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HomeMy WebLinkAbout6.e. Mankato Rehabilitation Center Project (MRC)-Approvethe Issuance and Sale of a Commercial Development Revenue NoteAGENDA ITEM: Mankato Rehabilitation Center Project (MRCI) Approve the Issuance and Sale of a Commercial Development Revenue Note AGENDA SECTION: Consent PREPARED BY Jeff May, Finance Director AGE i (a Y APPROVED BY: the Issuance and and Authorizing the Center, Inc Project) ATTACHMENTS: Resolution, Loan Agreement RECOMMENDED ACTION: Motion to adopt a Resolution Approving Sale of a Commercial Development Revenue Note, Series 2006 Execution of Documents Relating thereto (Mankato Rehabilitation ROSE MOUNT CITY COUNCIL City Council Meeting Date. May 16, 2006 ISSUE Take the necessary action to complete the financing for the MRCI project. BACKGROUND This item is on the agenda for Council to approve the final resolution and authorize the execution of the necessary documents to complete the fmancing for the MRCI project. This is the first financing that the City will have undertaken for these types of notes since the Council adopted a Private Activity Tax Exempt Financing Policy on March 6 of this year This is the final step involving the financing for this project for the City It is unportant to understand that this approval does not constitute approval or waiver of any other City regulations or requirements for the project, such as land use regulations. MRCI is in compliance with the City's Private Activity Tax Exempt Financing Pohcy at this tune. SUMMARY Recommend approval of the motion listed under the Recommended Action. EXECUTIVE SUMMARY RESOLUTION APPROVING THE ISSUANCE AND SALE OF A COMMERCIAL DEVELOPMENT REVENUE NOTE, SERIES 2006 AND AUTHORIZING THE EXECUTION OF DOCUMENTS RELATING THERETO (MANKATO REHABILITATION CENTER, INC. PROJECT) WHEREAS, CITY OF ROSEMOUNT DAKOTA COUNTY, MINNESOTA RESOLUTION 2006 (a) Minnesota Statutes, Chapter 469.152 to 469.1651 (the "Act as found and determined by the legislature is to promote the welfare of the state by the active attraction and encouragement and development of economically sound industry and commerce to prevent so far as possible the emergence of blighted and marginal lands and areas of chronic unemployment; (b) Factors necessitating the active promotion and development of econonncally sound industry and commerce are the increasing concentration of population m the metropolitan areas and the rapidly rising increase in the amount and cost of governmental services required to meet the needs of the increased population and the need for development of land use which will provide an adequate tax base to finance these increased costs and access to employment opportunities for such population; (c) The City Council of the City of Rosemount, Minnesota (the "City has received from Mankato Rehabilitation Center, Inc., a Minnesota nonprofit corporation organized under the laws of the State of Minnesota (the "Company a proposal that the City assist in financing a Project hereinafter described, through the issuance of a Revenue Note, referred to in this Resolution as the "Revenue Note" or "Note pursuant to the Act; (d) The City desires to facilitate the selective development of the community, promote training and rehabilitation services for persons with developmental disabilities, and retain and improve the tax base and help to provide the range of services and employment opportunities required by the population; and the Project will assist the City in achieving those objectives and will enhance the image and reputation of the community, (e) The Company is currently engaged in the business of providing training and rehabilitation services for persons with developmental disabilities. The project to be financed by the Note is the acquisition, construction and equipping of an approximately 20,000 square foot facility to be located at the intersection of Highway 3 and County Road 42 in the City (the "Project The Project will be owned and operated by the Company; (f) The City has been advised by representatives of the Company that conventional, commercial financing to pay the capital cost of the Project is available only on a limited basis and at such high costs of borrowing that the economic feasibility of operating the Project would be significantly ieduced, but the Company has also advised the City that with the aid of municipal financing, and its resulting low borrowing cost, the Project is economically more feasible; 1897318v3 SECTION 1. LEGAL AUTHORIZATION AND FINDINGS 1.1 Findings. The City hereby finds, determines and declares as follows: 1897318v3 2 RESOLUTION 2006 (g) No public official of the City has either a direct or indirect financial interest in the Project nor will any public official either directly or indirectly benefit financially from the Project, BE IT RESOLVED by the City Council of the City of Rosemount, Minnesota (the "City as follows: (a) The City is a municipal corporation and a pohtical subdivision of the State of Minnesota and is authonzed under the Act to assist the revenue producing project herein referred to, and to issue and sell the Note, as hereinafter defined, for the purpose, m the manner and upon the terms and conditions set forth in the Act and in this Resolution. (b) The City proposes to issue a revenue note in the principal amount not to exceed $2,640,000 (the "Note to provide funds to be loaned to Mankato Rehabilitation Center, Inc., a nonprofit corporation organized under the laws of the State of Minnesota (the "Borrower" or the "Company to finance the acquisition, construction and equipping of an approximately 20,000 square foot facility to be located at the intersection of Highway 3 and County Road 42 in the City (the "Project (c) On the basis of information available to this Council it appears, and the Council hereby fords, that the Project constitutes properties, real and personal, used or useful in connection with one or more revenue producing enterpnses engaged in business within the meaning of Section 469.153, Subdivision 2, of the Act, that the Project furthers the purposes stated in Minnesota Statutes, Section 469 152; that the availability of the fmancmg under the Act and willingness of the City to furnish such financing will be a substantial inducement to the Company to undertake the Project, and that the effect of the Project, if undertaken, will be to encourage the development of economically sound industry and commerce, to assist in the prevention of the emergence of bhghted and marginal land, to help prevent chronic unemployment, to help the City provide training and rehabilitation services for persons with developmental disabihties, to help prevent the movement of talented and educated persons out of the State and to areas within the State where their services may not be as effectively used, to promote more intensive development and use of land within the City and otherwise furthering these and other purposes set forth in Minnesota Statutes, Section 469.152. (d) As required by the Act and Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code the City, on April 18, 2006, held a public hearing on the issuance of one or more revenue notes to finance the Project. (e) The Company has agreed and it is hereby determined that any and all costs incurred by the City in connection with the financing of the Project whether or not the Project is carried to completion and whether or not approved by the Minnesota Department of Employment and Economic Development will be paid by the Company. (f) Nothing in this resolution or in the documents prepared pursuant hereto shall authorize the expenditure of any municipal funds on the Project other than the revenues derived from the Project. The Note shall not constitute a charge, hen or encumbrance, legal or equitable, upon any property or funds of the City except the revenue and proceeds pledged to the payment thereof, nor shall the City RESOLUTION 2006 be subject to any liability thereon. The holder of the Note shall never have the right to compel any exercise of the taxing power of the City to pay the outstanding principal on the Note or the interest thereon, or to enforce payment thereof against any property of the City. The Note shall recite in substance that the Note, including interest thereon, is payable solely from the revenue and proceeds pledged to the payment thereof. The Note shall not constitute a debt of the City within the meaning of any constitutional or statutory limitation (g) In anticipation of the approval by the Minnesota Department of Employment and Economic Development of the issuance of the Note to finance all or a poruon of the Project, and in order that completion of the Project will not be unduly delayed when approved, the Company is hereby authorized to make such expenditures and advances toward payment of that portion of the costs of the Project to be financed from the proceeds of the Note as the Company considers necessary, mcluding the use of interim, short -term financing, subject to reimbursement from the proceeds of the Note if and when delivered but otherwise without liability on the part of the City. (h) The issuance and sale of the Commercial Development Revenue Note, Senes 2006 (Mankato Rehabihtation Center Project) in a prmctpal amount not to exceed $2,640,000 (the "Note by the City, pursuant to the Act, is in the best interest of the City, and the City hereby determines to issue the Note and to sell the Note to Wells Fargo Bank, Nauonal Association (the "Lender as provided herem The City will loan the proceeds of the Note (the "Loan to the Borrower in order to finance the Project. (i) Pursuant to a Loan Agreement (the "Loan Agreement to be entered into between the City and the Borrower, the Borrower has agreed to repay the Note in specified amounts and at specified umes sufficient to pay in full when due the principal of, premium, if any, and interest on the Note In addition, the Loan Agreement contains provisions relating to the construction, the maintenance and operauon of the Project, indemnification, insurance, and other agreements and covenants which are required or permitted by the Act and which the City and the Borrower deem necessary or desirable for the financing of the Project. A draft of the Loan Agreement has been submitted to the City Council. (j) Pursuant to a Pledge Agreement to be entered into between the City and the Lender, the City has pledged and granted a security interest m all of its rights, title, and interest in the Loan Agreement to the Lender (except for certain rights of indemnification and to reimbursement for certain costs and expenses). A draft of the Pledge Agreement has been submitted to the City Council. (k) Pursuant to a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Financing Statement (the "Mortgage to be executed by the Borrower in favor of the Lender, the Borrower has secured payment of amounts due under the Loan Agreement and Note by granting to the Lender a mortgage and security interest in the property described therein. A draft of the Mortgage has been submitted to the City Council (1) Pursuant to a Disbursing Agreement (the "Disbursing Agreement by and between the Borrower and the Lender, the Lender will disburse a portion of the proceeds of the Note to the Borrower to construct the Project. 1897318v3 3 RESOLUTION 2006 (m) The Note will be a special, limited obligation of the City. The Note shall not be payable from or charged upon any funds other than the revenues pledged to the payment thereof, nor shall the City be subject to any hability thereon. No holder of the Note shall ever have the right to compel any exercise of the taxing power of the City to pay the Note or the interest thereon, nor to enforce payment thereof against any property of the City The Note shall not constitute a debt of the City within the meaning of any constitutional or statutory lurutation. (n) It is desirable, feasible and consistent with the objects and purposes of the Act to issue the Note, for the purpose of fmancmg the costs of the Project. 1.2 Authorization and Ratification of Project The City does hereby authonze the Borrower, in accordance with the provisions of the Act and subject to the terms and conditions imposed by the Lender, to provide for the acquismon and construction of the Project by such means as shall be available to the Borrower and in the manner determined by the Borrower, and without advertisement for bids as may be required for the construction and acquisition of other municipal facilities, and the City hereby ratifies, affirms, and approves all actions heretofore taken by the Borrower consistent with and in anticipation of such authority. SECTION 2. THE NOTE. 2.1 Authorized Amount and Form of Note. The Note issued pursuant to this Resolution shall be in substantially the form attached as Exhibit A with such appropriate variations, omissions and insertions as are permitted or required by this Resolution, and m accordance with the further provisions hereof, and the total aggregate principal amount of the Note that may be outstanding hereunder is expressly limited to $2,640,000, unless a duphcate Note is issued pursuant to Section 2.7. The Note shall bear interest at a variable rate and the final maturity date shall be not later than 30 years from the date hereof 2.2 The Note. The Note shall be dated as of the date of delivery to the Lender, shall be payable at the times and in the manner as provided therein, shall bear interest at the rate, and shall be subject to such other terms and conditions as are set forth therein. 2.3 Execution. The Note shall be executed on behalf of the City by the signatures of its Mayor and Administrator and shall be sealed with the seal of the City; provided that the seal may be intentionally omitted as provided by law In case any officer whose signature shall appear on the Note shall cease to be such officer before the delivery of the Note, such signature shall nevertheless be valid and sufficient for all purposes, the same as if he or she had remained m office until delivery. In the event of the absence or disability of the Mayor or the Admirstrator such officers of the City as, in the opinion of the City Attorney, may act in their behalf, shall without further act or authorization of the City Council execute and deliver the Note 2.4 Delivery of Note. Before delivery of the Note, there shall be filed with the Lender (except to the extent waived by the Lender) the following items: (a) an executed copy of each of the following documents: (1) the Loan Agreement; (2) the Pledge Agreement; 1897318v3 4 (3) (4) (b) (c) RESOLUTION 2006 the Mortgage; the Disbursing Agreement; an opinion of Counsel for the Borrower as prescribed by the Lender and Bond Counsel; the opinion of Bond Counsel as to the vandity and tax exempt status of the Note; (d) a 501(c)(3) determination letter from the Internal Revenue Service evidencing that the Borrower is exempt from income taxation under Section 501(c)(3) of the Code; and (e) such other documents and opinions as Bond Counsel may reasonably require for purposes of rendering its opinion required m subsection (3) above or that the Lender may reasonably require for the closing 2.5 Disposition of Note Proceeds. Upon delivery of the Note to Lender, the Lender shall, on behalf of the City, disburse the proceeds of the Note for payment of Project Costs m accordance with the terms of the Disbursing Agreement. 2.6 Registration of Transfer. The City will cause to be kept at the office of the City Finance Director a Note Register m which, subject to such reasonable regulations as it may prescribe, the City shall provide for the registration of transfers of ownership of the Note The Note shall be imtially registered m the name of the Lender and shall be transferable upon the Note Register by the Lender in person or by its agent duly authorized in wrung, upon surrender of the Note together with a written instrument of transfer satisfactory to the Finance Director, duly executed by the Lender or its duly authorized agent. The following form of assignment shall be sufficient for said purpose. For value received hereby sells, assigns and transfers unto the within Note of the City of Rosemount, Minnesota, and does hereby irrevocably constitute and appoint attorney to transfer said Note on the books of said City with full power of substitution in the preimses. The undersigned certifies that the transfer is made in accordance with the provisions of Section 2.9 of the Resolution authorizing the issuance of the Note. Dated: 1897318v3 5 Registered Owner Upon such transfer the Finance Director shall note the date of registration and the name and address of the new Lender in the Note Register and m the registration blank appearing on the Note. 2.7 Mutilated Lost or Destroyed Note. In case any Note issued hereunder shall become mutilated or be destroyed or lost, the City shall, if not then prohibited by law, cause to be executed and delivered, a new Note of like outstanding principal amount, number and tenor in exchange and subsutution for and upon cancellation of such mutilated Note, or m heu of and m substitution for such Note destroyed or lost, upon the Lender's paying the reasonable expenses and charges of the City m connection therewith, and in the case of a Note destroyed or lost, the filing with the City of RESOLUTION 2006 evidence satisfactory to the City with indemnity satisfactory to it. If the mutilated, destroyed or lost Note has already matured or been called for redemption in accordance with its terms it shall not be necessary to issue a new Note pnor to payment. 2.8 Ownership of Note. The City may deem and treat the person in whose name the Note is last registered in the Note Register and by notation on the Note whether or not such Note shall be overdue, as the absolute owner of such Note for the purpose of receiving payment of or on account of the Principal Balance, redemption price or interest and for all other purposes whatsoever, and the City shall not be affected by any notice to the contrary 2.9 Limitation on Note Transfers. The Note has been issued without registration under state or other securities laws, pursuant to an exemption for such issuance; and accordingly the Note may not be assigned or transferred in whole or part, nor may a participation interest in the Note be given pursuant to any participation agreement, except (0 in amounts not less than $100,000, (u) not more than 35 persons each of whom have knowledge and experience m financial business matters and that are capable of evaluating the merits and rules of the investment m the Note and are not purchasing for more than one account or with a view to distributing the Note or then interest therein. Any such sale, assignment or participation shall also be (i) in full good faith compliance with all securities registration, broker, anti -fraud and other provisions of the apphcable state and federal laws, (u) with full and accurate disclosure of all material facts to the prospective purchaser(s) or transferee(s), and (iu) under effective federal and state registration statements (which neither the City nor the Borrower shall in any way be obligated to provide) or under exemptions from such registrations. 2.10 Issuance of New Notes. Subject to the provisions of Section 2.9, the City shall, at the request and expense of the Lender, issue new notes, in aggregate outstanding principal amount equal to that of the Note surrendered, and of like tenor except as to number, principal amount, and the amount of the monthly installments payable thereunder, and registered in the name of the Lender or such transferee as may be designated by the Lender. 2.11 Designauon of Quahfied Tax Exempt Obhganons• Issuance Limit In order to quahfy as a "quahfied tax exempt obhgation" within the meaning of Section 265(b)(3) of the Code, the City hereby makes the following factual statements and representations: (a) the Note is issued after August 7, 1986; (b) the Note is not a "private activity bonds" as defined m Section 141 of the Code; (c) the City hereby designates the Note as a "quahfied tax- exempt obligations" for purposes of Section 265(b)(3) of the Code; (d) the reasonably anticipated amount of tax exempt obligations (other than private activity bonds, treating qualified 501(c)(3) bonds as not being private activity bonds) which will be issued by the City (and all entities treated as one issuer with the City, and all subordinate enuues whose obhgauons are treated as issued by the City) during this calendar year 2006 will not exceed $10,000,000; (e) not more than $10,000,000 of obhgations issued by the City during this calendar year 2006 have been designated for purposes of Section 265(b)(3) of the Code, and 1897318v3 6 (f) the aggregate face amount of the Note does not exceed $10,000,000. RESOLUTION 2006 The City shall use its best efforts to comply with any federal procedural requirements which may apply m order to effectuate the designation made by this paragraph SECTION 3. MISCELLANEOUS. 3.1 Severabihty. If any provision of this Resolution shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case in any lunsdiction or lunsdictions or in all jurisdictions or m all cases because it conflicts with any provisions of any constitution or statute or rule or pubhc pohcy, or for any other reason, such circumstances shall not have the effect of rendering the provision m question moperanve or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained mvand, inoperative, or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or paragraphs m this Resolution contained shall not affect the remaining portions of this Resolution or any part thereof. 3.2 Authentication of Transcnpt. The officers of the City are directed to furnish to Bond Counsel certified copies of this Resolution and all documents referred to herein, and affidavits or ceitificates as to all other matters which are reasonably necessary to evidence the validity of the Note All such certified copies, certificates and affidavits, including any heretofore furnished, shall constitute recitals of the City as to the correctness of all statements contained therein. 3.3 Authorization to Execute Agreements The forms of the proposed Loan Agreement, the Pledge Agreement, the Mortgage, Escrow Agreement are hereby approved m substantially the form heretofore presented to the City Council, together with such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be necessary and appropriate and approved by Bond Counsel and the City Attorney prior to the execution of the documents, and the Mayor and Administrator of the City are authorized to execute the Loan Agreement and the Pledge Agreement in the name of and on behalf of the City and such other documents as Bond Counsel consider appropriate in connection with the issuance of the Note. In the event of the absence or disability of the Mayor or the Administrator such officers of the City as, in the opinion of the City Attorney, may act in their behalf, shall without further act or authorization of the City Council do all things and execute all instruments and documents required to be done or executed by such absent or disabled officers. The execution of any instrument by the appropriate officer or officers of the City herein authorized shall be conclusive evidence of the approval of such documents in accordance with the terms hereof. 1897318v3 7 ADOPTED this 16th day of May, 2006. ATTEST: Amp Domeier, City Clerk William H Droste, Mayor RESOLUTION 2006 Motion by: Seconded by: Voted in favor: Voted Against. 1897318v3 8 STATE OF MINNESOTA COUNTY OF DAKOTA ss CITY OF ROSEMOUNT CERTIFICATE 1897318v3 9 Amy Domeier, City Clerk City of Rosemount Dakota County, Minnesota RESOLUTION 2006 I, Amy Domeier, duly appointed, acting and qualified City Clerk of the City of Rosemount, do hereby certify that I have examined the City of Rosemount records and the Minute Book of said City for the meeting of the 16th of May, 2006 and that the attached copy of the RESOLUTION APPROVING THE ISSUANCE AND SALE OF A COMMERCIAL DEVELOPMENT REVENUE NOTE, SERIES 2006 AND AUTHORIZING THE EXECUTION OF DOCUMENTS RELATING THERETO (MANKATO REHABILITATION CENTER, INC. PROJECT) was approved and is a true and correct copy of the City Proceedings relating to said Resolution IN WITNESS WHEREOF, I have hereunto set my hand and seal of said City this day of 2006. 1897318v3 EXHIBIT A UNITED STATES OF AMERICA STA 1E OF MINNESOTA COUNTY OF DAKOTA CITY OF ROSEMOUNT COMMERCIAL DEVELOPMENT REVENUE NOTE, SERIES 2006 (MANKATO REHABILITATION CENTER PROJECT) A -1 RESOLUTION 2006 FOR VALUE RECEIVED THE CITY OF ROSEMOUNT, Dakota County, Minnesota (the "City hereby piomises to pay WELLS FARGO BANK, NATIONAL ASSOCIATION, in Mankato, Minnesota, its successors or registered assigns (the "Lender from the source and in the manner hereinafter provided, the prmcipal sum of Two Million Six Hundred Forty Thousand and No /100 Dollars ($2,640,000), or so much thereof as has been advanced and remains unpaid from time to time (the "Principal Balance with interest thereon from the date of the advance until paid or otherwise discharged at the annual interest rate equal to the prune rate announced by the Lender (the "Prime Rate as such Prime Rate may change from time to time, in any coin or currency which at the time or times of payment is legal tender for the payment of pubhc or private debts in the United States of America, in accordance with the terms hereinafter set forth 1. (a) Interest shall accrue on the Principal Balance from and after the date hereof. Interest is payable monthly beginning 1 2006, and on the same date of each consecutive month therewith, through and including 2026. (b) The Pnncipal Balance and accrued interest hereon shall be amortized and paid in monthly installments set forth on Appendix 1 attached hereto, commencing on 2006, and thereafter through and including 2026 (the "Final Matunty Date at which time any remarnmg Principal Balance and accrued interest thereon shall be paid in full. Payments shall be apphed first to interest due on the Pnncipal Balance and thereafter to reduction of the Principal Balance. 2. In any event, the payments hereunder shall be sufficient to pay all principal and interest due, as such principal and interest becomes due, or service charge, at maturity, upon redemption, or otherwise Interest shall be computed on the basis of a 360 -day year of twelve 30 -day months. 3. Principal and interest or service charge, if any, due hereunder shall be payable at the principal office of the Lender, or at such other place as the Lender may designate in writing. 4. This Note is issued by the City to provide funds for a project, as defined m Minnesota Statutes, Section 469 152, consisting of the construction and equipping of a facility to be owned and operated by Mankato Rehabilitation Center, Inc a Minnesota nonprofit corporation (the "Borrower pursuant to a Loan Agreement dated as of May 1, 2006 by and between the City and RESOLUTION 2006 the Borrower (the "Loan Agreement and this Note is further issued pursuant to and in full compliance with the Constitution and laws of the State of Minnesota, particularly Minnesota Statutes, Sections 469.152 to 469.1651 and pursuant to a resolution of the City Council duly adopted on May 16, 2006 (the "Resolution 5. This Note is secured by a Pledge Agreement of even date herewith between the City and the Lender (the "Pledge Agreement and is further secured by a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Financing Statement, of even date herewith executed by the Borrower, as mortgagor, m favor of the Lender, as mortgagee. 6. The City, for itself, its successors and assigns, hereby waives demand, presentment, protest and notice of dishonor; and to the extent permitted by law, the Lender may extend interest and /or principal of or any service charge or premium, if any, due on this Note, including the Final Maturity Date, all without nonce to or consent of any party liable hereon or thereon and without releasing any such party from such hability and whether or not as a result thereof the interest on the Note is no longer exempt from the federal or state income tax In no event, however, may the Final Matunty Date of the Note be extended beyond thirty (30) years from the date hereof. 7. This Note may be prepaid m whole, or in part, at the option of the Borrower, on any monthly payment date, at a price of par plus accrued interest without premium. 8. Upon the occurrence of certain Events of Default, as defined in the Loan Agreement and Mortgage, the Lender may declare the Principal Balance and accrued interest on the Note to be immediately due and payable. 9. In the event of prepayment of this Note, the Lender shall apply any such prepayment against the accrued interest on the Principal Balance and then agamst the final principal amounts due under the Note The monthly payments due under paragraph 1 hereof, shall continue to be due and payable in full until the entire Principal Balance, accrued interest and any prenuum due on this Note have been paid. 10. As provided in the Resolution and subject to certain hmitations set forth therein, this Note is only transferable upon the books of the City at the office of the City Finance Director, by the Lender m person or by its agent duly authorized m writing, at the Lender's expense, upon surrender hereof together with a written instrument of transfer satisfactory to the City Finance Director, duly executed by the Lender or its duly authorized agent. Upon such transfer the Finance Director will note the date of registration and the name and address of the new registered owner in the registration blank appearing below The City may deem and treat the person m whose name the Note is last registered upon the books of the City with such registration noted on the Note, as the absolute owner hereof, whether or not overdue, for the purpose of receiving payment of or on the account of the Principal Balance, redemption price or interest and for all other purposes, and all such payments so made to the Lender or upon its order shall be valid and effective to satisfy and discharge the liability upon the Note to the extent of the sum or sums so paid, and the City shall not be affected by any notice to the contrary. 11. All of the agreements, conditions, covenants, provisions and stipulations contained in the Resolution, the Loan Agreement, the Pledge Agreement, the Disbursing Agreement, and the 189731 8v3 A -2 1897318%3 A -3 RESOLUTION 2006 Mortgage are hereby made a part of this Note to the same extent and with the same force and effect as if they were fully set forth herein. 12. This Note and interest thereon and any service charge or premium, if any, due hereunder are payable solely from the revenues and proceeds derived from the Loan Agreement and the Mortgage do not constitute a debt of the City within the meaning of any constitutional or statutory ]mutation, are not payable from or a charge upon any funds other than the revenues and proceeds pledged to the payment thereof, and do not give rise to a pecuniary liability of the City or any of its officers, agents or employees, and no holder of this Note shall ever have the right to compel any exercise of the taxing power of the City to pay this Note or the interest thereon, or to enforce payment thereof against any property of the City, and this Note does not constitute a charge, hen or encumbrance, legal or equitable, upon any property of the City, and the agreement of the City to perform or cause the performance of the covenants and other provisions herein referred to shall be subject at all times to the availability of revenues or other funds furnished for such purpose m accordance with the Loan Agreement, sufficient to pay all costs of such performance or the enforcement thereof. 13. If an Event of Default (as that term is defined in the Loan Agreement and the Mortgage) shall occur, then the Lender shall have the right and option to declare, upon thirty (30) days written notice, the Principal balance and accrued interest thereon, immediately due and payable, whereupon the same, plus any Premiums or service charges, shall be due and payable, but solely from sums made available under the Loan Agreement Failure to exercise such option at any time shall not constitute a waiver of the right to exercise the same at any subsequent time 14. The remedies of the Lender, as provided herein and in the Loan Agreement, the Pledge Agreement and the Mortgage, are not exclusive and shall be cumulative and concurrent and may be pursued singly, successively or together, at the sole discretion of the Lender, and may be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. 15. The Lender shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is m writing and signed by the Lender and, then only to the extent specifically set forth in the wntmg A waiver with reference to one event shall not be construed as contmumg or as a bar to or waiver of any right or remedy as to a subsequent event. 16. This Note has been issued without registration under state or federal or other securities laws, pursuant to an exemption for such issuance; and accordingly the Note may not be assigned or transferred in whole or part, nor may a participation interest in the Note be given pursuant to any participation agreement, except m accordance with an applicable exemption from such registration requirements. The City acknowledges that the Lender intends to enter into a participation agreement with one or more sophisticated investors. 17. This Note is a "qualified tax exempt obligation" under Section 265(b) of the Internal Revenue Code of 1986, as amended. IT IS HEREBY CERTIFIED AND RECITED that all conditions, acts and things required to exist to happen and to be performed precedent to or in the issuance of this Note do exist, have happened and have been performed in regular and due form as required by law Attest. Administrator 1897318v3 A -4 Mayor RESOLUTION 2006 IN WITNESS WHEREOF, the City has caused this Note to be duly executed in its name by the manual signatures of the Mayor and Administrator, the corporate seal having been intentionally omitted as pertrutted by law, and has caused this Note to be dated as of 2006. CITY OF ROSEMOUNT, MINNESOTA The ownership of the unpaid Principal Balance of this Note and the interest registered on the books of the City of Rosemount in the name of the holder Date of Name and Address Registrauon Registered Owner 2006 PROVISIONS AS TO REGISTRATION Wells Fargo Bank, National Association 608 Second Avenue South MAC N9303 -100 Minneapolis, MN 55479 1897318v3 A-5 RESOLUTION 2006 accruing thereon is last noted below. Signature of Finance Director 1897318v3 APPENDIX 1 I -1 RESOLUTION 2006 LOAN AGREEMENT BETWEEN CITY OF ROSEMOUNT, MINNESOTA AND MANKATO REHABILITATION CENTER, INC. Dated as of May 1, 2006 Except for certain reserved rights, the interest of the City of Rosemount, Minnesota, in this Loan Agreement has been pledged and assigned to Wells Fargo Bank, National Association, pursuant to a Pledge Agreement of even date herewith. 1897652vdoc (Underscored V3 to V2, 5/3/06) This instrument was drafted by: BRIGGS AND MORGAN (MMD) Professional Association 2200 First National Bank Building 332 Minnesota Street Saint Paul, Minnesota 55101 ARTICLE 1 Section Section ARTICLE 2 Section Section ARTICLE 3 Section Section Section Section Section ARTICLE 4 Section Section Section Section Section Section Section Section Section Section ARTICLE 5 Section ARTICLE 6 Section Section Section Section Section Section ARTICLE 7 Section Section Section Section Section Section Section 1897652vdoc (Underscored V3 to V2, 5/3/06) TABLE OF CONTENTS DEFINITIONS, EXHIBITS AND RULES OF INTERPRETATION 1 1.1 Definitions 1 1.2 Rules of Interpretation 3 REPRESENTATIONS 5 2.1 Representations by the City 5 2.2 Representations by the Borrower 5 THE LOAN 8 3.1 Amount and Source of Loan 8 3.2 Documents Required Prior to Disbursement of the Loan 8 3.3 Disbursement of the Loan 8 3 4 Repayment 8 3.5 Borrower's Obligations Unconditional 8 BORROWER'S COVENANTS 10 4.1 Indemnity 10 4.2 Continuing Existence and Qualification 10 4.3 Reports to Governmental Agencies 11 4.4 Security for the Loan 11 4.5 Preservation of Tax Exemption 11 4 6 Lease or Sale of the Project 14 4 7 Project Operation and Maintenance Expenses 14 4.8 Notification of Changes 14 4.9 Financial Information 14 4.10 Financial Covenants 15 PREPAYMENT OF LOAN 16 5.1 Prepayment at Option of Borrower 16 EVENTS OF DEFAULT AND REMEDIES 17 6.1 Events of Default 17 6.2 Remedies 18 6 3 Disposition of Funds 18 6.4 Manner of Exercise 18 6.5 Attorneys' Fees and Expenses 19 6.6 Effect of Waiver 19 GENERAL 20 7.1 Notices 20 7.2 Binding Effect 20 7.3 Severability 20 7.4 Amendments, Changes and Modifications 20 7.5 Execution Counterparts 20 7.6 Limitation of City's Liability 21 7.7 City's Attorneys Fees and Costs 21 i- Page Section 7.8 Release 21 Section 7.9 Assignment by City and Survivorship of Obligations 21 Section 7.10 Required Approvals 22 Section 7.11 Termination Upon Retirement of Note 22 1897652vdoc (Underscored V3 to V2, 5/3106) TABLE OF CONTENTS (continued) Page THIS LOAN AGREEMENT dated as of May 1, 2006, between the City of Rosemount, a Minnesota municipal corporation of the State of Minnesota (the "City and Mankato Rehabilitation Center, Inc., a Minnesota nonprofit corporation (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: hereof; ARTICLE 1 DEFINITIONS, EXHIBITS AND RULES OF INTERPRETATION Section 1.1 Definitions. In this Agreement the following terms have the following respective meanings unless the context hereof clearly requires otherwise: Act: Minnesota Statutes, Sections 469.152 to 469.1651, as amended; Agreement: this Agreement between the City and the Borrower as the same may from time to time be amended or supplemented as herein provided; Bond Counsel: the firm of Briggs and Morgan, Professional Association, of Saint Paul and Minneapolis, Minnesota, and any opinion of Bond Counsel shall be a written opinion signed by such Bond Counsel; Borrower: Mankato Rehabilitation Center, Inc., a Minnesota nonprofit corporation, its successors and assigns, and any surviving, resulting or transferee business entity which may assume its obligations in accordance with the provisions of this Agreement; City: the City of Rosemount, Minnesota, its successors and assigns; Closing: the date there is physical delivery of the Note to the Purchaser and payment therefore; Code: the Internal Revenue Code of 1986, as amended and the temporary, final or proposed regulations promulgated thereunder; Counsel: an attorney designated by or acceptable to the Purchaser, duly admitted to practice law before the highest court of any state; an attorney for the Borrower or the City may be eligible for appointment as Counsel; Date of Taxability: this term shall have the meaning ascribed to it in Section 4.5(2) Debt Service Coverage Ratio: means for any period of time, the ratio of Gross Revenues less Operating Expenses to annual debt service on the Note. 1897652vdoc (Underscored V3 to V2, 5/3/06) Determination of Taxability: this term shall have the meaning ascribed to it in Section 4.5(2) hereof; Event of Default: any of the events described in Section 6.1 hereof; Fiscal Year means the period commencing on the first day of January of any year and ending on the last day of December or any other twelve (12) month period specified by the Borrower in writing as its fiscal agent. Gross Revenue: means gross revenues under generally accepted accounting principals. Issuance Expenses: shall mean any and all costs and expenses relating to the issuance, sale and delivery of the Note, including, but not limited to, the Issuer Fee, any fees of the Purchaser, all fees and expenses of legal counsel, financial consultants, feasibility consultants and accountants, any fee to be paid to the Issuer, the preparation and printing of this Loan Agreement, the Mortgage, the Resolution, the Pledge Agreement, the Note and all other related documents, and all other expenses relating to the issuance, sale and delivery of the Note and any other costs which are treated as "issuance costs" within the meaning of Section 147(g) of the Code; Land: the real property and any other easements and rights described in Exhibits A and B to the Mortgage; Loan: the loan of Note proceeds from the City to the Borrower described in Section 3.1 of this Agreement; Mortgage: the Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Financing Statement dated as of May 1, 2006, between the Borrower, as mortgagor, and the Purchaser, as mortgagee, Note: the Commercial Development Revenue Note, Series 2006 (Mankato Rehabilitation Center. Inc. Project), in the principal amount of $2,640,000, to be issued by the City pursuant to the Resolution; Operating Expenses: means for any period of time for which calculated, the total of all operating and non operating expenses or losses incurred in such period by the Project, as determined in accordance with generally accepted accounting principles, other than (I) interest expense; (ii) depreciation, (Iii) extraordinary losses resulting from the early extinguishment of debt, the sale or disposition of assets not in the ordinary course of business, and any other extraordinary losses or expenses Permitted Encumbrances: the encumbrances described in Exhibit B to the Mortgage; Pledge Agreement: the pledge agreement of even date herewith between the City and the Purchaser pledging and assigning the City's interest in the Loan Agreement to the Purchaser to the extent provided therein; 1897652vdoc (Underscored V3 to V2, 5/3/06) 2 Principal Balance: so much of the principal sum on the Note as from time to time and remains unpaid; Project: the acquisition, construction and equipping of an approximately 20,000 square foot facility located at Highway 3 and County Road 42 in the City. Project Costs: all direct costs authorized by the Act and paid or incurred by the Borrower, to acquire, equip and construct the Project, including, but not limited to, interest on the Note during construction, site preparation costs, architectural fees. engineering fees, contractor's fees and all costs of labor, material and services; Purchaser Wells Fargo Bank, National Association, a Minnesota banking corporation, in Mankato, Minnesota, its successors and assigns; Resolution: the Final Note Resolution of the City, adopted May 16, 2006, authorizing the issuance of the Note together with any supplement or amendment thereto; State: the State of Minnesota; Treasury Regulations: all proposed, temporary or permanent federal income tax regulations then in effect and applicable. Section 1.2 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) Where the Borrower is permitted or required to do or accomplish any act or thing hereunder, the City may cause the same to be done or accomplished with the same force and effect as if done or accomplished by the Borrower. (5) The Table of Contents and titles of articles and sections herein are for convenience only and are not a part of this Agreement. (6) Unless the context hereof clearly requires otherwise, the singular shall include the plural and vice versa and the masculine shall include the feminine and vice versa. (7) Articles, sections, subsections and clauses mentioned by number only are those so numbered which are contained in this Agreement. 1897652vdoc (Underscored V3 to V2, 5/3/06) 3 (8) References to the Note as "tax exempt" or to the "tax exempt status of the Note" are to the exclusion of interest on the Note from gross income pursuant to Section 103(a) of the Code. 1897652vdoc (Underscored V3 to V2, 5/3/06) 4 ARTICLE 2 REPRESENTATIONS Section 2.1 Representations by the City. The City makes the following representations as the basis for its covenants herein: (1) The City is a municipal corporation pursuant to the laws of the State of Minnesota and is authorized to Issue the Note to finance Project Costs pursuant to the Act; (2) In authorizing the Project, the City's purpose is, and in its judgment the effect thereof will be, to promote the public welfare by: the attraction, encouragement and development of economically sound industry and commerce so as to prevent, so far as possible, the emergence of blighted and marginal lands and areas of chronic unemployment and to aid in the redevelopment of areas of existing blight, marginal land and persistent unemployment; the development of industry to use the available resources of the community, in order to retain the benefit of the community's existing investment in educational and public service facilities; halting the movement of talented, educated personnel of mature age to other areas and thus preserving the economic and human resources needed as a base for providing governmental services and facilities; providing accessible employment opportunities for residents in the area; and the expansion of an adequate tax base to finance the increase in the amount and cost of governmental services; (3) The Project has been approved by the Commissioner of the Department of Employment and Economic Development of the State of Minnesota, or his or her duly delegated designee, as tending to further the purposes and policies of the Act; (4) 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 this Agreement, the Note and the Pledge Agreement, and of all other acts and things required under the Constitution and laws of the State of Minnesota to make this Agreement, the Pledge Agreement and Note valid and binding obligations of the City in accordance with their terms, are authorized by the Act and have been duly authorized by a resolution of the governing body of the City adopted at a meeting thereof duly called and held on May 16, 2006, by the affirmative vote of not less than a majority of its members; (5) Pursuant to the Resolution, the City has authorized and directed the Purchaser to disburse the proceeds of the Note as provided in the Escrow Agreement and such other parties as may be entitled to payment for Project Costs, upon receipt of such supporting documentation as the Purchaser may deem reasonably necessary or as required by this Agreement; (6) No public official of the City has either a direct or indirect financial interest in this Agreement nor will any public official either directly or indirectly benefit financially from this Agreement. Section 2.2 Representations by the Borrower. The Borrower makes the following representations as the basis for its covenants herein: 1897652vdoc (Underscored V3 to V2, 5/3/06) 5 (1) The Borrower is a Minnesota nonprofit corporation duly incorporated and in good standing under the laws of the State of Minnesota, is duly authorized to conduct its business in all states where its activities require such authorization, has power to enter into this Agreement and the Mortgage and to use the Project for the purpose set forth in this Agreement and by proper corporate action has authorized the execution and delivery of this Agreement and the Mortgage; (2) The Borrower is an organization described in Section 50I(c)(3) of the Code and is exempt from tax under Section 501(a) of the Code. The Borrower is not a "private foundation" as defined in Section 509(a) of the Code. Not more than five percent (5 of the proceeds of the Note will be used, directly or indirectly, to finance or refinance property used in an unrelated trade or business of the Borrower determined by applying Section 513(c) of the Code or in the trade or business of any person other than an organization described in Section 501(c)(3) of the Code. There is no action, proceeding or investigation pending or threatened by the Internal Revenue Service or authorities of the State of Minnesota which, if adversely determined, might result in a modification of the status of the Borrower as a Section 501(c)(3) corporation; (3) The execution and delivery of this Agreement and the Mortgage, the consummation of the transactions contemplated thereby. and the fulfillment of the terms and conditions thereof do not and will not conflict with or result in a breach of any of the terms or conditions of the Borrower's articles of incorporation, its bylaws, any restriction or any agreement or instrument to which the Borrower or any of its partners is now a party or by which it is bound or to which any property of the Borrower is subject, and do not and will not constitute a default under any of the foregoing or a violation of any order, decree, statute, rule or regulation of any court or of any state or federal regulatory body having jurisdiction over the Borrower or its properties, including the Project, and do not and will not result in the creation or imposition of any hen, 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 to which the Borrower is a party or by which it is bound; (4) As of the date hereof, the use of the Project as designed and proposed to be operated complies, 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 of Minnesota and the respective agencies thereof and the political subdivisions in which the Project is located. The Borrower has obtained, or will obtain in a timely manner, all necessary and material approvals of and licenses, permits, consents and franchises from federal, state, county, municipal or other governmental authorities having jurisdiction over the Project to acquire, construct, install, and operate the Project and to enter into, execute and perform its obligations under this Agreement and the Mortgage, and no violation of any local ordinance, laws, regulation or requirement exists with respect to the Land; (5) The proceeds of the Note, together with any other funds to be contributed to the Project by the Borrower or otherwise in accordance with this Agreement, will be sufficient to pay the cost of the Project in a manner suitable for use as educational employment placement and rehabilitation facility, and all costs and expenses incidental thereto, and the proceeds of the Note will be used only for the purposes contemplated hereby and allowable under the Act; 1897652vdoc (Underscored V3 to V2, 5/3/06) 6 (6) The Borrower represents that conventional, commercial financing to pay the capital cost of the Project was available only on a limited basis and at such high costs of borrowing that the economic feasibility of operating the Project would be significantly reduced, the Borrower also represents that with the aid of municipal financing, and its resulting low borrowing cost, the Project is economically more feasible. (7) The Borrower is not in the trade or business of selling properties such as the Project and is acquiring and/or constructing the Project for investment purposes only or otherwise for use by the Borrower in its trade or business, and therefore the Borrower has no intention now or in the foreseeable future to voluntarily sell, surrender or otherwise transfer, in whole or part, its interest in the Project; (8) There are no actions, suits, or proceedings pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any property of the Borrower in any court or before any federal, state, municipal or other governmental agency, which, if decided adversely to the Borrower would have a material adverse effect upon the Borrower or upon the business or properties of the Borrower; and the Borrower is not in default with respect to any order of any court or governmental agency; (9) The Borrower is not in default in the payment of the principal of or interest on any indebtedness for borrowed money nor in default under any instrument or agreement under and subject to which any indebtedness for borrowed money has been issued; (10) The Borrower has filed all federal and state income tax returns which, to the knowledge of the officers of the Borrower, are required to be filed and has paid all taxes shown on said returns and all assessments and governmental charges received by the Borrower to the extent that they have become due; (11) The Borrower has approved the terms and conditions of the Note; and (12) No public official of the City has either a direct or indirect financial interest in this Agreement nor will any public official either directly or indirectly benefit financially from this Agreement. 1897652vdoc (Underscored V3 to V2, 5/3/06) 7 ARTICLE 3 THE LOAN Section 3.1 Amount and Source of Loan. The City has authorized the issuance of the Note in the principal amount of $2,640,000 to provide funds to the Borrower for its use in financing the Project. The City agrees to lend the Borrower. upon the terms and conditions set forth herein, the proceeds received from the Note by causing such sums to be advanced to the Borrower and deposited in the Escrow Fund established under the Escrow Agreement and disbursed upon receipt of the supporting documentation required in the Escrow Agreement and such other supporting documentation as the Purchaser may deem reasonably necessary Section 3.2 Documents Required Prior to Disbursement of the Loan. Prior to any advance of Note proceeds, the Borrower shall deliver to the Purchaser the following: (1) The Note. (2) The Loan Agreement. (3) The Pledge Agreement (4) The Disbursing Agreement. (5) The Mortgage. (6) Opinion of Briggs and Morgan, Professional Association, to the effect that the City has duly authorized the Note and that the interest thereon is exempt from federal income taxation and subject to other conditions acceptable to the Purchaser. Section 3.3 Disbursement of the Loan. Pursuant to the Loan Agreement and the Act, the City has authorized the Borrower to provide directly for the financing of the Project and payment of interest on the Note during construction in such manner as determined by the Borrower and hereby authorizes the Purchaser to advance the proceeds of the Note directly to the Borrower pursuant to the Disbursing Agreement for the payment of Project Costs. Section 3.4 Repayment. Subject to the prepayment provisions set forth in the Note, the Borrower agrees to repay the Loan by making all payments of principal and interest, penalty or charge that are required to be made by the City under the Note at the times and in the amounts provided therein. All payments shall be made directly to the Purchaser at its principal office for the account of the City The Borrower represents and covenants that the source of payment of the Note is from Net Revcnucsnet revenues of the Borrower. Section 3.5 Borrower's Obligations Unconditional. All payments required of the Borrower hereunder shall be paid without notice or demand and without setoff, 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, and, except as expressly permitted herein, will not terminate this Agreement for any cause, including but not limited to any acts or circumstances that may constitute failure of consideration, destruction or 1897652odoc (Underscored V3 to V2, 513/06) 8 damage to the Project, eviction by paramount title, commercial frustration of purpose, bankruptcy or insolvency of the City or the Purchaser, 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 1897652vdoc (Underscored V3 to V2, 513/06) 9 1897652vdoc (Underscored V3 to V2, 5/3/06) ARTICLE 4 BORROWER'S COVENANTS Section 4.1 Indemnity. The Borrower will, to the extent permitted by law, pay, and will protect, indemnify and save the City, its officers, agents and employees harmless from and against all liabilities. losses, damages, costs, expenses (including attorneys' fees and expenses), causes of action, suits, claims, demands and judgments of any nature arising from: (1) any injury to or death of any person or damage to property in or upon the Project or growing out of or connected with the use, non -use, condition or occupancy of the Project or a part thereof; (2) violation of any agreement or condition of this Agreement, except by the City or its assignee; violation of any contract, agreement or restriction by the Borrower relating to the (3) Project; (4) violation of any law, ordinance or regulation affecting the Project or a part thereof or the ownership, occupancy or use thereof, or arising out of this Agreement, the Note or the transactions contemplated thereby, including any requirements imposed on the Purchaser as a financial institution or any disclosure or registration requirements imposed by any federal or state securities law; and (5) any statement or information relating to the expenditure of the proceeds of the Note contained in the non- 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. Section 4.2 Continuing Existence and Qualification. Throughout the term of this Agreement the Borrower will remain duly qualified to do business as a nonprofit corporation in Minnesota, and will continue to operate as an organization described in Section 501(c)(3) of the Code whose income is exempt from taxation under Section 501(a) of the Code, and will maintain its corporate existence, will not dissolve or otherwise dispose of all or substantially all of its assets, and will not consolidate with or merge into another corporation or other business entity or permit any other corporation or other business entity to consolidate with or merge into it unless (1) the surviving, resulting or transferee corporation, or other business entity, as the case may be, shall be a nonprofit corporation operating under the laws of the United States, any state or the District of Columbia, and an organization described in Section 501(c)(3) of the Code (provided the Project will not constitute an unrelated trade or business within the meaning of Section 513(e) of the Code) or a governmental unit under Section 145 of the Code; (2) the surviving, resulting or transferee corporation, or other business entity, as the case may be, if other than the Borrower, assumes in writing all of the obligations of the Borrower under this Agreement and the Mortgage and shall deliver that instrument to the Purchaser, (3) the surviving, resulting or transferee corporation or other business entity, as the case may be, is duly qualified to do business in Minnesota, and (4) with the consent of the purchaser. At least ten (10) days before any such merger, transfer or consolidation becomes effective, the Borrower shall to the 10 extent permitted by law give the Purchaser written notice of such merger, consolidation or transfer. Every surviving, resulting or transferee corporation and other entity referred to in this Section 4.2 shall be bound by all of the covenants and agreements of the Borrower herein with respect to any further consolidation, merger, sale or transfer Section 4.3 Reports to Governmental Agencies. The Borrower will furnish to agencies of the State of Minnesota, such periodic reports or statements as are required under the Act, or as they may otherwise reasonably require of the City or the Borrower throughout the term of this Agreement in connection with the transaction contemplated herein Copies of such reports will be provided to the City and the Purchaser. Section 4.4 Security for the Loan. As additional security for the Purchaser, and to induce the City to issue and deliver the Note, the Borrower agrees to execute and deliver the Mortgage and agrees to meet all its obligations under the Mortgage. which document shall remain in effect until all payments required hereunder have been made; and the Borrower will direct Bond Counsel to cause to be recorded and filed the Mortgage. Financing Statement and such other documents requested by Bond Counsel, in such places and in such manner as Bond Counsel deems necessary or desirable to perfect or protect the security interest of the Purchaser in and to the Project and other collateral referred to in said documents. Section 4.5 Preservation of Tax Exemption. (1) The Borrower covenants and agrees that, in order to assure that the interest on the Note shall at all times be free from federal income taxation, the Borrower represents and covenants with the City and the Purchaser that it will comply with the applicable provisions of Section 103 and Section 141 through 150 of the Code and as follows: (a) The Project is and will continue to be owned and operated by the Borrower and no portion of the Project is managed by anyone other than the Borrower. (b) The Project will not be used by the Borrower in an unrelated trade or business, determined by the application of Section 513(a) of the Code. (c) No more than five percent (5 of the net proceeds of the Note are to be used for any private business use as defined in Section 141(b)(6) of the Code (d) The payment of the principal of, or interest on, no more than five percent (5 of the net proceeds of the Note is (under the terms of the Note or any underlying arrangement) directly or indirectly (a) secured by any interest in (i) property used or to be used for a private business use, or (ii) payments in respect of such property, or (b) to be derived from payments (whether or not to the City) in respect of property, or borrowed money, used or to be used for a private business use. (e) The aggregate authorized face amount of the Note (when increased by any outstanding tax- exempt "qualified 501(c)(3) bonds other than "qualified hospital bonds of the Borrower, or any organization with which the Borrower is under common management or control and is a test period beneficiary determined in accordance with Section 145(b) of the 1897652vdoc (Underscored V3 to V2, 5/3/06) 11 Code) does not exceed $150,000,000 or, alternatively, at least 95% of the net proceeds of the Note will be used for capital expenditures. (f) The weighted average maturity of the Note will not exceed the estimated economic life of the Project by more than twenty percent (20 all within the meaning of Section 147(b) of the Code. (g) While the Note remains outstanding, no portion of the proceeds of the Note will be used to provide any airplane, skybox or other private luxury box, any facility primarily used for gambling, or a store, the principal business of which is the sale of alcoholic beverages for consumption off premises. (h) Not more than 2% of the proceeds of the Note will be used to finance Issuance Expenses. (i) The Borrower agrees it will not use the proceeds of the Note in such a manner as to cause the Note to be an "arbitrage bond" within the meaning of Section 148 of the Code and applicable Treasury Regulations. The Borrower shall: (i) maintain records identifying all "gross proceeds" and "replacement proceeds" (as defined in Section 148(f)(6)(B) of the Code attributable to the Note, the yield at which such gross proceeds are invested, any arbitrage profit derived therefrom (earnings in excess of the yield on the Note) and any eamings derived from the investment of such arbitrage profit; (ii) make, or cause to be made as of the end of each fifth bond year, the annual determinations of the amount, if any, of excess arbitrage required to be paid to the United States (the "Rebate Amount (iii) pay, or cause to be paid, to the United States at least once every fifth bond year the amount, if any, which is required to be paid to the United States, including the last installment which shall be made no later than sixty (60) days after the day on which the Note is paid in full; (iv) not invest, or permit to be invested, "gross proceeds" of the Note in any acquired nonpurpose obligations so as to deflect arbitrage otherwise payable to the United States as a "prohibited payment" to a third party; and (v) retain all records of the annual determination of the foregoing amounts until six (6) years after the Note has been fully paid. The Borrower agrees that, in order to comply with this paragraph (i), it shall determine the Rebate Amount within thirty (30) days after each fifth year of the anniversary of the Closing and upon payment in full of the Note; upon request, the Borrower shall furnish the Purchaser a certificate showing how such calculation was made. (j) The Borrower has not leased, sold, assigned, granted or conveyed and will not lease, sell, assign, grant or convey all or any portion of the Project or any interest therein to 1897652,doc (Underscored V3 to V2, 5/3/06) 12 the United States or any agency or instrumentality thereof within the meaning of Section 149(b) of the Code (k) In addition to the Note, no other obligations have been or will be issued under Section 103 of the Code which are sold at substantially the same time as the Note pursuant to a common plan of marketing and at substantially the same rate of interest as the Note and which are payable in whole or part by the Borrower or otherwise have with the Note any common or pooled security for the payment of debt service thereon, or which are otherwise treated as the same "issue of obligations" as the Note as described in Treasury Regulations Section 1.150- (1)(c)(1); (1) No Note proceeds shall be invested in investments which cause the Note to be federally guaranteed within the meaning of Section 149(b) of the Code. If at any time the moneys in such funds exceed, within the meaning of Section 149(b)(3)(B) of the Code, (i) amounts invested for an initial temporary period until the moneys are needed for the purpose for which the Note was issued, (ii) investments of a bona fide debt service fund, and (iii) investments of a reserve which meet the requirement of Section 148(d) of the Code, such excess moneys shall be invested in only those investments, which are (A) obligations issued by the United States Treasury, (B) other investments permitted under regulations, or (C) obligations which are (a) not issued by, or guaranteed by, or insured by, the United States or any agency or instrumentality thereof or (b) not federally insured deposits or accounts, all within the meaning of Section 149(b) of the Code, and (m) Not to otherwise use Note proceeds, or take or fail to take any action, the effect of which would be to impair the exemption of interest on the Note from federal income taxation. (2) For the purpose of this Section, a "Determination of Taxability" shall mean the issuance of a statutory notice of deficiency by the Internal Revenue Service, or a ruling of the National Office or any District Office of the Internal Revenue Service, or a final decision of a court of competent Jurisdiction, or a change in any applicable federal statute, which holds or provides in effect that the interest payable on the Note is includible, for federal income tax purposes under Section 103 of the Code in the gross income of the Purchaser or any other holder or prior holder of the Note, if the period, if any, for contest or appeal of such action, ruling or decision by the Borrower or Purchaser or any other interested party has expired without any such contest or appeal having been properly instituted by the Purchaser. the Borrower or any other interested party. The expenses of any such contest shall be paid by the party initiating the contest, and neither the Purchaser nor the Borrower 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, order, or decision, that the interest payable on the Note becomes includible in the gross income of the Purchaser or any other holder or prior holder of the Note. as the case may be, for federal income tax purposes. (3) If the Borrower receives a Determination of Taxability it will promptly give notice of such Determination of Taxability to the City and the Purchaser. 1897652vdoc (Underscored V3 to V2, 5/3/06) 13 Section 4.6 Lease or Sale of the Project. The Borrower shall not lease, sell, convey or otherwise transfer the Project in whole or part, nor sell the Project in whole or part, without first securing the written consent of the Purchaser, provided that in no event shall such lease, transfer, assignment or sale be permitted if the effect thereof would otherwise be to impair the validity or the tax exempt status of the Note, nor shall any such transaction release the Borrower of any of its obligations under this Agreement, unless the assignee- transferee is a surviving, resulting or transferee entity as permitted under Section 4.2 hereof. The Borrower shall promptly notify the City of any such sale, transfer, assignment or lease. Section 4.7 Project Operation and Maintenance Expenses The Borrower shall pay all expenses of the operation and maintenance of the Project including, but without limitation, 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 Loan Agreement, all in conformance with the provisions of the Mortgage. The Project shall not be used for purposes which violate any Federal, State or other laws prohibiting discrimination in access or employment based on race, creed, sex, handicap, ethnic origin, age or marital status Section 4.8 Notification of Changes. The Borrower covenants and agrees that it will promptly notify the Purchaser of (i) any litigation which might materially and adversely affect the Borrower and any of its properties; (ii) the occurrence of any Event of Default under this Agreement or under any other loan agreement, debenture, note, purchase agreement or any other agreement providing for the borrowing of money by the Borrower or any event of which the Borrower has knowledge and which, with the passage of time or giving of notice, or both, would constitute an Event of Default under this Loan Agreement or under such other agreements; and (iii) any material adverse change in the operations, business, properties, assets or conditions, financial or otherwise, of the Borrower. 1897652vdoc (Underscored V3 to V2, 5/3/06) Section 4.9 Financial Information. The Borrower agrees to furnish to the Lender, the following: (1) by no later than one hundred twenty (120) days after the close of each Fiscal Year, a copy of annual audited financial statements of the Borrower for the preceding Fiscal Year, including a balance sheet and operating statements, audited by an Independent certified public accountant; and (2) by no later than thirty (30) days after the end of each month, monthly accounts receivable aging information. 14 1897652vdoc (Underscored V3 to V2, 5/3/06) Section 4.10 Financial Covenants. (1) Commencing with the Borrower's Fiscal Year ending December 31, 2006, the Borrower agrees to generate Net RcvenucGnet revenues sufficient to maintain a Debt Service Coverage Ratio of at least 1:25 to 1. (2) As of the end of each Fiscal Year, commencing with the Fiscal Year ending December 31, 2006, the Borrower will maintain unrestricted cash and cash equivalents equal to not less than $500,000 in an account with the Lender 15 ARTICLE 5 PREPAYMENT OF LOAN Section 5.1 Prepayment at Option of Borrower. The Borrower may at its option prepay the Loan. in whole or in part, on any monthly payment date at par plus accrued interest without premium. 18976520 doe (Underscored V3 to V2, 5/3/06) 16 ARTICLE 6 EVENTS OF DEFAULT AND REMEDIES Section 6.1 Events of Default. Any one or more of the following events is an Event of Default under this Agreement: (1) If (a) the Borrower shall fail to make any payments required under Section 3.4 of this Agreement on the date due, or (b) any other payment due under this Agreement on or before the date that the payment is due and such default continues for ten (10) days after written notice given to the Borrower by the City or the Purchaser as provided in the Note. (2) If the Borrower shall fail to observe and perform any other covenant, condition or agreement on its part under this Agreement 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 Purchaser, unless the Purchaser shall agree in writing to an extension of such time prior to its expiration, or for such longer period as may be reasonably necessary to remedy such default provided that the Borrower is proceeding with reasonable diligence to remedy the same. (3) The occurrence of a Determination of Taxability. (4) If the Borrower shall file a petition in bankruptcy or for reorganization or for an arrangement pursuant to any present or future federal bankruptcy act or under any similar federal or state law, shall consent to the entry of an order for relief pursuant to any present or future federal bankruptcy act or under any similar federal or state law, or shall make an assignment for the benefit of its creditors or shall admit in writing its inability to pay its debts generally as they become due, or if a petition or answer proposing the entry of an order for relief of the Borrower under any present or future federal bankruptcy act or any similar federal or state law shall be filed in any court and such petition or answer shall not be filed in any court and such petition or answer shall not be discharged or denied within ninety (90) days after the filing thereof, or a receiver, trustee or liquidator of the Borrower of all or substantially all of the assets of the Borrower, or of the Project shall be appointed in any proceeding brought against the Borrower and shall not be discharged within ninety (90) days after such appointment or if the Borrower shall consent to or acquiesce in such appointment, or if the estate or interest of the Borrower in the Project or a part thereof shall be levied upon or attached in any proceeding and such process shall not be vacated or discharged within 90 days after such levy or attachment; if the Borrower shall be dissolved or liquidated or shall be merged with or is acquired by another business entity in violation of Section 4.2. (5) If the articles of incorporation of the Borrower shall expire or be annulled; or if the Borrower shall be dissolved or liquidated (other than when a new entity assumes the obligations of the Borrower under the conditions permitting such action contained in Section 4.2). (6) If any representation or warranty made by the Borrower herein, or by an officer or representative of the Borrower in any document or certificate furnished the Purchaser or the City 1897652vdoc (Underscored V3 to V2, 5/3/06) 17 in connection herewith or therewith or pursuant hereto or thereto, shall prove at any time to be, in any material respect, incorrect or misleading as of the date made. (7) If the Borrower shall default or fail to perform any covenant, condition or agreement on its part under the Mortgage or any other security document securing the Note, and such failure continues beyond the period set forth in such documents during which the Borrower may cure the default. Section 6.2 Remedies. Whenever any Event of Default referred to in Section 6.1 hereof shall have happened and be subsisting, any one or more of the following remedial steps to the extent permitted by law may be taken by the City with the prior written consent of the Purchaser or by the Purchaser itself: (1) The Purchaser's obligation to advance any further amounts under the Disbursing Agreement pursuant thereto shall terminate. (2) The City, upon written direction of the Purchaser, or the Purchaser may declare all installments of the Loan (being an amount equal to that necessary to pay in full the Principal Balance plus accrued interest thereon assuming acceleration of the Note under the terms thereof and to pay all other indebtedness thereunder) to be immediately due and payable, whereupon the same shall become immediately due and payable by the Borrower. (3) The Purchaser may exercise its remedies under the Mortgage and may enter the Land to complete the remodeling, renovation and construction portion of the Project and disburse the remaining principal of the Note, together with such other sums as may, in the Purchaser's discretion be necessary, to pay for remaining costs of such completion, and in such event Borrower shall be responsible for all amounts outstanding on the Note together with all additional amounts advanced by the Purchaser to pay for remaining costs of such completion. (4) The City, upon written direction of the Purchaser (except as otherwise provided in Section 7.9 herein), or the Purchaser (in either case at no expense to the City) may take whatever action at law or in equity may appear necessary or appropriate to collect the amounts then due and thereafter to become due under this Agreement, or to enforce performance and observance of any obligation, agreement or covenant of the Borrower under this Agreement Section 6.3 Disposition of Funds. Notwithstanding anything to the contrary contained in this Agreement, any amounts collected pursuant to action taken under Section 6.2 hereof, except for any amounts collected solely for the benefit of the City under any of the provisions set forth in Section 7.9, shall, after deducting all expenses incurred in collecting the same, be applied as a prepayment of the Note in accordance with Section 5.1. Section 6.4 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 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 1897652vdoc (Underscored V3 to V2, 5/3/06) 18 City or the Purchaser to exercise any remedy reserved to either of them in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Section 6.5 Attorneys' Fees and Expenses. In the event the Borrower should default under any of the provisions of this Agreement and the City or the Purchaser should employ attorneys or incur other expenses for the collection of amounts due hereunder or the enforcement of performance of any obligation or agreement on the part of the Borrower, the Borrower will on demand pay to the City or the Purchaser the reasonable fee of such attorneys and such other expenses so incurred. Section 6.6 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. 1897652vdoc (Underscored V3 to V2, 5/3/06) 19 1897652vdoc (Underscored V3 to V2, 5/3/06) ARTICLE 7 GENERAL Section 7.1 Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when received by certified or registered mail, return receipt requested, postage prepaid, with proper address as indicated below. The City, the Borrower and the Purchaser 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: To the City: City of Rosemount, Minnesota 2875 145 Street West Rosemount. Minnesota 55068 -4941 Attn. Finance Director To the Borrower: Mankato Rehabilitation Center, Inc. 15 Map Drive Mankato, Minnesota 56001 Attn: Executive Director To the Purchaser: Wells Fargo Bank, National Association 206 East Hickory Street Second Floor Mankato, Minnesota 56001 -3629 Attn: Section 7.2 Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the City and the Borrower and their respective successors and assigns. Section 7.3 Severabilitv. 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 7.4 Amendments, Changes and Modifications. Except as otherwise provided in this Agreement or in the Resolution, subsequent to the initial 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 Purchaser. Section 7.5 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. 20 Section 7.6 Limitation of City's Liability. It is understood and agreed by the Borrower and the Purchaser that no covenant of the City herein shall give rise to a pecuniary liability of the City or a charge against its general credit, or taxing powers. It is further understood and agreed by the Borrower and the Purchaser that the City shall incur no pecuniary liability hereunder, and shall not be liable for any expenses related hereto, including administrative expenses and fees and disbursements of the City's attorney, Bond Counsel and fiscal consultant retained in connection therewith, all of which expenses the Borrower agrees to pay. Section 7.7 City's Attorneys Fees and Costs If, notwithstanding the provisions of Section 7.6 hereof, the City incurs any expense, or suffers any losses, claims or damages, or incurs any liabilities in connection with the transaction contemplated by this Agreement, the Borrower will indemnify and hold harmless the City from the same and will reimburse the City for any reasonable legal or other expenses incurred by the City in relation thereto. The Borrower shall also reimburse the City for all other costs and expenses, including without limitation reasonable attorneys' fees, paid or incurred by the City in connection with (i) the discussion, negotiation, preparation, approval, execution and delivery of this Agreement, the Note, the Pledge Agreement and the documents and instruments related hereto or thereto; (ii) any amendments or modifications hereto or to the Note, the Pledge Agreement and any document, instrument or agreement related hereto or thereto, and the discussion, negotiation, preparation, approval, execution and delivery of any and all documents necessary or desirable to effect such amendments or modifications, and (iii) the enforcement by the City during the term hereof or thereafter of any of the rights or remedies of the City hereunder or under the Note, the Pledge Agreement or any document, instrument or agreement related hereto or thereto, including, without limitation, costs and expenses of collection in the Event of Default, whether or not suit is filed with respect thereto. Section 7.8 Release. The Borrower hereby acknowledges and agrees that the City shall not be liable to the Borrower, and hereby releases and discharges the City from any liability, for any and all losses, costs, expenses (including attorneys' fees), damages, Judgments, claims and causes of action, paid, incurred or sustained by the Borrower as a result of or relating to any action, or failure or refusal to act, on the part of the Purchaser with respect to this Agreement or the documents and transactions related hereto or contemplated hereby, including, without limitation, the exercise by the Purchaser of any of its rights or remedies pursuant to Article 6, the Note, the Pledge Agreement, the Mortgage, the Disbursing Agreement or any collateral security documents The Borrower's release of the City pursuant to the preceding sentence does not extend to the Purchaser following the assignment of the City's rights to the Purchaser pursuant to the Pledge Agreement. Section 7.9 Assignment by City and Survivorship of Obligations. The City shall assign its rights under this Agreement and any related documents to the Purchaser to secure payment of the principal of and interest on the Note. Following such assignment, the City shall have no obligations hereunder, except such assignment shall not operate to limit or otherwise affect the following provisions hereof to the extent that they run to the City from the Borrower to which extent they shall survive any such assignment: 1897652vdoc (Underscored V3 to V2, 5/3/06) 21 Section 3.5 Section 4.1 Section 4.3 Section 6.5 Section 7 6 Section 7.7 Section 7.8 Upon such assignment, the provisions immediately above running to the City from the Borrower for the City's benefit shall run jointly and severally to the City and the Purchaser (if appropriate), provided that the City shall have the right to enforce any retained rights without the approval of the Purchaser but only if the Purchaser is not enforcing such rights in a manner to protect the City or is otherwise taking action with respect thereto that brings adverse consequences to the City. The obligations of the Borrower running to the City for the purpose of preserving the tax exempt status of the Note or otherwise for the City's benefit under the foregoing Sections shall survive repayment of the Note and interest thereon. Section 7.10 Required Approvals. Consents and approvals required by this Agreement to be obtained from the Borrower, the City or the Purchaser shall be in writing and shall not be unreasonably withheld or delayed. Section 7.11 Termination Upon Retirement of Note. At any time when no principal balance on the Note remains outstanding, and arrangements satisfactory to the Purchaser and the City have been made for the discharge of all other accrued liabilities, if any, under this Loan Agreement, this Loan Agreement shall terminate, except as otherwise expressly provided in Section 7.9 or otherwise herein. 1897652vdoc (Underscored V3 to V2, 5/3/06) 22 IN WITNESS WHEREOF, the City and the Borrower have caused this Agreement to be executed in their respective names all as of the date first above written. Loan Agreement dated as of May 1, 2006, between the City of Rosemount, Minnesota and Mankato Rehabilitation Center, Inc. 1897652vdoc (Underscored V3 to V2, 5/3/06) S -1 CITY OF ROSEMOUNT, MINNESOTA By Mayor By City Administrator 1897652vdac (Underscored V3 to V2, 5/3/06) MANKATO REHABILITATION CENTER, INC. By S-2 Dwayne Krenz. President By Charles Cuggisberv, Secretary Loan Agreement dated as of May I, 2006, between the City of Rosemount, Minnesota and Mankato Rehabilitation Center, Inc. 1897652vdoc (Underscored V3 to V2, 5/3/06) S -3