Loading...
HomeMy WebLinkAboutLoan Agreement 3-4-82 LOAN AGREEMENT between CITY OF COLUMBIA HEIGHTS, MINNESOTA and RUVELSON & ASSOCIATES, INCORPORATED Dated March 2{, 1982 The interest of the City of Columbia Heights, Minnesota, in this Loan Agreement has been pledged and a security interest therein granted to Unionmutual Stock Life Insurance Co. of America, pursuant to a Pledge Agreement, of even date herewith, from the City of Columbia Heights. This instrument was drafted by Dorsey & Whitney 2200 First Bank Place East Minneapolis, Minnesota 55402 TABLE OF CONTENTS Page ARTICLE I - DEFINITIONS AND RULES OF INTERPRETATION. . .. ... Section 1.01. Definitions.. . . . . . Section 1.02. Rules of Interpretation 1 1 4 ARTICLE II - REPRESENTATIONS. . . . . . . . 4 Section 2.01. Representation by the City 4 Section 2.02. Representations by the Borrower. 6 Section 2.03. Holder May Rely on Representations 8 ARTICLE III - THE Section 3.01. Section 3.02. Section 3.03. Section 3.04. Section 3.05. Section 3.06. LOAN. . . . . . . Source of Loan; Repayment. Additional Payments Borrower's Obligations Unconditional. . . . Borrower's Remedies Disbursement of Note Proceeds. Payment of Project Costs by Borrower . . . 8 8 11 11 12 12 13 ARTICLE IV - BORROWER'S COVENANTS 13 Section 4.01. Indemnity... 13 Section 4.02. Notice of Default. 14 Section 4.03. Reports to Governmental Agencies . . . . . . . . 14 Section 4.04. Mortgage of proj ect. . . 14 Section 4.05. Concerning the Project. 14 Section 4.06. Covenants for Benefit of Lender. 14 Section 4.07. Annual Statements. . . . 15 Section 4.08. Assurance of Tax Exemption. . 15 BORROWER'S OPTIONS .. ...... 5.01. Prepayment of Loan Repayments and No te . . . . . . . . . Extraordinary Prepayments. . Assignment . . . . . . . . . Termination Upon Retirement of Note. . . . . . . . . ARTICLE V - Section Section Section Section 5.02. 5.03. 5.04. 18 18 19 19 20 ARTICLE VI - EVENTS OF DEFAULT AND REMEDIES Section 6.01. Events of Default Section 6.02. City's Remedies Section 6.03. Disposition of Funds Section 6.04. Manner of Exercise. 20 20 21 22 22 Section 6.05. Section 6.06. Section 6.07. Section 6.08. ARTICLE VII Section Section Section Section Section Section Section SIGNATURES. Attorneys' Fees and Expenses Effect of Waiver .. ... Waiver of Stay or Extension Laws . . . . . . . . Lender's Exercise of the City's Remed ies - GENERAL . . . 7.01. Notices 7.02. Binding Effect 7.03. Severability. 7.04. Amendments, Changes and Modifications .. . . Execution Counterparts . Concerning the Note. Limitation of City's Liability 7.05. 7.06. 7.07. . . . . . . . . . . . . . . . . . . . 22 23 23 23 23 23 24 24 24 24 24 25 25 THIS LOAN AGREEMENT, dated March ~, 1982, between the CITY OF COLUMBIA HEIGHTS, MINNESOTA, a municipal corporation and political subdivision of the State of Minnesota, called herein the City, and RUVELSON & ASSOCIATES, INCORPORATED, a Minnesota corporation, called herein the Borrower, WITNESSETH that the City and the Borrower, each in consideration of the representations, covenants and agreements of the other as set forth herein, mutually represent, covenant and agree as follows: ARTICLE ONE DEFINITIONS AND RULES OF INTERPRETATION Section 1.01. Definitions. In this Agreement the following terms have the following respective meanings unless the context hereof clearly requires otherwise: Acquisition and Construction Costs: all costs paid to acquire and construct the Project, including but not limited to the cost of acquiring the Land, site preparation costs, architectural fees, engineering fees, costs of acquisition and installation of fixtures and equipment, and all costs of labor, material and services paid or incurred by the Borrower; Act: the Minnesota Municipal Industrial Development Act, Minnesota Statutes, Chapter 474, as amended; Agreement: amendment hereof or accordance with the this Loan Agreement, including any supplement hereto entered into in provisions hereof; Assignment: the Assignment of Rents and Leases, of even date herewith, given by the Borrower to the Lender, including any amendment thereof or supplement thereto entered into in accordance with the provisions thereof; Borrower: Ruvelson & Associates, Incorporated, a Minnesota corporation, its successors and assigns; City: the City of Columbia Heights, Minnesota, its successors and assigns; Code: the Internal Revenue Code of 1954, as amended; Counsel: an attorney designated by or acceptable to the Lender, duly admitted to practice law before the highest court of any state; an attorney for the Borrower or City may be eligible for appointment as Counsel; Event of Default: any of the events described in Section 6.01 hereof; Guarantor: James J. Ruvelson, an individual residing in the State of Minnesota; Guaranty: the Guaranty, of even date herewith, from the Guarantor to the Lender, including any amendment thereof or supplement thereto entered into in accordance with the provisions thereof; Holder: any holder of the Note; Improvements: the approximately 20,160-square foot office building and related facilities and improvements acquired and constructed on the Land by the Borrower in accordance with this Agreement; Land: the real estate located in the County of Anoka, State of Minnesota, and legally described in Exhibit A to the Mortgage; Lender: Unionmutual Stock Life Insurance Co. of America, a Maine corporation, its successors and assigns; Loan: the loan of the proceeds of the Note to be made by the City to the Borrower pursuant to the terms of Section 3.01 of this Agreement; Loan and Carrying Charges: all commitment fees to the Lender, brokerage fees, standby fees, interest charges, service fees, attorneys' fees (including attorneys for the City, Lender and Borrower and bond counsel), inspection fees, contractors' fees, developers' fees, title insurance fees and charges, recording fees and registration taxes incurred by the Borrower in the acquisition and construction of the Project and issuance of the Note; Loan Commitment: the commitment of the Lender to purchase the Note from the City and to make the Loan to the Borrower, consisting of a letter to the Borrower dated January 19, 1982, and a letter to the Borrower dated February 13, 1982; -2- Loan Year: the twelve-month period commencing on the first day of April, 1982, and each subsequent twelve-month period during the term of the Loan; Mortgage: the Mortgage and Security Agreement and Fixture Financing Statement, of even date herewith, between the Borrower, as mortgagor, and the Lender, as mortgagee, including any amendment thereof or supplement thereto entered into in accordance with the provisions thereof; Note: the Commercial Development Revenue Note (Ruvelson~ssociates, Incorporated Project), of even date herewith, issued by the City to the Lender pursuant to the Resolution, in the principal amount of $810,000; Permitted Encumbrances: the liens, charges and encumbrances listed as "Permitted Encumbrances" on Exhibit A to the Mortgage; Person: shall mean any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof; Pledge Agreement: the Pledge Agreement, of even date herewith, given by the City to the Lender, including any amendment thereof or supplement thereto entered into in accordance with the terms thereof; Prior Issue: the $775,000 City of Columbia Heights, Minnesota Commercial Development Revenue Note (Ruvelson & Associates, Incorporated Project), Series 1981; Project: the Land and Improvements, as they may at any time exist; Project Costs: the total of all Acquisition and Construction Costs and Loan and Carrying Charges; Resolution: the Resolution of the City, adopted February 22, 1982, authorizing the issuance of the Note; and Tenants: National Services Center, Inc.; International Union of Electrical, Radio, and Machine Workers; Perry L. Williams and Robert E. Halva; Dr. Bob Donsker; Coldwell Banker Residential Real Estate Services of Minnesota, Inc. d/b/a/ Coldwell Banker Spring; Odell Realtors, Inc.; Goodman - Reichwald - Dodge, Inc.; Mart -3- Enterprises, Inc., d/b/a The Insurance Mart; and Ruvelson & Associates, Incorporated. Section 1.02. Rules of Interpretation. (1) This Agreement shall be interpreted in accordance with and governed by the laws of the State of Minnesota. (2) The words "herein" and "hereof" and words of similar import, without reference to any particular section or subdivision, refer to this Agreement as a whole rather than to any particular section or subdivision hereof. (3) References herein to any particular section or subdivision hereof are to the section or subdivision of this instrument as originally executed. (4) The headings of articles and sections herein are for convenience only and are not a part of this Agreement. (5 ) otherwise, the versa, and the vice versa. Unless the context hereof clearly requires singular shall include the plural and vice masculine shall include the feminine and ARTICLE TWO REPRESENTATIONS Section 2.01. Representations by the City. The City makes the following representations as the basis for its covenants herein: (1) The City is a municipal corporation and political subdivision of the State of Minnesota, duly organized and existing under the Constitution and laws of the State of Minnesota, and is authorized to issue the Note in accordance with the Act. (2) The Project constitutes a "project" as contemplated by and defined in the Act and has been approved by the Commissioner of Securities and Real Estate of the State of Minnesota as required by the Act. (3) In authorizing the transactions contemplated herein the City's purpose 1S and in its judgment the effect thereof will be to (i) encourage the development of -4- economically sound commerce in the City, (ii) increase the tax base of the City, and (iii) provide additional employment opportunities for residents of the City and surrounding areas. (4) The financing of the Project, the issuance and sale of the Note, the execution and delivery of this Agreement and the Pledge Agreement, and the performance of all covenants and agreements of the City contained in the Note, this Agreement and the Pledge Agreement and of all other acts and things required under the Charter of the City and the Constitution and laws of the State of Minnesota to make the Note, this Agreement and the Pledge Agreement valid and binding obligations of the City in accordance with their terms, are authorized by the Act and have been duly authorized by regular meetings thereof duly called and held on September 8, 1980, and February 22, 1982, by the affirmative vote of not less than a four-fifths majority of its members. (5) To provide funds to be loaned to finance a portion of the Project Costs, in anticipation of the collection of the Loan repayments to be received hereunder, the City has duly authorized the Note in the principal amount of $810,000 to be issued upon the terms set forth in the Resolution, under the provisions of which the City has agreed, by entering into the Pledge Agreement, to pledge and grant a security interest in its interest in this Agreement to the Lender as security for the payment of the principal of, interest and premium and late charges, if any, on, the Note. (6) This Agreement, the Note and the Pledge Agreement are the legal, valid and binding obligations of the City enforceable against it in accordance with their respective terms. (7) Pursuant to the Resolution and this Agreement, the City has authorized and directed the Lender to disburse the proceeds of the Note directly to the Borrower and such other parties as may be entitled to payment for Project Costs, upon receipt of such supporting documentation as the Lender may require pursuant to this Agreement. (8) The issuance of the Note and the execution and delivery of this Agreement and the Pledge Agreement do not and will not conflict with or constitute on the part of the City a breach of, or a default under, any existing (i) law, or (ii) agreement, indenture, mortgage, lease or -5- other instrument to which the City is subject or is a party or by which it is bound. (9) No litigation is pending or, to the best knowledge of the City, threatened against the City questioning the organization or boundaries of the City or the right of any officer of the City to hold his or her office, or in any manner questioning the right and power of the City to execute and deliver the Note, or otherwise questioning the validity of the Note or the execution, delivery or validity of this Agreement or the Pledge Agreement, or questioning the appropriation of revenues to payment of the Note or the right of the City to loan the proceeds of the Note to the Borrower as herein provided. Section 2.02. Representations by the Borrower. The Borrower makes the following representations as the basis for its covenants herein: (1) The Borrower is a corporation duly organized, validly existing, in good standing and authorized to do business in the State of Minnesota, and has power to enter into and has authorized execution and delivery of this Agreement, the Mortgage, the Assignment and the Loan Commitment. (2) The execution and delivery by the Borrower of this Agreement, the Mortgage, the Assignment and the Loan Commitment, the consummation of the transactions contemplated hereby and thereby and the fulfillment of the terms and conditions hereof and thereof do not and will not conflict with or result in a breach of any of the terms or conditions of any mortgage, indenture, loan agreement or any other instrument to which the Borrower is now a party or to which any of the property of the Borrower is subject and do not and will not constitute a default under any of the foregoing or result in the creation or imposition of any lien, charge or encumbrance of any nature upon any of the property or assets of the Borrower contrary to the terms of any instrument or agreement. (3) The contemplated issuance of the Note and the contemplated execution of this Agreement by the City have been a substantial inducement to the Borrower to acquire and construct the Project. (4) The Borrower does not rely on any warranty of the City, either express or implied, that the Project will be suitable to the Borrower's needs and recognizes -6- that under the Act the City is not authorized to operate the Project or to expend any funds thereon other than the revenues received by it therefrom or the proceeds of the Note or other funds granted to it for purposes contemplated in the Act. (5) There is not pending any suit, action or proceeding against or affecting the Borrower before or by any court, arbitrator, administrative agency or other governmental authority which materially and adversely affects the validity, as to the Borrower, of any of the transactions contemplated hereby or the ability of the Borrower to perform its obligations hereunder or as contemplated hereby. (6) The Project as designed meets, on the date hereof, all requirements of law, including requirements of any federal, state, county, city or other governmental authority having jurisdiction over the Borrower or the Project. (7) No councilperson or other officer or employee of the City is directly or indirectly interested in this Agreement or any contract, agreement or job hereby contemplated to be entered into or undertaken. (8) The proceeds of the Note, together with any other funds contributed to the payment of Project Costs by the Borrower, will be sufficient to pay the cost of acquiring, constructing and otherwise rendering the Project suitable for use as an office building and all costs and expenses incidental thereto, including payment of the outstanding principal amount of the Prior Issue. (9) The Project has been acquired and constructed in accordance with the provisions of this Agreement. (10) Neither this Agreement nor any other document executed pursuant hereto or otherwise in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading. There is no fact known to the Borrower which materially adversely affects or in the future may (so far as the Borrower can now foresee) materially adversely affect the business, operations, affairs, or conditions of the Borrower or any of its material properties which has not been set forth in this Agreement or in the other documents referred to in the foregoing sentence. -7- Section 2.03. Holder May Rely On Representations. The City and the Borrower agree that the representations contained in this Article Two are for the use and benefit of the Holder, and the Holder shall be entitled to rely thereon. ARTICLE THREE THE LOAN Section 3.01. Source of Loan; Repayment. The City agrees to lend the Borrower, and the Borrower agrees to borrow from the City, upon the terms and conditions set forth herein and in the Loan Commitment, the proceeds received from the sale of the Note. Subject to any rights of prepayment granted herein and in the Note, the Borrower agrees to repay the Loan, together with interest thereon, in installments due as follows: (1) on or before the first day of April, 1982, there shall be paid an interest only payment equal to accrued interest between the date hereof and April 1, 1982, at the rate of fourteen percent (14%) per annum; and (2) on or before the first day of each and every calendar month thereafter to and including February 1, 2011, principal and interest shall be payable in equal monthly installments in the amount of $9,598.50, with a final payment of all unpaid principal and interest on the Loan on March 1, 2011, such amounts representing payments of principal of the Loan and interest thereon at the rate of fourteen percent (14%) per annum. Upon receipt by the Holder of notice of a "Determination of Taxability," as defined in Section 4.08(2) hereof, the interest rate on the Loan shall, pursuant to Section 4.08, be automatically increased as provided in Section 4.08(3) hereof, and the payments required under this Section 3.01 shall thereafter be computed using such increased rate. In addition to the increase in interest rate, the Borrower shall pay the additional amounts specified in Section 4.08(3). At the option of the Holder, the rate of interest payable on the unpaid principal balance of the Note may be increased as of the beginning of the sixth Loan Year upon no less than sixty (60) days' prior written notice to the Borrower and the City, in which event the rate of interest -8- payable on the unpaid principal balance of the Loan shall be correspondingly increased subject to the limitations set forth in the next succeeding paragraph. In the event of any such increase in the rate of interest hereunder, and provided that the Borrower does not prepay the Loan as provided in the Note and in Section 5.01 hereof, the monthly installment payments of principal and interest required by the Borrower in clause (2) of the first paragraph of this Section 3.01 shall be increased, effective as of the first day of the second calendar month of the sixth Loan Year, to an amount sufficient to amortize the then unpaid principal balance of the Loan, together with interest at the rate of interest per annum then payable under this Agreement, as increased in accordance with the provisions of this paragraph, in full, in equal monthly installment payments of principal and interest, by March 1, 2011. Notwithstanding anything in this Agreement to the contrary, in no event shall the rate of interest at any time payable on the Loan be less than fourteen percent (14%) per annum nor exceed (i) the lesser of forty percent (40%) per annum or, for the period beginning with the sixth Loan Year, the rate of interest per annum equal to one hundred ten percent (110%) of the average of the yields reflected in The Bond Buyer's Rev'enue Bond Index (25 Bond - 30 Year) as published in The Daily Bond Buyer (or, if said index is no longer pUblished, a comparable index selected by the Holder) during the last three (3) full calendar months prior to the Holder's written notice of increase of the interest rate hereon, given in accordance with the provisions of the previous paragraph, with respect to such period, provided that a Determination of Taxability has not occurred, or (ii) forty percent (40%) per annum if a Determination of Taxability has occurred. The rate of interest payable on the unpaid principal balance of the Loan and the monthly installment payments of principal and interest required by the Borrower in clause (2) of the first paragraph of this Section 3.01 are also subject to adjustment in the event that the Project is leased, sold, assigned, transferred, conveyed or otherwise alienated, or mortgaged, pledged or encumbered, as more fully provided in Section 1.11 of the Mortgage. At the option of the Holder, the unpaid principal balance of the Note, together with accrued interest thereon and any other indebtedness due under the Note, may -9- be declared due and payable in full as of the end of the tenth, fifteenth, twentieth and twenty-fifth Loan Years, upon six (6) months' prior written notice to the Borrower and the City, in which event the unpaid principal balance of the Loan, together with accrued interest thereon and any other indebtedness due hereunder or under the Note, shall become due and payable as of such date. In the event the Holder exercises such option, and the Loan is paid in full by the Borrower on or before the date specified in such notice, no prepayment penalty or premium shall be payable with respect to such payment. All payments are to be applied first to interest then due and then to the principal balance of the Loan. In any event, the payments hereunder shall be sufficient to enable the City to pay all principal, premium and late charges, if any, and interest due on the Note as due, whether at maturity, upon prepayment or otherwise. The payments required hereunder shall be made upon the assumption that each year contains three hundred sixty (360) days and is composed of twelve (12) thirty-day months. All payments under this Section 3.01 shall be made directly to the Holder at its principal office, or such other office as the Holder may designate in writing, for the account of the City, and shall be made, at the option of the Holder, by bank wire transfer or other immediately available funds. If any payment of principal and/or interest provided for in this Section 3.01 is not paid on or before the thirtieth day after such payment is due, the entire outstanding principal balance of the Loan shall bear interest to the extent permitted by law at the rate af interest per annum then payable under this Agreement plus five percent (5%), retroactively from the date such payment was due until paid. If the Holder should not receive on or before the fifth day of any month all of the principal and interest due on the Loan, as provided in this Section 3.01, on the first day of such month, then, in addition to all other sums due hereunder, the Borrower shall be obligated to pay to the Holder as of the sixth day of such month a service charge for the Holder's uncovered administrative costs in handling late payments equal to five percent (5%) of the delinquent principal and interest. -10- Section 3.02. Additional Payments. The Borrower agrees to pay the following amounts to the following persons as additional payments under this Agreement: (1) to the Lender when due, all reasonable expenses of the Lender incurred in enforcing this Agreement, the Mortgage, the Note, the Guaranty and the Assignment, and all fees and expenses payable or which may become payable by the Borrower pursuant to said instruments; and (2) to the City as additional payments under this Agreement all reasonable expenses incurred by the City in relation to the Project and the issuance and sale of the Note which are not otherwise required to be paid by the Borrower under the terms of this Agreement, including attorneys' fees and all permit and license fees required under regulations or codes of the City. In the event the Borrower should fail to make any of the payments required by this Section 3.02, the item in default shall continue as an obligation of the Borrower until the amount in default shall have been fully paid, and the Borrower agrees to pay the same with interest thereon until paid at the rate per annum then payable under this Agreement on the Loan, plus five percent (5%). Section 3.03. Borrower's Obligations Unconditional. All payments required of the Borrower hereunder shall be paid without notice or demand and without set-off, counterclaim, abatement, deduction or defense. The Borrower will not suspend or discontinue any payments and will perform and observe all of its other agreements in this Agreement, the Mortgage and the Assignment, and, except as expressly permitted herein, will not terminate this Agreement, the Mortgage or the Assignment for any cause, including but not limited to any acts or circumstances that may constitute failure of consideration, destruction or damage to the Project, eviction by paramount title, commercial frustration of purpose, bankruptcy or insolvency of the City, any tenants in the Project or the Lender, change in the tax or other laws or administrative rulings or actions of the United States of America or of the State of Minnesota or any political subdivision thereof, or failure of the City to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with this Agreement. -11- Section 3.04. Borrower's Remedies. Nothing contained in this Article shall be construed to release the City from the performance of any of its agreements in this Agreement, and, if the City should fail to perform any such agreement, the Borrower may institute such action against the City to compel performance so long as such action shall not violate the Borrower's agreements in Section 3.03 hereof. Section 3.05. Disbursement of Note Proceeds. The City hereby directs the Lender to disburse the proceeds from the sale of the Note to the Borrower or its order upon receipt by the Lender of the following items: (1) The Note, duly executed by the City. (2) Executed counterparts of this Agreement, the Pledge Agreement, the Mortgage, the Assignment and the Guaranty. (3) A copy of the Resolution, duly certified by the City Clerk. (4) A certificate of the Borrower containing the following: (i) a statement of the amount and nature and the name and address of the payee of each item of Project Costs certified to have been paid by and requested to be reimbursed to the Borrower; (ii) a statement from the payee of the amount and nature of each item of Project Costs certified by the Borrower to be due and payable, if requested to be paid to a Person other than the Borrower; and (iii) a statement that each item of Project Costs for which payment or reimbursement is requested is or was necessary in connection with the acquisition and construction of the Project. (5) All such other documentation, including opinions of counsel, as shall be required by the Lender pursuant to the terms of the Loan Commitment. In disbursing proceedS of the Note pursuant to this Section 3.05, Lender shall be entitled to receive and to rely upon a certificate of bond counsel as to the receipt of the items listed in clauses (1) through (4). To the extent Project Costs have been paid from the -12- proceeds of the sale of the Prior Issue, the proceeds of the Note shall be used to pay the outstanding principal amount of the Prior Issue. Section 3.06. Payment of pro~ect Costs by Borrower. The Borrower agrees to provlde promptly any and all sums of money required to pay all of the Project Costs, to the extent not paid from proceeds of the Note. ARTICLE FOUR BORROWER'S COVENANTS Section 4.01. Indemnity. The Borrower agrees to indemnify and hold harmless the City, its officers, employees and agents, against any and all losses, claims, damages or liability to which the City, its officers, employees and agents may become subject under any law in connection with the issuance and sale of the Note and the carrying out of the transactions contemplated by this Agreement, and to reimburse the City, its officers, employees and agents for any out-of-pocket legal and other expenses (including reasonable counsel fees) incurred by the City, its officers, employees and agents in connection with investigating any such losses, claims, damages or 1 iabil i ty or in connection wi th defend ing any actions relating thereto, including, but without limitation and by way of example only, the following: ( 1) damage to out of or occupancy any injury to or death of any person or property in or upon the Project or growing connected with the use, nonuse, condition or of the Project or any part thereof; (2) violation of any agreement or condition of this Agreement, except by the City; (3) violation of any contract, agreement or restriction by the Borrower relating to the Project; (4) violation of any law, ordinance or regulation affecting the Project or a part thereof or the ownership, occupancy or use thereof; and (5) any statement or information relating to the expenditure of the proceeds of the Note contained in the "Arbitrage Certificate" or similar document furnished by the Borrower to the City which, at the time made, is misleading, untrue or incorrect in any material respect. -13- 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 upon request of the Borrower promptly to assert any or all of the rights and privileges and defenses identified in writing by the Borrower which may be available to the City. The provisions of this Section 4.01 shall survive the payment of the Note. Section 4.02. will give to the Holder condition or event that Notice of Default. The Borrower and the City prompt notice of any constitutes a default hereunder. Section 4.03. Reports to Governmental Agencies. The Borrower will furnish to agencies of the State of Minnesota, including but not limited to the Commissioner of Securities and Real Estate and the Commissioner of Energy, Planning and Development, such periodic reports or statements as they may require throughout the term of this Agreement. Section 4.04. Mortgage of Project. As additional security for the Holder the Borrower agrees to execute and deliver, or cause to be executed and delivered, the Mortgage, the Assignment, the Guaranty and the other agreements specified in the Loan Commitment, to the Lender, which documents shall remain in effect until all payments required hereunder have been made. Section 4.05. Concerning the Project. The Borrower agrees to pay all expenses of the operation and maintenance of the Project, including, but not limited to, adequate insurance thereon and insurance against all liability for injury to persons or property arising from the operation thereof and all taxes and special assessments levied upon or with respect to the Project and payable during the term of this Agreement. To this end the Borrower agrees to perform all the terms and covenants of Sections 1.03, 1.05 and 1.09 of the Mortgage as fully as if such Sections were set forth in full herein. Section 4.06. Covenants for Benefit of Lender. The Borrower recognizes the authority of the City to pledge and grant a security interest in all moneys receivable under, and all rights and remedies which may be available to the City under this Agreement (other than any payments required to be made to the City under Sections 3.02(2), 4.01, 6.05 or 7.07 hereof) to the Lender as security for the payment of the principal of and interest -14- and prepayment premiums and late charges, if any, on the Note and the payment of all fees and expenses of the Lender and others as provided herein and in the Mortgage and the Assignment and consents to such pledge and grant. 4.07. Annual Statements. The Borrower shall provide to the City within seven (7) days after any request of the City therefor copies of all financial statements or reports of the Borrower which have been provided to the Lender under Section 1.14 of the Mortgage. 4.08. Assurance of Tax Exemption. (1) The Borrower recognizes that the exemption from federal income taxation of the interest to be paid on the Note is dependent upon qualification of the Note under the "small issue" exemption set forth in Section 103(b)(6)(A) of the Code. The Borrower represents to and covenants with the City and Holder that: (a) neither the Borrower, the Tenants nor any "related person" within the meaning of Section 103(b)(6)(C) of the Code is or has been a principal user of facilities located in the City, within the meaning of Treasury Regulations, Section 1.103-10(d)(2)(i), acquired, in whole or in part, from proceeds of obligations of a political subdivision, other than the Project; (b) substantially all of the proceeds of the Note will be used to pay principal of the Prior Issue and Loan and Carrying Charges relating to the Note and Prior Issue; substantially all of the proceeds of the Prior Issue have been used for the acquisition, construction, reconstruction or improvement of land or property of a character subject to the allowance for depreciation, within the meaning of Section 103(b) (6) (A) of the Code; and all of the Project Costs financed with proceeds of the Prior Issue were paid or incurred subsquent to September 8, 1980; (c) as of the date hereof, the Borrower and the Tenants are the only principal users of the Project, within the meaning of Section 103(b)(6)(E) of the Code; (d) the Borrower will fulfill all conditions specified in Section l03(b)(6) of the Code and applicable Regulations to qualify the Note as a "small issue" under Section l03(b)(6)(A) of the Code; -15- (e) the Borrower will not permit any person or entity to become a principal user of the Project, within the meaning of Section 103(b)(6)(E) of the Code, if, under the provisions of Section 103(b)(6) of the Code and applicable regulations, such action would cause the interest on the Note to become subject to federal income taxes in the hands of the Holder thereof (other than a Holder who is a substantial user of the facilities or a related person, within the meaning of Section 103(b) (10) of the Code); and (f) the Borrower will not use the proceeds of the Note or any funds of the Borrower in such a manner as to cause ~he Note to be classified as an "arbitrage bond" under Section 103(c) of the Code. (2) A "Determination of Taxability" shall mean the issuance of a statutory notice of deficiency by the Internal Revenue Service, a ruling by the National Office of the Internal Revenue Service or a final decision of a court of competent jurisdiction which holds in effect that the interest payable on the Note is includible in the gross income of the Holder thereof (other than a Holder who is a substantial user of the facilities or a related person, within the meaning of Section 103(b) (10) of the Code) for federal income tax purposes, if the period, if any, for contest or appeal of such action, ruling or decision by the Borrower, Holder or City has expired without any such contest or appeal having been properly instituted by the Borrower, Holder or City. The expenses of any such contest shall be paid by the party initiating the contest and neither the Borrower, Holder or City shall be required to contest or appeal any Determination of Taxability. The "Date of Taxability" shall mean that point in time, as specified in the determination, ruling or decision, that the interest payable on the Note becomes includible in the gross income of the Holder for federal income tax purposes. In addition to the foregoing, a "Determination of Taxability" shall also mean, except by reason of the fact the Holder is a substantial user of the facilities or a related person thereto, (i) the inability of the Holder to obtain an opinion of nationally recognized bond counsel that the interest payable on the Note continues to be exempt from federal income taxes or (ii) receipt by the Holder of an opinion of nationally recognized bond counsel which holds in effect that the interest payable on the Note is includable in the gross income of the Holder for federal income tax purposes.. The "Date of Taxability" in such instance shall be the point in time, as specified in such opinion, that said interest became includable in the gross income of the Holder for -16- federal income tax purposes, or the point in time after which no favorable opinion as to tax exemption could be given, as the case may be. (3) If the Holder receives notice of a Determination of Taxability, the rate of interest then payable on the Loan shall automatically be increased to sixteen and one-half percent (16 1/2%) per annum (or, if the rate of interest on the Loan has previously been increased pursuant to the third paragraph of Section 3.01 hereof, to the rate of interest per annum equal to two and one-half percent (2 1/2%) in excess of such increased rate), effective as of the date of receipt by the Holder of the notice of such Determination of Taxability, in which event the monthly installment payments of principal and interest by the Borrower required in clause (2) of the first paragraph of Section 3.01 hereof shall be increased, effective as of the first day of the calendar month following such date of receipt, to an amount sufficient to amortize the then unpaid principal balance of the Loan, together with interest at the rate of interest per annum then payable under this Agreement, as increased in accordance with the provisions of this paragraph, in full, in equal monthly installment payments of principal and interest, by March 1, 2011. Except in cases where such Determination of Taxability is due to any change in applicable laws or regulations, the Borrower shall also pay to the current and any previous Holder of the Note, in addition to the other amounts set forth in this paragraph and within thirty (30) days of receipt of a notice setting forth such amounts, the amounts of additional federal and state income taxes, including penalties and interest thereon, which such Holder or Holders estimate they will incur by reason of such Determination of Taxability for or with respect to their current and past tax years for the period of time between the Date of Taxability and the date of increase in interest rate on the Loan. In cases where such Determination of Taxability is due to any change in applicable laws or regulations, the Borrower shall also pay to the current and any previous Holder of the Note, in addition to the other amounts set forth in this paragraph, and within ten (10) days of receipt of a notice setting forth the amount of such difference, the difference between (i) the amounts actually paid hereunder between the Date of Taxability and the date of such payment, and (ii) the amounts which would have been due during such period if the increased interest rate provided for in this paragraph had been in effect. The provisions of this paragraph and the preceding paragraph shall survive the payment of the Loan. -17- The Holder shall notify in writing the City and the Borrower, as soon as practicable after the receipt thereof, of its receipt of a Determination of Taxability and of the consequent increase in interest rate and monthly installment payments required hereunder. In addition, the Holder, at its option, may, at any time after receipt of notice of a Determination of Taxability, declare the unpaid principal balance of the Note, together with accrued interest thereon and any other indebtedness due under the Note, due and payable in full, upon at least six (6) months' prior written notice to the City and the Borrower, in which event the unpaid principal balance of the Loan, together with accrued interest thereon and any other indebtedness due hereunder and under the Note, shall be due and payable on the date specified in such notice, and the Borrower shall pay to the Holder on such date an amount equal to the entire unpaid principal balance of the Loan, plus accrued interest thereon and any other indebtedness due hereunder and under the Note, plus a pr.emium equal to ten percent (10%) of such unpaid principal balance, if such payment occurs prior to the expiration of the tenth Loan Year, or the premium that would be payable by the Borrower pursuant to Section 5.01 hereof upon an optional prepayment if such payment occurs on or after the commencem~nt of the eleventh Loan Year; provided that in the event such Determination of Taxability is due to a change in applicable laws or regulations, no premium shall be payable. ARTICLE FIVE BORROWER'S OPTIONS Section 5.01. Prepayment of Loan Repayments and Note. The Borrower may prepay the unpaid principal baIance of the Loan, in whole or in part, on any installment payment date, to the extent the principal of the Note is at the time prepayable by the City and upon payment of the applicable prepayment premium, if any, provided for in the Note upon such prepayment. The Holder shall apply any such prepayment against the applicable prepayment premium, if any, and then against unpaid principal amounts due on the Loan, if the entire unpaid principal balance of the Loan and interest thereon is not thereby paid in full. Any prepayments of the Loan by the Borrower pursuant to this Section shall be paid directly to the Holder and utilized to prepay a corresponding principal amount of the Note. No prepayment shall suspend -18- any required Loan repayments to be made by the Borrower under Article Three hereof, or reduce the amount of the monthly installment payments of principal and interest. To the extent permitted by law, (i) said prepayment premium shall be payable regardless of whether the Loan is prepaid voluntarily or involuntarily, and (ii) if the principal sum is prepaid prior to the expiration of the tenth Loan Year because of an acceleration of the Loan upon an Event of Default, the premium payable in respect thereof shall be an amount equal to ten percent (10%) of the principal sum prepaid. Section 5.02. Extraordinary Prepayments. In the event the Improvements have been destroyed or damaged or all or any portion of the Land and Improvements have been taken pursuant to the exercise of the power of eminent domain and the.net proceeds of any insurance claims or condemnation awards are applied by the Holder to the payment of the Note pursuant to the terms of Section 1.06 or 1.07 of the Mortgage, such proceeds shall be applied in prepayment of all or a portion of the Loan, as the case may be, without a premium, but otherwise as provided in Section 5.01 hereof. Section 5.03. Assignment. Subject to and except as provided in the Mortgage, the Borrower shall not lease, sell, assign, transfer, conveyor otherwise alienate any of its right, title and interest in the Project, nor shall it assign any of its obligations under this Agreement, to another person without the prior written approval of the Holder, and even then only provided that: (a) such lease, sale, assignment or conveyance shall not subject the interest payable on the Note to united States income taxes or cause the Note to be deemed an "arbitrage bond" within the meaning of Section 103(c) of the Code and the regulations thereunder, (b) any purchaser and assignee shall assume in writing all of the obligations of the Borrower under this Agreement by instrument in form and substance satisfactory to the Holder and (c) an opinion of Counsel shall be submitted to the Holder to the effect that any purchaser and assignee from the Borrower has good and marketable title to the Project and has succeeded to and assumed all the Borrower's right, title and interest in the Project and obligations under this Agreement and that this Agreement is a valid and legally binding obligation of the purchaser and assignee, enforceable in accordance with its terms, except to the extent limited by state and federal laws affecting remedies and by bankruptcy, reorganization or other laws of general application affecting the enforcement of creditors' rights. -19- Section 5.04. Termination Upon Retirement of Note. At any time when no principal balance on the Note remains outstanding, and arrangements satisfactory to the Lender and the City have been made for the discharge of all other accrued liabilities, if any, under this Agreement, this Agreement shall terminate. ARTICLE SIX EVENTS OF DEFAULT AND REMEDIES Section 6.01. Events of Default. Anyone or more of the following events is an Event of Default under this Agreement: (1) if the Borrower shall fail to make any payments required under this Agreement on or before the date that the payment is due and such default continues for a period of ten (10) days after such due date; (2) if the Borrower shall fail to observe and perform any other covenant, condition or agreement on its part under this Agreement (other than a covenant, condition or agreement set forth in Section 4.08(1) hereof) for a period of thirty (30) days after written notice, specifying such default and requesting that it be remedied, given to the Borrower by the City or the Lender; (3) if the Borrower or any guarantor of the Loan, or any heirs, legal representatives, successors or assigns thereof, including without limitation any general partner, joint venturer or controlling shareholder of any of the foregoing: (i) files a petition under any chapter of the Federal Bankruptcy Code or any similar law, state or federal, whether now or hereafter existing; or (ii) in any voluntary bankruptcy case commenced against any of them: files an answer admitting that it or he is generally not paying its or his debts as such debts become due, or fails to obtain a dismissal of such case within forty-five (45) days of its commencement, or converts the case from one chapter of the Bankruptcy Code to another chapter of the Bankruptcy Code, or is the subject of an order -20- for relief in such bankruptcy case or be adjudged a bankrupt or insolvent; or (iii) has a "custodian", as that term is defined in the Federal Bankruptcy Code, appointed for it or him, or consents to such appointment, or has any court take jurisdiction of its or his property, or substantially all thereof, in any voluntary proceeding for the purpose of reorganization, arrangement, dissolution or liquidation, if such custodian shall not be discharged or if such jurisdiction shall not be relinquished, vacated or stayed on appeal within forty-five (45) days of the appointment; or (iv) makes an assignment for the benefit of its or his creditors; (4) if the Borrower shall default or fail to perform any covenant, condition or agreement on its part under the Loan Commitment or the Assignment, or an Event of Default, as defined therein, occurs under the Mortgage; or (5) if there is a determination that any representation or warranty (other than a representation or warranty the falseness of which would give rise to a Determination of Taxability and the remedies specified in Section 4.08 hereof) made by the Borrower in this Agreement or in any certificate, document or instrument furnished in connection with the issuance and sale of the Note or under the terms of this Agreement is untrue in any material respect. Section 6.02. City's Remedies. Whenever any Event of Default referred to in Section 6.01 shall have happened, anyone or more of the following remedial steps may be taken by the City, but only with the prior written consent of the Lender (provided, however, that the City shall not be obligated to take any such action): (1) The City may, at its option, declare all installments of the Loan payable under this Agreement (being an amount equal to that necessary to pay in full the Note assuming acceleration of the Note under the terms thereof and to pay all other indebtedness thereunder and hereunder) to be immediately due and payable, whereupon the same shall become immediately due and payable by the Borrower. -21- (2) The City may take whatever action at law or in equity which may appear necessary or appropriate to collect the amounts 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. Section 6.03. Disposition of Funds. Any amounts collected pursuant to action taken under Section 6.02 shall be applied as follows: (a) First, to the payment of all costs and proper expenses (including reasonable attorneys' fees as permitted by law), liabilities incurred or advances made hereunder by the City or Lender; and (b) Then, to the payment to the Holder, on behalf of the City, of the amount then owing or unpaid under this Agreement for principal, interest, or any late charge or prepayment penalty due on the Loan and, in case any such proceeds shall be insufficient to pay the whole amount so due, then first to the payment of late charges, then to the payment of prepayment penalty, then to the payment of interest, and then to the payment of principal. Section 6.04. Manner of Exercise. No remedy herein conferred upon or reserved to the City 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 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 or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the City to exercise any remedy reserved to it in this Article Six, it shall not be necessary to give any notice, other than such notice as may be herein expressly required, but no remedy shall be exercised by the City without the prior written consent of the Lender. Section 6.05. Attorneys' Fees and Expenses. In the event the Borrower should default under any of the provisions of this Agreement and the City or the Lender should employ attorneys or incur other expenses for the collection of amounts due hereunder or for the enforcement of performance of any obligation or agreement on the part -22- of the Borrower, the Borrower will on demand pay to the City or the Lender the reasonable fees of such attorneys and such other expenses so incurred. Section 6.06. Effect of Waiver. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be-deemed to waive any other breach hereunder. Section 6.07. Waiver of Stay or Extension Laws. The Borrower covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead or in any manner whatsoever claim or take the benefit or advantage of any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Agreement, the Assignment or the Mortgage; and the Borrower (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the City or the Lender but will suffer and permit the execution of every such power as though no such law had been enacted. Section 6.08. Lender's Exercise of the City's Remedies. Whenever any Event of Default shall have happened and be subsisting, the Lender may, but except as otherwise provided in the Mortgage shall not be obliged to, exercise any or all of the rights of the City under this Article Six, upon notice as required of the City unless the City has already given the required notice. ARTICLE SEVEN GENERAL Section 7.01. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when mailed by certified or registered mail, postage prepaid, with proper address as indicated below. The City, the Borrower and the Lender may, by written notice given by each to the others, designate any address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Agreement. Until otherwise provided by the respective parties, all notices, certificates and communications to each of them shall be addressed as follows: -23- To the City: City of Columbia Heights 590 40th Avenue N.E. Columbia Heights, Minnesota 55421 Attn: City Manager To the Borrower: Ruvelson & Associates, Incorporated 4111 Central Avenue N.E. Columbia Heights, Minnesota 55421 Attn: James J. Ruvelson To the Lender: Unionmutual Stock Life Insurance Co. of America 2211 Congress Street Portland, Maine 04122 Attn: Mortgage Servicing Department Section 7.02. Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the City and the Borrower and their respective heirs, legal representatives, successors and assigns. Section 7.03. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 7.04. Amendments, Changes and Modifications. Subsequent to the issuance of the Note and before the Note is satisfied and discharged in accordance with its terms, this Agreement may not be effectively amended, changed, modified, altered or terminated without the written consent of the Lender. The Borrower recognizes that the City's interest in, to and under this Agreement will be pledged and a security interest therein granted to the Lender as security for the prompt payment of the principal of, premium and late charges, if any, and interest on the Note and consents to such pledge and grant. Section 7.05. Execution Counterparts. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 7.06. Concerning the Note. The Borrower agrees to be bound by all of the terms and conditions set forth in the Note. -24- Section 7.07. Limitation of City's Liability. It is understood and agreed by the Borrower and the Holder that no covenant, provision or agreement of the City herein or in the Note contained, or any obligation herein or therein imposed upon the City or breach thereof, shall give rise to a pecuniary liability of the City or a charge against its general credit or taxing powers. In making the agreements, provisions and covenants set forth herein, the City has not obligated itself except with respect to this Agreement and the application of revenues hereunder as hereinabove provided. The Note constitutes a special obligation of the City, payable solely from the revenues pledged to the payment thereof pursuant to this Agreement and the Pledge Agreement, and does not now and shall never constitute an indebtedness or a loan of the credit of the City, the State of Minnesota or any political subdivision thereof or a charge against general taxing powers within the meaning of any constitutional or statutory provision whatsoever. It is further understood and agreed by the Borrower and the Holder that the City shall incur no pecuniary liability hereunder and shall not be liable for any expenses related hereto, all of which the Borrower agrees to pay. If, notwithstanding the provisions of the immediately preceding sentence, the City incurs any expense, or suffers any losses, claims or damages or incurs any liabilities, the Borrower will indemnify and hold harmless the City from the same and will reimburse the City for any legal or other expenses incurred by the City in relation thereto, and this covenant to indemnify, hold harmless and reimburse the City shall survive delivery of and payment for the Note. The liability of the City is further restricted as provided in Section 474.10 of the Act. IN WITNESS WHEREOF, the City and the Borrower have caused this Agreement to be executed in their respective names as of the date first above written. CITY OF COLUMBIA MINNESOTA And ~: i: ~JV~.ul :2. . Robert S. Bocwlnskl, City Manager By (SEAL) -25- RUVELSON & ASSOG9ATES, INC?~ ',::::;// / By <_' ~~ c:/ ;t2",L )Jarnes J. ,Ruvel son, // President -26- EXHIBIT A Legal Description Lots 21, 22, 23, 24, 25 and 26, except the South 20.00 feet of said Lot 26; that part of the West 8E.00 feet of Lot 15 lying Southerly of the Easterly extension of the North line of said Lot 21; that part of the West Half of Lot 31, lying Northerly of the Easterly extension of the North line of the said South 20.00 feet of Lot 26; the West 15.00 feet of the East Half of Lot 31, except the South 163.50 feet thereof; and the North 60.00 feet of the South 223.50 feet of the East 15.00 feet of the West 30.00 feet of the East Half of Lot 31, all in Block 4, Reservoir Hills, according to the plat thereof on file and of record in the Office of the County Recorder in and for Anoka County, Minnesota. Permitted Encumbrances 1. Real estate taxes and special assessments not yet due and payable 2. Minerals and mineral rights reserved by the State of Minnesota in Document No. 114420. (Lot 22, Block 4). 3. Restrictions, covenants and conditions contained in deed dated February 18, 1981, by and between Housing and Redevelopment Authority of Columbia Heights and Ruvelson & Associates Incorporated. 4. Rights of tenants under leases approved by Mortgagee.