreement shall be construed
and applied in accordance with the laws of the State.
Unless the context indicates otherwise, words importing the singular number
include the plural number, and vice versa. Words of any gender include the correlative words
of the other gender. "Articles" and "Sections" mentioned by number only are the respective
Articles and Sections of this Agreement so numbered. The terms "hereof," "hereby," "herein,"
"hereto," "hereunder," "hereinafter," and similar terms refer to this Indenture; and the term
"hereafter" means after, and the term "heretofore" means before, the date on which this
Agreement was fully executed. Reference to a "person" shall include any natural individual,
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corporation,association,partnership,joint venture,trust,limited liability company or partnership
or any other legally recognized entity.
Unless otherwise expressly provided herein, any terms pertaining to accounting
or financial matters shall be interpreted in accordance with generally accepted accounting
principles.
Reference to any person includes reference to any successor or assign of such
person to the extent not in contravention here. Reference to any person in any position, office
or capacity refers to any person who succeeds to such position, office or capacity or is otherwise
authorized to act is such position, office or capacity due to the absence or incapacity of such
person, who regularly holds such position, office or capacity. Reference to any instrument or
document includes reference to any amendment or modification thereof not in contravention
hereof or the Indenture.
The captions or headings herein are for convenience only and in no way define,
limit or describe the scope or intent of any provisions or sections of this Indenture.
Any terms defined in the Indenture—er—tic Mortgagc , the Mortgage, the
Subordinate Mortgage or the Continuing Disclosure Agreement but not defined herein shall have
the same meaning herein unless the context hereof clearly requires otherwise.
[End of Article I]
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ARTICLE II
REPRESENTATIONS,ETC.
Section 2.01 Representations by the City. As of the Date of Issuance of the Series 2001
Bonds,the City represents to the Borrower:
(a) The City is a municipal corporation duly organized and validly existing under the
laws of the State.
(b) On May 14, 2001, the City held a hearing during a meeting of the City Council,
duly called and convened,to consider adoption of the Program under the Act and
the granting of preliminary authorization for the Project.Such meeting and hearing
were open to the public, all who were present at the hearing were offered the
opportunity to speak on the matter.
(c) Following the hearing, the City Council adopted the Program and granted
preliminary authorization for the Project,while a quorum was in attendance.
(d) On October 22, 2001, the City, at a meeting of the City Council, duly called and
convened,granted final authorization for the Project and provided for the issuance
of the Series 2001 Bonds and the City's execution of the Indenture, the Loan
Agreement,the Bond Purchase Agreement, and the various assignments, while a
quorum was in attendance.
(e) There is no litigation pending or,to the actual knowledge of the City threatened,
against the City, questioning the City's execution and delivery of the Series 2001
Bonds, or this Agreement, the Indenture, the Mortgage, the Subordinate or the
mortgage assignments or questioning the powers or authority of the City under the
Act,or questioning the corporate existence or boundaries of the City or the title of
any of the present officers of the City to their respective offices.
(f) The City's execution and delivery of the Indenture and the Loan Agreement and the
assignment to the Trustee of the Mortgage and the Subordinate Mortgage do not
violate any agreement or any court order or judgment in any litigation to which the
City is a party or by which it is bound.
(g) The Series 2001A Bonds and the Subordinate Bonds are designated as
qualified tax-exempt obligations under Section 265 (b) (3) of the Code.
Section 2.02 Representations,Warranties and Covenants by the Borrower. As of the Date
of Issuance of the Series 2001 Bonds,the Borrower represents to the City:
(a) The Borrower is a limited liability company duly organized, in good standing and
existing as a limited liability company under the laws of the State,and the Borrower
has full power and authority to undertake its actions and responsibilities as
contemplated by this Agreement.
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(b) The Sole Member is the sole member of the Borrrower and is a Minnesota
nonprofit corporation duly organized,in good standing and existing under
the laws of the State, and the Sole Member has full power and authority
to undertake its actions and responsibilities as contemplated by this
Agreement.
•
(c) The Project Facilities will constitute a"multifamily housing development"within
the meaning of the Act since they will include an apartment facility which include
four or more dwelling units,each to be rented or occupied by a person or family for
use as a residence.
(d) The Loan will finance the acquisition and preparation of a site and the construction
of a new development,within the meaning of Minn. Stat. §462C.05(1)(a).
(e) Upon completion, the Project Facilities will comply with all applicable building
code requirements.
(f) Substantially all proceeds of the Series 2001 Bonds shall be used to pay the cost of
a multifamily housing development, including property functionally related and
subordinate to it.
(g) The Project Facilities are designed for rental primarily to elderly persons.
(h) On ,2001 ,notice for a public hearing to be held on May
14, 2001 to consider adoption of the Program was published in a newspaper
generally circulating in the City,which date was at least 15 days before the hearing.
(i) Subject only to Section 5.02 hereof,the Borrower intends to own and operate the
Project Facilities from the date hereof to the expiration or sooner termination of this
Agreement, as provided herein, except to the extent such operation may be
interrupted by strikes, riots, acts of God or public enemy or other circumstances
beyond the control of the Borrower.
(j) The execution and delivery of the Loan Documents,and the consummation of the
transactions herein and therein contemplated,will not conflict with or constitute a
breach of or default under the Borrower's Articles of Organization or its Operating
Agreement,or under the Sole Member's Articles of Incorporation or its Bylaws,or
any bond, debenture,note or other evidence of indebtedness or any contract, loan
agreement or lease to which the Borrower or the Sole Member is a party or by
which either is bound,or violate any law,regulation or order of the United States
or the State or agency or political subdivision thereof, or any court order or
judgment in any proceeding to which the Borrower or the Sole Member is or was
a party or by which either is bound.
(k) The proceeds of the Series 2001 Bonds, together with any other funds to be
contributed to the Project by the Borrower in accordance with this Agreement,will
be sufficient to pay all Project Costs.
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(1) As of the date hereof,the use of the Project as designed and proposed to be operated
complies,to the best of the Borrower's knowledge,in all material respects,with all
presently applicable development,pollution control,water conservation,and other
laws,regulations,rules and ordinances of the Federal Government and the State and
the respective agencies thereof and the political subdivisions in which the Project
is located. The Borrower has or has caused to be obtained or will obtain or will
cause to be obtained all necessary and material approvals and licenses, permits,
consents and franchises from federal, state, country, municipal or other
governmental authorities having jurisdiction over the Project and to enter into,
execute and perform its obligations under this Agreement.
(m) There is no litigation pending, or to the best of the Borrower's knowledge
threatened affecting the ability of the Borrower to operate the Project Facilities or
of the Borrower to carry out the terms of this Agreement, the Mortgage or the
Subordinate Mortgage.
(n) To the best knowledge of the Borrower, no member of the City Council or other
officer or employee of the City or the City had any direct or indirect interest in this
Agreement,the Series 2001 Bonds,the Project or any contract, agreement or job
hereby contemplated to be entered into or undertaken in connection therewith.
(o) There are no liens or encumbrances on the Project Facilities except Permitted
Encumbrances.
(p) The Official Statement relating to the issue and sale of the Series 2001 Bonds does
not contain any untrue statement of a material fact required to be set forth therein
or necessary in order to make the statements contained therein not misleading.
(q) The Borrower has reviewed the Indenture and hereby approves its provisions,
consents to its terms and agrees to abide by and perform all specific covenants and
obligations contained in the Indenture that are therein(or elsewhere) specifically
made, or which may become applicable to the Borrower.
(r) The Borrower covenants that it will comply with all provisions of the Act,including
without limitation any notice and filing requirements imposed under the Act.
(s) The recitals in this Agreement and the recitals in the Indenture are true and correct.
Section 2.03 Tax Representations and Covenants of the Borrower. As of the Date of
Issuance of the Series 2001 Bonds,the Borrower represents or covenants,as the case may be,the following
matters, understanding and acknowledging, after such consultation with such legal counsel as deemed
appropriate, that the exclusion from gross income of interest on the Series 2001 Tax-Exempt Bonds for
federal income tax purposes is dependent on the accuracy and truthfulness of such representations of the
Borrower and compliance with such covenants:
(a) All property to be provided by the proceeds of the Series 2001 Tax-Exempt Bonds
will constitute a part of the Project Facilities.
(b) So long as any Series 2001 Tax-Exempt Bonds are outstanding,the owner of the
Project Facilities shall be a 501(c)(3) Organization, a limited liability company
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whose sole member is a 501(c)(3)Organization,or a Governmental Unit(unless all
Series 2001 Tax-Exempt Bonds are redeemed within 90 days from date on which
there is a change from such an ownership). Neither the Borrower nor the Sole
Member has any expectation that the Project Facilities will be owned in
contravention of the preceding sentence,disregarding the parenthetical therein.
(c) So long as any Series 2001 Tax-Exempt Bonds are outstanding,no more than five
percent of the net proceeds of the Series 2001 Tax-Exempt Bonds(the sale proceeds
thereof,less amounts deposited in the Debt Service Reserve Fund)will be used by
any person other than:
(i) by a Governmental Unit,
(ii) by a 501(c)(3)Organization in a trade or business,the conduct of which is
substantially related to the exercise or performance by the 501(c)(3)
Organization of its charitable, educational, or other purpose or function
which constitutes the basis for its exemption under Section 501 of the Code
(other than such activities as will not constitute an "unrelated trade or
business"for the person under Section 513(a)of the Code)(collectively,a
"Non-Qualifying Use"),or
(iii) a limited liability company, the sole member of which is a
501(c)(3)Organization,that operates as described in subparagraph
(ii) above,
(unless all Series 2001 Tax-Exempt Bonds are redeemed within 90 days
from date on which there is a change from such an ownership). Neither
the Borrower nor the Sole Member has any expectation that the Project
Facilities will be used in contravention of the preceding sentence,
disregarding the last parenthetical therein. For purposes of the foregoing,
any proceeds of the Series 2001 Tax-Exempt Bonds used to finance Costs of
Issuance will be treated as used in a Non-Qualifying Use.
(d) The Sole Member is nonprofit corporation created and validly existing under the
laws of the State. The Sole Member is a 501(c)(3)Organization. Either(i)the Sole
Member has elected under Treasury Regulation §301.7701-3(a) to disregard the
Borrower as an entity separate from the Sole Member for federal income tax
purposes,or(ii)no election has been made under Treasury Regulation§301.7701-
3(b)(1)(i)not to disregard the Borrower as an entity separate from Sole Member for
federal income tax purposes.
(e) Within the meaning of Section 501(c)(3)of the Code,directly or indirectly,no part
of the net earnings of the Sole Member inures to the benefit of any private
shareholder or individual,no substantial part of the activities of the Sole Member
is the carrying on of propaganda,or otherwise attempting,to influence legislation
(except as otherwise provided in subsection(h)of Section 501 of the Code),and the
Sole Member does not and will not participate in, or intervene in (including the
publishing or distributing of statements),any political campaign on behalf of(or in
opposition to)any candidate for public office.
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(f) The Borrower's sole member is the Sole Member.
(g) While the Borrower will hold title to or an interest in the Project Facilities,the Sole
Owner is the owner of the Project Facilities for federal income tax purposes.
(h) So long as the Borrower holds title to or have an interest in the Project Facilities,
the Borrower shall have only one member, and no person other than the Sole
Member shall be such member,except to the extent the Trustee receives an opinion
of Bond Counsel to the effect that noncompliance with this paragraph will not cause
interest on any Tax-Exempt Bonds to be included in gross income for federal
income tax purposes.
(i) So long as the Series 2001 Tax-Exempt Bonds are unpaid,and the Borrower hold
title to or an interest in the Project Facilities, neither the Borrower nor the Sole
Member will take or omit to take, nor permit others to take or omit to take, any
action that would adversely affect the qualification of the Sole Member as a
501(c)(3) Organization, except to the extent the Trustee receives an opinion of
Bond Counsel to the effect that noncompliance with this paragraph will not cause
interest on any Series 2001 Tax-Exempt Bonds to be included in gross income for
federal income tax purposes.
(j) Within the meaning of Section 145(d)of the Code,the first use of all portions of the
Project Facilities will commence with the Borrower.
(k) Within the meaning of Section 147(b) of the Code, the average maturity of the
Series 2001 Tax-Exempt Bonds does not exceed 120% of the average reasonably
expected economic life of the Project Facilities determined as of the later of(i)the
date on which the Series 2001 Bonds are issued,or(ii)the date on which the Project
Facilities are placed in service,with such economic lives determined exclusive of
the economic life of the land purchased with the net proceeds of the Series 2001
Tax-Exempt Bonds,unless 25 percent or more of such proceeds are used to finance
land, in which case the economic life of such land will be 30 years.
(I) Within the meaning of Section 147(e) of the Code, no portion of the Series 2001
Tax-Exempt Bonds will be used to provide any airplane, skybox or other private
luxury box,facility primarily used for gambling,or store the principal business of
which is the sale of alcoholic beverages for consumption off premises.
(m) The Series 2001 Tax-Exempt Bonds have received public approval within the
meaning of Section 147(f)of the Code no earlier than one year prior to the Date of
Issuance of their issuance.
(n) No more than two percent of the proceeds of the Series 2001 Tax-Exempt Bonds
will be used to pay any Costs of Issuance, and any Costs of Issuance in excess of
two percent will be paid by the Borrower from funds other than the proceeds of the
Series 2001 Tax-Exempt Bonds.
(o) No obligations have been or will be issued under Sections 141, 142, 143, 144 or 145
of the Code that are being sold at substantially the same time as the Series 2001
Tax-Exempt Bonds,pursuant to a common plan of marketing and that are payable
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in whole or in part by the Borrower or the Sole Member or otherwise have any
common or pooled security for the payment of debt service thereon with the Series
2001 Tax-Exempt Bonds.
(p) The Borrower will not take any action or omit to take any action with respect to the
gross proceeds of the Series 2001 Tax-Exempt Bonds or with respect to any
amounts expected to be used to pay the principal thereof or the principal thereon,
which if taken or omitted,would cause any of the Series 2001 Tax-Exempt Bonds
to be classified as an "arbitrage bond" within the meaning of Section 148 of the
Code.
(q) The Borrower will not,at any time prior to the final payment of all Series 2001 Tax-
Exempt Bonds, direct or permit the Trustee to invest the gross proceeds of the
Series 2001 Tax-Exempt Bonds in any investment property(nor will the Borrower
use gross proceeds to replace any amounts so invested) if as a result of such
investment the yield of all investments acquired with gross proceeds (or funds
replaced thereby)exceeds the yield of the Series 2001 Tax-Exempt Bonds to stated
maturity, except as otherwise permitted by the Arbitrage Certificate delivered in
connection with the issuance of the Series 2001 Tax-Exempt Bonds.
(r) The Borrower will immediately remit to the Trustee,at such time as required by the
Trustee for deposit into the Rebate Fund,any amount required to be rebated to the
Internal Revenue Service pursuant to the provisions of Section 148 of the Code and
this Agreement.
(s) The Series 2001 Tax-Exempt Bonds are not subject to any federal guaranty within
the meaning of Section 149 of the Code,other than as specifically permitted under
such Section.
(t) The Borrower will provide to Bond Counsel for the Series 2001 Tax-Exempt Bonds
all information required to satisfy the informational requirements set forth in
Section 149(e)of the Code,including the information necessary to complete Form
8038 of the Internal Revenue Service.
(u) The Borrower reasonably expects that at least 85%of the spendable proceeds of the
Series 2001 Tax-Exempt Bonds will be used to carry out the governmental purpose
of the issue within three years of the date the Series 2001 Tax-Exempt Bonds are
issued. Not more than 50%of the proceeds of the Series 2001 Tax-Exempt Bonds
will be invested in nonpurpose investments(as defined in Section 148(f)(6)(A)of
the Code)having a substantially guaranteed yield for four years or more.
(v) The Borrower will not enter into any "management agreement" (as defined in
Revenue Procedure 97-13) in violation of such Revenue Procedure, except to the
extent the Trustee receives an opinion of Bond Counsel to the effect that
nonobservance of this representation will not cause interest on any Series 2001 Tax-
Exempt Bonds to be included in gross income for federal income tax purposes.
(w) Project Costs to be financed by the Series 2001 Tax-Exempt Bonds were paid or
incurred no earlier than 60 days prior to the adoption of"official intent" or are
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"preliminary expenditures" or "de minimus expenditures" within the meaning of
Treasury Regulation 1.150-2.
(x) Neither the Borrower, the Sole Member nor any "related person" as defined in
Treasury Regulations,Section 1.103-13(h)(2)(iv),will,pursuant to an arrangement,
formal or informal, purchase obligations of the City in an amount related to the
principal amount of the Series 2001 Tax-Exempt Bonds.
(y) Neither the Borrower nor the Sole Member will take or omit to take, nor permit
others to take or omit to take, any action, which, if taken or omitted, would
adversely affect the exclusion of interest on the Series 2001 Tax-Exempt Bonds
from gross income for federal income tax purposes.
(z) Not more than 5%of the sale proceeds of the Series 2001 Tax-Exempt Bonds will
be spent on working capital within the meaning of Treasury Regulation§1.148-6(c),
except as otherwise described in§1.148-6(d)(3)(ii). No proceeds of the Series 2001
Tax-Exempt Bonds will be applied to fund a working capital reserve within the
meaning of Treasury Regulation §1.148.
(aa) The Borrower has provided, or caused to be provided, to Bond Counsel for the
Series 2001 Tax-Exempt Bonds all documents, instruments and other written
material requested by Bond Counsel to enable Bond Counsel to render its opinion
with respect to the tax-exempt status of interest on the Series 2001 Tax-Exempt
Bonds. In addition,such documentation provided to Bond Counsel did not and does
not contain any untrue statement of a material fact and did not and does not omit to
state any material fact necessary to be stated therein to make the information
provided therein, in light of the circumstances under which such information was
provided,not misleading with respect to any matter relied upon by Bond Counsel
in rendering such opinion,and the Sole Member is not aware of any other material
information which Bond Counsel has not requested.
[End of Article II]
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ARTICLE III
ISSUANCE OF THE SERIES 2001 BONDS;
PROJECT AND PROJECT FUND
Section 3.01 Completion of Project.
(a) The Borrower shall make all contracts and do all things necessary for the
completion of the Project,with or without advertising for bids,and the Borrower
agrees that:
(i) The Borrower shall cause the Project Buildings and Project Equipment to
be acquired, constructed, equipped and installed wholly within the
boundary lines of the Land in substantial accordance with the Project Plans
and the construction contracts,as the same may be modified from time to
time in accordance with the provisions hereof, and shall provide or cause
to be provided all other improvements, access roads, utilities, equipment,
furnishings and other items required for a facility fully operable for the
purpose for which the Project Facilities will be used.
(ii) It will acquire,construct,equip and install the Project Buildings and Project
Equipment with all reasonable dispatch and use its best efforts to cause the
acquisition,construction and equipping of the Project to be completed by
November 1,2002(exclusive of seasonal or punch-list construction costs),
or as soon thereafter as may be practicable,delays caused by Force Majeure
and seasonal or punch-list completion items only excepted; but if for any
reason such acquisition, construction and equipping is not completed by
said date there shall be no diminution in or postponement of the payments
required in Section 4.02 hereof to be paid by the Borrower.
(b) Until the Completion Date the Borrower shall have and keep on file and available
for inspection by the Trustee copies of the following: (i)the Project Plans, (ii) a
survey of the Land,prepared by a registered land surveyor in accordance with the
standard detail requirements for land title surveys, showing the location of all
improvements, easements, encroachments and other encumbrances on the Land,
(iii)appropriate permits for construction,if required,including any building permits
and such other evidence as shall be required in order to establish the approval by the
local government of the construction of the Project, and (iv) a copy of each
construction contract and a copy of the contract with each architect and/or engineer
with respect to the Project,all of which have been assigned to the Trustee.
(c) The Borrower may make changes in the Project Plans, Project Buildings or items
of Project Equipment at any time; provided that:
(i) no changes shall be made which would delete from the Project any essential
characteristics of the Project nor which materially and adversely affect the
total operating unity and efficiency or anticipated net income-producing
capacity of the Project Facilities and that, after such changes,the Project
shall continue to constitute an authorized "multifamily housing
development" within the meaning of the Act, and remain in compliance
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with all applicable requirements of the Code to the extent necessary or
desirable in order to maintain the tax exempt status of all Series 2001 Tax-
Exempt Bonds;
(ii) no material changes shall be made without the approval thereof by the
Inspecting Architect;
(iii) no changes shall be made which in the aggregate increase the total Project
Costs, unless amounts then on deposit in the Construction Account are
sufficient, together with reasonably anticipated investment earnings
thereon,to pay all Project Costs when anticipated to be due.
In the event of a material default of any contractor under a construction contract or any other
contract made in connection with the Project,or in the event of a material breach of warranty with respect
to any materials,workmanship or performance,the Borrower will promptly proceed,either jointly,separately
or in conjunction with others,to pursue diligently the remedies of the Borrower and the Trustee against the
contractor or any subcontractor in default and against each surety on a bond,if any,securing the performance
of such contract. Any amounts recovered by way of damages, refunds, adjustments or otherwise in
connection with the foregoing,after deduction of expenses incurred in such recovery and after reimbursement
to the Borrower of any amounts theretofore paid by the Borrower and not previously reimbursed to the
Borrower for correction or remedying of the default which gave rise to the proceedings against the contractor
or surety,shall be paid into the Construction Account if received before the Completion Date,and otherwise
shall be paid into the Revenue Fund.
Section 3.02 Agreement to Issue Bonds;Application of Bond Proceeds. In order to provide
funds to loan to the Borrower for acquisition, development,construction and equipping of the Project,the
City has, or will have, upon or promptly after the execution of this Agreement, issued and delivered the
Series 2001 Bonds to the purchasers thereof,and the City has or will have deposited the net proceeds of said
Series 2001 Bonds in accordance with Section 4.02 of the Indenture.
Section 3.03 Disbursements from the Project Fund. The City has, in the Indenture,
authorized and directed the Trustee to use the moneys in the Project Fund, including the Costs of Issuance
Account and the Construction Account,to pay or reimburse the Borrower for payments made for the Project
Costs.
Disbursements by the Trustee of funds credited to the Project Fund shall be made to or at
the direction of the Authorized Borrower Representative, as further provided in this Section 3.03, in the
Indenture and in the Disbursing Agreement. Investment of funds credited to the Project Fund shall be made
as provided in Section 3.07 hereof and in the Indenture.
Moneys in the Project Fund shall be subject to withdrawal from time to time only for the
purpose of paying for Project Costs if such payments shall not result in less than 95%of the net proceeds of
the Bonds being used as required by Section 145 (a) of the Internal Revenue Code. The City and the
Borrower agree that none of the moneys in the Project Fund shall be used for any purposes other than the
payment or reimbursement of Project Costs and the payment of principal of,premium,if any,on and interest
on the Bonds.
Notwithstanding any other provision hereof,the Borrower covenants that the issuance costs
financed by the Bonds(including underwriting discount)shall not exceed 2.00%of the proceeds of the Series
2001 Tax-Exempt Bonds.
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Section 3.04 Obligation of the Borrower to Cooperate in Furnishing Documents to the
Trustee. The Borrower agrees to cooperate in furnishing to the Trustee(i)the documents and directions that
are required to effect payments out of the Project Fund,and(ii)the documents referred to in the Indenture
required for the authentication and delivery of the Series 2001 Bonds. Such obligations are subject to any
provision of this Agreement or the Indenture requiring additional documentation.
Section 3.05 Establishment of Disbursing Agreement. In addition to the provisions of
Section 3.03 and 3.04 above, the Borrower shall comply with all applicable provisions of the Disbursing
Agreement,including the provisions hereof and thereof that the Borrower ensure that at all times monies in
the Project Fund are sufficient to finance the total costs of acquiring,constructing and equipping the Project.
Section 3.06 Borrower Required to Provide Funds in Event Project Fund Insufficient. The
City makes no warranty,either express or implied,that the moneys,which will be paid into the Project Fund
and which under the terms hereof and the Disbursing Agreement will be available for payment of Project
Costs will be sufficient to pay such costs. The Borrower agrees that it shall pay or cause to be paid all
Project Costs and that to the extent such Project Costs exceed the available amount on deposit in the
Construction Account, it shall not be entitled to any reimbursement therefor from the City,the Trustee,or
the Holders of any of the Bonds,nor shall it be entitled to any diminution in or postponement of payments
to be made under any provision hereof.
Section 3.07 Investment of Moneys in the Project Fund. Any moneys held as a part of the
Project Fund shall be invested or reinvested by the Trustee, at the written direction of an Authorized
Borrower Representative,to the extent permitted by law,as set forth in the Indenture.
Section 3.08 Inspection of Project Facilities. The Trustee and its duly authorized agent shall
have the right at all reasonable times to examine and inspect and for that purpose to enter upon the Land and
any building thereon, and shall also have such rights of access thereto as may be reasonably necessary to
assure that the acquisition, construction, installation and equipping of the Project are proceeding in
accordance with the provisions of this Agreement and to assure that the Project Facilities are being properly
maintained in accordance herewith.
Section 3.09 Abandonment of Project. If the Borrower at any time prior to the completion
of the Project abandons the same or ceases work thereon and fails to resume work thereon within thirty(30)
days after written notice from the Trustee to the Borrower stating that such abandonment or cessation has
begun(except where such cessation in work is caused by labor disputes,fire,unusual delay in transportation,
unavoidable casualties or any other causes beyond the control of the Borrower or any contractor) and
requesting that work on the Project be resumed, or fails to complete the Project in accordance with the
Project Plans and Specifications, or makes changes in the Plans and Specifications in violation of the
requirements of hereof,the Trustee may declare such failure to be an Event of Default, and, in addition to
the other remedies provided in this Agreement,it may enter into and take possession of the Project Facilities
and perform any and all work and labor necessary to complete the Project substantially according to the
Project Plans.The Borrower hereby grants the Trustee a right of entry for the foregoing purpose. All sums
expended in completion of the Project shall be deemed to have been paid to the Borrower. For this purpose,
the Borrower hereby constitutes and appoints the Trustee its true and lawful attorney-in-fact,with full power
of substitution in the premises,to complete the Project in the name of the Borrower. The Borrower hereby
empowers said attorney as follows:
(a) To use any funds of the Borrower, including any balance which may be held in
escrow,and any funds in the Construction Account for the purpose of completing
the Project in accordance with the Project Plans;
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(b) To make such additions, changes and corrections in the Project Plans as shall be
necessary or desirable to complete the Project in substantially the manner
contemplated by the Project Plans;
(c) To employ such contractors, subcontractors, agents, architects and inspectors as
shall be required for such purposes;
(d) To pay, settle or compromise all existing bills and claims which may be liens
against the Land, or as may be necessary or desirable for the completion of the
Project,or for clearance of title;
(e) To execute all applications and certificates in the name of the Borrower;
(f) To prosecute and defend in the name of the Borrower all actions or proceedings in
connection with the acquisition,construction and installation of the Project and to
take such action and require such performance as it deems necessary under any
applicable the payment and performance bonds; and
(g) To do any and every act which the Borrower might do in its own behalf in
connection with completion of the Project.
It is further understood and agreed that this power of attorney, which constitutes a power
coupled with an interest,cannot be revoked. The Borrower hereby assigns and quitclaims to the Trustee all
sums unadvanced under the Loan and held in the Construction Account,such assignment to become effective
only in case of the Borrower's default. The rights and powers granted to the Trustee pursuant to this Section
shall in no way alter or affect the rights of the Trustee under the Mortgage,the Subordinate Mortgage,or any
other provision hereof.
Section 3.10Establislmiiit 3.10 Establishment of Completion Date.
The Completion Date shall be the date on which the Trustee shall receive:
(a) a Certificate signed by the Authorized Borrower Representative stating that:
(i) except for amounts retained by the Trustee in the Project Fund at the
Borrower's direction for any Project Costs not then due and payable because of retainage,
punch list items or required seasonality delays or similar reasons,all Project Costs incurred
and to be incurred for completion of the Project have been paid(or will have been paid upon
receipt of any pending disbursement from the Project Account);
(ii) construction of the Project has been completed in accordance with the
Project Plans and is satisfactory to the Borrower;
(iii) all Project Equipment has been installed to the Borrower's satisfaction,such
equipment so installed is suitable and sufficient for the operation of the Project;
(iv) the Project Facilities conform to all applicable zoning, building, planning
and land use law, ordinances and regulations;
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(v) all licenses and permits necessary for the operation of the Project for its
intended purposes have been obtained, together with any other building inspection
approvals;
(vi) all other improvements and facilities necessary in connection with the full
operation of the Project for its intended purposes have been acquired constructed and
equipped;
(vii) a certificate or certificates of occupancy for all of the Project Facilities,if
required, from the City has been obtained;
(viii) an "as-built survey" of the Project is on file;
(ix) Certificate from the Inspecting Architect has been obtained to the effect
that,based upon actual inspection of the Project Facilities and review of the Project Plans,
the Project Facilities are completed substantially in compliance with the Project Plans;
such Certificate shall state that it is given without prejudice to any rights against third
parties which exist at the date of such Certificate or which may subsequently come into
being;
(b) an endorsement or update to the title insurance policy insuring the Trustee with
respect to the Land dated no earlier than the five days prior to the Completion Date reflecting that
no liens or encumbrances exist on the Project Facilities other than Permitted Encumbrances.
The Borrower shall cause the Certificate of the Borrower and the endorsement or update to
the Title Insurance Policy described above to be delivered on a reasonably timely basis to the Trustee.
Upon receipt of such Certificate,the Trustee shall retain in the Project Fund a sum equal to
the amounts necessary for payment of holdback amounts or other Project Costs not then due and payable
(including 150% of all punch list items as certified to the Trustee by its Borrower). On and after the
Completion Date,the Trustee shall apply all amounts in the Project Fund as provided in Section 4.03 of the
Indenture.
[End of Article III]
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ARTICLE IV
LOAN PAYMENTS AND DEPOSITS
Section 4.01 The Loan. The City agrees,upon the terms and conditions in this Agreement,
to lend the gross sale proceeds derived from the issuance of the Series 2001 Bonds($ ). The Loan
will be fully funded on the Date of Issuance of the Series 2001 Bonds by the deposit of all net proceeds from
the sale thereof.
Section 4.02 Repayment of Loan; Pledge of Monthly Net Project Revenues and Tax
Increment Revenues. As security for all outstanding Bonds,the Borrower hereby assigns and pledges to the
Trustee all Monthly Net Project Revenues and all Tax Increment Revenues, and further agrees for each
month to deposit with the Trustee on the 15t day of each month(or if such day is not a Business Day,on the
next succeeding Business Day), commencing on and after the date on which any portion of the Project
Facilities has been placed in service,all Monthly Net Project Revenues and all Tax Increment Revenues for
application as provided in Section 5.01 of the Indenture.
Furthermore, irrespective of any deposit of Monthly Net Project Revenues and Tax
Increment Revenues (or sufficient Monthly Net Project Revenues and Tax Increment Revenues for the
following purposes),the Borrower agrees as follows:
(a) The Borrower shall repay the Loan,together with interest and premium, if any, in
Loan Repayments which in the aggregate shall be in an amount sufficient to pay,
in full and when due, all Bonds. To provide for the repayment of the Loan (until
the principal of,premium(if any)on and interest on the Bonds shall have been fully
paid or provision for payment thereof shall have been made in accordance with the
Indenture),the Borrower agrees to pay to the Trustee for the account of the City in
immediately available funds as Loan Repayments,on or before the 15t day of each
month(or if such date is not a Business Day,the next succeeding Business Day),
an amount equal to the monthly payments of principal and interest on the Series
2001 Bonds for such month,but with credit being given against such payments for
any amounts transferred from the Revenue Fund or any other fund held by the
Trustee in accordance herewith to the Bond Fund for such month.
Notwithstanding the foregoing,if on any date any amount of principal,premium or
interest is due and owing on Bonds,sufficient funds are not available therefor in the
Bond Fund or the Optional Redemption Fund, as an additional Loan Repayment,
the Borrower shall immediately pay the deficiency to the Trustee upon demand
from the Trustee.
(b) The Borrower shall pay on or before the date payment is due all principal of and
interest and premium on all Senior Indebtedness not constituting Bonds. The
Borrower agrees that so long as any Senior Bonds are outstanding, the Borrower
shall not make any payments in respect of Subordinated Debt except from Net
Revenues Available for Subordinated Debt Service.
(c) On or before the 15t day of each month(or if such date is not a Business Day,the
next succeeding Business Day), the Borrower shall pay to the Trustee an amount
equal to the Monthly Taxes and Insurance Deposit for credit to the Taxes and
Insurance Fund;but with credit being given against such payments for any amounts
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transferred from the Revenue Fund or any other fund held by the Trustee in
accordance herewith to the Taxes and Insurance Fund for such month. In addition,
the Borrower shall on a timely basis pay to the Trustee for credit to the Taxes and
Insurance Fund any other amounts required to permit the Trustee to pay when due
all installments of taxes or insurance premiums payable from the Taxes and
Insurance Fund.
(d) On or before the 15th day of each month occurring in November 2003 and each
month thereafter (or if such date is not a Business Day, the next succeeding
Business Day), the Borrower shall pay to the Trustee an amount equal to the
Monthly Repair and Replacement Fund Deposit for credit to the Repair and
Replacement Fund; but with credit being given against such payments for any
amounts transferred from the Revenue Fund or any other fund held by the Trustee
in accordance herewith to the Repair and Replacement Fund for such month.
(e) On or before the 15t day of each month(or if such date is not a Business Day,the
next succeeding Business Day),the Borrower shall pay any sum necessary to restore
the amount in the Debt Service Reserve Fund to the Debt Service Reserve Fund
Requirement,but with credit being given against such payments for any amounts
transferred from the Revenue Fund or any other fund held by the Trustee in
accordance herewith to the Debt Service Reserve Fund for such month.
(f) On or before the 15`h day of each month(or if such date is not a Business Day,the
next succeeding Business Day),the Borrower shall pay any sum necessary to restore
the amount in the Operating Reserve Fund to the Operating Reserve Requirement,
but with credit being given against such payments for any amounts transferred from
the Revenue Fund or any other fund held by the Trustee in accordance herewith to
the Operating Reserve Fund for such month.
(g) On or before the date any Bonds are called for redemption because of a
Determination of Taxability, the Borrower shall pay the amount, which together
with other Trust Funds, available therefor, is sufficient to pay the principal,
premium and interest due on the Bonds.
(h) On or before the 30th day following each Computation Date,the Borrower shall pay
an amount for deposit in the Rebate Fund equal to all rebatable arbitrage due the
United States with respect to the Computation Date (unless the Borrower shall
deliver evidence reasonably satisfactory to the Trustee that the Borrower has
calculated the rebatable arbitrage due and paid the same to the United States in
compliance with Section 148(f)of the Code), but with credit being given against
such payments for any amounts transferred from the Revenue fund or any other
fund held by the Trustee in accordance herewith to the Rebate Fund for such
purpose.
Section 4.03 Additional Payments. The Borrower also agrees:
(a) To pay to the Trustee, promptly after being billed, until the principal of and the
interest on the Bonds shall have been fully paid or provision for the payment thereof
shall have been made in accordance with the provisions of the Indenture (i) all
Ordinary Trustee Fees and Expenses, but with credit being given against such
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payments for any amounts transferred from the Revenue Fund to the Trustee for
such purpose,and(ii)the reasonable fees and charges of the Trustee for necessary
extraordinary services rendered by it and extraordinary expenses incurred by it
under the Indenture,as and when the same become due;provided,that the Borrower
may,without creating a default hereunder, contest in good faith the necessity for
any such extraordinary services and extraordinary expenses and the reasonableness
of any such fees, charges or expenses;
(b) To pay to the City any City fees and to hold the City harmless from all liabilities,
costs and other expenses(including attorney's fees)of the City suffered, incurred
or paid at any time in connection with any actions, transactions or other matters
contemplated by or taken pursuant(or relating in any manner whatsoever)to the
Bonds,the Indenture,the Mortgage,the Subordinate Mortgage,this Agreement or
any of the other documents executed or delivered in connection with the issuance
of or otherwise related to the Bonds, including without limitation any official
statements,placement memoranda or other offering materials, or as may arise in
connection with any of the foregoing;
(c) Subject to the provisions of Section 5.04 hereof,to each public or private person,
firm or Borrower furnishing utility service or constructing or extending facilities for
the furnishing of such service for the Project, when due and payable during the
Term,all reasonable fees,charges and rentals for such service and facilities; and
(d) Subject to the provisions of the Management Contract, Section 6.12 hereof and
Section 5.02 ofthe Indenture,to the Manager the Senior Management Fee and,when
permitted,the Subordinated Management Fee when due.
Section 4.04 No Set-Off; Borrower's Obligations Unconditional. The obligation of the
Borrower to make the payments required hereby shall be absolute and unconditional. Subject to the
preceding sentence,until such time as the principal of,premium,if any,and interest on the Bonds shall have
been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture,
the Borrower(i)will perform and observe all of its agreements contained in this Agreement,and(ii)will pay
without abatement,diminution or deduction(whether for taxes or otherwise)all amounts required to be paid
hereunder,regardless of any cause or circumstance whatsoever including,without limiting the generality of
the foregoing: any defense, set-off, recoupment or counterclaim which the Borrower may have or assert
against the City,the Trustee,any Holder of a Bond or any other person; any failure of the City to perform
any covenant or agreement between the City and the Borrower; any indebtedness or liability at any time
owing to the Borrower by the City, the Trustee, any Holder of a Bond or any other person; any acts or
circumstances that may constitute failure of consideration; damage to or condemnation of the Project
Facilities;failure or delay in completion of the Project;eviction by paramount title;commercial frustration
of purpose; bankruptcy or insolvency of the City or the Trustee; any change in the tax or other laws of the
United States of America or of the State or any political subdivision of either; foreclosure of the Mortgage
or the Subordinate Mortgage; or any failure in the performance and observance any agreement, whether
express or implied,or any duty,liability or obligation,arising out of or connected with this Agreement,the
Mortgage,the Subordinate Mortgage,or the Indenture.
The Borrower hereby waives,to the extent permitted by law,any and all rights which it may
now have or which at any time hereafter may be conferred upon it,by statute or otherwise,to terminate or
cancel, or to limit its liability under this Agreement, the Mortgage or the Subordinate Mortgage except in
accordance with the express terms hereof.
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Section 4.05 Interest on Loan Repayments and Other Overdue Payments. In the event the
Borrower shall fail to make Loan Repayments required by Section 4.02 or 4.03 hereof,the installment so in
default shall continue as an obligation of the Borrower until the amount in default shall have been fully paid,
and if such failure shall result in a failure to pay when due any principal of,premium,if any,or interest on
any Series of the Bonds,the Borrower agrees to pay interest on such sum from such date at the rate or rates
of interest specified in the applicable Series of Bonds. In the event the Borrower shall fail to make any
payment required under Section 4.03 hereof or if advances are made pursuant to Section 7.05 hereof,the item
so in default shall continue as an obligation of the Borrower until the amount shall have been fully paid and
the Borrower agrees to pay interest on such payment in default at the rate or rates of interest specified in
Section 7.05 hereof.
Section 4.06 Options to Prepay Loan.
(a) The Bonds are subject to redemption in whole or in part at the request of the
Borrower as provided in Section 3.01(a) of the Indenture, and the Borrower is
hereby granted the option to prepay the Loan in whole or in part for the purpose of
so redeeming Bonds.
(b) The Bonds will be subject to redemption in whole and not in part as provided in
Section 3.01(b)of the Indenture,and the Borrower is hereby granted the option to
prepay the Loan in whole for the purpose of so redeeming all outstanding Bonds,
but only if:
(i) the Project Facilities shall be damaged or destroyed or all or a portion of
the Project Facilities are taken in condemnation proceedings and in the
good faith reasonable judgment of the Borrower, the Project Facilities
cannot be restored or replaced to substantially the same condition as existed
before such damage,destruction or condemnation,and the Borrower shall
determine not to rebuild, repair, restore or replace the Project Facilities
pursuant to Sections 5.10 and 5.11 hereof; or
(ii) as a result of any changes in the Constitution of the State or the
Constitution of the United States of America or of legislative or
administrative action (whether state or federal) or of a final decree,
judgment or order of any court or administrative body (whether state or
federal) this Agreement shall have become void or unenforceable or
impossible of performance in any material respect in accordance with the
intent and purposes of the parties as expressed herein.
(c) The Borrower may also prepay the Loan by causing a defeasance of all outstanding
Bonds in accordance with Article X of the Indenture.
To exercise the options granted in paragraphs(a)or(b)of this Section,the Borrower shall,
at least forty-five(45)days prior to the date upon which such prepayment is to be made,give written notice
of such prepayment to the Trustee (subject to the right of the Trustee to agree to a shorter notice period).
Such notice shall request the redemption on a specified redemption date pursuant to Article III of the
Indenture of a specified principal amount of Bonds(if less than all outstanding Bonds are to be redeemed)
and shall otherwise comply with the provisions hereof and of Article III of the Indenture. On or before the
date specified for the redemption of the Bonds,the Borrower shall pay the Trustee for deposit in the Optional
Redemption Fund an amount which, together with other funds held by the Trustee and available for the
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purpose, is equal to the redemption price of the Bonds to be redeemed and accrued interest thereon to the
redemption date, and in any case, such further amounts, if any, as may be required to redeem the Bonds
called for redemption by the Trustee on the redemption date.
Except as otherwise expressly provided herein,Bonds shall be called for redemption by the
Trustee only upon the direction of the Borrower.
Section 4.07 Additional Tax-Related Payments.
(a) If a Determination of Taxability occurs, the Borrower shall forthwith repay the
Loan and cause the Series 2001 Bonds to be redeemed on the first Business Day for
which notice of redemption can be given in accordance with the Indenture following
notice to the Borrower of the Determination of Taxability.Any redemption required
under this Section shall be effected upon the following terms and conditions:
(i) Within ten days after notice to the Borrower of the Determination of
Taxability the Borrower shall give written notice of the Determination of
Taxability and of its intention to redeem the Outstanding Series 2001
Bonds to the Trustee,stating the date of redemption,and the Borrower shall
make arrangements satisfactory to the Trustee for the giving of notice
required under Section 3.03 of the Indenture for redemption of all of the
outstanding Bonds subject to redemption because of such event,and for the
transmittal of funds needed for such redemption in advance of that date.
(ii) The aggregate redemption price payable by the Borrower shall be an
amount which, when added to all amounts then held under the Indenture
and available for the purpose, will be equal to the principal amount of all
then Outstanding Series 2001 Bonds, plus accrued interest thereon to the
redemption date, and, in the event that it is determined that the
Determination of Taxability is the fault of the Borrower,a premium equal
to frve-three percent (554r)(3%) of the principal amount of each Bond
redeemed.
(iii) The Borrower shall also pay an amount equal to the Trustee's and any
paying agent's fees under the Indenture, accrued and to accrue until final
payment and redemption of the Bonds being redeemed and all other
advances, fees, costs and expenses incurred by the Trustee under the
Indenture.
(b) If a Determination of Taxability occurs and the Borrower shall fail to give notice
thereof and of its intention to redeem the Bonds as above described, the Trustee
shall nevertheless be authorized to give notice of redemption of all outstanding
Series 2001 Bonds on the first Business Day for which notice required by the
Indenture can be given occurring thereafter whenever the Trustee shall have
determined,in good faith,that a Determination of Taxability has occurred;and the
Trustee shall give such notice of redemption if the Trustee shall have received
satisfactory evidence of the occurrence of a Determination of Taxability. The
Trustee shall furnish to the Borrower, any other Holder who so requests and the
City a copy of evidence of a Determination of Taxability given by it pursuant to this
paragraph,and the Borrower shall thereupon become obligated to pay the aggregate
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redemption price to the Trustee as a Loan Repayment prior to the redemption date
and to pay all fees, expenses, costs and advances of the Trustee and any paying
agent under the Indenture.
(c) The Borrower hereby acknowledges that under Section 148 of the Code and
regulations thereunder, with certain exception, some or all investment return on
gross proceeds of the Series 2001 Bonds in excess of the yield on such Bonds is
required to be rebated to the United States (rebatable arbitrage). The Borrower
hereby agrees to pay in full to the United States all rebatable arbitrage when due
under Section 148 or such regulations.
To fulfill such requirement, prior to each Computation Date, the Borrower shall
engage a Rebate Analyst to prepare a report(the "Rebate Report") as to the amount of rebatable
arbitrage due the United States with respect to such Computation Date, based on records of the
Trustee,and to deliver the Rebate Report to the Trustee within 30 days after such Computation Date.
The Borrower acknowledges that if the Trustee does not receive the Rebate Report within 30 days
after a Computation Date, under Section 5.11 of the Indenture,the Trustee is instructed to engage
a Rebate Analyst on behalf of and at the expense of the Borrower to determine the rebatable
arbitrage, if any,due with respect to the Computation Date.
Subject to Section 5.01, if the Borrower shall fail to deposit with the Trustee the
amount of rebatable arbitrage within 45 days following any Computation Date(or within 5 days after
the Borrower's receipt of any Rebate Report prepare at the direction of the Trustee),the Borrower
acknowledges that the Trustee is instructed to transfer to the Rebate Fund the amount of rebatable
arbitrage from the following funds:first from the Surplus Fund,second,from the Subordinate Debt
Service Account,third from the Operating Reserve Fund,fourth from the Repair and Replacement
Fund, fifth, from the Debt Service Reserve Fund (to the extent permitted by Section 5.04), sixth,
from the Senior Debt Service Account, Seventh, from the Taxes and Insurance Fund, and eighth,
from the Revenue Fund.
The Borrower further acknowledges that under Section 5.11 of the Indenture,the
Trustee is instructed to make available to the Borrower,to the extent of amounts in the Rebate Fund,
the amount of rebate due,but only upon receipt of a Internal Revenue Service Form 8038T(or such
other form as shall be appropriate for reporting the rebate due)duly completed with respect to the
applicable issue of Tax-Exempt Bonds,accompanied by representations that the Borrower will apply
such amounts to the payment of rebate due.
Section 4.08 Investment of Funds, Credits. Amounts held by the Trustee pursuant to the
Indenture shall be invested in accordance with Section 5.13 5.10 of the Indenture.
Section 4.09. Pledge of Tax Increment Revenues. At or before the Date of Issuance,the
City will execute and deliver the Tax Increment Note,whereby the City will agree to pay to the Borrower
the Tax Increment Revenue, and the Borrower will deliver the Assignment of TIF Note to the Trustee as
additional security for the Bonds,and will direct the City to make the payments of Tax Increment Revenue
to the Trustee. The Trustee shall deposit the Tax Increment Revenue,as received,in the Revenue Fund,to
be used as provided in the Indenture.
[End of Article IV]
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ARTICLE V
PROJECT FACILITIES
Section 5.01 Use of Project Facilities;Compliance with Laws. The Borrower will use the
Project Facilities and all Mortgaged Property only in furtherance of its lawful purposes and will cause the
Project Facilities to be used and operated as required by the Act.
The Borrower will not use or permit any person to use the Project Facilities or the Mortgaged
Property for any use or purpose in violation of the laws of the United States,the State,or any ordinance of
the City,and agrees to comply with all the orders,rules,regulations and requirements of the City,the County
or the State or other governmental authority having jurisdiction over the Project Facilities. The Borrower
shall have the right to contest by appropriate legal proceedings, without cost or expense to the City, the
validity of any law,ordinance, order,rule,regulation or requirement of the nature herein referred to.
Section 5.02 Ownership,Maintenance,Operation and Disposition of Project Facilities by
Borrower. The Borrower agrees that so long as the Bonds are Outstanding,the Borrower will keep or cause
to be kept the Project Facilities and the Mortgaged Property in good repair and good operating condition
(ordinary wear,tear,and obsolescence and acts of God being excepted)at its own cost,making such repairs
and replacements as are necessary to that end.
The Borrower shall provide all equipment,furnishings,supplies and other personal property
required or convenient for the proper operation, repair and maintenance of the Project Facilities and
Mortgaged Property in an economical and efficient manner, consistent with the then current standards of
operation and administration generally acceptable for facilities such as the Project Facilities located in the
State.
The Borrower shall:
(a) use the Project Facilities only in a manner that is consistent with the Sole Member's
status as a 501(c)(3)Organization and, except as it shall not impair the exclusion
from gross income of interest on any Tax-Exempt Bonds,not use or allow the use
of the Project Facilities in any unrelated trade or business with respect to the Sole
Member(or any other 501(c)(3)Organization)under Section 513(a)of the Code;
and
(b) not use the Project Facilities or any part thereof for sectarian instruction nor use the
Project Facilities primarily as a place of religious worship or as a facility used
primarily as a part of a program of a school or department of divinity for any
religious denomination or the religious training of ministers,priests,rabbis or other
similar persons in the field of religion.
The Borrower represents that it has no present intention to sell, lease or otherwise dispose
of any interest in the Project Facilities,other than to lease units in the Project Facilities to residents in the
ordinary course of business. Furthermore,the Borrower shall not sell or dispose of all or any portion of the
Project Facilities or the Mortgaged Property except as permitted in Sections 5.06, 5.07, 5.08 and 6.04.
So long as any Tax-Exempt Bonds are outstanding and no Default or Event of Default has
occurred and exists,the Borrower may sell all or any part of the Project Facilities to or enter into a lease of
all or any part of the Project Facilities so long as:
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(a) No such sale, lease or agreement shall be inconsistent with the provisions of this
Agreement,the Indenture,the Mortgage,the Subordinate Mortgage, or the Act;
(b) The Borrower shall remain fully obligated under all Loan Documents as if such
sale, lease or agreement had not been made; and
(c) The Borrower shall cause to be delivered to the Trustee an opinion of Bond Counsel
to the effect that such transaction shall not cause interest on any Tax-Exempt Bonds
to be included in gross income for federal income tax purposes.
Notwithstanding the foregoing,so long as no Default or Event of Default has occurred and
exists under this Agreement,upon any sale of all or substantially all of the Project Facilities in accordance
with this Section and Section 6.04,the Borrower,may,upon request to the Trustee,be released and forever
discharged from its obligations under the Loan Documents.
For purposes of this Section and Section 6.04, any change of the sole member of the
Borrower from the Sole Member to another person shall be deemed a sale of all of the Project Facilities to
such person.
Section 5.03 Liens. The Borrower will pay or cause to be paid all utility charges and other
charges arising from the operations at the Project Facilities and the Mortgaged Property which, if unpaid,
would become a lien on the Project Facilities or the Mortgaged Property and will not permit any lien or
encumbrance except Permitted Encumbrances to be established or to remain unsatisfied against the Project
Facilities or the Mortgaged Property, including any mechanics' liens;provided,that if no Event of Default
has occurred and is continuing,the Borrower may at its own expense diligently prosecute and in good faith
contest any mechanics' or other liens filed or established against the Project Facilities or Mortgaged
Property,and in such event may permit the items so contested to remain undischarged and unsatisfied during
the period of such contest and any appeal therefrom unless the Trustee shall notify the Borrower that, in the
opinion of Independent Counsel, by nonpayment of any such items the Project Facilities, the Mortgaged
Property or any part thereof will be subject to loss or forfeiture,in which event the Borrower shall promptly
pay and cause to be satisfied and discharged all such unpaid items;provided that the Borrower may continue
to contest such liens if it posts security deemed adequate by Independent Counsel and complies with all
requirements related thereto in the Mortgage.
Section 5.04 Taxes and Other Governmental Charges. The Borrower will pay or cause to
be paid,as the same respectively become due,any taxes,special assessments,license fees and governmental
charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect
to the operations at the Project Facilities or Mortgaged Property,or any improvements,equipment or related
property installed or brought by the Borrower therein or thereon. If no Event of Default has occurred and
is continuing,the Borrower may,at its expense, in good faith contest any such taxes,assessments, license
fees and other governmental charges and,in the event of any such contest,may permit the taxes,assessments,
license fees or other charges so contested to remain unpaid during the period of such contest and any appeal
therefrom unless the Trustee shall notify the Borrower that, in the opinion of Independent Counsel, by
nonpayment of any such items, the Project Facilities or Mortgaged Property or any part thereof, or the
revenue therefrom,will be subject to loss or forfeiture,in which event such taxes,assessments,license fees
or charges shall be paid promptly.
Section 5.05 Alterations to Project Buildings. The Borrower shall have the privilege from
time to time at its cost and expense, of remodeling and of making additions, modifications, alterations,
improvements and changes(hereinafter collectively referred to as"alterations")in or to the Project Facilities
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and Mortgaged Property as it, in its discretion,may deem to be desirable for its uses and purposes,subject,
however,to the following:
(a) All alterations to the Project Buildings shall be located within the boundary lines
of the Land and shall become a part of the Mortgaged Property;
(b) Alterations to the Project Buildings shall not substantially impair the structural
strength or utility of any Project Buildings or significantly alter the character or
purpose or detract from the value or operating efficiency of the Project Facilities or
Mortgaged Property, and the Borrower shall have delivered to the Trustee a
Certificate of the Authorized Borrower Representative to such effect; and
(c) The alterations shall not significantly impair the revenue producing capacity of the
Project Facilities and the Mortgaged Property, and the Borrower shall have
delivered to the Trustee a Certificate of the Authorized Borrower Representative to
such effect.
The Trustee may, in its discretion, require the Borrower to furnish an opinion of an
Independent Engineer,at the expense of the Borrower,to the effect of paragraph(b)if the alterations shall
exceed$50,000 in the aggregate.
All work in connection with any alterations shall be done promptly and in good workmanlike
manner and in compliance with the building and zoning laws of the City and other governmental subdivisions
wherein the Project Facilities are situated, and with all laws, ordinances, orders, rules, regulations and
requirements of all federal,state and municipal governments and the appropriate departments,commissions,
boards and officers thereof, and shall not violate the provisions of any policy of insurance covering the
Project Facilities;and the work shall be prosecuted with reasonable dispatch,unavoidable delays excepted.
Any work involving more than$100,000 of cost shall be insured by a policy of builders risk in conformance
with the requirements of Section 5.09(d)or similar insurance. During the construction or installation of such
alterations the Borrower shall maintain the Project Facilities free of all mechanics liens or other
encumbrances except for Permitted Encumbrances, and unless waived by a Majority of Holders, no
disbursement of funds held by the Trustee shall be made for the payment of costs that may be the subject of
a mechanic's lien unless prior to the payment of such costs mechanic lien waivers applicable to the costs
shall be delivered to the Disbursing Agent.
Section 5.06 Installation of Equipment. The Borrower may, from time to time in its
discretion and at its own cost and expense, install or place other equipment and tangible personal property
in the Project Buildings and on the Land,subject to the lien of the Mortgage and the Subordinate Mortgage.
In the event that a lessor,vendor or purchase money lender is entitled to and does remove any equipment or
other property, any damage resulting to the Project Facilities therefrom shall be repaired and the Project
Facilities restored to their previous condition at the sole expense of the party effecting such removal or at
the sole expense of the Borrower.
Section 5.07 Removal of Equipment. If no Default exists,the Borrower shall have the right
to remove Equipment from the Mortgaged Property and have the Equipment released from the lien of the
Mortgage and the Subordinate Mortgage, as follows:
(a) The Borrower shall have the privilege from time to time in the ordinary course of
business of substituting equipment and related property for any Equipment
constituting a part of the Mortgaged Property, provided that the effect of such
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substitution shall not be to impair the character or revenue producing significance
of the Project Facilities or change the nature of the equipment substituted, and
provided that such substituted equipment shall not diminish the value or usefulness
of the Project Facilities. Any such substituted property shall become Project
Equipment subject to the lien of the Mortgage and the Subordinate Mortgage in
place of the replaced equipment.
(b) The Borrower shall also have the privilege in the ordinary course of business of
removing any Equipment from the Mortgaged Property without substitution therefor
if the same is obsolete and no longer used or useful in the operation of the Project
Facilities; provided that the Borrower pays a sum equal to the then value of said
Equipment as determined by an Independent Engineer selected by the Borrower if
and so long as any of the Bonds remain Outstanding. The Borrower shall pay such
amounts to the Trustee for deposit in the Optional Redemption Fund(in addition to
the amounts required to be maintained therein) and shall deliver to the Trustee a
Certificate signed by said Engineer setting forth the value of said Project Equipment
and a Certificate signed by the Authorized Borrower Representative stating that the
removal of such Equipment will not impair the character or revenue producing
significance of the Project Facilities,provided that if the original cost of any item
of Equipment so removed was less than$10,000,such removal without substitution
and such deposit to the Optional Redemption Fund may be effected without such
determination of value and submission of the Certificate by an Independent
Engineer upon such showing by the Borrower as may be satisfactory to the Trustee;
provided no transfer of ownership or use of Project Equipment with any remaining
useful life shall be made unless an opinion of Bond Counsel is first obtained stating
that such transfer or use will not cause interest on any Tax-Exempt Bonds to be
included in gross income for federal income tax purposes.
In the event any removal of equipment under this Section causes damage to buildings,the
Borrower shall restore or repair such damage at its expense. The Trustee shall execute and deliver as
provided in the Indenture such releases or other documents(if any)as the Borrower may properly request
in connection with any action taken by the Borrower in conformity with this Section. The removal from the
Project Facilities of any portion of equipment pursuant to the provisions of this Section shall not entitle the
Borrower to any abatement or diminution of Loan Repayments subsequently due.
Section 5.08 Release of Real Property.-The-Subject to the terms of the Ground Lease,the
Borrower shall have the right,at any time and from time to time,to a release of Land from the Mortgage and
the Subordinate Mortgage,but only as follows:
(a) Land not containing any permanent structure necessary for the total operating unity
and efficiency of the Project Facilities may be released for the purpose of selling the
same to a third person or to facilitate the construction or financing of additions to
the Project Buildings or additional structures not related to the Project on the Land,
and the Trustee shall, from time to time, release from the Mortgage and the
Subordinate Mortgage such real property so sold,pledged or disposed of,but only
upon receipt by the Trustee of the following:
(i) Certificate of an Authorized Borrower Representative setting forth in
substance as follows:
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(A) The number of acres or square feet of the property to be
released,
(B) The calculation of the release price,which shall be(i)the
sale price in the case of sale to a party who is not an
Affiliate of the Borrower or the Manager,or(ii)an amount
equal to the fair market value of such property as
determined by an Independent appraiser, in other cases,
(C) The property to be released is not needed for the operation
of the Project Facilities and is not necessary for the total
operating unity and efficiency of the Project Facilities,
(D) The release will not impair the structural integrity of the
Project Facilities or the usefulness of the Project Facilities
for these purposes and will not inhibit adequate means of
ingress to or egress from the Project Facilities,
(E) No Default exists under this Agreement, and
(F) All conditions precedent herein provided for relating to
such release have been complied with;
(ii) A survey prepared by a registered land surveyor describing and showing the
Land,after giving effect to such release and showing that the Land does not
contain any permanent structure necessary for the total operating unity and
efficiency of the Project Facilities;
(iii) Cash equal to the release price as certified pursuant to subparagraph(1)(B),
which cash shall be deposited in the Optional Redemption Fund;
(iv) An opinion of Bond Counsel to the effect that the proposed release of the
Land will not cause any interest on Tax-Exempt Bonds to be included in
gross income for federal income tax purposes; and
(v) An Opinion of Counsel stating that the certificates, opinions and other
instruments and cash which have been or are therewith delivered to and
deposited with the Trustee conform to the requirements of this Agreement
and that,upon the basis of such application,the property may be released
from the lien of the Mortgage and the Subordinate Mortgage, and that all
conditions precedent herein provided for relating to such release have been
complied with.
(b) The Subject to the terms of the Ground Lease, the Borrower may at any time or
times grant to itself or others easements,licenses,rights of way and other rights or
privileges in the nature of easements with respect to the Land,free from the lien of
the Mortgage and the Subordinate Mortgage,or the Borrower may release existing
easements, licenses, rights of way and other rights or privileges with or without
consideration,and the Trustee will execute and deliver any instrument necessary or
appropriate to confirm and grant or release any such easement,license,right of way
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or privilege;provided,however,that prior to any such grant or release,there shall
have been supplied to the Trustee a Certificate of the Authorized Borrower
Representative to the effect(i)that such grant or release is not detrimental to the
proper operation of the Project Facilities,and(ii)that such grant or release will not
impair the operating unity or the efficiency of the Project Facilities on such Land
or materially and adversely affect the character thereof.
Section 5.09 Insurance. The Borrower shall maintain,or cause to be maintained,at its cost
and expense, insurance as follows:
(a) Insurance against loss and/or damage to the Mortgaged Property under a policy or
policies covering such risks as are ordinarily insured against by similar businesses,
including (without limiting the generality of the foregoing) fire and extended
coverage in an amount not less than 100%of the full insurable replacement value
of the Project Facilities,but any such policy may have a deductible amount of not
more than$100,000. No policy of insurance shall be so written that the proceeds
thereof will produce less than the minimum coverage required by the preceding
sentence, by reason of co-insurance provisions or otherwise, without the prior
consent thereto in writing by the Trustee (based on a report of an Independent
Consultant). The term "full insurable replacement value" shall mean the actual
replacement cost of the Project Facilities (excluding foundation and excavation
costs and costs of underground flues,pipes,drains and other uninsurable items)and
equipment,and shall be determined or redetermined on the fifth anniversary hereof
and every fifth anniversary thereafter, by an Insurance Consultant. All policies
evidencing insurance required by this subparagraph(a)with respect to the Project
Facilities shall be carried in the names of the Borrower and the Trustee as their
respective interests may appear and shall contain standard mortgage clauses which
provide for Net Proceeds of insurance resulting from claims per casualty thereunder
to the Project Facilities which are less than $250,000 for loss or damage covered
thereby to be made payable directly to the Borrower,and Net Proceeds from such
claims which are equal to or in excess of$250,000 to be made payable directly to
the Trustee. The Net Proceeds of such insurance required by this paragraph(a)with
respect to the Project Facilities shall be applied as provided in Sections 5.10 and
5.11 hereof.
(b) Comprehensive general public liability insurance, including personal injury
liability, and, if the Borrower owns or leases any automobiles, automobile
insurance,including owned,non-owned and hired automobiles,against liability for
injuries to persons and/or property,in the minimum amount for each occurrence and
for each year of$1,000,000, for public liability not arising from ownership or
operation of automobiles(or other motor vehicles),and in the minimum amount of
$500,000 for each occurrence and for each year for liability arising out of
ownership or operation of automobiles (or other motor vehicles) and shall be
endorsed to show the Trustee as an additional insured.
(c) Business interruption insurance covering actual losses in gross operating earnings
of the Borrower resulting directly from necessary interruption of business caused
by damage to or destruction of real or personal property constituting part of the
Project Facilities(for a period of at least twelve months commencing 30 days after
such damage or destruction), less charges and expenses which do not necessarily
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continue during the interruption of business, for such length of time as may be
required with the exercise of due diligence and dispatch to rebuild,repair or replace
such properties as have been damaged or destroyed, with limits equal to at least
100% of the maximum principal and interest scheduled to be due on all Senior
Indebtedness and all Bonds for any current or subsequent Fiscal Year.
(d) Until the Completion Date,and at any time when any construction or improvement
valued at more than$100,000 is being undertaken,insurance for the Project or such
construction or improvement,under an All-Risk,Completed Value,Non-Reporting
Form policy with coverage for 100% of the completed value, with delayed
completion coverage, collapse coverage, and special cause of loss coverage. In
addition,any general contractor shall maintain with respect to the work insurance
for liability and worker's compensation no less in coverage than is required by this
Agreement with respect to the Borrower.
(e) Such other insurance, including workers' compensation insurance respecting all
employees of the Borrower, in such amount as is customarily carried by like
organizations engaged in like activities of comparable size and liability exposure;
provided that the Borrower may be self-insured with respect to all or any part of its
liability for workers' compensation.
(0 In addition to the foregoing,all insurance coverage carried by or on behalf of the
Borrower with respect to the Project Facilities and it operations shall be evaluated
at least once every five years by the Insurance Consultant,who shall prepare and
deliver to the Trustee a report as to the Insurance Consultant's recommendations for
any changes in the then current insurance coverage required so that such insurance
coverage is no less than the coverage which is customary for like organizations and
businesses,including in such evaluation the particular risks insured,the amount of
insured loss coverage, and exclusions from coverage. Thereafter, the Borrower
shall promptly procure the any recommended additional insurance coverage.
All insurance required in this Section shall be taken out and maintained in responsible
nationally recognized insurance companies rated not less than"A"by Best's Insurance Guide selected by the
Borrower which are authorized under the laws of Minnesota to assume the risks covered thereby. The
Borrower will deposit annually on May 1 of each year with the Trustee a certificate of compliance with the
provisions hereof. Each policy shall contain a provision that the insurer shall not cancel or modify it without
giving written notice to the Borrower and the Trustee at least thirty (30) days before the cancellation or
modification becomes effective. In lieu of separate policies, the Borrower may maintain a single policy,
blanket or umbrella policies, or a combination thereof,having the coverage required herein.
Section 5.10 Damage or Destruction. The Borrower agrees to notify the Trustee
immediately in the case of damage to,or destruction of,the Project Facilities or any portion thereof,resulting
from fire or other casualty, estimated to exceed $100,000 in amount, which notice shall be followed as
promptly as practicable by a description of the damage or destruction,the estimated costs to repair the same,
and the sources of funds expected to be utlilized in the repair or replacement of the Project Facilities. In the
event that the Net Proceeds for such damage shall not exceed$250,000 and no Default has occurred and is
continuing, the Net Proceeds shall be paid to the Borrower, who shall forthwith repair, reconstruct and
restore the Project Facilities to substantially the same condition and value as existed prior to the event
causing such damage and,to the extent necessary to accomplish such repair,reconstruction and restoration,
the Borrower will apply the Net Proceeds to the payment or reimbursement of the costs thereof.
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If a Default has occurred and is continuing, all Net Proceeds shall be deposited with the
Trustee for application in accordance with the Indenture. In the event the Project Facilities or any portion
thereof is destroyed by fire or other casualty and Net Proceeds exceed$250,000,all Net Proceeds shall be
deposited with the Trustee for credit to the Insurance and Award Account,unless the Borrower shall notify
the Trustee of the Borrower's election to redeem all then redeemable outstanding Bonds as hereinafter
provided,in which case all Net Proceeds shall be deposited in the Optional Redemption Fund for redemption
of Bonds available to be redeemed because of such destruction or casualty. Notwithstanding the foregoing,
Net Proceeds from business interruption insurance shall be deposited in the Revenue Fund as a portion of
Monthly Net Project Revenues.
If Net Proceeds from the damage or destruction is estimated to exceed$250,000,then the
Borrower shall within 60 days after such damage or destruction elect one of the following two options by
written notice of such election to the Trustee(to the extent an option is available):
(a) Option A-Repair and Restoration. The Borrower may elect to repair,reconstruct
and restore the damaged Project Facilities;provided that the Borrower certifies in
writing to the Trustee that such repair,reconstruction or restoration is reasonably
expected to be completed within twelve (12) months after the damage or
destruction. In such event, the Borrower shall proceed forthwith to repair,
reconstruct and restore the damaged or destroyed Project Facilities to substantially
the same condition and value as existed prior to the event causing such damage or
destruction and,to the extent necessary to accomplish such repair, reconstruction
and restoration,the Borrower shall apply the Net Proceeds of any insurance relating
to such damage or destruction received by the Borrower from the Trustee to the
payment or reimbursement of the costs thereof. So long as no Default exists,any
Net Proceeds of insurance relating to such damage or destruction received by the
Trustee shall be released from time to time by the Trustee to the Borrower upon the
receipt of a Certificate of the Authorized Borrower Representative specifying the
expenditures made or to be made or the indebtedness incurred in connection with
such repair, reconstruction and restoration and stating that such Net Proceeds,
together with any other moneys legally available for such purposes, will be
sufficient to complete such repair,reconstruction and restoration.
In the event the Borrower shall elect this Option A,the Borrower shall complete the
repair, reconstruction and restoration of the Project Facilities, whether or not the
Net Proceeds of insurance received by the Borrower for such purposes are sufficient
to pay for the same. Net Proceeds (exclusive of amounts payable from business
interruption insurance which may be directed to pay salaries or other operating costs
of the Project) not required for the repair, reconstruction and restoration of the
Project Facilities shall be applied to the prepayment of the Bonds. Prior to
commencement of the repair, reconstruction or restoration, the Borrower shall
deliver to the Trustee(i)one or more construction,equipment purchase or similar
contracts providing for all work,materials and equipment required for the repair,
reconstruction and restoration, and in each case containing a fixed or guaranteed
maximum price for the same,and in each case accompanied by an assignment of the
contract to the Trustee(in a form reasonably satisfactory to the Trustee)as security
for the Bonds and the Borrower's performance under this Agreement,(ii)all other
applicable items related to such work described in Section 2.01 of the Disbursing
Agreement(other than paragraphs(i),(j),(1)and(n)),and(iii)a written opinion of
Bond Counsel to the effect that completion of the repair, reconstruction or
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restoration, and the operation of the Project Facilities by the Borrower as so
completed,will not cause interest on any Tax-Exempt Bonds to be included in gross
income for federal income tax purposes.
(b) Option Redemption of the Bonds. In the event that the Borrower shall deliver
B-
to the Trustee a written estimate by an Independent person qualified to express such
opinion(including an Independent licensed architect)that that the Project Facilities
cannot be rebuilt, restored or replaced within 12 months from the date of the
destruction of damage,all outstanding Series 2001 Bonds(and all other outstanding
Bonds redeemable because of such any event) shall be redeemed in whole on the
next Interest Payment Date for the Series 2001 Bonds occurring at least 45 days
after the date of the notice given as to exercise of this Option B, and the Net
Proceeds shall be deposited in the Optional Redemption Fund and shall be applied
for that purpose. In such event,the applicable outstanding Bonds shall be redeemed
at par plus accrued interest, and redemption shall be effected pursuant to the
provisions of, in the manner, and with the effect provided in the Indenture. If the
Net Proceeds of insurance,together with all amounts then held by the Trustee under
the Indenture available to redeem or retire the applicable Bonds, shall be
insufficient to so redeem the applicable outstanding Bonds(including and expenses
of redemption), the Borrower shall pay such deficiency to the Trustee as a Loan
Repayment;and the Net Proceeds of insurance,together with such Loan Repayment
and amounts held by the Trustee under the Indenture, shall be applied to such
redemption of the Bonds. If all outstanding Bonds have been fully paid and all
obligations of the Borrower hereunder have been paid or provided for,all remaining
Net Proceeds shall be paid to the Borrower.
Section 5.11 Condemnation. If any portion of the Project Facilities or any material portion
thereof becomes subject to any eminent domain or condemnation proceeding,the Borrower shall give prompt
notice thereof to the Trustee. In the event that the Net Proceeds for such event shall not exceed$250,000
and no Default has occurred and is continuing,the Net Proceeds shall be paid to the Borrower,who shall
forthwith repair,reconstruct and restore the Project Facilities to substantially the same condition and value
as existed prior to the event causing such damage and, to the extent necessary to accomplish such repair,
reconstruction and restoration,the Borrower will apply the Net Proceeds to the payment or reimbursement
of the costs thereof.
If a Default has occurred and is continuing, all Net Proceeds shall be deposited with the
Trustee for application in accordance with the Indenture. If Net Proceeds from the condemnation exceed
$250,000, all Net Proceeds shall be deposited with the Trustee for credit to the Insurance and Award
Account, unless the Borrower shall notify the Trustee of the Borrower's election to redeem all then
redeemable outstanding Bonds as hereinafter provided,in which case all Net Proceeds shall be deposited in
the Optional Redemption Fund for redemption of Bonds available to be redeemed because of such event.
If Net Proceeds will exceed $250,000, then the Borrower shall within 60 days after such
condemnation elect one of the following two options by written notice of such election to the Trustee(to the
extent an option is available):
(a) Option A - Repairs and Improvements. The Borrower may elect to use the Net
Proceeds of the award made in connection with such condemnation or taking for
additions, repairs and improvements to the Project Facilities to restore or replace
the Project Facilities to substantially the same condition and value as existed prior
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to the event;provided that the Borrower certifies in writing to the Trustee that such
additions, repairs and improvements are reasonably expected to be completed
within twelve (12) months after the condemnation or taking. In such event, the
Borrower shall proceed forthwith to construct additions,repairs or improvements
and restore the Project Facilities to substantially the same condition and value as
existed prior to the event causing such damage or destruction, and to the extent
necessary to accomplish such addition,repair or improvement,the Borrower shall
apply the Net Proceeds of any condemnation or taking received by the Borrower
from the Trustee to the payment or reimbursement of the costs thereof. So long as
no Default exists,the Borrower shall have the right to receive such Net Proceeds
from the Trustee from time to time upon receipt by the Trustee of a Certificate of
an Authorized Borrower Representative specifying the expenditures made or to be
made or the indebtedness incurred in connection with such repairs and
improvements and stating that such Net Proceeds,together with any of the moneys
legally available for such purposes,will be sufficient to complete such repairs and
improvements.
In the event the Borrower shall elect this Option A,the Borrower shall complete the
addition,repair or improvement with respect to the Project Facilities,whether or not
the Net Proceeds of the condemnation or taking received by the Borrower for such
purposes are sufficient to pay for the same. Net Proceeds not required for the
addition, repair or improvement with respect to the Project Facilities shall be
applied to the prepayment of the Bonds. Prior to commencement of the addition,
repair or improvement, the Borrower shall deliver to the Trustee (i)one or more
construction, equipment purchase or similar contracts providing for all work,
materials and equipment required for the addition, repair or improvement, and in
each case containing a fixed or guaranteed maximum price for the same,and in each
case accompanied by an assignment of the contract to the Trustee (in a form
reasonably satisfactory to the Trustee)as security for the Bonds and the Borrower's
performance under this Agreement, (ii) all other applicable items related to such
work described in Section 2.01 of the Disbursing Agreement(other than paragraphs
(i), (j), (I) and (n)), and (iii)a written opinion of Bond Counsel to the effect that
completion of the addition,repair or improvement and the operation of the Project
Facilities by the Borrower after such work is completed,will not cause interest on
any Tax-Exempt Bonds to be included in gross income for federal income tax
purposes.
(b) Option B -Redemption of the Bonds. In the event that the Borrower shall deliver
to the Trustee a written estimate by an Independent person qualified to express such
opinion(including an Independent licensed architect)that that the Project Facilities
cannot be rebuilt, restored or replaced within 12 months from the date of the
condemnation or taking by eminent domain,all outstanding Series 2001 Bonds(and
all other outstanding Bonds redeemable because of such event)shall be redeemed
in whole on the first Business Day for which notice can be given under the
Indenture after the date of the notice given as to exercise of this Option B,and the
Net Proceeds shall be deposited in the Optional Redemption Fund and shall be
applied for that purpose. In such event,the applicable outstanding Bonds shall be
redeemed at par plus accrued interest,and redemption shall be effected pursuant to
the provisions of, in the manner,and with the effect provided in the Indenture.
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If the Net Proceeds of condemnation, together with the amount then held by the Trustee
under the Indenture available to redeem the Bonds shall be insufficient to redeem the Bonds (including
principal, accrued interest, and expenses of redemption), the Borrower shall pay such deficiency to the
Trustee as a Loan Repayment,and the Net Proceeds of condemnation,together with such Loan Repayment
and amounts held by the Trustee under the Indenture shall be applied to such redemption of the Bonds at the
earliest possible date. If the Bonds have been duly paid and all other obligations of the Borrower hereunder
have been paid or provided for,any remaining Net Proceeds shall be paid to the Borrower.
[End of Article V]
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ARTICLE VI
SPECIAL COVENANTS
Section 6.01 No Warranty of Condition or Suitability;Indemnification. The City does not
make any warranty,either express or implied,as to the design or capacity of the Project Facilities,as to the
suitability for operation of the Project Facilities,or that they will be suitable for the Borrower's purposes or
needs. The Borrower hereby releases the City from,agrees that the City shall not be liable for,and agrees
to hold the City,its Common Council and its respective officers and employees,harmless against,any claim,
cause of action,suit or liability for any loss or damage to property or any injury to or death of any person that
may be occasioned by any cause whatsoever pertaining to the Project,the Project Facilities or the use thereof.
The Borrower further agrees to indemnify and hold harmless the City, its officers and
employees, against any and all losses, claims, damages or liability to which the City, its officers and
employees, may become subject under any law in connection with the issuance and sale of the Bonds and
the carrying out of the transactions contemplated by this Agreement,and to reimburse the City, its officers
and employees,for any out-of-pocket legal and other expenses(including reasonable counsel fees)incurred
by the City, its officers and employees, in connection with investigating any such losses,claims, damages
or liabilities or in connection with defending any actions relating thereto. The City agrees,at the request and
expense of the Borrower,to cooperate in the making of any investigation in defense of any such claim and
promptly to assert any or all of the rights and privileges and defenses which may be available to the City.
The provisions of this Section shall survive the payment and redemption of the Bonds.
Section 6.02 Financial Statements and other Reports. The Borrower shall provide to the
Trustee,the Original Purchaser and any Holder who so requests:
(a) By no later than 120 days after the close of each Fiscal Year during the Term
hereof,beginning with the first full Fiscal Year following the Completion Date, a
copy of annual financial statements of the Borrower for the preceding Fiscal Year,
prepared in accordance with generally accepted accounting principles,consistently
applied, accompanied by an audit report of an Independent certified public
accountant, covering the operations of the Borrower for such Fiscal Year and
containing a balance sheet as at the end of such Fiscal Year, showing in
comparative form the financial data for the preceding Fiscal Year,and accompanied
by a separate written statement of such accountant preparing such report that the
accountant has obtained no knowledge of any default by the Borrower in the
fulfillment of any of the terms, covenants, provisions or conditions of this
Agreement,or if the accountant shall have obtained knowledge of any such default,
a description of such default; but such accountant shall not hereby be held liable
directly or indirectly to anyone for such accountant's failure to obtain knowledge
of any default.
(b) By no later than 120 days after the last day of each Fiscal Year during the Term
hereof,beginning with the first full Fiscal Year following the Completion Date,a
Certificate of the Authorized Borrower Representative stating that the Borrower
whether or not,after such review as is appropriate,the Borrower has complied with
all terms and covenants herein during such year, and if the Borrower has not,
specifying the same.
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(c) By no later than 45 days after the last day of each quarter of the Fiscal Year,
beginning with the first full quarter following the Completion Date, financial
statements prepared by or on behalf of the Borrower(which need not be audited),
setting forth in accordance with generally accepted accounting principles
consistently applied,the revenues and expenses of the Borrower for the quarter,in
comparison with the same period for the prior fiscal year,together with a balance
sheet-and, a statement of cash flow, and evidence and a certification of the
Borrower's satisfaction of the requirements of Section 6.13 herein,which shall in
each case be certified by any authorized officer of the Borrower with knowledge of
its financial affairs to be true and accurate to the best of such officer's knowledge.
(d) By no later than 45 days after the last day of each quarter of the Fiscal Year,
beginning with the first full quarter following the Completion Date,a statement as
to the occupancy of the Project Facilities for each of the last preceding twelve
consecutive months, setting forth for each month the number of units leased,
percentage of units leased, number of units occupied by new tenants, number of
persons on a waiting list,and number of units for which a lease terminated.
In addition to the foregoing,prior to the Completion Date,on or before the 15th day of each
month,commencing December 15,2001,the Borrower shall cause a narrative description to be prepared in
reasonable detail, explaining (i) the progress toward completion of the Project in comparison with the
schedule of completion contemplated on the Date of Issuance of the Series 2001 Bonds,(ii)a summary of
the costs incurred to date in comparison with costs incurred to such date that were expected on the Date of
Issuance of the Series 2001 Bonds,(iii)a statement of the costs required to be paid to complete the Project
in accordance with the Plans in comparison to amounts then on deposit in the Construction Account,(iv)a
brief description of any marketing activities undertaken since the last report furnished pursuant to this
paragraph.
The Borrower shall promptly deliver,or cause to be delivered to the Trustee all reports and
tax returns filed by the Sole Member with the Internal Revenue Service, including each Form 990 (or any
equivalent successor form or forms).
Borrower acknowledges that so long as any item required to be provided by this Section is
past due,under the Indenture,no amounts will be disbursed for payment of costs from the Surplus Fund or
the Repair and Replacement Fund,and no amounts will be released to the Borrower from the Surplus Fund.
Section 6.03 Annual Budget. No later than 30 days prior to the commencement of each
Fiscal Year,the Borrower shall prepare and submit to the Trustee,the Original Purchasers and any Holder
who has so requested to the Trustee,a budget for the Fiscal Year(the "Budget"),reflecting the Borrower's
best estimates of(i)all revenues and expenditures of any nature related to the Project Facilities or amounts
held by the Trustee reasonably anticipated for the year, including reasonable detail as to various categories
of such revenues and expenditures,(ii)projecting the expected ratio for such year of Net Revenues Available
for Senior Debt Service in comparison to expected Senior Debt Service Requirements for the year,and(iii)
projecting the excepted ratio for such year of Net Revenue Available for Debt Service in comparison to
expected Debt Service Requirements for the year.
Whenever, in the reasonable judgment of the Borrower, the amount by which expected
revenues will exceed expenditures for a Fiscal Year is anticipated to be more than 10%less than previously
budgeted, or whenever, in the reasonable judgement of the Borrower, the amount by which expected
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expenditures will exceed revenues for a Fiscal Year is anticipated to be more than 10%higher than budgeted,
the Borrower shall promptly cause a new Budget to be prepared and submitted to the Trustee,the Original
Purchasers and any Holder who has so requested to the Trustee.
Borrower acknowledges that so long as any item required to be provided by this Section is
past due,under the Indenture,no amounts will be disbursed for payment of costs from the Surplus Fund or
the Repair and Replacement Fund,and no amounts will be released to the Borrower from the Suplus Fund.
Section 6.04 Borrower to Maintain its Existence; Conditions Under Which Exceptions
Permitted. The Borrower agrees that,so long as the Bonds are Outstanding,it will maintain its existence as
a limited liability company under the laws of the State,with the Sole Member as it sole member; will not
dissolve or otherwise dispose of all or substantially all of its assets; and will not consolidate with or merge
into another person or permit one or more other persons to consolidate with or merge into it;provided,that
the Borrower may,without violating the agreement contained in this Section,consolidate with or merge into
another institution,or permit one or more other of such institutions to consolidate with or merge into it,or
sell or otherwise transfer to another such institution all or substantially all of its assets as an entirety and
thereafter dissolve(collectively,a"Transaction")upon satisfaction ofthe following conditions;provided that
except with the consent of a Majority of Holders, no Transaction shall occur while an Event of Default is
continuing:
(a) If the surviving,resulting or transferee person,as the case may be,is other than the
Borrower, such surviving, resulting or transferee person shall assume all of the
obligations of the Borrower under all Loan Documents,with such assumption being
evidenced by a writing acceptable to a Majority of Holders and the Trustee (with
the Borrower responsible to pay all reasonable costs incurred by the Trustee to
review such writing and the proposed assumption); and a copy of all executed
documents evidencing such assumption shall be promptly delivered to the Trustee
and such Majority of Holders;
(b) Unless otherwise approved by a Majority of Holders, immediately after the
Transaction,the resulting party will not be engaged in any trade or business other
than in the operation of the Project Facilities or the Mortgaged Property as herein
permitted; and
(c) Either(1)the acquiring party as the"Borrower",immediately after the Transaction,
shall be permitted under the terms hereof to incur at least one dollar of Sed:oi
Indebtedness under this Agreement(based on a report prepared by an Independent
accounting firm delivered to the Trustee),or(2)the ratio ofNet Revenues Available
for Se,i;ot-Debt Service to Senio.-Debt Service Requirements for the current and
next succeeding Fiscal Year, assuming Project Facilities' ownership of the
acquiring party,will not be less than the same ratio as calculated for the current and
next succeeding Fiscal Year, assuming Project Facilities' ownership by the
Borrower(based on a report prepared by an Independent accounting firm delivered
to the Trustee);and
(d) The Borrower shall cause to be delivered to the Trustee an opinion of Bond Counsel
to the effect that such Transaction shall not cause interest on any Tax-Exempt
Bonds to be included in gross income for federal income tax purposes.
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If merger or sale or other transfer is made as provided in this Section,the provisions of this
Section shall continue in full force and effect and no further merger or sale or other transfer shall be made
except in compliance with the provisions of this Section.
Section 6.05 Records and Inspection. The Borrower shall maintain(i)copies of federal,
state, municipal and other licenses and permits obtained by the Borrower relating to the operation of the
Project Facilities,(ii)financial books and records reflecting the condition of the Borrower,and(iii)all other
documents, instruments, reports and records required by any provision of this Agreement or the Indenture
or by law relating to the Project or the affairs of the Borrower. The Trustee shall have the right to inspect
all such materials,except any materials made private or confidential by federal or state law or regulation,to
inspect the Project Facilities at all reasonable times and to make such copies and extracts as they may desire.
At the request of the Trustee,the Borrower shall furnish to the Trustee,at the Borrower's expense,a copy
of any such materials which are required by the Trustee in the performance of their duties under the Loan
Documents or the Act.
Section 6.06 Further Assurances, Financing Statements, Maintenance of Lien. At the
request of the Trustee,the Borrower shall execute any financing statement,supplement to the Mortgage,the
Subordinate Mortgage or other instrument which,according to an Opinion of Counsel,is or may be required
to carry out the intent of the parties as expressed in the Loan Documents. The Borrower shall, at its sole
expense,file or cause to be filed any financing statements under the Uniform Commercial Code or similar
instruments deemed necessary by the Trustee to perfect and continue the security interest of the Trustee in
the Project Facilities,this Agreement,and the payments to be made hereunder and under the Mortgage and
the Subordinate Mortgage, including any financing statements which the Trustee may be required to file
under the Indenture. The Borrower shall also,at its sole expense,cause the Mortgage and the Subordinate
Mortgage,and any supplement thereto,to be filed for record in the office of the County Recorder or Registrar
of Titles,or both,and in any other office which the Trustee shall deem necessary or desirable to perfect or
maintain the lien of the Mortgage and the Subordinate Mortgage and shall pay any mortgage registration tax
or filing fee or other payment for the effective filing thereof.
Section 6.07 Assignment;Trust Funds Exempt. The Borrower consents to the pledge and
assignment of the Loan Repayments and other interests of the City in this Agreement by the City to the
Trustee as provided in the Indenture. Except as otherwise provided in Section 5.02 hereof,the interests and
obligations of the Borrower under this Agreement are nonassignable and shall not be assigned except to a
trustee in bankruptcy or similar officer pursuant to the Bankruptcy Code or similar law. Without limiting
the foregoing,cash and investments in any fund or account comprising the Trust Estate constitute trust funds
not subject to assignment by the Borrower or to the execution,attachment, or garnishment by any creditor
of the Borrower.
Section 6.08 Observance of Indenture Covenants and Terms. The Borrower will not do,in
any manner,anything which will cause or permit to occur any default under the Indenture,but will faithfully
observe and perform, and will do all things necessary so that all of the conditions, covenants and
requirements of the Indenture may be observed and performed.
Section 6.09 Nondiscrimination. The Borrower covenants and agrees that, in respect to
renting all units in the Project Facilities,it shall not discriminate against any person on the basis of sex,race,
color, creed,national origin or religious belief.
Section 6.10 Environmental Matters. The Borrower hereby warrants and represents that
the Mortgaged Property, including all of the Land and the use thereof are in compliance with, and the
Borrower will maintain or cause to be maintained the condition of the Mortgaged Property, including the
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Land so that they shall remain in compliance with, all applicable laws, statutes, ordinances, rules and
regulations of any governmental or quasi-governmental authority,specifically including without limitation
the Resource Conservation and Recovery Act and the Comprehensive Environmental Response
Compensation and Liability Act,both as amended,and all other environmental protection or toxic waste or
hazardous substance handling,treatment,storage or disposal laws,statutes,ordinances,rules and regulations.
The Borrower agrees to provide the Trustee with copies of any notifications known to it of
releases of oil or hazardous materials or substances or of any environmental hazards or potential hazards
which are given by or on behalf of the City to any federal,state or local agencies or authorities or which are
received by the Borrower from any federal, state or local agencies or authorities with respect to the
Mortgaged Property or the Land. Such copies shall be sent to the Trustee within ten(10)days after they are
received by the Borrower.
The Borrower agrees to provide the Trustee with copies of all emergency and hazardous
chemical inventory forms (hereinafter "Notices") with respect to the Mortgaged Property or the Land
previously given to any federal, state or local governmental authority or agency as required pursuant to the
Emergency Planning and Community Right-to-Know Act of 1986,48 U.S.C.A. Section 1101 et seq.,and to
provide the Trustee with copies of all such Notices subsequently sent to any such governmental authority
or agency as required pursuant to the Emergency Planning and Community Right-to-Know Act of 1986.
Such copies of subsequent Notices shall be sent to the Trustee concurrently with their being mailed to any
such governmental authority or agency.
To the extent allowed by law the Borrower hereby covenants and agrees to indemnify,
protect and hold harmless the Trustee, the Holders of the Bonds and any purchaser at a foreclosure sale
pursuant to the Mortgage and any assignee of such purchaser from and against any and all claims,demands,
liabilities and costs, including without limitation attorneys' fees,arising from(a)any"release" (as defined
above)or threat of a"release,"actual or alleged,or any"hazardous substances"(as defined above)upon or
about the Mortgaged Property or the Land or respecting any products or materials previously or now located
upon, delivered to or in transit to or from the Mortgaged Property or the Land regardless of whether such
release or threat of a release or alleged release or threat of release has occurred prior to the date hereof or
hereafter occurs and regardless of whether such release or threat of a release or alleged release or threat of
a release occurs as the result of the negligence or misconduct of the Borrower or any third party or otherwise,
or(b)any violation,actual or alleged,of or any other liability under or in connection with any law,statute,
ordinance, rule or regulation of any governmental or quasi-governmental authority, specifically including
without limitation the Resource Conservation and Recovery Act and the Comprehensive Environmental
Response Compensation and Liability Act,both as amended,or any other environmental protection or toxic
waste or hazardous substance handling,treatment, storage or disposal laws, statutes, ordinances, rules or
regulations, upon or about the Mortgaged Property or the Land or respecting any products or materials
previously or now located upon, delivered to or in transit to or from the Mortgaged Property or the Land,
regardless of whether such violation or alleged violation has occurred prior to the date hereof or hereafter
occurs and regardless of whether such violation or alleged violation occurs as a result of the negligence or
misconduct of the Borrower or any third party or otherwise. The provisions of this Section shall survive any
termination of this Loan
The Borrower shall not use the Mortgaged Property in any manner so as to violate any
applicable law, rule, regulation or ordinance of any governmental body or in such manner as to vitiate
insurance upon the Mortgaged Property. The Borrower shall not commit or permit any waste upon the
Mortgaged Property which would materially decrease the value of the Mortgaged Property. The Borrower
shall comply with all regulations concerning the environment,health and safety relating to the generation,
use,handling,production,disposal,discharge and storage of Hazardous Materials,as defined herein,in,on,
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under,or about the Mortgaged Property. The Borrower shall promptly take any and all necessary action in
response to the presence,storage,use,disposal,transportation or discharge of any Hazardous Materials in,
on,under or about the Mortgaged Property by the Borrower or persons acting on behalf of or at the direction
of the Borrower as all applicable laws, rules, regulations, or ordinances may require. In the event the
Borrower undertakes any remedial action with respect to any Hazardous Materials on, under or about the
Mortgaged Property,the Borrower shall immediately notify the City and the Trustee of any such remedial
action,and shall conduct and complete such remedial action(A)in compliance with all applicable federal,
state and local laws,regulations,rules,ordinances and policies,(B)to the reasonable satisfaction of the City
and(C)in accordance with the orders and directives of all federal,state and local governmental authorities.
The Borrower shall protect,indemnify and hold the City,the Trustee and the Holders of the
Bonds and their officers,employees and agents,harmless from and against any and all claims,proceedings,
lawsuits, liabilities, damages, losses, fines, penalties,judgments, settlements, awards, costs and expenses
(including,without limitation,reasonable attorneys fees and costs and expenses of investigation and proof)
which arise out of or relate in any way to any generation,use,handling,production,transportation,disposal
or storage of any Hazardous Materials in, on, under, or about the Mortgaged Property by the Borrower or
any person acting on behalf of or at the direction of the Borrower, including, without limitation: (i) all
foreseeable and all unforeseeable consequential damages directly or indirectly arising out of(A)the use,
generation, storage, discharge or disposal of Hazardous Materials by the Borrower, or persons acting on
behalf of or at the direction of the Borrower,or(B)any residual contamination affecting any natural resource
or the environment,and(ii)the costs of any required or necessary repair,cleanup,or detoxification of the
Mortgaged Property and the preparation of any closure or other required plans(all such costs,damages,and
expenses referred to in this Section referred to as"Expenses"). In addition,the Borrower agrees that in the
event any Hazardous Material is caused to be removed from the Mortgaged Property by the Borrower,the
City, or any other person or entity, such Hazardous Material shall be considered generated,transported or
disposed of solely in the name of the Borrower and the Borrower shall assume any and all liability for such
removed Hazardous Material. The indemnification of the City,the Trustee and the Holders of the Bonds by
the Borrower shall be a continuing indemnification and shall remain in full force and effect notwithstanding
the expiration or termination of this Agreement.
As used herein, the term Hazardous Material shall mean: (i) oil, flammable substances,
explosives, radioactive materials,hazardous wastes or substances,toxic wastes or substances or any other
substances,materials or pollutants which(1)pose a hazard to the Mortgaged Property,to adjacent premises
or to persons on or about the Mortgaged Property or adjacent premises, (2) substances which cause the
Mortgaged Property to be in violation of any local, state or federal law, rule, regulation or ordinance, or
(3) substances which are defined as or included in the definition of"hazardous substances," "hazardous
wastes,""hazardous materials,"or"toxic substances"or words of similar import under any applicable local,
state or federal law or under the regulations,policy guidelines or other publications adopted or promulgated
pursuant thereto, including, but not limited to: (A) the Comprehensive Environmental Response
Compensation and Liability Act of 1980,as amended,42 U.S.C.§9601,et seq.;(B)the Hazardous Materials
Transportation Act,as amended,49 U.S.C.§ 1101,et seq.;(C)the Resource Conservation and Recovery Act,
as amended,42 U.S.C. § 6901, et seq.; (D)the Clean Air Act,42 U.S.C. § 7412; (E)the Toxic Substance
Control Act, 15 U.S.C. § 2601 et seq.; (F)the Clean Water Act, 33 U.S.C. § 1317 and 1321(b)(2)A and
(G)rules, regulations, ordinances and other publication adopted or promulgated pursuant to the aforesaid
laws; (ii)asbestos in any form which is or could become friable, urea formaldehyde foam insulation, and
(iii)any other chemical,material or substance,exposure to which is prohibited,limited or regulated by any
governmental authority or may or could pose a hazard to the health and safety or property interests of the
Borrower or its employees, the occupants of the Mortgaged Property or the owners and/or occupants of
property adjacent to or surrounding the Mortgaged Property.
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Notwithstanding anything to the contrary herein,the Borrower shall not be liable for any
releases of hazardous substances which occur following the Trustee's acquisition of the Mortgaged Property
by reason of a foreclosure sale(after the period of redemption)or a conveyance in lieu of a foreclosure sale
or following a sale by the Mortgagor which results in the release of the Mortgagor on the Loan Agreement,
provided that such Hazardous Substances release was not caused by an act or omission of the Mortgagor
prior to the date of such transfer or conveyance and provided further that such Hazardous Substances were
first placed on the Mortgaged Property following Trustee's acquisition of the Mortgaged Property by reason
of a foreclosure sale (after the period of redemption) or a conveyance in lieu of a foreclosure sale or
following a sale by the Borrower which results in the release of the Borrower on the Loan Agreement.
Section 6.11 Sole Business of Borrower. The Borrower shall engage in no trade or business
other than the operation of the Project Facilities and any other improvements or actions undertaken on the
Land or land adjacent thereto.
Section 6.12 Matters Related to Management Contracts.On or before the Date of Issuance
of the Series 2001 Bonds,the Borrower has entered shall enter into the initial Management Contract with
the Manager. The B iso'wer . . . . . . • . • .
Management Cont.act or ternrinatally Management Cont,act.Any Management Contract entered into with
the Manager or any substitute Manager shall provide that any Subordinate Management Fee, if any, is
payable solely from funds available therefor under Section 5.01 of the Indenture.
Section 6.13 Rate Covenant.
(a) The Borrower shall operate the Project Facilities,subject to applicable requirements
or restrictions imposed by law,such that Net Revenues Available for Debt Service
in each calendar quarter,commencing with the calendar quarter ending September
30, 2003, will be at least 110% of Maximum Debt Service Requirements during
such calendar quarter. The foregoing is subject to the qualification that if
requirements necessary for the Sole Member to maintain its status as a 501(c)(3)
Organization, or applicable state or federal laws or regulations, or the rules and
regulations of agencies having jurisdiction(the "Operating Requirements"), shall
not permit the Borrower to produce the foregoing level of Net Revenues Available
for Debt Service, then the Borrower shall, in conformity with the then prevailing
requirements,laws,rules or regulations,maintain the maximum permissible level.
(b) If based on the financial statements required to be prepared under Section 6.02,for
any two consecutive calendar quarters ending on or after December 31,2003,Net
Revenues Available for Debt Service are less than 110% of Debt Service
Requirements for such periods,then the Trustee shall immediately notify all Bond
Holders of such fact, and the Borrower will promptly employ an Independent
Management Consultant to:(i)review and analyze the financial reports required to
be made by the Borrower, (ii) inspect the Project Facilities, their operation and
administration,(iii) submit to the Borrower and the Trustee, a written report and
(iv) make such recommendations as to the operation and administration of the
Project Facilities as such Management Consultant deems appropriate. The
Borrower agrees to the fullest extent lawful, to adopt and carry out such
recommendations,subject always to the Operating Requirements,and if such lawful
recommendations are not adopted and carried out, the Borrower shall replace the
Manager.
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(c) So long as the Borrower is otherwise in full compliance with its other obligations
under this Agreement,it shall not constitute an Event of Default that Net Revenues
Available for Debt Service for any calendar quarter are less than the coverage
requirements described above, unless for any consecutive twelve calendar month
period ending on or after June 30,2004,Net Revenues Available for Debt Service
are less than Debt Service Requirements.
Section 6.14 Limitations on Indebtedness. The Borrower covenants that after the Date of
Issuance of the Series 2001 Bonds it will not, directly or indirectly, incur any Indebtedness (secured or
unsecured)except as provided in Sections 6.15, 6.16, 6.17, 6.18, and 6.19.
Section 6.15 Short-Term Indebtedness. The Borrower may incur such Short-Term
Indebtedness as in the Borrower's judgment may be deemed expedient to provide for working capital,
provided that Short-Term Indebtedness when incurred shall not cause the total Short-Term Indebtedness in
the aggregate then outstanding to exceed 5%of the Gross Revenues of the Borrower for the preceding Fiscal
Year for which annual audited financial statements have been prepared. Short-Term Indebtedness may be
secured by collateral comprising accounts receivable, but in no other manner. The Borrower shall give
prompt written notice to the Trustee of the incurrence of more than$150,000 in the aggregate of Short-Term
Indebtedness.
Section 6.16 Interim Indebtedness. The Borrower may incur Interim Indebtedness by
borrowing money on an interim basis to provide temporary financing of Improvements for which the City
shall have previously agreed to provide permanent financing by the issuance of Additional Bonds therefor
or for which other lenders shall have previously agreed to provide permanent financing, but only after the
right of the City to issue Additional Bonds has been established pursuant to the Indenture or the right of the
Borrower to enter into the permanent financing has been established in accordance with Section 6.17 hereof.
No property or assets of the Borrower may secure Interim Indebtedness.
Section 6.17 Additional Senior Indebtedness. After the Date of Issuance of the Series 2001
Bonds, and, unless waived by a Majority of Holders, so long as no Event of Default has occurred and is
continuing,the Borrower may incur Senior Indebtedness only as provided in this Section and only for the
purpose of(i)refunding Outstanding Bonds,(ii)refinancing outstanding Senior Indebtedness,(iii)financing
or refinancing the design, acquisition, construction, development and equipping of Improvements, or(iv)
financing or refinancing the design, acquisition, construction, development and equipping of additional
senior residential or health care related facilities to be owned and operated by the Borrower. The Borrower
may incur Senior Indebtedness in amounts which are sufficient, in addition to paying the cost of
accomplishing the purpose for which the Senior Indebtedness was incurred,to pay the costs of the Borrower
in incurring such Senior Indebtedness,to fund a reserve fund for the payment of such Senior Indebtedness
(or related Bonds)and to fund interest payable on such Senior Indebtedness for a period of time not to exceed
six months beyond the completion of construction of any Improvements,but only upon complying with the
following requirements:
(a) Before incurring or otherwise becoming liable in respect of any Senior
Indebtedness,the Borrower shall furnish the Trustee:
(i) a Certificate of an Authorized Borrower Representative which shall:
(A)state the general purpose for which such Senior Indebtedness is to be
incurred; (B) describe the Improvements or facilities to be financed or
refinanced thereby or the Outstanding Bonds to be refunded thereby or the
outstanding Senior Indebtedness to be refinanced thereby,as the case may
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be;(C)state the principal amount of Senior Indebtedness to be incurred,the
maturity date or dates thereof and the interest rate or rates with respect
thereto;and(D)state that the proposed Senior Indebtedness,together with
any other funds available to and committed or reserved by the Borrower for
use in connection with such financing, refinancing or refunding, which
other funds shall be identified as to amount and source,is not less than the
amount required to acquire and construct the Improvements and to place the
same in service, to refund the Outstanding Bonds to be refunded or to
refinance the outstanding Senior Indebtedness,as the case may be,and to
pay all fees,expenses and financing costs,including required reserves and
funded interest, in connection therewith;
(ii) an Opinion of Counsel to the Borrower to the effect that all conditions
precedent herein specified for incurring such Senior Indebtedness have
been satisfied;
(iii) a written opinion of Bond Counsel to the effect that the incurrence of the
Senior Indebtedness will cause interest on any Tax-Exempt Bonds to be
included in gross income for federal income tax purposes; and
(iv) a written report of an independent certified public accountant (which
accountant and report are acceptable to the Trustee) stating that the
Historical Debt Service Coverage Ratio for the Fiscal Year immediately
preceding the incurring of such Senior Indebtedness for which financial
statements reported upon by independent certified public accountants are
available was not less than 1.20:1; and (b) a written Consultant's report
(which report is acceptable to the Trustee)to the effect that the Projected
Debt Service Coverage Ratio of the Company for each of the next five(5)
succeeding Fiscal Years is not less than 1.20:1; provided that such report
shall include forecast statement of financial position(income statement),
statements of revenues and expenses and statements of changes in financial
position for such Fiscal Year and a statement of the relevant assumptions
upon which such forecasted statements are based, which financial
statements must indicate that sufficient revenues and cash flow could be
generated to pay the operating expenses of the Project and the debt service
on the Borrower's other existing Indebtedness during such Fiscal Year.
(b) The Borrower shall not incur any Senior Indebtedness to refund Outstanding Bonds
or other Senior Indebtedness unless,in addition to the filing of the items described
in subsection(a)above:
(i) there shall be filed with the Trustee a report of an Independent accountant
to the effect that the proceeds of the Senior Indebtedness,together with any
other funds deposited with the Trustee for such purpose, will be not less
than an amount sufficient to pay the principal of and the redemption
premium,if any,on the Outstanding Bonds to be refunded and the interest
which will become due and payable thereon on or prior to the redemption
date or stated maturity thereof, or that the principal of and interest on
Government Obligations purchased from such proceeds or from other funds
provided by the Borrower and deposited in trust with the Trustee, which
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Government Obligations do not permit redemption thereof at the option of
the issuer, when due and payable (or redeemable at the option of the
holder)will without reinvestment provide,together with any other moneys
which shall have been deposited irrevocably with the Trustee for such
purpose, sufficient moneys to pay such principal,redemption premium,if
any,and interest; and
(ii) there shall be filed with the Trustee an opinion of Bond Counsel to the
effect that the incurring of such Senior Indebtedness and the refunding of
Bonds or other Senior Indebtedness with the proceeds thereof will not
cause interest on any Tax-Exempt Bonds to be included in gross income for
federal income tax purposes.
(c) Any additional Senior Indebtedness may be secured by the Mortgage on parity with
the Bonds, but the additional Senior Indebtedness shall not be secured by any
amounts in the Debt Service Reserve Fund(except any Additional Bonds payable
from such Senior Indebtedness would be secured by the Debt Service Reserve
Fund);provided,however,that the Borrower shall not secure nor attempt to secure
such Senior Indebtedness with an interest in the property secured under the
Mortgage except in accordance with the terms of an agreement satisfactory to the
Trustee.
(d) Any default under any agreement for repayment of Senior Indebtedness shall be a
default under this Agreement and there shall be included in any agreement for
repayment of such Senior Indebtedness a provision that any default under this
Agreement shall be a default under such agreement. In addition,any agreement for
repayment of such Senior Indebtedness shall include a provision that, prior to
exercising any remedies upon a default by the Borrower under such agreement,the
holder or holders of such Senior Indebtedness (or a trustee representing such
holders)shall cooperate with the Trustee to the end that the interests of such holder
or holders and the Bondholders shall be equally protected.
Section 6.18 Calculation of Debt Service. The calculation of Debt Service Requirements
pursuant to this Agreement or the Indenture, shall be made in a manner consistent with the following:
(a) With respect to Balloon Indebtedness, as hereafter defined, such Balloon
Indebtedness shall be assumed to be amortized in substantially equal annual
amounts to be paid for principal and interest over an amortization period equal to
the actual term thereof,at the interest rate specified therein.
"Balloon Indebtedness"means Long-Term Indebtedness twenty-five percent(25%)
or more of the original principal amount of which(A)is due in any 12-month period
or(B)may,at the option of the holder thereof,be required to be redeemed,prepaid,
or purchased directly or indirectly by the Borrower or otherwise paid in any 12-
month period; provided,that, in calculating the principal amount of such Balloon
Indebtedness due or required to be redeemed,prepaid,purchased or otherwise paid
in any 12-month period, such principal amount shall be reduced to the extent that
all or any portion of such amount is required to be amortized prior to such 12-month
period. Balloon Indebtedness shall not include Long-Term Indebtedness with
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substantially equal annual installments of principal or substantially equal annual
installments of principal and interest.
(b) Except as otherwise provided in subsection (a) above with respect to Balloon
Indebtedness which is also Variable Rate Indebtedness, as hereinafter defined, in
determining the amount of debt service payable on Variable Rate Indebtedness for
any future period, interest on such indebtedness for any period of calculation(the
"Determination Period") shall be computed by assuming that the rate of interest
applicable to the Determination Period is equal to the average annual rate of interest
on similar securities(calculated in the manner in which the rate of interest for the
Determination Period is to be calculated) which was in effect for the 24 month
period prior to a date selected by the Borrower plus two percent (2%), which
selected date is within 45 days immediately preceding the beginning of the
Determination Period, as certified by a banking or investment banking institution
knowledgeable in matters of variable rate financing or, if it is not possible to
calculate such average annual rate of interest,by assuming that the rate of interest
applicable to the Determination Period is equal to the rate of interest then in effect
on such Variable Rate Indebtedness. In addition, debt service shall include any
continuing credit enhancement, liquidity and/or remarketing fees for the relevant
period.
Variable Rate Indebtedness means any portion of Long-Term Indebtedness the interest rate
on which varies periodically such that the interest rate at a future date cannot accurately be calculated.
Section 6.19 Subordinate Debt. Notwithstanding the restrictions set forth in this Article VI,
the Borrower may incur such Subordinate Debt as in the Borrower's judgment may be deemed expedient for
the payment of working capital so long as the consent thereto is obtained from a majority by principal amount
of the holders of then outstanding Subordinate Debt (other than holders of Subordinate Debt to be fully
repaid from proceeds of the new Subordinate Debt)and prior notice thereof is given to a Majority of Holders;
provided however,that the terms thereof shall expressly provide that such Indebtedness is payable only from
Net Revenues Available for Subordinate Debt Service so long as any Senior Bonds are outstanding,and any
lien securing the Indebtedness and all rights of payment and enforcement shall be subordinated to the
payment of outstanding Senior Bonds, enforcement of rights in respect thereof and the lien of the
Subordinate Mortgage,as evidenced by an agreement between the holder of such Subordinate Debt and the
Trustee(consented to by the Borrower).
Section 6.20 Restrictions on Transfers and Payments. The Borrower shall not make any
payment, transfer any money or property or engage in any transaction with another person except if the
Borrower shall receive fair value for the same; provided that any transfer of funds or payment shall be
permitted so long as no Event of Default and no Event of Nonpayment has occurred or is existing (a) if
deemed necessary or desirable by the Borrower in order to maintain or continue the status of the Sole
Member as a 501(c)(3) Organization, or (b) if by treating any such payment or transfer as an Operating
Expense, the rate covenant of Section 6.13 will not have been violated for any period (disregarding
provisions relating to the engagement of a Management Consultant).
Section 6.21 Additional Indemnities. In addition to any other provision herein,and not
by way of any limitation on any other protection herein afforded to the City,the Trustee or any Holder,
the Borrower agrees to pay,and protect, indemnify and save the City,the Trustee and each Holder
harmless from and against,all liabilities, losses,damages,costs and expenses(including reasonable
attorneys' fees and expenses of such persons),causes of action, suits,claims,demands and judgments of
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any nature(other than those arising from the gross negligence or willful misconduct of the indemnified
party)arising from:
(a) any injury to or death of any person or damage to property in or upon the Project
Facilities, or growing out of or connected with the use, non-use, condition or
occupancy of the Project Facilities or a part thereof;
(b) violation of any agreement,warranty,covenant or condition of this Agreement or
other Loan Documents,except by the City;
(c) violation of any contract, agreement or restriction by the Borrower relating to the
Project Facilities;
(d) violation of any law, ordinance, regulation or court order affecting the Project
Facilities or a part thereof or the ownership,occupancy or use thereof; or
(e) any statement or information relating to the expenditure of the proceeds of the
Bonds contained in the"Arbitrage Certificate"or similar document furnished by the
Borrower to the City or the Trustee which,at the time made, is misleading,untrue
or incorrect in any material respect; or
(f) any statement or information contained in the Official Statement furnished to
purchasers of the Bonds that is untrue or incorrect in any material respect,and any
omission from such Official Statement of any statement or information which
should be contained therein for the purpose for which the same is to be used or
which is necessary to make the statements therein not misleading in any material
respect.
The provisions of this Section shall survive the retirement and payment of the Bonds.
Section 6.22 Continuing Disclosure. The Borrower covenants and agrees that it will comply
with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other
provision of this Loan Agreement, failure of the Borrower to comply with the Continuing Disclosure
Agreement shall not be considered an Event of Default;however,the Trustee may(and,at the request of any
Participating Underwriter(as defined in the Continuing Disclosure Agreement) or the Holders of at least
twenty-five percent(25%)aggregate principal amount of the Outstanding Bonds,shall),or any Bondholder
or Beneficial Owner may,take such actions as may be necessary and appropriate,including seeking specific
performance by court order,to cause the Borrower to comply with its obligations under this Section. For
purposes of this Section,"Beneficial Owner"means any person who(i)has the power,directly or indirectly,
to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding
Bonds through nominees,depositories or other intermediaries), or(ii)is treated as the owner of any Bonds
for federal income tax purposes.
[End of Article VI]
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.01 Events of Default. The following shall be "Events of Default" under this
Agreement and the term"Event of Default"shall mean,whenever used in this Agreement,any one or more
of the following events:
(a) If the Borrower fails to pay the amount of any Loan Repayment required to be paid
under Section 4.02(a)hereof and if,as a result thereof,the principal of,premium,
if any, or interest on any Bond is not paid; or
(b) If the Borrower shall fail to punctually perform any of the other covenants,
conditions, agreements and provisions contained in this Agreement on the part of
the Borrower to be performed, and (except in the case of a payment due under
Section 4.07(c)) such Default shall have continued for a period of 30 days after
written notice,specifying such Default and requiring the same to be remedied,shall
have been given to the Borrower by the City or the Trustee; or
(c) If any representation or warranty of the Borrower made herein or in any report,
certificate or financial statement provided by the Borrower in connection with this
Agreement shall prove to be false or misleading in any material respect; or
(d) If any Event of Default shall exist under the other Loan Documents; or
(e) If the Borrower files a petition in voluntary bankruptcy, for the composition of its
affairs or for its reorganization under any state or federal bankruptcy or insolvency
law, or makes an assignment for the benefit of creditors,or consents in writing to
the appointment of a trustee or receiver for itself or for the whole or any substantial
part of its property; or
(f) If a court of competent jurisdiction shall enter an order, judgment or decree
declaring the Borrower an insolvent, or adjudging the Borrower bankrupt, or
appointing a trustee or receiver of the Borrower or of the whole or any substantial
part of the property of the Borrower under any applicable law or statute of the
United States of America or any state thereof,and such order,judgment or decree
shall not be vacated or set aside or stayed within 60 days from the date of the entry
thereof;
(g) If,under the provisions of any other law for the relief or aid of debtors, any court
of competent jurisdiction shall assume custody or control of the Borrower or of the
whole or any substantial part of its property,and such custody or control shall not
be terminated within 60 days from the date of assumption of such custody or
control;
(h) If a court of competent jurisdiction shall enter an order,judgment or decree(which
is not subject to further appeal or rehearing)declaring that the Borrower owes any
amount in excess of$50,000,and such amount is not paid within 30 days after such
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order,judgment or decree shall become final and not subject to further appeal or
rehearing.
The provisions of paragraph(b)of this Section are subject to the following limitations: (1)If by reason of
Force Majeure the Borrower is unable in whole or in part to carry out its agreements contained herein,the
Borrower shall not be deemed in default during the continuance of such disability(except for a payment
default under Section 4.07(c));and(2)If the Default can be remedied but not within a period of thirty(30)
days after notice and if the Borrower has taken all action reasonably possible to remedy such Default within
such thirty day period,the Default shall not become an Event of Default for a period of up to ninety(90)days
after the notice so long as the Borrower shall diligently proceed to remedy such Default and in accordance
with any directions or limitations of time made by the Trustee(except for a payment default under Section
4.07(c)). The Borrower agrees,however,to use its best efforts to remedy with all reasonable dispatch any
cause or causes preventing the Borrower from carrying out its agreements.
Section 7.02 Remedies on Default. Whenever any Event of Default shall have happened
and be subsisting, any one or more of the following steps may be taken:
(a) The Trustee may(and shall if all outstanding Bonds have been declared due and
owing as a result of a default under the Indenture) declare all or any amounts of
Loan Repayments thereafter to become due and payable under Section 4.02 hereof
for the remainder of the term hereof to be immediately due and payable,whereupon
the same shall become immediately due and payable in an amount sufficient to pay
all principal of and unpaid accrued interest to the date on which all outstanding
Bonds are finally paid.
(b) The Trustee may foreclose the Mortgage or the Subordinate Mortgage,file proofs
of claim or take whatever other action in law or in equity which appears necessary
or desirable to enforce this Agreement,the Mortgage,the Subordinate Mortgage,
or the Indenture in accordance with the provisions thereof.
Any amounts collected by the Trustee pursuant to action taken under the foregoing paragraphs shall be
applied as provided in Section 7.05 of the Indenture.
Whenever any Default shall occur,the Trustee(or the City directly and without the necessity
of consent of or joinder by the Trustee,with respect to the City's rights under Sections 4.03(b), 6.01, 6.10
and 8.10 hereof)may take whatever action at law or in equity which may appear necessary or desirable to
collect the payments then due and thereafter to become due or to enforce performance and observance of any
obligation,agreement or covenant of the Borrower under this Agreement,the Mortgage and the Subordinate
Mortgage.
Section 7.03 Remedies Cumulative,Delay Not to Constitute Waiver. No remedy conferred
upon or reserved to the City,the Trustee,or a receiver by this Agreement,the Mortgage or the Subordinate
Mortgage is intended to be exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement,
Mortgage,the Subordinate Mortgage or now or hereafter existing at law or in equity or by statute. No delay
or omission to exercise any right or power accruing upon any Default shall impair any such right or power,
and any such right or power may be exercised from time to time and as often as may be deemed expedient.
In order to entitle the City,the Trustee,or a receiver to exercise any remedy reserved to it in this Article, it
shall not be necessary to give any notice,other than such notice as may be herein expressly required. In the
event any agreement contained in this Agreement should be breached by either party and thereafter waived
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by the other party,such waiver shall be limited to a particular breach so waived and shall not be deemed to
waive any other breach hereunder.
Section 7.04 Agreement to Pay Attorneys' Fees and Expenses. In the event the Borrower
should default under any of the provisions of this Agreement, Mortgage or the Subordinate Mortgage and
the Trustee or a receiver should employ attorneys or incur other expenses for the collection of payments due
or to become due hereunder or the enforcement of performance or observance of any obligation or agreement
on the part of the Borrower contained in this Agreement, Mortgage or the Subordinate Mortgage, the
Borrower agrees that it will on demand therefor reimburse the reasonable fee of such attorneys and such
other expenses so incurred.
Section 7.05 Advances. In the event the Borrower shall fail to pay any Loan Repayments
under Section 4.02 hereof,or to do any other thing or make any other payment required to be done or made
by any other provision of this Agreement, Mortgage or the Subordinate Mortgage,the Trustee may do or
cause to be done any such thing or make or cause to be made any such payment at the expense or as an
advance for the account of the Borrower,and the Borrower shall pay to the Trustee,upon demand,all costs
and expenses so incurred and advances so made. Any such advance shall be entitled to priority of payment
from any funds thereafter received from the Borrower or under Section 7.02.
Section 7.06 Notice and Borrower's Remedial Plans. Borrower shall give prompt notice
to the Trustee and all other Holders of any occurrence of an Event of Default, setting forth a reasonable
description of the nature and cause of the Event of Default and describing the plans,if any,of the Borrower
to remedy the Event of Default.
[End of Article VII]
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ARTICLE VIII
MISCELLANEOUS
Section 8.01 Amounts Remaining in Funds. It is agreed by the parties hereto that any
amounts remaining in any fund or account held by the Trustee under the Indenture after payment of all Bonds
(or provision for payment thereof having been made in accordance with the provisions of the Indenture)and
any additional amounts payable to the City or the Trustee and fees, charges and expenses of any paying
agents and all other amounts required to be paid under the Indenture, shall belong to and be paid to the
Borrower by the Trustee as overpayment of the Loan Repayments.
Section 8.02 Notices. All notices,certificates,requests or other communications hereunder
shall be sufficiently given and shall be deemed given when delivered personally or mailed by first class mail
or mailed by registered mail,return receipt requested,postage prepaid,addressed as follows:
To the City: City of Orono
2750 Kelley Parkway
Orono,MN 5555356
Attention: City Finance Director
To the Trustee: U.S.Bank Trust National Association
180 East Fifth Street,2nd Floor
St. Paul,MN 55101
Attention: Corporate Trust Department
To the Borrower: Orono Senior Housing,LLC
c/o Wedum Foundation
3191 Shorewood Drive
Arden Hills, MN 55112
Attention: President
To the Original Purchaser: Miller Johnson Steichen Kinnard,Inc.
5500 Wayzata Blvd., Suite 1450
Minneapolis,MN 55416
Attention: Public Finance
A duplicate copy of each notice,certificate,request or other communication given hereunder
to the City, the Borrower, the Trustee or the Original Purchaser shall also be given to the others. The
Borrower,the City,the Trustee and the Original Purchaser may,by notice given hereunder, designate any
further or different addresses to which subsequent notices, certificates, requests or other communications
shall be sent.
Any notice,report or other information required hereunder to be given or delivered to the
Trustee or Original Purchasers shall also be given or delivered concurrently to all other Holders.
Section 8.03 Reference to Bonds Ineffective after Bonds Paid. Upon payment in full of the
Bonds (or provision for payment thereof having been made in accordance with the provisions of the
Indenture)and all fees and charges of the Trustee and any paying agents of the Bonds,all references in this
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Agreement to the Bonds and the Trustee shall be ineffective and neither the Trustee nor the Holders of any
of the Bonds shall thereafter have any rights hereunder,saving and excepting those that shall have heretofore
vested.
Section 8.04 Binding Effect. This Agreement shall inure to the benefit of and shall be
binding upon the City, the Borrower and their respective successors, heirs and assigns, and subject to the
further limitation that any obligation of the City created by or arising out of this Agreement shall not be a
general debt of the City but shall be payable solely out of the proceeds derived from this Agreement or the
sale of the Bonds. The Borrower shall not assign any of its rights in any this Agreement or any other Loan
Document except as contemplated in Sections 5.02 or 6.04.
Section 8.05 Amendments,Changes and Modifications. Except as otherwise provided in
this Agreement or in the Indenture, subsequent to the issuance of the Bonds and prior to payment of the
Bonds in full(or provision for the payment thereof having been made in accordance with the provisions of
the Indenture), this Agreement, the Indenture, Mortgage and the Subordinate Mortgage may not be
effectively amended, changed, modified, altered or terminated except as provided in the Indenture.
Section 8.06 Counterparts. This Agreement may be executed in several counterparts,each
of which shall be regarded as an original and all of which shall constitute but one and the same Loan
Agreement.
Section 8.07 Severability. In case any section or provision of this Agreement,or in case any
covenant,stipulation,obligation,agreement,act,or action,or part thereof,made,assumed,entered into,or
taken under this Agreement, or any application thereof, is for any reason held to be illegal or invalid,or is
at any time inoperable by reason of any law, or actions thereunder, such illegality or invalidity or
inoperability shall not affect this remainder thereof or any other section or provision of the Loan Agreement
or any other covenant, stipulation, obligation, agreement, act, or action, or part thereof, made, assumed,
entered into, or taken under this Agreement, which shall at the time be construed and enforced as if such
illegal or invalid or inoperable portion were not contained therein,nor shall such illegality or invalidity or
inoperability or any application thereof affect any legal and valid and operable application therefor from time
to time,and each such section,provision,covenant,stipulation,obligation,agreement,act,or action,or part
thereof,shall be deemed to be effective,operative,made,entered into or taken in the manner and to the full
extent from time to time permitted by law.
Section 8.08 Nonrecourse Liability of Borrower. Notwithstanding thstanding any provision or
obligation to the contrary set forth in any other Section of this Agreement(except Sections 4.03(b), 6.01,
6.10, 6.22 and 8.10 to which the provisions of this Section do not apply), (i)the liability of the Borrower,
and the Sole Member,and any governor,manager,trustee,director,officer,employee,agent or shareholder
of the Borrower or the Sole Member(collectively,"Borrower Parties")under this Agreement shall be limited
to the Mortgaged Property or to such other security as may from time to time be given or have been given
for payment of the obligations under the Loan Documents or the Indenture(collectively,the "Collateral"),
and any judgment rendered against the Borrower Parties under any of the Loan Documents shall be limited
to the Collateral; and (ii) no deficiency or other personal judgment nor any order or decree of specific
performance shall be sought or rendered against the Borrower Parties,their successors,transferees or assigns,
in any action or proceeding arising out of the Loan Documents, or any judgment,order or decree rendered
pursuant to any such action or proceeding;provided,however,that nothing in the Loan Documents shall limit
the Trustee's ability to exercise any right or remedy that it may have with respect to any property pledged
or granted to the City or the Trustee,or both of them,or to exercise any right against the Borrower Parties
or any other person or entity on account of any damage caused by fraud or intentional misrepresentation by
the Borrower or any intentional damage of the property subject to the Mortgage. Furthermore,the Borrower
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shall be fully liable for the misapplication of(i)proceeds paid prior to any foreclosure under any and all
insurance policies, under which the Trustee is named as insured,by reason of damage, loss or destruction
to any portion of the Mortgaged Property, to the full extent of such misapplied proceeds and awards,
(ii)proceeds or awards resulting from the condemnation, or other taking in lieu of condemnation, prior to
any foreclosure of the Mortgaged Property, to the full extent of such misapplied proceeds and awards,
(iii)rents,issues,profits and revenues received or applicable to a period subsequent to the occurrence of an
Event of Default under the Loan Documents,(iv)proceeds from the sale of all or any part of the Mortgaged
Property and any other proceeds that, under the terms hereof, should have been paid to the City or the
Trustee, and(v)tenant security deposits.
Furthermore,the Borrower shall be fully liable in damages for the breach of(i)any covenant
to indemnify the City,the Trustee or any other Holder,wherever contained in this Agreement, and(ii)the
Borrower's covenants contained herein which shall result in a Determination of Taxability. The limit on the
Borrower's liability set forth in this Section shall not,however,be construed,and is not intended in any way,
to constitute a release, in whole or in part, of the Borrower's obligations under any Loan Document or a
release, in whole or in part,or an impairment of the lien and security interest of any Loan Document upon
any Collateral,or to preclude the Trustee from foreclosing the Mortgage in case of any Event of Default or
enforcing any other right of the City or the Trustee or to alter, limit or affect the liability of any person or
party who may now or hereafter or prior hereto guarantee,or pledge,grant or assign its assets or collateral
as security for,the obligations of the Borrower under the Loan Documents.
Section 8.09 Benefit of Bondholders. This Agreement is executed in part to induce the
purchase by others of Bonds to be issued by the City,and accordingly all covenants and agreements on the
part of the Borrower and the City as set forth in this Agreement are hereby declared to be for the benefit of
the owners from time to time of the Bonds. Notwithstanding the foregoing,those provisions of Sections 7.04
and 7.05 which confer certain rights upon the City are intended to permit the City to protect its interests
under Sections 6.01 hereof,are not for the benefit of the Borrower,the Trustee or the Bondholders,and may
be exercised by the City in its sole discretion. The City shall not be liable to the Borrower,the Trustee or
the Bondholders for any action or failure to act in asserting its rights under said Sections.
Section 8.10 Limitation on Liability of the City. It is understood and agreed by the
Borrower: (1) that no covenant, provision or agreement contained in this Agreement, the Bonds, the
Mortgage, the Assignment, the Indenture or in any other agreement, certificate or document executed or
delivered in connection with the issuance of the Bonds,and that no obligation herein or therein imposed upon
the City(or any other party)or respecting the breach thereof(collectively,the"Indemnified Matters"),shall
give rise to a pecuniary liability of the City or a charge against its general credit or taxing powers; and
(2)that the Bonds shall be and constitute only a special and limited revenue obligation of the City,payable
solely from the revenues pledged to the payment thereof pursuant to the Indenture and this Agreement,and
that the Bonds do not now and shall never constitute an indebtedness,a moral or general obligation or a loan
of the credit of the City or a charge, lien or encumbrance, legal or equitable, against the City's property,
general credit or taxing powers. The Borrower hereby indemnifies the City and each of its officers,agents
and employees (collectively, the "Indemnified Parties") and the Borrower agrees to hold the Indemnified
Parties harmless against all expense, loss, claim,judgment, damage and any other liability respecting or
arising out of the Indemnified Matters,and the Borrower will reimburse the Indemnified Parties for all legal
and other expenses incurred by the Indemnified Parties in relation thereto,and this covenant to indemnify,
hold harmless and reimburse the Indemnified Parties,together with the rights of the City provided in Section
4.03(b), 6.01 and 6.10 of this Agreement, shall survive delivery of and payment for or defeasance of the
Bonds and the expiration or termination of this Agreement. Notwithstanding any other provision of this
Agreement,the Indemnified Parties shall have the right in their discretion to employ separate counsel,and
the reasonable fees of said counsel shall be included with the costs indemnified by the Borrower,and no prior
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approval of such separate representation and no consent by the Borrower to settlement or other disposition
of such matter shall be required.
Section 8.11 Term of Agreement. Except as otherwise provided herein, this Agreement
shall remain in full force and effect from the date of execution hereof until such time as the Indenture has
been discharged in accordance with its terms.
[End of Article VIII]
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IN WITNESS WHEREOF,the City and the Borrower have caused this Agreement to be duly
executed in their respective names, all as of the date first above written.
CITY OF ORONO
By
Its Mayor
By
Its City Clerk
[Signature Page to Loan Agreement between City of Orono, Orono Senior Housing, LLC and Wedum
Foundation]
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ORONO SENIOR HOUSING,LLC
By
Its
[Signature Page to Loan Agreement between City of Orono, Orono Senior Housing,LLC and Wedum
Foundation]
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WEDUM FOUNDATION
By
Its
[Signature Page to Loan Agreement between City of Orono,Orono Senior Housing,LLC and Wedum
Foundation]
MI:796875.01
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