HomeMy WebLinkAbout7A McKenna Crossing Public HearingPhone 952.447.9800 / Fax 952.447.4245 / www.cityofpriorlake.com
4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL AGENDA REPORT
MEETING DATE: MAY 23, 2016
AGENDA #: 7A
PREPARED BY: DON URAM, FINANCE DIRECTOR
CASEY MCCABE, COMMUNITY DEVELOPMENT SPECIALIST
PRESENTED BY: DON AND CASEY
AGENDA ITEM:
DISCUSSION:
PUBLIC HEARING APPROVING THE ISSUANCE OF, AND GIVING
HOST APPROVAL TO THE ISSUANCE OF SENIOR HOUSING
REVENUE REFUNDING NOTES TO REFINANCE A PROJECT BY
SHEPHERD'S PATH SENIOR HOUSING, INC. (MCKENNA CROSSING
SENIOR HOUSING PROJECT)
Introduction
Shepherd's Path Senior Housing, Inc., an affiliate of Presbyterian Homes
has asked that the City of Prior Lake act as one of three issuers of over
$25,000,000 in 501(c)(3), bank-qualified revenue bonds to refinance the
McKenna Crossing senior housing project located in Prior Lake. It is
anticipated that the Bonds will be directly purchased by Bremer Bank,
National Association.
History
In 2006, the Prior Lake EDA and the City issued $10,000,000 Senior
Housing Revenue Bonds, Series 2006A and $21,445,000 Senior Housing
Revenue Bonds, Series 2006B respectfully to finance the acquisition,
construction, and equipping of an elderly housing development of 154
senior rental housing units including 82 independent housing units, 54
assisted living units, and 18 memory care units, together with
approximately 35,000 square feet of common space. The project,
McKenna Crossing is owned and operated by Presbyterian Homes.
Current Circumstances
The purpose of the current refinancing is interest savings which according
to the debt service schedule is about $$8.9M over the next 25 years.
There will be no additional improvements to the projects as a result of this
transaction.
Conclusion
Since the closing won’t be until sometime in July, not all of the documents
are final and the closing certificates haven’t been drafted. Due to having
three issuers for the overall transaction, the borrower needs to have the
joint powers agreement and the purchase agreement signed prior to
closing. Section 4.3 of the Resolution (which is final) authorizes the Mayor
and City Manager to execute the final documents in substantially the same
form as presented to the Council prior to closing.
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ISSUES: Under federal and State law, in order for the Bonds to be tax exempt, they
must be issued by a political subdivision. In addition, the city in which the
project is located must give approval to another city to issue bonds for a
project within its jurisdiction. This requires that the City hold a public
hearing and approve issuance of the Bonds, approve issuance of bonds by
Hampton and Mayer, and approve the execution of related documents.
Prior Lake will hold a public hearing and give final approval to the actual
issuance of the Bonds, give approval to the issuance of bonds by Hampton
and Mayer, and approve all related documents on May 23rd.
FINANCIAL
IMPACT:
The Bonds will be issued as bank-qualified bonds. Each city may issue up
to $10,000,000 of its own and 501(c)(3) bonds each calendar year as
bank-qualified bonds. Because the entire financing will be over
$25,000,000, the cities of Mayer and Hampton will also issue bonds for the
Project. It is expected that Mayer and Hampton will each issue bonds in the
principal amount of $10,000,000. Prior Lake, which has already used some
of its bank-qualification capacity for its own bonds, will make up the
difference. That amount is currently expected to be $5,155,000. Prior Lake
will receive an issuer administration fee equal to 1/4 of 1% of the principal
amount that the City issues. The Private Activity Bond application and fee
has been received.
The issuance of the Bonds will not affect the City's credit rating on bonds it
issues for municipal purposes. The Bonds and the resolutions adopted by
the City will recite that the Bonds, if and when issued, will not be payable
from or charged upon any of the City's funds, other than the revenues
received under the Loan Agreement and pledged to the payment of the
Bonds, and the City is not subject to any liability on the Bonds.
ALTERNATIVES: The following alternatives are available to the City Council once the public
hearing has been conducted:
1.Approve Resolution Authorizing the Issuance and Sale of Senior
Housing Revenue Refunding Notes, Giving Host Approval in
Connection Therewith and Authorizing the Execution of Documents
Relating Thereto and Approval of a Joint Powers Agreement.
2.Deny Resolution Authorizing the Issuance and Sale of Senior
Housing Revenue Refunding Notes.
RECOMMENDED
MOTION:
Unless new information is revealed during the course of the public hearing,
Alternative 1.
ATTACHMENTS 1.Project Description
2.Resolution
3.Purchase Agreement
4.Loan Agreement
5.Mortgage
6.Mortgage Assignment
7.Joint Powers Agreement
8.Form of Note 2016A
9. Pledge Agreement
7659273v2
Extract of Minutes of a Meeting of the
City Council of the City of Prior Lake
Pursuant to due call and notice thereof, a regular meeting of the City Council of the City
of Prior Lake was duly held in the City of Prior Lake, Minnesota, on Monday, May 23, 20 16, at
7:00 o'clock P.M.
The following members were present:
and the following were absent:
During said meeting _________ introduced the following resolution and moved its
adoption:
RESOLUTION NO. _______
RESOLUTION APPROVING THE ISSUANCE AND SALE OF
SENIOR HOUSING REVENUE REFUNDING NOTES,
GIVING HOST APPROVAL IN CONNECTION THEREWITH AND AUTHORIZING THE
EXECUTION OF DOCUMENTS RELATING THERETO
AND APPROVAL OF A JOINT POWERS AGREEMENT
(McKENNA CROSSING SENIOR HOUSING PROJECT)
WHEREAS,
(a) The purpose of Minnesota Statutes, Chapter 462C (the "Act"), confers
upon cities the power to issue revenue obligations to finance a program for the purposes of
planning, administering, making or purchasing loans with respect to a multifamily housing
facility for the elderly;
(b) The City (as defined below) desires to facilitate the selective development
of the community, retain and improve the tax base and help to provide the range of services and
employment opportunities required by the population, including senior housing and health care
services; and the Project (defined below) will assist the City in achieving those objectives and
will enhance the image and reputation of the community;
(c) Shepherd’s Path Senior Housing, Inc., a Minnesota nonprofit corporation
(the "Borrower"), which is an affiliate of Presbyterian Homes and Services, a Minnesota
nonprofit corporation, and an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"), has proposed that the City, along with the City
of Hampton, Minnesota ("Hampton") and the City of Mayer, Minnesota ("Mayer"), undertake a
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program to refinance the Project (as defined below) through the issuance of revenue notes or
other obligations, in one or more series pursuant to the Act and in connection therewith the
following described notes are to be issued: (i) City of Prior Lake, Minnesota Senior Housing
Revenue Refunding Note (McKenna Crossing Senior Housing Project) Series 2016A (the "Prior
Lake Note"); (ii) City of Mayer, Minnesota Senior Housing Revenue Refunding Note (McKenna
Crossing Senior Housing Project) Series 2016B (the "Mayer Note"); and (iii) City of Hampton,
Minnesota Senior Housing Revenue Refunding Note (McKenna Crossing Senior Housing
Project) Series 2016C (the "Hampton Note," and together with the Mayer Note and the Prior
Lake Note, the "Notes"), in the total aggregate principal amount not to exceed $26,000,000;
(d) The "project" consists of the refunding of the outstanding principal
amount of the City’s $21,445,000 Senior Housing Revenue Bonds (Shepherd’s Path Senior
Housing, Inc. Project) Series 2006B, and the Economic Development Authority of the City of
Prior Lake’s $10,000,000 Senior Housing Revenue Bonds (Shepherd’s Path Senior Housing
Project) Series 2006A (collectively, the “Series 2006 Bonds”), the proceeds of which were used
to finance the acquisition , construction, and equipping of an elderly housing development of 154
senior rental housing units including 82 independent housing units, 54 assisted living units, and
18 memory care units, together with approximately 35,000 square feet of common space, located
adjacent to the Shepherd of the Lake Lutheran Church located at 13760 McKenna Road in the
City (the “Project”). The Project, known as McKenna Crossing, is and will be owned an d
operated by the Borrower.
(e) The City has been advised by representatives of the Borrower 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 reduced;
(f) Based on representations of the Borrower, 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;
(g) In connection with the issuance of the Notes, it is proposed that the City,
Hampton, and Mayer, pursuant to Minnesota Statutes, Section 471.59, enter into a Joint Powers
Agreement (the "Joint Powers Agreement"). A copy of the proposed form of the Joint Powers
Agreement has been presented to the City Council in connection with its consideration of this
Resolution, and is currently on file in the offices of the City Manager;
(h) The Notes, as and when issued, will not constitute a charge, lien or
encumbrance upon any property of the City, Hampton, or Mayer and will not be a charge against
the general credit or taxing powers of the City, Hampton, or Mayer;
(i) As required by the Act and Section 147(f) of the Code, a notice of public
hearing was published in the City's official newspaper and newspaper of general circulation, for
a public hearing on the proposed issuance of the Prior Lake Note by the City and the proposal of
the Borrower to undertake and refinance the Project; and
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(j) As required by the Act and Section 147(f) of the Code, the City Council
has on this same date held a public hearing on the issuance of the Prior Lake Note by the City
and the proposal by the Borrower to undertake and refinance the Project, at which hearing all
those appearing who desired to speak were heard and written comments were accepted.
BE IT RESOLVED by the City Council of the City of Prior Lake, Minnesota (the
"City"), as follows:
SECTION 1. LEGAL AUTHORIZATION AND FINDINGS.
1.1 Findings. The City hereby finds, determines and declares as follows:
(a) The City is a municipal corporation and a political subdivision of the State
of Minnesota and is authorized under the Act to assist the project referred to herein, and
to issue and sell the Prior Lake Note, as hereinafter defined, for the purpose, in the
manner, and upon the terms and conditions set forth in the Act and in this Resolution.
(b) The issuance and sale of the City of Prior Lake, Minnesota Senior
Housing Revenue Refunding Note (McKenna Crossing Senior Housing Project), Series
2016A (the "Prior Lake Note") by the City, pursuant to the Act, is in the best interest of
the City, and the City hereby determines to issue the Prior Lake Note and to sell the Prior
Lake Note to Bremer Bank, National Association in Minneapolis, Minnesota or another
bank in Minnesota (the "Lender"), as provided in an Agreement to Purchase (the
"Purchase Agreement") to be entered into between the Borrower, the City, and the
Lender. The City will loan the proceeds of the Prior Lake Note (the "Loan") to the
Borrower in order to finance the refunding, in part, of the Series 2006 Bonds. A draft of
the Purchase Agreement has been submitted to the City Council.
(c) Pursuant to a Series 2016A Loan Agreement (the "Loan Agreement") to
be entered into between the City and the Borrower, the Borrower has agreed to repay the
Prior Lake Note in specified amounts and at specified times sufficient to pay in full when
due the principal of, premium, if any, and interest on the Prior Lake Note. In addition,
the Loan Agreement contains provisions relating to the maintenance and operation 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 their refinancing of the Project. A draft of the Loan Agreement has been
submitted to the City Council.
(d) Pursuant to a Series 2016A Pledge Agreement (the "Pledge Agreement")
to be entered into between the City and the Lender, the City has pledged and granted a
security interest in 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.
(e) Pursuant to a Mortgage, Security Agreement, Fixture Financing Statement
and Assignment of Leases and Rents (the "Mortgage") given by the Borrower to the City,
Hampton, and Mayer, and assigned by the City, Hampton, and Mayer to the Lender
pursuant to an Assignment of Mortgage, Security Agreement, Fixture Financing
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Statement and Assignment of Leases and Rents (the "Assignment"), the Borrower has
secured payment of amounts due under the Loan Agreement and Notes by granting to the
Lender a mortgage and security interest in the property described therein. A draft of the
Mortgage and the Assignment have been submitted to the City Council.
(f) A copy of the proposed form of the Joint Powers Agreement has been
presented to the City Council in connection with its consideration of this Resolution, and
has been submitted to the City Council.
(g) The Prior Lake Note will be a special, limited obligation of the City. The
Prior Lake 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 liability
thereon. No holder of the Prior Lake Note shall ever have the right to compel any
exercise of the taxing power of the City to pay the Prior Lake Note or the interest thereon,
nor to enforce payment thereof against any property of the City. The Prior Lake Note
shall not constitute a debt of the City within the meaning of any constitutional or
statutory limitation.
(h) On the basis of information available to the City it appears, and the City
hereby finds, that the Project constitutes properties, real and personal, used or useful in
connection with a multifamily housing facility for the elderly within the meaning of the
Act; that the Project furthers the purposes stated in the Act; that the availability of the
financing under the Act and the willingness of the City to furnish such financing will be a
substantial inducement to the Borrower to undertake the Project, and that the effect of the
Project, if undertaken, will be to assist in the prevention of the emergence of blighted and
marginal land, to help prevent chronic unemployment, to help the surrounding area retain
and eventually improve the tax base, to provide the range of service and employment
opportunities required by the population, 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, and to promote more intensive development and use of land
within the City and surrounding communities, and to provide available adequate senior
housing facilities to residents of the State at a reasonable cost.
(i) It is desirable, feasible and consistent with the objects and purposes of the
Act to issue the Prior Lake Note, for the purpose of refinancing the costs of the Project.
SECTION 2. THE PRIOR LAKE NOTE.
2.1 Authorized Amount and Form of Prior Lake Note. The Prior Lake Note is hereby
approved and shall be issued pursuant to this Resolution in substantially the form submitted t o
the City Council with such appropriate variations, omissions and insertions as are necessary and
appropriate and are permitted or required by this Resolution, and in accordance with the further
provisions hereof; and the total aggregate principal amount of the Prior Lake Note that may be
outstanding hereunder is expressly limited to not more than $5,250,000, but presently expected
to be $5,155,000, unless a duplicate Note is issued pursuant to Section 2.7. The Prior Lake Note
shall bear interest at a rate or rates as set forth therein.
7659273v2
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2.2 The Prior Lake Note. The Prior Lake Note shall be dated as of the date of
delivery to the Lender, shall be payable at the times and in the manner, 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 Prior Lake Note shall be executed on behalf of the City by the
signatures of its Mayor and the City Manager 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 Prior Lake Note shall cease to be such officer before the
delivery of the Prior Lake Note, such signature shall nevertheless be valid and sufficient for all
purposes, the same as if had remained in office until delivery. In the event of the absence or
disability of the Mayor or the City Manager such officers of the City as, in the opinion of the
City Attorney, may act in their behalf, shall without further act or authorizat ion of the City
Council execute and deliver the Prior Lake Note.
2.4 Delivery of Initial Prior Lake Note. Before delivery of the Prior Lake Note there
shall be filed with the Lender (except to the extent waived by the Lender) the following items:
(1) an executed copy of each of the following documents:
(a) the Purchase Agreement;
(b) the Loan Agreement;
(c) the Pledge Agreement;
(d) the Mortgage;
(e) the Assignment;
(f) the Joint Powers Agreement;
(2) an opinion of Counsel for the Borrower as prescribed by the Lender and
Bond Counsel;
(3) the opinion of Bond Counsel as to the validity and tax exempt status of the
Prior Lake Note;
(4) 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;
(5) such other documents and opinions as Bond Counsel may reasonably
require for purposes of rendering its opinion required in subsection (3) above or that the
Lender may reasonably require for the closing.
2.5 Disposition of Proceeds of the Prior Lake Note. Upon delivery of the Prior Lake
Note to Lender, the Lender shall, on behalf of the City, disburse the proceeds of the Prior Lake
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Note for refunding, in part, the Series 2006 Bonds in accordance with the terms of the Loan
Agreement.
2.6 Registration of Transfer. The City will cause to be kept at the office of the City
Manager a Note Register in which, subject to such reasonable regulations as it may prescribe, the
City shall provide for the registration of transfers of ownership of the Prior Lake Note. The Prior
Lake Note shall be initially registered in the name of the Lender and shall be transferable upon
the Prior Lake Note Register by the Lender in person or by its agent duly authorized in writing,
upon surrender of the Prior Lake Note together with a written instrument of transfer satisfactory
to the City Manager, 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 Prior Lake, 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
premises. 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
Prior Lake Note.
Dated:
Registered Owner
Upon such transfer the City Manager shall note the date of registration and the name and address
of the new Lender in the applicable Note Register and in the registration blank appearing on the
Prior Lake Note.
2.7 Mutilated, Lost or Destroyed Note. In case the Prior Lake 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 substitution for and upon cancellation of such mutilated Note, or in lieu of and
in substitution for such Note destroyed or lost, upon the Lender's paying the reasonable expenses
and charges of the City in connection therewith, and in the case of a Note destroyed or lost, the
filing with the City of 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 prior to payment.
2.8 Ownership of Note. The City may deem and treat the person in whose name the
Prior Lake Note is last registered in the Prior Lake Note Register and by notation on the Prior
Lake 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 Prior Lake Note will be issued to an
"accredited investor" and without registration under state or other securities laws, pursuant to an
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exemption for such issuance; and accordingly the Prior Lake Note may not be assigned or
transferred in whole or part, nor may a participation interest in the Prior Lake Note be given
pursuant to any participation agreement, except to another "accredited investor" or "financial
institution" in accordance with an applicable exemption from such registration requirements and
with full and accurate disclosure of all material facts to the prospective purchaser(s) or
transferee(s).
2.10 Issuance of a New Note. Subject to the provisions of Section 2.9, the City shall,
at the request and expense of the Lender, issue a new note, in aggregate outstanding prin cipal
amount equal to that of the Prior Lake Note surrendered, and of like tenor except as to number,
principal amount, and the amount of the periodic installments payable thereunder, and registered
in the name of the Lender or such transferee as may be designated by the Lender.
SECTION 3. GENERAL COVENANTS.
3.1 Payment of Principal and Interest. The City covenants that it will promptly pay or
cause to be paid the principal of and interest on the Prior Lake Note at the place, on the dates,
solely from the source and in the manner provided herein and in the Prior Lake Note. The
principal and interest are payable solely from and secured by revenues and proceeds derived
from the Loan Agreement and the Pledge Agreement, which revenues and proceeds are hereby
specifically pledged to the payment thereof in the manner and to the extent specified in the Prior
Lake Note, the Loan Agreement, and the Pledge Agreement; and nothing in the Prior Lake Note
or in this Resolution shall be considered as assigning, pledging, or otherwise encumbering any
other funds or assets of the City.
3.2 Performance of and Authority for Covenants. The City covenants that it will
faithfully perform at all times any and all covenants, undertakings, stipulations and provisions
contained in this Resolution, in the Prior Lake Note executed, authenticated and delivered
hereunder and in all proceedings of the City Council pertaining thereto; that it is duly authorized
under the Constitution and laws of the State of Minnesota including particularly and without
limitation the Act, to issue the Prior Lake Note authorized hereby, pledge the revenues and
assign the Loan Agreement in the manner and to the extent set forth in this Resolution, the Prior
Lake Note, the Loan Agreement, and the Pledge Agreement; that all action on its part for the
issuance of the Prior Lake Note and for the execution and delivery thereof has been duly and
effectively taken; and that the Prior Lake Note in the hands of the Lender is and will be a valid
and enforceable special limited obligation of the City according to the terms thereof.
3.3 Enforcement and Performance of Covenants. The City agrees to enforce all
covenants and obligations of the Borrower under the Loan Agreement, upon request of the
Lender and being indemnified to the satisfaction of the City for all expenses and claims arising
therefrom, and to perform all covenants and other provisions pertaining to the City contained in
the Prior Lake Note and the Loan Agreement and subject to Section 3.4.
3.4 Nature of Security. Notwithstanding anything contained in the Prior Lake Note,
the Loan Agreement, the Pledge Agreement, or any other document referred to in Section 2.4 to
the contrary, under the provisions of the Act the Prior Lake Note may not be payable from or be
a charge upon any funds of the City other than the revenues and proceeds pledged to the payment
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thereof, nor shall the City be subject to any liability thereon, nor shall the Prior Lake Note
otherwise contribute or give rise to a pecuniary liability of the City or, to the extent p ermitted by
law, any of the City's officers, employees and agents. No holder of the Prior Lake Note shall
ever have the right to compel any exercise of the taxing power of the City to pay the Prior Lake
Note or the interest thereon, or to enforce payment thereof against any property of the City other
than the revenues pledged under the Pledge Agreement; and the Prior Lake Note shall not
constitute a charge, lien or encumbrance, legal or equitable, upon any property of the City; and
the Prior Lake Note shall not constitute a debt of the City within the meaning of any
constitutional or statutory limitation; but nothing in the Act impairs the rights of the Purchaser to
enforce the covenants made for the security thereof as provided in this Resolution, the Loan
Agreement, and the Pledge Agreement, and in the Act, and by authority of the Act the City has
made the covenants and agreements herein for the benefit of the Lender; provided that in any
event, the agreement of the City to perform or enforce the covenants and other provisions
contained in the Prior Lake Note, the Loan Agreement, and the Pledge Agreement, shall be
subject at all times to the availability of revenues under the Loan Agreement sufficient to pay all
costs of such performance or the enforcement thereof, and the City shall not be subject to any
personal or pecuniary liability thereon.
3.5 Qualified Tax Exempt Obligation. In order to qualify the Prior Lake Note as a
"qualified tax-exempt obligation" within the meaning of Section 265(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"), the City hereby makes the following factual
statements and representations;
(a) the Prior Lake Note is not treated as a "private activity bond" under
Section 265(b)(3) of the Code;
(b) the City hereby designates the Prior Lake Note as a qualified tax-exempt
obligation for purposes of Section 265(b)(3) of the Code;
(c) the reasonably anticipated amount of tax-exempt obligations (other than
obligations described in clause (ii) of Section 265(b)(3)(C) of the Code) which will be
issued by the City (and all entities whose obligations will be aggregated with those of the
City) during the calendar year 2016 will not exceed $10,000,000;
(d) not more than $10,000,000 of obligations issued by the City during the
calendar year 2016 have been designated for purposes of Section 265(b)(3) of the Code;
and
(e) the aggregate face amount of the Prior Lake Note does not exceed
$10,000,000.
SECTION 4. MISCELLANEOUS.
4.1 Severability. 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 jurisdiction
or jurisdictions or in all jurisdictions or in all cases because it conflicts with any provisions of
any constitution or statute or rule or public policy, or for any other reason, such circumstances
shall not have the effect of rendering the provision in question inoperative or unenforceable in
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any other case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatever. The invalidity of any
one or more phrases, sentences, clauses or paragraphs in this Resolution contained shall not
affect the remaining portions of this Resolution or any part thereof.
4.2 Authentication of Transcript. 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 certificates as to all other matters which are reasonably necessary to evidence the
validity of the Prior Lake 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.
4.3 Authorization to Execute Agreements. The forms of the proposed Joint Powers
Agreement, Purchase Agreement, Loan Agreement, and the Pledge Agreement are hereby
approved in substantially the form 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 prior to the execution of the documents. The Mayor and the City Manager of the City
are authorized to execute the Joint Powers Agreement, the Purchase Agreement, the Loan
Agreement, and the Pledge Agreement and such other documents as Bond Counsel consider
appropriate in connection with the issuance of the Prior Lake Note, in the name of and on behalf
of the City. In the event of the absence or disability of the Mayor or the City Manager such
officers of the City as, in the opinion of the City Attorney, may act on 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.
4.4 Host Approval. The City Council hereby gives the host approval required under
Section 147(f) of the Code and, pursuant to Minnesota Statutes §471.656, Subd. 2(4), consents to
the issuance of the Hampton Note and the Mayer Note, each in an amount not to exceed
$10,000,000, and the execution and delivery by the City of the Joint Powers Agreement.
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Adopted by the City Council of the City of Prior Lake, Minnesota, this 23rd day of May,
2016.
_______________________________________
Mayor
ATTEST:
City Manager
The motion for the adoption of the foregoing resolution was duly seconded by Member
________________________, and after full discussion thereof and upon vote being taken
thereon, the following voted in favor thereof:
and the following voted against the same:
whereupon said resolution was declared duly passed and adopted.
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STATE OF MINNESOTA
COUNTY OF SCOTT
CITY OF PRIOR LAKE
I, the undersigned, being the duly qualified and acting City Manager of the City of Prior
Lake, DO HEREBY CERTIFY that I have compared the attached and foregoing extract of
minutes with the original thereof on file in my office, and that the same is a full, true and
complete transcript of the minutes of a meeting of the City Council duly called and held on the
date therein indicated, insofar as such minutes relate to a resolution authorizing the issuance of a
revenue note.
WITNESS my hand this ____ day of May, 2016.
_______________________________________
City Manager
7660233v2
AGREEMENT TO PURCHASE
(Series 2016A Note)
May 23, 2016
(Dated Date)
Shepherd’s Path Senior Housing, Inc.
Suite 200
2845 Hamline Avenue North
Roseville, Minnesota 55113
City of Prior Lake, Minnesota
4646 Dakota Street SE
Prior Lake, Minnesota 55372-1776
Ladies and Gentlemen:
The undersigned (the “Purchaser”) hereby agrees to purchase from the City of Prior Lake,
Minnesota (the “Issuer”) the Issuer’s $5,155,000 Senior Housing Revenue Refunding Note, Series
2016A (McKenna Crossing Senior Housing Project) (the “Series 2016A Note”) subject to the
conditions hereinafter set out. The proceeds of the Series 2016A Note will be loaned and disbursed
to, or at the direction of, Shepherd’s Path Senior Housing, Inc. (the “Borrower”) for the purpose
of refinancing a portion of the costs of the acquisition, construction, equipping and furnishing an
elderly housing development of 154 senior rental housing units including 82 independent housing
units, 54 assisted living units, and 18 memory care units, together with approximately 35,000
square feet of common space, located adjacent to the Shepherd of the Lake Lutheran Church
located at 13760 McKenna Road in the City of Prior Lake (the “Facility”), by refunding, in part,
the Issuer’s $21,445,000 Senior Housing Revenue Bonds (Shepherd’s Path Senior Housing, Inc.
Project) Series 2006B, and the Economic Development Authority of the City of Prior Lake’s
$10,000,000 Senior Housing Revenue Bonds (Shepherd’s Path Senior Housing Project) Series
2006A (collectively, the “Prior Bonds”).
The Series 2016A Note will be issued with a floating interest rate equal to 67% of the sum
of the then current 30-day LIBOR Swap Rate plus 250 basis points (the “Rate”); provided,
however, that the Borrower shall enter into an interest rate swap agreement to manage the interest
rate during the term of the Series 2016A Note, in form and substance acceptable to the Lender.
The Series 2016A Note shall be subject to other terms and conditions in the terms attached hereto
as Exhibit A. On the closing date of the Series 2016A Note, the Issuer and the Borrower will enter
into a Loan Agreement (the “Loan Agreement”) evidencing the Borrower’s obligation to repay the
loan pursuant to the terms of the Loan Agreement and containing financial covenants, security
provisions and other terms acceptable to the Purchaser and the Borrower.
The Purchaser’s purchase of the Series 2016A Note is not contingent upon the purchase of
any notes, bonds or other obligation to be issued in the future by the Issuer or any other issuer to
finance a portion of the refunding of the Prior Note.
7660233v2
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The Purchaser’s purchase of the Series 2016A Note is subject to satisfaction of closing
conditions and final legal documentation satisfactory to Purchaser, including participation
agreements in an amount satisfactory to the Purchaser, and evidence satisfactory to the Purchaser
of sufficient financing to pay the total costs of the Project.
7660233v2
S-1
IN WITNESS WHEREOF, the Purchaser has caused this Purchase Agreement to be
executed in its name, all as of the Dated Date.
BREMER BANK, NATIONAL
ASSOCIATION
By: ____________________________________
Its: Vice President
[Execution Page for Agreement to Purchase]
7660233v2
S-2
IN WITNESS WHEREOF, the Borrower has caused this Purchase Agreement to be
executed in its name, all as of the Dated Date.
SHEPHERD’S PATH SENIOR HOUSING,
INC.
By: ____________________________________
Its: _________________________________
[Execution Page for Agreement to Purchase]
7660233v2
S-3
IN WITNESS WHEREOF, the Issuer has caused this Purchase Agreement to be executed
in its name as of the Dated Date.
CITY OF PRIOR LAKE, MINNESOTA
By: ____________________________________
Mayor
By: ____________________________________
City Manager
[Execution Page for Agreement to Purchase]
7660233v2
A-1
EXHIBIT A
LOAN TERMS
Principal Amount: $5,155,000
Maturity Date: 20 years from closing
Amortization: 25 years
Rate: Floating rate equal to 67% of the sum of the 30-day LIBOR Swap
Rate plus 250 basis points.
Interest Rate Reset Date: Monthly, commencing on the first payment date (“Reset Date”).
Payments: Monthly payments of principal plus interest on the 15th day of
each month (the “Payment Date”).
Definitions: “30-Day LIBOR Rate” means a fluctuating rate of interest per
annum equal to the ICE London Interbank Offered Rate (“ICE
LIBOR”), as published by IntercontinentalExchange (“ICE”) (or
other commercially available source providing quotations of ICE
LIBOR as selected by Purchaser from time to time) as determined
for each London Banking Day at approximately 11:00 a.m.,
London time, two (2) London Banking Days (as hereinafter
defined) prior to the Reset Date (defined above), for U.S. Dollar
deposits with a thirty (30) day term, as adjusted from time to time
in Purchaser’s sole discretion for reserve requirements, deposit
insurance assessment rates and other regulatory costs. If such rate
is not available at such time for any reason, then the rate will be
determined by such alternate method as reasonably selected by
Purchaser.
“London Banking Day” is a day on which banks in London,
United Kingdom are open for business and dealing in offshore
dollars.
7660233v2
A-2
Swap Agreement: The Borrower shall enter into a swap agreement to manage the
interest rate accruing on the Series 2016A Note, in form and
substance acceptable to the Lender.
Prepayment: The Series 2016A Note will be subject to optional prepayment by
the Borrower on any date without a prepayment penalty; provided,
however, that prepayment prior to maturity of the swap agreement
may result in a termination payment owed by the Borrower to the
Purchaser.
7663261v2
LOAN AGREEMENT
BETWEEN
CITY OF PRIOR LAKE, MINNESOTA
AND
SHEPHERD’S PATH SENIOR HOUSING, INC.
Dated as of July __, 2016
Except for certain reserved rights, the interest of the City of Prior Lake, Minnesota, in this
Agreement has been pledged and assigned to Bremer Bank, National Association, pursuant to a
Pledge Agreement of even date herewith.
This instrument was drafted by:
Briggs and Morgan, Professional Association
2200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402-2157
7663261v2
TABLE OF CONTENTS
Page
i
ARTICLE I DEFINITIONS, EXHIBITS AND RULES OF INTERPRETATION ............ 1
Section 1.1 Definitions............................................................................................ 1
Section 1.2 Rules of Interpretation ......................................................................... 5
ARTICLE II REPRESENTATIONS .................................................................................... 6
Section 2.1 Representations by the City ................................................................. 6
Section 2.2 Representations by the Borrower ......................................................... 6
ARTICLE III THE LOAN .................................................................................................... 10
Section 3.1 Amount and Source of Loan .............................................................. 10
Section 3.2 Documents Required Prior to Disbursement of the Loan .................. 10
Section 3.3 Disbursement of the Loan .................................................................. 11
Section 3.4 Repayment ......................................................................................... 12
Section 3.5 Borrower’s Obligations Unconditional .............................................. 12
ARTICLE IV BORROWER’S COVENANTS .................................................................... 13
Section 4.1 Indemnity ........................................................................................... 13
Section 4.2 Continuing Existence and Qualification ............................................ 13
Section 4.3 Reports to Governmental Agencies ................................................... 14
Section 4.4 Security for the Loan ......................................................................... 14
Section 4.5 Preservation of Tax Exemption ......................................................... 14
Section 4.6 Lease or Sale of Facility .................................................................... 17
Section 4.7 Facility Operation and Maintenance Expenses .................................. 18
Section 4.8 Notification of Changes ..................................................................... 18
Section 4.9 Financial Covenants ........................................................................... 18
Section 4.10 Matters Related to Management Contracts ........................................ 19
Section 4.11 Access ................................................................................................ 19
Section 4.12 Access to Books and Inspection ........................................................ 19
Section 4.13 IRS Audit Expenses ........................................................................... 19
Section 4.14 Bank Qualification ............................................................................. 20
Section 4.15 Replacement Reserve ......................................................................... 20
Section 4.16 Reports to City ................................................................................... 20
Section 4.17 Additional Debt .................................................................................. 20
ARTICLE V PREPAYMENT OF LOAN ........................................................................... 21
Section 5.1 Prepayment at Option of Borrower .................................................... 21
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES ................................................ 22
Section 6.1 Events of Default ............................................................................... 22
Section 6.2 Remedies ............................................................................................ 23
Section 6.3 Disposition of Funds .......................................................................... 24
Section 6.4 Manner of Exercise ............................................................................ 24
Section 6.5 Attorneys’ Fees and Expenses ........................................................... 25
7663261v2
TABLE OF CONTENTS
(continued)
Page
ii
Section 6.6 Effect of Waiver ................................................................................. 25
ARTICLE VII GENERAL ..................................................................................................... 25
Section 7.1 Notices ............................................................................................... 25
Section 7.2 Binding Effect .................................................................................... 25
Section 7.3 Severability ........................................................................................ 25
Section 7.4 Amendments, Changes and Modifications ........................................ 26
Section 7.5 Execution Counterparts ...................................................................... 26
Section 7.6 Limitation of City’s Liability ............................................................. 26
Section 7.7 City’s Attorneys Fees and Costs ........................................................ 26
Section 7.8 Release ............................................................................................... 26
Section 7.9 Pledge and Assignment by Issuer and Survival of Obligations ......... 27
Section 7.10 Required Approvals ........................................................................... 27
Section 7.11 Termination Upon Retirement of Note .............................................. 27
Section 7.12 Expenses of Lender ............................................................................ 27
Section 7.13 Entire Agreement ............................................................................... 28
Section 7.14 Further Assurances............................................................................. 28
7663261v2
THIS LOAN AGREEMENT dated as of July __, 2016, between the City of Prior Lake,
Minnesota, a municipal corporation and political subdivision of the State of Minnesota (the
“City”), and Shepherd’s Path Senior Housing, 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:
ARTICLE I
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, Chapter 462C, 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;
Assignment: the Assignment of Mortgage, Security Agreement, Fixture Financing
Statement and Assignment of Leases and Rents dated as of the date hereof by the City, the City
of Hampton, Minnesota, and the City of Mayer, Minnesota to the Lender.
Bond Counsel: the firm of Briggs and Morgan, Professional Association, of
Minneapolis, Minnesota, or other firm of nationally recognized bond counsel retained by the
Borrower and acceptable to the City and the Lender, and any opinion of Bond Counsel shall be a
written opinion signed by such Bond Counsel;
Borrower: Shepherd’s Path Senior Housing, Inc., a Minnesota nonprofit corporation and
a 501(c)(3) organization, 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 Prior Lake, Minnesota, its successors and assigns;
Closing: the date there is physical delivery of the Note to the Lender and payment
therefor;
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 Lender, 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;
7663261v2
2
Date of Taxability: this term shall have the meaning ascribed to it in Section 4.5(2)
hereof;
Days’ Cash on Hand: Liquid Assets divided by (Operating Expenses of the Borrower for
its most recent fiscal year divided by 365);
Debt Service Coverage Ratio: the ratio of (i) the annual Net Revenues for the Facility
(assuming stabilized operating expenses), as determined by GAAP, to (ii)(1) the actual annual
principal and interest payments that would be required under the Notes assuming (A) interest
accrues on the Notes at a rate equal to the rates provided under the Swap Documents, or if the
Swap Documents are no longer in effect, the greater of 5% per annum or the rate of interest then
payable under the Notes, and (B) the Notes are amortizing over a period ending on August __,
2041, plus (2) actual principal and interest payments due under any parity indebtedness.
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;
Facility: a senior housing development which consists of approximately 154 senior
housing rental units, including 82 independent living units, 54 assisted living units, and 18
memory care units, together with approximately 35,000 square feet of common space adjacent in
the City;
GAAP: generally accepted accounting principles, consistently applied in the United
States of America;
Hampton: the City of Hampton, Minnesota;
Hampton Note: the $10,000,000 Senior Housing Revenue Refunding Note, Series 2016C
(McKenna Crossing Senior Housing Project) to be issued by the City of Hampton, Minnesota on
a parity basis with the Note in accordance with the Intercreditor Agreement;
Indemnity: the Hazardous Substance Indemnity Agreement of even date herewith
executed by the Borrower in favor of the Lender.
Intercreditor Agreement: the Intercreditor and Parity Agreement of even date herewith
by the Lender, as the purchaser of each of the Series 2016 Notes;
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, any fees of the Lender, all fees and
expenses of legal counsel, financial consultants, feasibility consultants and accountants, any fee
to be paid to the City, 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;
7663261v2
3
Land: means the real estate described in Exhibit A to the Mortgage subject to Permitted
Encumbrances identified on Exhibit B to the Mortgage, and any additional real estate or
leasehold interest therein which may be included within the lien of the Mortgage;
Lender: Bremer Bank, National Association, a national banking association, its
successors and assigns;
Liquid Assets: unencumbered and unrestricted cash and cash equivalents of the
Borrower, including cash on deposit pursuant to the Replacement Reserve Escrow Agreement;
Loan: the loan of proceeds of the Note from the City to the Borrower described in
Section 3.1 of this Agreement;
Mayer: the City of Mayer, Minnesota;
Mayer Note: the $10,000,000 Senior Housing Revenue Refunding Note, Series 2016B
(McKenna Crossing Senior Housing Project) to be issued by the City of Mayer, Minnesota on a
parity basis with the Note in accordance with the Intercreditor Agreement;
Mortgage: the Mortgage, Security Agreement, Fixture Financing Statement and
Assignment of Leases and Rents dated as of the date hereof, between the Borrower, as
mortgagor, and the City, the City of Hampton, Minnesota, and the City of Mayer, Minnesota,
collectively as mortgagee;
Net Revenues: Operating Income less Operating Expenses for the applicable period of
time.
Note: the $5,155,000 Senior Housing Revenue Refunding Note, Series 2016A
(McKenna Crossing Senior Housing Project) to be issued by the City pursuant to the Resolution;
Operating Expenses: all normal and reasonable expenses of owning, operating, leasing,
managing, maintaining and occupying the Property, computed on an accrual basis in accordance
with GAAP, including but not limited to (a) all payments to, for the benefit of or required in
connection with personnel employed to manage, operate and maintain the Property, including but
not limited to wages, salaries, uniform allowances, medical and/or life insurance, pension and
other employee benefit payments, workers’ compensation insurance payments, unemployment
insurance payments, and FICA and other payroll taxes; (b) all utility charges, including but not
limited to electric, gas, oil, water, sanitary sewer, storm sewer, and trash and rubbish removal
charges; (c) all costs of heating, lighting, ventilating and air conditioning the Property; (d) all
premiums for hazard, casualty, rent loss and liability insurance carried upon the Property; (e) ad
valorem real estate and personal property taxes, installments of special assessments and sal es tax
payments; (f) all Property building, grounds, common area, driveway and parking area
maintenance and repair expense, including the cost of supplies, tools and equipment therefor;
(g) all costs of janitorial services, tools, equipment and supplies; (h) reasonable and customary
management fees; (i) all landscaping, lawn, shrub and tree trimming, fertilizing and care
expenses; (j) all equipment lease payments to the extent not included in (f) above; (k) all snow
and ice removal expenses; (l) all advertising and promotion expenses; (m) all expenses related to
7663261v2
4
the delivery of cable television, internet access, telephone and similar services to tenants of the
Property for a fee; (n) all security expenses; (o) all costs of printing, stationery and office
supplies; and (p) attorneys’ fees and accountants’ fees incurred in the ordinary course of
operation of the Property, but excluding payments of principal, interest and/or late charges upon
the Series 2016 Notes; capital improvements and expenditures; depreciation of the Property; fees
of consultants; deferred developer fees; costs in connection with or in contemplation of sale or
refinancing, such as costs of appraisals, environmental or engineering studies, etc.; income or
franchise taxes; and non-cash, non-recurring extraordinary expenses;
Operating Income: gross receipts, income, payments and consideration resulting from
the operation, leasing and occupancy of the Facility, computed on an accrual basis in accordance
with generally accepted accounting principles, including but not limited to rentals and other fees
and charges payable by anyone pursuant to a lease (including reimbursements, if any, for
operating expenses); deferred property management fees; late charges; interest on delinquent
rents; interest on security and other deposits (to the extent that the same is not required by law to
be paid to tenants); fees for cable television, internet access, telephone and similar services
provided to the tenants of the Facility; transfers from affiliates of the Borrower; and vending
machine income; but excluding proceeds of casualty insurance and of condemnation and
proceeds of any sale or refinancing of all or any portion of the Facility or any interest therein and
non-cash, non-recurring extraordinary income;
Pledge Agreement: the Pledge Agreement of even date herewith between the City and
the Lender pledging and assigning the City’s interest in the Loan Agreement to the Lender to the
extent provided therein;
Principal Balance: so much of the principal sum on the Note as from time to time and
remains unpaid;
Prior Bonds: the Economic Development Authority of the City of Prior Lake’s
$10,000,000 Senior Housing Revenue Bonds (Shepherd’s Path Senior Housing Project), Series
2006A Bonds and the City’s $21,445,000 Housing Revenue Bonds (Shepherd’s Path Senior
Housing Project) Series 2006B, outstanding in the aggregate principal amount of $________;
Project: refunding a portion of the outstanding principal amount of the Prior Bonds;
Purchase Agreement: the Agreement to Purchase between the City, the Borrower, and
the Lender dated May 23, 2016;
Replacement Reserve Escrow Agreement: the Replacement Reserve Escrow Agreement
dated of even date herewith between the Borrower and the Lender;
Resolution: the Final Note Resolution of the City, adopted May 23, 2016, authorizing the
issuance of the Note together with any supplement or amendment thereto;
Series 2016 Notes: the Note, the Hampton Note, and the Mayer Note;
State: the State of Minnesota;
7663261v2
5
Swap Agreements: collectively, the ISDA Master Agreement, ISDA Schedule, the
Confirmation of the interest rate swap transaction and certain other related documents and
agreements between the Borrower and the Lender concerning an interest rate swap transaction;
Title: First American Title Insurance Company; and
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.
(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.
7663261v2
6
ARTICLE II
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 duly organized and existing municipal corporation and
political subdivision pursuant to the laws of the State of Minnesota and is authorized to issue the
Note to refund, in part, the Prior Bonds 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 providing necessary senior housing, so
that adequate senior housing is available to residents of the state at reasonable cost;
(3) Pursuant to Section 462C.04, subd. 2, of the Act, the City developed a
housing program providing for the issuance of the Prior Bonds, and on or before the day on
which notice of a public hearing thereon was published, the City submitted the program to the
Metropolitan Council for review and comment.
(4) On May 23, 2016, after due publication of notice of hearing in the City’s
official newspaper, a newspaper of general circulation in the City, the City Council held a public
hearing on the Project, prepared pursuant to the Act and Section 147(f) of the Code in connection
with the issuance of the Note, and duly adopted a resolution approving the issuance of the Note.
(5) The issuance and sale of the Note, the execution and delivery of this
Agreement, the Assignment, the Pledge Agreement, and the performance of all covenants and
agreements of the City contained in this Agreement, the Note, the Assignment, 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 23, 2016, by the affirmative vote of not less than a majority of its
members;
(6) Pursuant to the Resolution, the City has authorized and directed the
Lender to disburse the proceeds of the Note directly to the trustee for the Prior Bonds and such
other parties as may be entitled to payment to refund the Prior Bonds, upon receipt of such
supporting documentation as the Lender may deem reasonably necessary or as required by this
Agreement;
(7) 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:
7663261v2
7
(1) The Borrower is a Minnesota nonprofit corporation organized 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 Facility 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 501(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 adversel y
determined, might result in a modification of the status of the Borrower as a Section 501(c)(3)
corporation.
(3) [Intentionally omitted.]
(4) The execution and delivery of this Agreement, the Mortgage, and the
Swap Agreements, 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 organization, its bylaws,
any restriction or any agreement or instrument to which the Borrower 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 Facility, and do not and will not 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 to which the Borrower is a party
or by which it is bound;
(5) As of the date hereof, the use of the Facility as designed and 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 Facility 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 Facility to
operate the Facility 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 Facility. The representations contained in this subsection (5) as to the
presence or release of any hazardous substances or environmental conditions located in, on, or
from the Facility are subject to limitations as set forth in the Mortgage;
7663261v2
8
(6) The proceeds of the Note, together with any other funds available under
the bond documents related to the Prior Bonds or to be contributed to the Project by the
Borrower or otherwise in accordance with this Agreement, will be sufficient to refund the Prior
Bonds 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;
(7) Comparable private financing for the Project was not found by the
Borrower to be reasonably available, and the Project is economically more feasible with the
availability of the financing herein authorized;
(8) The Borrower is not in the trade or business of selling properties such as
the Facility and undertook the Facility 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 Facility;
(9) 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;
(10) 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;
(11) The Borrower has filed all federal and state income tax returns which 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;
(12) To the knowledge of the Borrower, 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;
(13) The Borrower has approved the terms and conditions of the Note;
(14) The Borrower intends to operate the Facility as a senior housing and
assisted living facility until the date on which the entire Principal Balance of the Note has been
fully paid and is no longer outstanding;
(15) The financial statements of the Borrower heretofore furnished to the
Lender are complete and correct in all material respects and fairly present the financial condition
of the Borrower at the date of such statements. Since the most recent set of financial statements
delivered by the Borrower to the Lender, there have been no material adverse changes in the
financial condition of the Borrower;
7663261v2
9
(16) No consent, approval, order or authorization of, or registration, declaration
or filing with, or notice to, any governmental authority or any third part y is required in
connection with the execution and delivery of this Agreement, or any of the agreements or
instruments herein mentioned or related hereto to which the Borrower is a party or the carrying
out or performance of any of the transactions required or contemplated hereby or thereby on the
part of the Borrower or, if required, such consent, approval, order or authorization has been (or,
with respect to the filing of the Form 8038 with the Internal Revenue Service will be) obtained or
such registration, declaration or filing has been or will be accomplished or such notice has been
or will be given;
(17) The Borrower has good fee title to the Facility, free and clear of all
mortgages, liens and encumbrances, except the Permitted Encumbrances (as described in the
Mortgage). When timely and properly recorded, the Mortgage will constitute a valid and
perfected first mortgage lien on the Facility; and
(18) The Facility will be in substantial compliance with the accessibility
guidelines set forth in Title III of The Americans with Disabilities Act of 1990, as the same may
be amended from time to time, and any rules and regulations promulgated thereunder (the
“ADA”).
7663261v2
10
ARTICLE III
THE LOAN
Section 3.1 Amount and Source of Loan. The City has authorized the issuance of the
Note in the principal amount of $5,155,000 to provide funds to the Borrower for its use in
refunding the Prior Bonds. The Borrower agrees to use such funds to refund the Prior Bonds and
the City agrees to lend the Borrower, upon payment of the City’s administrative fee of
$12,887.50and the other terms and conditions set forth herein, the proceeds received from the
Note by causing such sums to be advanced to the Borrower and disbursed at Closing or pursuant
to this Agreement.
Section 3.2 Documents Required Prior to Disbursement of the Loan. Prior to any
advance of the proceeds, the Borrower shall deliver to the Lender the following:
(1) The Note;
(2) The Loan Agreement;
(3) The Pledge Agreement;
(4) The Mortgage;
(5) The Indemnity;
(6) The Purchase Agreement;
(7) The Replacement Reserve Escrow Agreement;
(8) The Swap Agreements;
(9) An opinion of Counsel for the Borrower as prescribed by the Lender and
Bond Counsel;
(10) An Opinion of Bond Counsel, 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 Lender;
(11) 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 such other documents and opinions as Bond Counsel may reasonably require for
purposes of rendering its opinion required in subsection (10) above;
(12) Current searches of appropriate filing offices showing that (i) no state or
federal tax liens have been filed and remain in effect against the Borrower, (ii) no financing
statements have been filed and remain in effect against the Borrower or covering the Facility
except those financing statements relating to liens held by persons who have agreed in writing
that upon receipt of proceeds of the Note, they will deliver UCC releases and/or terminations
7663261v2
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satisfactory to the Lender, and (iii) the Lender has duly filed all financing statements necessary
to perfect the security interest granted to the Lender pursuant to the Mortgage, to the extent the
security interest is capable of being perfected by filing;
(13) Copies of: (i) the resolutions of the Borrower’s Board of Directors
authorizing the execution, delivery and performance of the documents required hereunder, (ii)
the Articles of Incorporation and Bylaws, and (iii) the signatures of the Borrower’s officers
authorized to execute and deliver the documents required hereunder and other instruments,
agreements and certificates on the Borrower’s behalf;
(14) [Reserved];
(15) A current Certificate of Good Standing issued by the Secretary of State of
the State of Minnesota with respect to the Borrower.
(16) Certificates of the insurance required under the Mortgage.
(17) A title insurance policy issued by a title insurance company approved by
the Lender with respect to the Facility in form and content acceptable to the Lender (a proforma
policy or marked-up title commitment shall satisfy this condition).
(18) An ALTA survey covering the Facility, properly certified to the Lender.
(19) A Phase I Environmental Site Assessment covering the Facility, together
with a reliance letter addressed to the Lender.
(20) An appraisal for the Facility showing a minimum fair market value of
$____________.
(21) A zoning letter covering the Facility and addressed to the Lender.
(22) A copy of the property management agreement for the Facility (the
“PMA”), together with an assignment and subordination of the PMA in favor of the Lender (the
“Assignment”).
(23) Payment of a fully earned, non-refundable loan origination fee in the
amount of $12,887.50.
(24) Such other assignments, security agreements, guaranties, financing
statements, indemnities, opinions, certificates, and other instruments evidencing or securing the
Loan as may be required by the Lender; and
(25) Any certification, instrument, financing statement, assignment or other
document referenced in or required by any of the foregoing.
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 Facility in such
manner as determined by the Borrower and hereby authorizes the Lender to advance a portion of
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the proceeds of the Note directly to the trustee of the Prior Bonds upon receipt of a mortgage
satisfaction in connection with the Prior Bonds. On the date hereof, $_____ of the proceeds of
the Note will be disbursed to the trustee of the Prior Bonds to be applied, along with the proceeds
of the other Series 2016 Notes and other funds on deposit with the trustee for the Prior Bonds, to
the redemption of the Prior Bonds, and $_______ of the proceeds of the Note shall be used to
pay Issuance Expenses. In no event shall more than $103,100 of the proceeds of the Note be
disbursed to pay Issuance Expenses. Any proceeds of the Note remaining following the
disbursement to the holder of the Prior Bonds and payment of Issuance Expenses shall be applied
to the payment of debt service on the Note on the first payment date thereunder.
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, interest and any
premium, 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 Lender as
provided in the Note for the account of the City. The Borrower represents and covenants that the
source of payment of the Note is from revenues derived from the operation of the Facility and
other revenues of the Borrower obtained pursuant to its tax-exempt purposes.
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
damage to the Facility, eviction by paramount title, commercial frustration of purpose,
bankruptcy or insolvency of the City 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, the Mortgage, the Swap Agreements, or the Note.
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ARTICLE IV
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, the Lender, and their respective 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 the following:
(1) any injury to or death of any person or damage to property in or upon the
Facility or growing out of or connected with the use, non-use, condition or occupancy of the
Facility or a part thereof;
(2) violation of any agreement or condition of this Agreement, except by the
City or its assignee;
(3) violation of any contract, agreement or restriction by the Borrower relating
to the Facility;
(4) violation of any law, ordinance or regulation affecting the Facility 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 disclosure or registration
requirements imposed on the City 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. The Borrower is and throughout
the term of this Agreement will remain duly qualified to do business as a nonprofit corporation
under the laws of Minnesota and as an organization described in Section 501(c)(3) of the Code,
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. The Borrower 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(a) 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 Lender, (3) the surviving,
resulting or transferee corporation or other business entity, as the case may be, is duly qualified
7663261v2
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to do business in Minnesota, and (4) the Borrower first obtains the written consent of the Lender
to such merger, transfer or consolidation. At least 60 days before any proposed merger, transfer
or consolidation would become effective, the Borrower shall deliver to the Lender a written
request seeking the Lender’s approval of such merger, transfer or consolidation, and shall
thereafter promptly furnish to the Lender such information pertaining to the proposed merger,
transfer, or consolidation as the Lender shall request. If the Lender approves the proposed
merger, transfer or consolidation, the Borrower shall be released from its obligations hereunder
and the 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 Lender, upon written request.
Section 4.4 Security for the Loan. As additional security for the Lender, and to induce
the City to issue and deliver the Note, the Borrower agrees to execute and deliver (or cause to be
executed and delivered) the documents described in Section 3.2 hereof and agrees to meet all its
obligations under such documents, which documents shall remain in effect until all payments
required hereunder have been made; and the Borrower will direct Bond Counsel or the Lender to
cause to be recorded and filed the Mortgage and such other documents requested by Bond
Counsel or the Lender, in such places and in such manner as Bond Counsel or the Lender deems
necessary or desirable to perfect or protect the security interest of the Lender in and to the
Facility and other collateral referred to in said documents. Except as otherwise provided in the
Mortgage, the Borrower will not further encumber the property pledged therein without the
Lender’s consent.
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 Lender that it will comply with the applicable provisions of
Section 103 and Section 141 through 150 of the Code and as follows:
(a) The Facility is and will continue to be owned and operated by the
Borrower and no portion of the Facility is managed by anyone other than the Borrower or
a governmental entity or an organization described in Section 501(c)(3) of the Code or
pursuant to a “qualified management agreement” within the meaning of all pertinent
provisions of law, including all relevant provisions of the Code and regulations, rulings
and revenue procedures thereunder, including Revenue Procedure 97-13.
(b) The Facility will not be used by the Borrower in an unrelated trade or
business, determined by the application of Section 513(a) of the Code except to an extent
which does not adversely affect the tax-exempt status of the interest on the Note.
7663261v2
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(c) No more than 5% of the net proceeds of the Note is 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 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” issued prior to 1997, 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 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 Facility financed by the Note by more than 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, as applicable:
(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 or replacement proceeds are invested, any
arbitrage profit derived therefrom (earnings in excess of the yield on the Note)
and any earnings 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, unless the Borrower obtains an Opinion of Bond
Counsel to the effect that such calculations need not be made (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
7663261v2
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States, including the last installment which shall be made no later than 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 payabl e
to the United States as a “prohibited payment” to a third party; and
(v) if applicable, retain all records of the determination of the
foregoing amounts until 6 years after the Note has been fully paid.
Unless the Opinion of Bond Counsel described in (ii) above is provided, the
Borrower agrees that, in order to comply with this paragraph (i), it shall determine the
Rebate Amount within 30 days after each 5th year of the anniversary of the Closing and
upon payment in full of the Note; upon request, the Borrower shall furnish the Lender 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 Facility or any interest
therein to 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);
(l) No proceeds of the Note 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 otherwise use proceeds of the Note, or take or fail to take any action
within its control, the effect of which would be to impair the exemption of interest on the
Note from federal income taxation.
(n) Maintain such written procedures as appropriate and applicable to ensure
Borrower’s principal responsibility for compliance with the post-issuance requirements
7663261v2
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necessary to maintain the tax-exempt status of the interest on the Note, including
requirements that must be continually monitored, including (i) monitoring the investment
(pending expenditure) of Note proceeds (and keep detailed records thereof) in order to
assure compliance with the arbitrage requirements applicable to the Note, (ii) monitoring
the expenditures of the Note proceeds (and keep detailed records thereof), (iii)
monitoring the use of the Facility in order to ensure that the Note continues to qualify as
a qualified 501(c)(3) bond within the meaning of Section 145 of the Code, (iv)
periodically consulting with Bond Counsel with respect to arbitrage issues and
compliance, and (v) consulting with Bond Counsel as necessary to determine whether,
and to what extent, any change in the use or purpose of the financed facility will require
any remedial action under the relevant Treasury Regulations.
(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 rul ing
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 Lender or any other holder or
prior holder of the Note for any reason, if the period, if any, for contest or appeal of such action,
ruling or decision by the Borrower or Lender or any other interested party has expired without
any such contest or appeal having been properly instituted by the Lender, the Borrower or any
other interested party. The expenses of any such contest shall be paid by the part y initiating the
contest, and neither the Lender 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 Lender 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 Lender and the Note shall
convert to a taxable obligation effective as of the Date of Taxability. The interest rate for interest
accruing from the Date of Taxability shall be ad justed to the “Taxable Rate” (as defined in the
Note) on the date of the Determination of Taxability and the Borrower shall pay any interest
accruing from the Date of Taxability which is retroactively due as a result of the interest rate
adjustment on the next payment date along with regularly scheduled principal payment and
interest accruing from the previous payment date at the Taxable Rate, as provided in the Note.
Section 4.6 Lease or Sale of Facility. The Borrower shall not lease, sell, convey or
otherwise transfer the Facility in whole or part, except for leases in the ordinary course of
business, nor sell the Facility in whole or part, without first securing the written consent of the
Lender, which consent may be withheld in the Lender’s sole and absolute discretion, 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
Facility are conveyed in whole and such conveyance has been approved by Lender. The
Borrower shall promptly notify the City of any such sale, transfer, assignment or lease.
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Section 4.7 Facility Operation and Maintenance Expenses. The Borrower shall pay all
expenses for the operation and maintenance of the Facility 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 Facility and payable during the term of this Loan Agreement, all in conformance
with the provisions of the Mortgage. The Borrower shall keep the Facility in good working
order and condition, subject to ordinary wear and tear. The Facility 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 Lender of:
(1) any litigation which might materially and adversely affect the Borrower or
any of its properties;
(2) 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
(3) any material adverse change in the operations, business, properties, assets
or conditions, financial or otherwise, of the Borrower.
Section 4.9 Financial Covenants. The Borrower shall comply with and provide to the
Lender the following, as applicable, while any portion of the Note is outstanding:
(1) The Borrower shall achieve an annual Debt Service Coverage Ratio of at
least 1.35 to 1.00, measured as of [September 30th] of each year, commencing on [September
30], 2016.
(2) The Borrower shall at all times maintain at least 60 Days’ Cash on Hand,
which will be measured as of the end of each fiscal quarter, commencing on [September 30],
2016 through December 31, 2018 and, thereafter, at least 90 Days’ Cash on Hand measured as of
the end of each fiscal quarter; provided that such requirement may be less than 90 days (but not
less than 60 days) if funds have been invested in capital improvements to the Facility.
(3) The Borrower will be required to submit financial information to the
Lender as follows:
(a) Annual audited financial statements of the Borrower, including income
statements, shall be delivered to the Lender within [120] days of the end of each fiscal
year of the Borrower, commencing with the fiscal year ending September 30, 2016.
Delivery of the audited financial statements of the [Borrower’s affiliate, Presbyterian
Homes and Services], and its affiliates, shall satisfy this requirement, provided such
audit report has consolidating financial information which sets forth the financial results
of the Borrower;
7663261v2
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(b) as soon as available and in any event within thirty (30) days after the end
of each calendar quarter, internally prepared financial statements of the Borrower for
such quarter, in a form acceptable to the Lender, all in reasonable detail and prepared in
accordance with GAAP.
(c) as soon as available and in any event within thirty (30) days after the end
of each calendar quarter, occupancy reports for the Facility in a form acceptable to the
Lender;
(d) as soon as available, a copy of all inspection reports issued by any
governmental or regulatory agency with respect to any portion of the Facility, and, to the
extent any violations are noted therein, the actions which the Borrower has taken and/or
intends to take with respect thereto; and
(e) from time to time, with reasonable promptness, such further information
regarding the business, operations, affairs and financial and other condition of the
Borrower and the Facility as the Lender may reasonably request.
(4) The Borrower shall maintain its operating account for the Facility with the
Lender.
Section 4.10 Matters Related to Management Contracts. The manager under any
management contract for the management of the Facility shall be an organization recognized as
exempt under Section 501(c)(3) of the Code or such management contract shall comply with
Department of Treasury Revenue Procedure 97-13 (and any amended or successor rule) and in
particular with one of the “safe harbor” limitations thereof.
Section 4.11 Access. The Borrower grants to the Lender and to the Lender’s agents
access to the Facility at any reasonable time during normal business hours in order to inspect the
Facility.
Section 4.12 Access to Books and Inspection. The Borrower shall keep proper books
of record and accounts with respect to the use and operation of the Facility, and, subject to any
privacy laws applicable to Borrower, upon request of the Lender, provide any duly authorized
representative of the Lender access during normal business hours to, and permit such
representative to examine, copy or make extracts from, or audit any and all books, records and
documents relating to the use and operation of the Facility, the Borrower’s affairs and to inspect
the Facility. (The Lender shall be permitted to disclose the information contained therein to its
legal counsel, its independent public accountants, its regulators, any participating lenders, or in
connection with any action to collect any indebtedness of the Borrower or to enforce this
Agreement and the documents related hereto, or as otherwise permitted or required by law).
Section 4.13 IRS Audit Expenses. The Borrower agrees to pay any reasonable costs
incurred by the City, the Host City, or the Lender as a result of the City’s, the Host City’s, o r the
Lender’s compliance with an audit, random or otherwise, by the Internal Revenue Service or the
Minnesota Department of Revenue with respect to the Note or the Facility.
7663261v2
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Section 4.14 Bank Qualification. The Borrower agrees to pay to the City, the amount
required to reimburse the City for any loss of “bank qualification” for any Unqualified Bonds
issued in 2016 (referred to as the “Reimbursement Amount”). The term “Unqualified Bonds”
means bonds issued by the City (excluding “qualified 501(c)(3) bonds” as defined in Section 145
of the Code other than the Note) which the City properly designates as “qualified tax-exempt
obligations” for purposes of Section 265(b)(3) of the Code but which the Internal Revenue
Service determines were not eligible for bank qualification as a result of the issuance of the Note.
The Reimbursement Amount shall be the actual cost to the City as a result of such determination
by the Internal Revenue Service as determined by the Internal Revenue Service or as a result of
negotiations with the holders of such Unqualified Bonds. The Reimbursement Amount for any
Unqualified Bonds shall be payable within 15 days after Borrower’s receipt from the City of
written notice as to the Reimbursement Amount. All fees incurred by the City with respect to
such determination by the Internal Revenue Service and the collection of amounts due with
respect thereto from the Borrower shall be the sole obligation of the Borrower, payable with the
Reimbursement Amount. The City represents that it does not presently intend to issue any other
tax-exempt obligations in 2016.
Section 4.15 Replacement Reserve. The Borrower shall maintain a replacement reserve
account (the “Reserve Account”) with the Lender into which the Borrower shall deposit, from
funds other than Series 2016 Notes proceeds, an amount equal to not less than $200,000. The
Borrower shall make annual deposits to the Reserve Account during each calendar year in the
amount $250/unit ($39,500). Amounts in the Reserve Account may be used from time to time
by the Borrower for repairs and capital improvements to the Facility, upon prior written approval
of the Lender, as further described in the Replacement Reserve Escrow Agreement.
Any amounts on deposit in the Reserve Account in excess of the least of: (a) ten percent
(10%) of the stated principal amount of the Series 2016 Notes, within the meaning of the Code,
(b) the maximum annual debt service on the Series 2016 Notes, or (c) 125% of average annual
debt services on the Note, shall be invested at a yield which is not in excess of the yield on the
Series 2016 Notes. Borrower hereby grants a security interest to Lender in the Reserve Account
and the funds therein to secure repayment of the Notes.
Section 4.16 Reports to City. Annually, not later than March 1, in every year while any
portion of the Note remains outstanding, the Borrower agrees to provide a report to the City
documenting the then-outstanding principal amount of the Note. This provision cannot be
enforced by the Lender.
Section 4.17 Additional Debt. The Borrower shall not incur additional parity
indebtedness without the prior written consent of the Lender, which may be withheld or
conditioned in its sole and absolute discretion. The Borrower may enter into additional
subordinate indebtedness upon delivery of a standstill subordination agreement acceptable to the
Lender in its sole discretion, a determination that the loan to value ratio of such additional
subordinate debt plus the Notes shall not be more than 70%, and a determination that the
projected Debt Service Coverage Ratio including the subordinate debt, based on the most recent
audited financial statements of the Borrower, shall not be less than 1.35 to 1.00, as determined by
the Lender.
7663261v2
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ARTICLE V
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 date, by paying the principal amount to be prepaid,
together with accrued interest thereon without a prepayment penalty as described in the Note. In
addition to the foregoing, in the event of a prepayment, the Borrower acknowledges that it may
also be obligated to pay additional amounts pursuant to and upon the terms set forth in the Swap
Agreements and any and all LIBOR swap contract, fixed rate contracts, and other similar
contracts entered into by the Borrower in connection with this Loan Agreement and/or the Note.
Any partial prepayment shall be applied in the order described in the Note. At the date fixed for
prepayment, funds shall be paid to the Lender at its registered address appearing on the Note.
7663261v2
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ARTICLE VI
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 the Borrower shall fail to make (a) any payments required under
Section 3.4 of this Agreement on the date due; or (b) any other payment due under this
Agreement or any other Loan Document on or before the date that the payment is due and such
default continues for 10 days thereafter.
(2) Except as elsewhere addressed in this Section 6.1, 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 30 days after written notice, specifying such default and requesting
that it be remedied, given to the Borrower by the City or the Lender, unless the Lender shall
agree in writing to an extension of such time prior to its expiration.
(3) If an Event of Default shall occur under Section 4.2, 4.4, 4.5 (except a
Determination of Taxability), 4.6, 4.7, 4.9, 4.14 or 4.17 hereof.
(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 60 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 Facility shall be appointed in any proceeding brought against the Borrower
and shall not be discharged within 60 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
Facility or a part thereof shall be levied upon or attached in any pro ceeding and such process
shall not be vacated or discharged within 60 days after such levy or attachment; or 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 or take any act to 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); or if the Borrower terminates or suspends its
business operations or otherwise fails to operate its business in the ordinary course.
(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 Lender or
7663261v2
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the City 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, the Swap Agreements, 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.
(8) Any state or federal tax lien shall be filed against the Borrower and shall
remain undischarged for a period of 60 days.
(9) Any execution or attachment shall be issued whereby any property of the
Borrower shall be taken or attempted to be taken and the same shall not have been vacated or
stayed within thirty (30) days after the issuance thereof.
(10) Except as provided in the Mortgage, all or any portion of the Facility, or
the legal, equitable or any other interest therein, shall be sold, transferred, assigned, leased,
further encumbered (except as permitted herein) or otherwise disposed of, unless the prior
written consent of the Lender is first obtained; provided that nothing in this Agreement prohibits
the Borrower from entering into an agreement for sale of the Facility where the Loan and all
other amounts due under this Agreement and the other documents evidencing the Loan will be
paid in full at the closing of the sale.
(11) Final judgment(s) for the payment of money in excess of $250,000,
individually or in the aggregate, shall be rendered against the Borrower and shall remain
undischarged for a period of thirty (30) days during which execution shall not be effectively
stayed.
(12) The Borrower shall be or become insolvent (whether in the equity or
bankruptcy sense).
(13) The Facility is condemned, destroyed or damaged to any material extent
and the same is not covered by insurance.
(14) The suspension of any material license required by the Borrower to
operate the Facility which results or could result in a material cessation of business operations at
the Facility, following the expiration of any appeal period provided a stay of enforcement is in
place during such appeal period.
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 Lender
or by the Lender itself:
(1) The Lender’s obligation to advance any further amounts under the Note
shall terminate. Notwithstanding anything to the contrary contained herein or in any other
instrument evidencing or securing the Loan, the Lender may exercise the foregoing remedy upon
7663261v2
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the occurrence of an event that would constitute such an Event of Default but for the requirement
that notice be given or that a period of grace or time elapse.
(2) The City, upon written direction of the Lender, or the Lender 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 and any premium of the Note assuming acceleration of the
Note under the terms thereof and to pay all other indebtedness thereund er) to be immediately due
and payable, whereupon the same shall become immediately due and payable by the Borrower.
(3) The Lender may foreclose the Mortgage and proceed against the collateral
described therein.
(4) The City, upon written direction of the Lender (except as otherwise
provided in Section 7.9 herein), or the Lender (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 or
the Mortgage.
(5) The City, upon written direction of the Lender, or the Lender may exercise
any other remedy permitted under any other instrument evidencing or securing the Loan or any
other remedy available at law or equity.
(6) As security for the payment of the Series 2016 Notes, the Borrower grants
the Lender a lien and security interest in all of the Borrower’s present an d future personal
property now or hereafter in the possession, control or custody of, or in transit to, the Lender for
any purpose, and the balance of every present and future account of the Borrower with the
Lender. In addition to all other rights and remedies, when or at any time after an Event of
Default has occurred, Lender may foreclose such lien and security interest, and Lender may
offset or charge all or any part of the aggregate amount of such debts, obligations and liabilities
against any such property or accounts, provided that the Lender shall provide not less than two
(2) business days’ advance notice to the Borrower.
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 (a) all expenses incurred in collecting the same and (b)
then accrued interest on the Note, the remainder of such amounts, if any, 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 or the Lender 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
7663261v2
25
City or the Lender 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 Lender 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 Lender the reasonable fees and costs 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.
ARTICLE VII
GENERAL
Section 7.1 Notices. All notices, certificates or other communications hereunder shall
be sufficiently given and shall be deemed given when hand delivered or received by certified or
registered United States mail, return receipt requested, 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:
To the City: City of Prior Lake, Minnesota
4646 Dakota Street SE
Prior Lake, Minnesota 55372-1776
Attn: City Manager
To the Borrower: Shepherd’s Path Senior Housing, Inc.
2845 Hamline Avenue North, Suite 200
Roseville, Minnesota 55113
Attn: Chief Financial Officer
To the Lender: Bremer Bank, National Association
225 South Sixth Street, Suite 200
Minneapolis, Minnesota 55402
Attn: Jason Ruppert
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 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.
7663261v2
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Section 7.4 Amendments, Changes and Modifications. Except as otherwise provided
in this Agreement or in the Resolution, subsequent to the Closing Date 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.
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.
Section 7.6 Limitation of City’s Liability. It is understood and agreed by the
Borrower and the Lender 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 Lender 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 b y 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, the Assignment, and the documents and instruments related hereto or thereto;
(ii) any amendments or modifications hereto or to the Note, the Pledge Agreement, the
Assignment, 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 Lender with respect to this Agreement
or the documents and transactions related hereto or contemplated hereby, including, without
limitation, the exercise by the Lender of any of its rights or remedies pursuant to Article VI, the
Note, the Pledge Agreement, the Mortgage, the Assignment, or any collateral security
documents. The Borrower’s release of the City pursuant to the preceding sentence does not
extend to the Lender following the assignment of the City’s rights to the Lender pursuant to the
Pledge Agreement.
7663261v2
27
Section 7.9 Pledge and Assignment by Issuer and Survival of Obligations. The Issuer
may pledge and assign its rights under this Agreement and any related documents to the Lender
to secure payment of the principal of and interest and premium, if any, on the Note, conditioned
upon the Lender’s assumption of any obligations of the Issuer to the Borrower hereunder except
for the Issuer’s obligations in connection with its representations under Section 2.1 hereof which
are not being assumed, but any such assignment shall not operate to limit or otherwise affect the
following provisions hereof to the extent that they run to the Issuer from the Borrower to which
extent they shall survive any such assignment:
Section 3.5 Section 4.16
Section 4.1 Section 6.5
Section 4.3 Section 7.6
Section 4.13 Section 7.7
Section 4.14 Section 7.8
Upon any such pledge and assignment, the provisions immediately above running to the Issuer
from the Borrower for the Issuer’s benefit shall run jointly and severally to the Issuer and the
Lender (if appropriate), provided that the Issuer shall have the right to enforce any retained rights
without the approval of the Lender but only upon prior written notice to Lender and if the Lender
is not enforcing such rights in a manner to protect the Issuer or is otherwise taking action with
respect thereto that brings adverse consequences to the Issuer. The obligations of the Borrower
running to the Issuer and the Lender for the purpose of preserving the tax exempt status of the
Note or otherwise for the Issuer’s or Lender’s benefit under the foregoing Sect ions shall survive
repayment of the Note and interest thereon. All other agreements, representations and warranties
made in this Agreement shall survive the execution of this Agreement and the making of the
Loan, and shall continue until Lender receives payment in full of all indebtedness of Borrower
incurred under this Agreement.
Section 7.10 Required Approvals. Consents and approvals required by this Agreement
to be obtained from the Borrower, the City or the Lender shall be in writing.
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 Lender and the
City have been made for the discharge of all other accrued and contingent liabilities, if any,
under this Agreement, this Agreement shall terminate, except as otherwise expressly provided in
Section 7.9 or otherwise herein, or in a separate writing signed by the Borrower, the City, and the
Lender.
Section 7.12 Expenses of Lender. The Borrower shall pay or reimburse the Lender for
any and all costs and expenses, including, without limitation, reasonable attorneys’ fees, paid or
incurred by the Lender in connection with (i) review, negotiation, preparation, and approval of
this Agreement and any other document or agreement related hereto or thereto or the transactions
contemplated hereby; (ii) the review, negotiation, preparation, and approval of any amendments,
modifications or extensions to any of the foregoing documents, instruments or agreements, and
the preparation and consummation of any and all documents necessary or desirable to effect such
amendments, modifications or extensions; (iii) any appraisals, surveys, environmental
assessments or other reports relating to the Facility which the Lender is authorized to seek, order
7663261v2
28
or prepare pursuant to this Agreement or any other instrument evidencing or securing the Loan
or is required to seek, order or prepare pursuant either to applicable laws or regulations or the
Lender’s policies or procedures generally applicable to commercial mortgage loans by the
Lender; (iv) any reasonable fees or costs charged to the Lender by an architect or other design or
inspection professional engaged by the Lender to, among other things, inspect the Facility or the
construction of any approved improvements to the Land, or verify compliance thereof with
applicable building and zoning laws; (v) all title insurance premiums, filing and recording fees
and mortgage registration tax paid or payable in connection with the consummation of the
transaction contemplated hereby; and (vi) the enforcement by the Lender during the term hereof
or thereafter of any of the rights or remedies of the Lender under any of the foregoing
documents, instruments or agreements or under applicable law, whether or not suit is filed with
respect thereto (attorneys’ fees and costs are limited to reasonable fees and costs).
Section 7.13 Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to the subject matter of this Agreement and supersedes any and all prior
letters, proposals, contracts and understandings between the parties with respect to the same,
including, but not limited to, any proposal or commitment letter, and such letters, proposals,
contracts and understandings are hereby terminated.
Section 7.14 Further Assurances. At any time and from time to time, upon request by
the Lender, the Borrower will make, execute and deliver or cause to be made, executed and
delivered, to the Lender, any and all other further instruments, certificates and other documents
as may, in the reasonable opinion of the Lender, be necessary or desirable in order to effectuate,
complete, secure, or perfect, or to continue and preserve, the obligations of the Borrower
hereunder and under any of the other documents related to the Loan. Upon any failure by the
Borrower so to do after ten (10) days written notice from the Lender, the Lender may make,
execute and record any and all such instruments, certificates and documents for and in the name
of the Borrower at Borrower’s expense and the Borrower hereby irrevocably appoints the Lender
its agent and attorney-in-fact of the Borrower so to do. The Borrower hereby understands,
acknowledges and agrees that the Lender may prepare and file such UCC financing statements or
similar instruments as may be necessary to perfect the Lender’s security interest in any real or
personal property pledged by the Borrower as security for the Loan.
7663261v2
S-1
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.
CITY OF PRIOR LAKE, MINNESOTA
By ____________________________________
Mayor
By ____________________________________
City Manager
Loan Agreement between the City of Prior Lake, Minnesota and
Shepherd’s Path Senior Housing, Inc.
7663261v2
S-2
SHEPHERD’S PATH SENIOR HOUSING,
INC.,
By ____________________________________
Its ____________________________________
Loan Agreement between the City of Prior Lake, Minnesota and
Shepherd’s Path Senior Housing, Inc.
MORTGAGE, SECURITY AGREEMENT,
FIXTURE FINANCING STATEMENT
AND ASSIGNMENT OF LEASES AND RENTS
BY
SHEPHERD’S PATH SENIOR HOUSING, INC.
AS MORTGAGOR,
TO
THE CITY OF PRIOR LAKE, MINNESOTA, THE CITY OF MAYER, MINNESOTA, AND THE
CITY OF HAMPTON, MINNESOTA
AS MORTGAGEE,
TO SECURE
$5,155,000 SENIOR HOUSING REVENUE REFUNDING NOTE (MCKENNA CROSSING
SENIOR HOUSING PROJECT), SERIES 2016A
AND
$10,000,000 SENIOR HOUSING REVENUE REFUNDING NOTE (MCKENNA CROSSING
SENIOR HOUSING PROJECT), SERIES 2016B
AND
$10,000,000 SENIOR HOUSING REVENUE REFUNDING NOTE (MCKENNA CROSSING
SENIOR HOUSING PROJECT), SERIES 2016C
AND
Dated: July __, 2016
Tax statements for the real This instrument was drafted by:
property described in this
instrument should be sent to: WINTHROP & WEINSTINE, P.A.
225 South Sixth Street, Suite 3500
Shepherd’s Path Senior Living, Inc. Minneapolis, Minnesota 55402
2845 Hamline Avenue North
Roseville, MN 55113 THE CONTRARY CONTAINED HEREIN,
THE MAXIMUM PRINCIPAL AMOUNT
OF THE NOTES SECURED BY THIS
MORTGAGE IS $25,155,000.
The proceeds of the loan secured by this Mortgage will be utilized to finance or refinance an
affordable housing program as set forth in Minnesota Statutes Section 462C.05, and the Mortgagee is
a local government agency. As a result, and pursuant to Minnesota Statutes §287.04(f), no mortgage
registration tax is payable in connection with this Mortgage.
MORTGAGE, SECURITY AGREEMENT,
FIXTURE FINANCING STATEMENT AND
ASSIGNMENT OF LEASES AND RENTS
THIS MORTGAGE, SECURITY AGREEMENT, FIXTURE FINANCING STATEMENT
AND ASSIGNMENT OF LEASES AND RENTS (the “Mortgage”), is made as of the ____ day
of July, 2016, by SHEPHERD’S PATH SENIOR HOUSING, INC., a Minnesota nonprofit
corporation (the “Mortgagor”), in favor of the CITY OF PRIOR LAKE, MINNESOTA, a
municipal corporation and political subdivision of the State of Minnesota (“Prior Lake”), the
CITY OF MAYER, MINNESOTA, a municipal corporation and political subdivision of the
State of Minnesota (“Mayer”), and the CITY OF HAMPTON, MINNESOTA, a municipal
corporation and political subdivision of the State of Minnesota (“Hampton,” and together with
Prior Lake and Mayer, collectively, the “Mortgagee”).
W I T N E S S E T H:
WHEREAS, Prior Lake has issued or will issue its City of Prior Lake, Minnesota, Senior
Housing Revenue Refunding Note (McKenna Crossing Senior Housing Project), Series 2016A,
in the original principal amount of $5,155,000 (the “Prior Lake Note”); and
WHEREAS, the proceeds of the Prior Lake Note will be loaned by the Mortgagee to the
Mortgagor pursuant to that certain Loan Agreement (the “Prior Lake Loan Agreement”), by and
between Prior Lake and the Mortgagor; and
WHEREAS, Mayer will issue its City of Mayer, Minnesota, Senior Housing Revenue Refunding
Note (McKenna Crossing Senior Housing Project), Series 2016B, in the original principal
amount of $10,000,000 (the “Mayer Note”); and
WHEREAS, the proceeds of the Mayer Note will be loaned by the Mortgagee to the Mortgagor
pursuant to that certain Loan Agreement (the “Mayer Loan Agreement”), by and between Mayer
and the Mortgagor; and
WHEREAS, Hampton will issue its City of Hampton, Minnesota, Senior Housing Revenue
Refunding Note (McKenna Crossing Senior Housing Project), Series 2016C, in the original
principal amount of $10,000,000 (the “Hampton Note”); and
WHEREAS, the proceeds of the Hampton Note will be loaned by the Mortgagee to the
Mortgagor pursuant to that certain Loan Agreement (the “Hampton Loan Agreement,” and
together with the Prior Lake Loan Agreement and the Mayer Loan Agreement, collectively, the
“Loan Agreements”), by and between Hampton and the Mortgagor; and
WHEREAS, Prior Lake’s interest in the Prior Lake Loan Agreement, except for certain reserved
rights, has been or will be assigned to Bremer Bank, National Association, a national banking
association (the “Lender”); and
WHEREAS, Mayer’s interest in the Mayer Loan Agreement, except for certain reserved rights,
will be assigned to the Lender; and
2
WHEREAS, Hampton’s interest in the Hampton Loan Agreement, except for certain reserved
rights, will be assigned to the Lender; and
WHEREAS, the Lender agreed to purchase the Prior Lake Note, the Mayer Note and the
Hampton Note (collectively, the “Notes”); and
WHEREAS, the Notes become due and payable in full on or before July __, 2036; and
WHEREAS, the Mortgagee and the Lender have required, in connection with the foregoing, that
the Mortgagor secure the Notes by this Mortgage.
NOW THEREFORE, THIS MORTGAGE FURTHER WITNESSETH, that in consideration of
the Mortgagee purchasing the Notes, and to secure the Notes in the principal amount of Twenty
Five Million One Hundred Fifty Five Thousand and 00/100 Dollars ($25,155,000.00) (the
“Mortgage Amount”) and other good and lawful consideration, the receipt and sufficiency of
which are hereby acknowledged, and to secure, and as security for, the payment of principal and
interest and other premiums, penalties and charges on the Notes and the performance and
observance by the Mortgagor of all of the covenants, agreements, representations, warranties and
conditions contained herein, and all liability, whether liquidated or unliquidated, defined,
contingent, conditional or of any other nature whatsoever, and performance of all other
obligations, arising under or in connection with any interest rate swap agreement or similar
instrument now or hereafter entered into by and between the Mortgagor and the Lender (or one
of the Lender’s related entities), as the same may be amended, extended, renewed or restated
from time to time, including without limitation all costs and expenses pertaining to the
enforcement of such interest rate swap agreement or the collection of any and all sums owing
thereunder, the Mortgagor does hereby grant, bargain, sell, convey, assign, transfer, pledge, set
over and confirm unto the Mortgagee, its successors and assigns, forever, and does hereby grant
a mortgage lien and security interest to the Mortgagee, its successors and assigns, forever, in and
to the tracts of land legally described in Exhibit A attached hereto and made a part hereof
(hereinafter referred to as the “Land”);
Together with all of the Mortgagor’s right, title and interest in and to (a) all of the buildings,
structures and other improvements now standing or at any time hereafter constructed or placed
upon the Land; (b) all heating, plumbing and lighting apparatus, elevators and motors, engines
and machinery, electrical equipment, incinerator apparatus, air conditioning apparatus, water and
gas apparatus, pipes, water heaters, refrigerating plant and refrigerators, water softeners, carpets,
carpeting, storm windows and doors, window screens, screen doors, storm sash, window shades
or blinds, awnings, locks, fences, trees, shrubs, and all other furniture, fixtures, machinery,
equipment, appliances and personal property of every kind and nature whatsoever now or
hereafter owned by the Mortgagor and attached or affixed or located on or in or used or intended
to be used in connection with the ownership, use, operation or maintenance of, the Land and any
improvements located thereon, including all extensions, additions, improvements, betterments,
renewals and replacements of any of the foregoing; (c) all hereditaments, easements, rights,
privileges and appurtenances now or hereafter belonging, attached or in any way pertaining to
the Land or to any building, structure or improvement now or hereafter located thereon; (d) the
immediate and continuing right to receive and collect all rents, income, issues, profits and
accounts (including, without limitation, healthcare receivables) now due and which may
hereafter become due under or by virtue of any lease or agreement (oral or written) for the
3
leasing, subleasing, use or occupancy of all or part of the Land now, heretofore or hereafter made
or agreed to by the Mortgagor; (e) all of the leases and agreements described in (d) above,
together with all guarantees therefor and any renewals or extensions thereof; and (f) all insurance
and other proceeds of, and all condemnation awards with respect to, the foregoing (all of the
foregoing is hereinafter collectively referred to as the “Mortgaged Property”).
The filing of this Mortgage shall constitute a fixture filing in the office where it is filed and a
carbon, photographic or other reproduction of this document may also be filed as a financing
statement:
Name and Address of Shepherd’s Path Senior Housing, Inc.
Debtor and Record 2845 Hamline Avenue North
Owner of Real Estate: Roseville, MN 55113
Organizational ID Number: __________
Name and Address of City of Prior Lake
Secured Party: ____________________________
Prior Lake, MN _____
City of Mayer
____________________________
Mayer, Minnesota _____
City of Hampton
____________________________
Hampton, Minnesota _____
Description of the Types See above
(or items) of property
covered by this
financing statement:
Description of real estate See Exhibit A attached hereto.
to which all or a part of the
collateral is attached or
upon which it is located:
Some of the above described collateral is or is to become fixtures upon or minerals and mineral
rights located upon the real estate described on Exhibit A, and this financing statement is to be
filed for record in the public real estate records.
The Mortgagor will not change the principal place of business or chief executive office set f orth
above, or change the state of its registration, or change its name, without in each instance the
prior written consent of the Mortgagee, which consent shall not be unreasonably withheld,
delayed or conditioned. The Mortgagee’s consent will, however, be conditioned upon, among
other things, the execution and delivery of additional financing statements, security agreements
and other instruments which may be necessary to effectively evidence or perfect the Mortgagee’s
security interest in the Mortgaged Property as a result of such changes.
4
AND THE MORTGAGOR, for itself, its successors and assigns, does covenant with the
Mortgagee, its successors and assigns, that it is lawfully seized of the Mortgaged Property and
has good right to sell and convey the same; that the Mortgaged Property is free from all
encumbrances except as may be further stated in this Mortgage; that the Mortgagee, its
successors and assigns, shall quietly enjoy and possess the Mortgaged Property; and that the
Mortgagor will WARRANT AND DEFEND the title to the same against all lawful claims not
specifically excepted in this Mortgage.
PROVIDED, NEVERTHELESS, that if the Mortgagor shall pay the principal balance of the
Notes in full, plus interest at the rate set forth in the Notes and the related swap agreements, as
the same changes from time to time and is adjusted in the manner set forth in the Notes, on the
unpaid principal balance, as computed in accordance with the terms and conditions of the Notes,
and any other sums due and owing under the Notes and the Loan Agreements and shall also pay
or cause to be paid all other sums, with interest thereon, as may be advanced by the Mortgagee in
accordance with this Mortgage either to protect the lien of this Mortgage, or by way of additional
loan or for any other purpose, and shall also keep and perform all and singular the covenants
herein, required on the part of the Mortgagor to be kept and performed (the Notes, including any
and all renewals, amendments, extensions and modifications thereof, and all such sums, together
with interest thereon, and such covenants herein collectively referred to as the “Indebtedness
Secured Hereby”), then this Mortgage shall be null and void, in which event the Mortgagee will
execute and deliver to the Mortgagor in form suitable for recording a full satisfaction of this
Mortgage; otherwise this Mortgage shall remain in full force and effect.
ARTICLE I.
GENERAL COVENANTS, AGREEMENTS, WARRANTIES
SECTION 1.1. PAYMENT OF INDEBTEDNESS; OBSERVANCE OF COVENANTS. The
Mortgagor shall duly and punctually pay each and every payment of principal, interest and all
prepayment premiums and late charges, if any, required by the Notes or the Loan Agreements
and all other Indebtedness Secured Hereby, as and when the same shall become due, and shall
duly and punctually perform and observe all of the covenants, agreements and provisions
contained herein, in the Loan Agreements or in any other instrument given as security for the
payment of the Notes.
SECTION 1.2. MAINTENANCE; REPAIRS. Subject to the provisions of Section 2.3 hereof, the
Mortgagor shall keep and maintain the Mortgaged Property in good condition, repair and
operating condition free from any waste or misuse, and will comply with all requirements of law,
municipal ordinances and regulations, restrictions and covenants affecting the Mortgaged
Property and its use, and will promptly repair or restore any building, improvements or structures
now or hereafter located on the Land which may become damaged or destroyed to their
condition prior to any such damage or destruction. The Mortgagor shall not acquiesce in any
rezoning classification, modification or restriction affecting the Land, without the prior written
consent of the Mortgagee, which consent shall not be unreasonably withheld nor delayed. The
Mortgagor shall not abandon the Mortgaged Property.
SECTION 1.3. PAYMENT OF UTILITY CHARGES, TAXES AND ASSESSMENTS. The
Mortgagor shall, before any penalty attaches thereto, pay or cause to be paid all charges made for
electricity, gas, heat, water, sewer and other utilities furnished or used in connection with the
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Mortgaged property, and all taxes, assessments and levies of every nature heretofore or hereafter
assessed against the Mortgaged Property and, upon demand, will furnish the Mortgagee receipted
bills evidencing such payment.
Nothing in this Section 1.3 shall require the payment or discharge of any obligations imposed
upon the Mortgagor by this Section so long as the Mortgagor shall diligently and in good faith
and at its own expense contest the same or the validity thereof by appropriate legal proceedings
which shall operate to prevent the collection thereof or other realization thereon and the sale or
forfeiture of the Mortgaged Property or any part thereof to satisfy the same; provided, however,
that during such contest the Mortgagor shall, at the reasonable request of the Mortgagee, provide
security satisfactory to the Mortgagee, assuring the discharge of the Mortgagor’s obligation
under this Section and of any additional charge, penalty or expense arising from or incurred as a
result of such contest; and provided further, however, that if at any time payment of any
obligation imposed upon the Mortgagor by this Section shall become necessary to prevent the
delivery of a tax deed conveying the Land or any portion thereof because of nonpayment, then
the Mortgagor shall pay the same in sufficient time to prevent the delivery of such tax deed.
SECTION 1.4. LIENS. Except for liens and encumbrances, if any, listed on Exhibit B attached
hereto or consented to in writing by or granted to the Mortgagee (“Permitted Encumbrances”),
the Mortgagor will keep the Mortgaged Property free from all liens (other than liens for taxes
and assessments not yet due and payable) and encumbrances of every nature whatsoever
heretofore or hereafter arising and, upon written demand of the Mortgagee, the Mortgagor will
pay and procure the release of any such lien or encumbrance.
SECTION 1.5. COMPLIANCE WITH LAW. The Mortgagor will promptly comply with all
present and future laws, ordinances, rules and regulations of any governmental authority
affecting the Mortgaged Property unless the same is being diligently contested by the Mortgagor
in good faith and by proper proceedings.
SECTION 1.6. RIGHT OF THE MORTGAGEE TO ENTER. Subject to the rights of tenants at
the Mortgaged Property, the Mortgagor will permit the Mortgagee and its agents to enter, and to
authorize others to enter, upon any or all of the Land, at any time and from time to time, during
normal business hours, to inspect the Mortgaged Property to perform or observe any covenants,
conditions or terms hereunder which the Mortgagor shall fail to perform, meet or comply with,
or for any other purpose in connection with the protection or preservation of the Mortgagee’s
security, without thereby becoming liable to the Mortgagor or any person in possession under
this Mortgage.
SECTION 1.7. RIGHT OF THE MORTGAGEE TO PERFORM. If the Mortgagor fails to pay
all and singular any taxes, assessments, levies or other similar charges or encumbrances
heretofore or hereafter assessed against the Mortgaged Property or fails to obtain the release of
any lien or encumbrance (other than a Permitted Encumbrance) of any nature heretofore or
hereafter arising upon the Mortgaged Property or fails to perform any other covenants and
agreements contained in this Mortgage or if any action or proceeding is commenced which
adversely affects or questions the title to or possession of the Mortgaged Property or the interest
of the Mortgagor or the Mortgagee therein, then the Mortgagee, at the Mortgagee’s option,
without notice to the Mortgagor, may perform such covenants and agreements, investigate and
defend against such action or proceeding, and take such other action as the Mortgagee deems
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necessary to protect the Mortgagee’s interest. Any amounts disbursed by the Mortgagee
pursuant to this Section 1.7, including without limitation court costs and expenses and attorneys’
fees, with interest thereon, shall become additional indebtedness of the Mortgagor and shall be
secured by this Mortgage. Such amount shall be payable upon written notice from the
Mortgagee to the Mortgagor requesting payment thereof, and shall bear interest from the date of
disbursement at a rate equal to the Default Rate (as that term is defined in the Prior Lake Note)
or, if such rate is illegal or usurious, at the maximum rate then permitted by law. Nothing
contained in this Section 1.7 shall require the Mortgagee to incur any expense or to do any act or
thing hereunder.
SECTION 1.8. ASSUMPTION. The Mortgagor shall not sell, assign, lease (except in the
ordinary course of business), convey, mortgage or otherwise encumber or dispose of either the
legal or equitable title or both to all or any portion of the Mortgaged Property or any other
interest therein without the prior written consent of the Mortgagee. A sale, transfer or
assignment of any ownership interest in the Mortgagor shall constitute a sale for the purposes of
this Section 1.8.
SECTION 1.9. ASSIGNMENT OF RENTS. The Mortgagor does hereby sell, assign and transfer
unto the Mortgagee (i) the immediate and continuing right to receive and collect all rents,
income, issues, profits and accounts (including, without limitation, healthcare receivables) now
due and which may hereafter become due under or by virtue of any lease or agreement (oral or
written) for the leasing, subleasing, use or occupancy of all or any part of the Mortgaged
Property now, heretofore or hereafter made or agreed to by the Mortgagor, and (ii) all of such
leases and agreements, together with all guarantees therefor and any renewals or extensions
thereof, for the purpose of securing payment of the indebtedness of the Mortgagor under the
Notes, the Loan Agreements and the documents related thereto.
The Mortgagor does hereby irrevocably appoint the Mortgagee its true and lawful attorney in its
name, place and stead, with or without taking possession of the Mortgaged Property, to rent,
lease, sublease, let or sublet all or any portion of the Mortgaged Property to any party or parties
at such rental and upon such terms, as it in its discretion may determine, and to collect all of said
avails, rents, income, issues and profits arising from or accruing at any time hereafter under each
and all of such leases and agreements, with the same rights and powers and subject to the same
immunities, exoneration of liability and rights of recourse and indemnity as the Mortgagee would
have upon taking possession of the Mortgaged Property.
The Mortgagor represents and agrees that no rent has been or will be paid in advance by any
persons in possession of all or any portion of the Mortgaged Property for a period of more than
one month and that the payment of none of the rents to accrue for all or any portion of the
Mortgaged Property has or will be waived, released, reduced or discounted, or otherwise
discharged or compromised, by the Mortgagor, other than for forgiveness of rent as part of the
Mortgagor’s mission benevolence. The Mortgagor waives any right of setoff against any person
in possession of all or any portion of the Mortgaged Property. The Mortgagor represents that it
has not assigned any of said rents or profits to any third party and agrees that it will not so assign
any of said rents or profits without the prior written consent of the Mortgagee.
Nothing contained herein shall be construed as constituting the Mortgagee “a mortgagee in
possession” in the absence of the taking of actual possession of the Mortgaged Property by the
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Mortgagee. In the exercise of the powers herein granted to the Mortgagee, no liability shall be
asserted or enforced against the Mortgagee, all such liability being expressly waived and released
by the Mortgagor.
The Mortgagor further agrees to assign and transfer to the Mortgagee all rents from future leases
or subleases upon all or any part of the Mortgaged Property and to execute and deliver ,
immediately upon request of the Mortgagee, as such further assurances and assignments in the
Mortgaged Property as the Mortgagee from time to time shall require.
Although it is the intention of the parties that this assignment of leases and rents shall be a
present assignment, it is expressly understood and agreed that, anything herein contained to the
contrary notwithstanding, the Mortgagee shall not exercise any of the rights and powers
conferred upon it herein unless and until an Event of Default shall occur and nothing herein
contained shall be deemed to affect or impair any rights which the Mortgagee may have under
the Notes, the Loan Agreements, this Mortgage or any other document or agreement related
hereto or thereto.
The Mortgagor acknowledges and agrees that this assignment of leases and rents, and the
Mortgagee’s rights and remedies hereunder, may be enforced by the Mortgagee throughout the
entire redemption period provided by applicable law following any foreclosure sale of all or any
portion of the Mortgaged Property.
At any time after the occurrence of an Event of Default under the Loan Agreements, the
Mortgagee, without in any way waiving such default, may:
I. at the Mortgagee’s option without notice to the Mortgagor and without regard to
the adequacy of the security for the Notes, either in person or by agent, with or
without any action or proceeding, or by a receiver appointed by a court of
competent jurisdiction pursuant to Minnesota Statutes, Section 559.17, Subd. 2,
peaceably take possession of the Mortgaged Property and have, hold, manage,
lease, sublease and operate the same as a mortgagee in possession; or
II. without taking possession of the Mortgaged Property, sue for or otherwise collect
and receive all rents, income and profits from the Mortgaged Property to which
the Mortgagor would otherwise be entitled, including those past due and unpaid
with full power to make from time to time all adjustments thereto, as may seem
proper to the Mortgagee.
The Mortgagee shall not be obligated to perform or discharge, nor does it hereby undertake to
perform or discharge, any obligation, duty or liability under any leases, sublease or rental
agreements relating to the Mortgaged Property, and the Mortgagor shall and does hereby agree to
indemnify and hold the Mortgagee harmless from and against any and all liability, loss or
damage which it may or might incur under any such lease, sublease or agreement or under or by
reason of the assignment of the rents thereof and from and against any and all claims and
demands whatsoever which may be asserted against it by reason of any alleged obligations or
undertakings on its part to perform or discharge any of the terms, covenants or agreements
contained in any of such leases, provided that the Mortgagor shall not indemnify and hold
harmless the Mortgagee from any liability loss or damage resulting from acts or omissions of the
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Mortgagee which first occur on or after the date the Mortgagee takes possession of the
Mortgaged Property. Should the Mortgagee incur any liability, loss or damage by reason of this
assignment of leases and rents, or in the defense of any claim or demand, the Mortgagor agrees
to reimburse the Mortgagee for the amount thereof, including costs, expenses and attorneys’ fees,
immediately upon demand.
The Mortgagee, or such agent or receiver, in the exercise of the rights and powers conferred
upon it by this assignment of leases and rents shall have the full power to use and apply the
avails, rents, issues, income and profits of the Mortgaged Property to which the Mortgagor
would otherwise be entitled to the payment the following items in the order determined by the
receiver or the Mortgagee to preserve the value of the Mortgaged Property:
I. Reasonable receiver’s fees;
II. Application of tenant security deposits as required by Minnesota Statutes,
Section 504B.178;
III. Payment, when due, of prior or current real estate taxes or special assessments
with respect to the Mortgaged Property, or the periodic escrow for the payment of
the taxes or special assessments;
IV. Payment, when due, of premiums for insurance of the type required by this
Mortgage, or the periodic escrow for the payment of the premiums; and
V. All expenses for normal maintenance of the Mortgaged Property;
provided, however, that nothing herein shall prohibit the right to reinstate pursuant to Minnesota
Statutes, Section 580.30, or the right to redeem granted pursuant to Minnesota Statutes, Sections
580.23 and 581.10.
Any excess cash remaining after paying the expenses listed in clauses I. through V. above sha ll
be applied to the payment of the Notes and shall be deemed to be credited to the amount required
to be paid to effect a reinstatement or redemption or, if the period of redemption ends without
redemption, such remaining amounts shall be paid to the purchaser at the foreclosure sale, its
successors or assigns.
The Mortgagor does further specifically authorize and instruct each and every present and future
lessee, sublessee, tenant or subtenant of the whole or any part of the Mortgaged Property to pay
all unpaid rental agreed upon in any lease or sublease to the Mortgagee upon receipt of demand
from the Mortgagee so to pay the same.
Any tenants, subtenants or other occupants of all or any part of the Mortgaged Property are
hereby authorized to recognize the claims of the Mortgagee hereunder without investigating the
reason for any action taken by the Mortgagee, or the validity or the amount of indebtedness
owing to the Mortgagee, or the occurrence or existence of any Event of Default, or the
application to be made by the Mortgagee of any amounts to be paid to the Mortgagee. The sole
signature of any officer or attorney of the Mortgagee shall be sufficient for the exercise of any
rights under this assignment of leases and rents and the sole receipt of the Mortgagee for any
9
sums received by such tenants, subtenants or other occupants shall be a full discharge and release
therefor. Checks for all or any part of the rentals collected under this assignment of leases and
rents shall be drawn to the exclusive order of the Mortgagee.
SECTION 1.10. FURTHER ASSURANCES. At any time and from time to time, upon
request by the Mortgagee, the Mortgagor will make, execute and deliver or cause to be made,
executed and delivered, to the Mortgagee, any and all other further instruments, certificates and
other documents as may, in the reasonable opinion of the Mortgagee, be necessary or desirable in
order to effectuate, complete or perfect, or to continue and preserve, the obligations of the
Mortgagor hereunder and under the Notes, the Loan Agreements and the mortgage and security
interest granted by this Mortgage. Upon any failure by the Mortgagor so to do, the Mortgagee
may make, execute and record any and all such instruments, certificates and documents for and
in the name of the Mortgagor and the Mortgagor hereby irrevocably appoints the Mortgagee its
agent and attorney in fact of the Mortgagor so to do.
SECTION 1.11. EXPENSES. The Mortgagor will pay or reimburse the Mortgagee for all
attorneys’ fees, costs and expenses incurred by the Mortgagee in any legal proceeding or dispute
of any kind in which the Mortgagee is made a party, or appears as party plaintiff or defendant,
affecting the Indebtedness Secured Hereby, this Mortgage, the interest created herein or the
Mortgaged Property, including but not limited to the exercise of the power of sale set forth in this
Mortgage, any condemnation action involving the Mortgaged Property or any action to protect
the security hereof and any such amounts paid by the Mortgagee shall be added to the
indebtedness secured by this Mortgage.
SECTION 1.12. BOOKS AND RECORDS; FINANCIAL STATEMENTS. The
Mortgagor will keep and maintain full, true and accurate books of account adequate to reflect
correctly the results of the operation of the Mortgaged Property, all of which books and records
relating thereto shall be open to inspection by the Mortgagee or its representative during normal
business hours.
SECTION 1.13. HAZARDOUS SUBSTANCES. The Mortgagor warrants, covenants and
represents that, except as set forth in the environmental reports delivered b y the Mortgagor to the
Mortgagee, there does not exist in or under the Mortgaged Property any pollutant, toxic or
hazardous waste or substance, or any other material the release or disposal of which is regulated
by any law, regulation, ordinance or code related to pollution or environmental contamination,
and, that no part of the Mortgaged Property was ever used for any industrial or manufacturing
purpose or as a gasoline service station, and that there exists on the Mortgaged Property no
storage tanks, electrical transformers or other equipment containing PCBs or material amounts of
asbestos. The Mortgagor represents that it has received no summons, citations, directives, letters
or other communications, written or oral, from any federal, state or local agency or department
concerning the storing, releasing, pumping, pouring, emitting, emptying or dumping of any
pollutant, toxic or hazardous waste or substance on the Mortgaged Property.
The Mortgagor covenants and agrees that it shall not, nor shall it permit others to, use the
Mortgaged Property for the business of generating, transporting, storing, treating or dispos ing of
any pollutant, toxic or hazardous waste or substance except in accordance with law, nor shall it
either take or fail to take any action which may result in a release of any hazardous substance
from or onto the Mortgaged Property in violation of law. In addition to all rights of access
10
granted the Mortgagee pursuant to Section 1.6 hereof, during the term of the loan contemplated
hereby, the Mortgagee, or any authorized agent, contractor or representative of the Mortgagee, is
hereby irrevocably authorized to enter upon the Mortgaged Property at any time and from time to
time for the purpose of performing inspections, taking soil borings or other borings, or
conducting any other tests or procedures on, in or about the Mortgaged Property as the
Mortgagee deems necessary or appropriate to determine whether any hazardous or toxic
substances, including without limitation asbestos or PCBs, are present on, under or about the
Mortgaged Property.
The Mortgagor agrees to indemnify and to hold the Mortgagee harmless from any and all claims,
causes of action, damages, penalties, and costs (including, but not limited to, attorneys’ fees,
consultants’ fees and related expenses) which may be asserted against, or incurred by, the
Mortgagee resulting from or due to release of any hazardous substance or waste on the
Mortgaged Property or arising out of any injury to human health or the environment by reason of
the condition of or past activity upon the Mortgaged Property; provided that the Mortgagor shall
have no obligation to indemnify for loss, damage or expenses which arise as a result of the
Mortgagee’s negligence. The Mortgagor’s duty to indemnify and hold harmless includes, but is
not limited to, proceedings or actions commenced by any person (including, but not limited to,
any federal, state, or local governmental agency or entity) before any court or administrative
agency. The Mortgagor further agrees that pursuant to its duty to indemnify under this section,
the Mortgagor shall indemnify the Mortgagee against all expenses incurred by the Mortgagee as
they become due and not waiting for the ultimate outcome of the litigation or administrative
proceeding. The Mortgagor’s obligations to indemnify and hold the Mortgagee harmless
hereunder shall survive repayment of the Mortgage Amount and satisfaction or foreclosure of
this Mortgage.
SECTION 1.14. TAX ESCROW. Upon request by the Mortgagee after the occurrence of
an Event of Default, the Mortgagor shall pay to the Mortgagee, on each day monthly installments
of principal and/or interest are payable under the Notes, until the Notes are paid in full, a sum
equal to one-twelfth (1/12th) of the annual taxes and assessments payable with respect to the
Mortgaged Property, all as estimated initially and from time to time determined by the
Mortgagee, to be applied by the Mortgagee to pay said taxes and assessments (such amounts
being hereinafter referred to as the “Funds”). The Mortgagee shall apply the Funds to pay said
taxes and assessments prior to the date that penalty attaches for non-payment. The Funds are
hereby pledged as additional security for the Indebtedness Secured Hereby.
If the amount of the Funds held by the Mortgagee shall exceed at any time the amount deemed
necessary by the Mortgagee to provide for the payment of taxes and assessments, such excess
shall, at the option of the Mortgagee, either be promptly repaid to the Mortgagor or be credited to
the Mortgagor on the next monthly installment of Funds due. If at any time the Funds are less
than the amount deemed necessary by the Mortgagee to pay taxes and assessments as they fall
due, the Mortgagor shall promptly pay to the Mortgagee any amount necessary to make up the
deficiency upon written notice from the Mortgagee to the Mortgagor requesting payment thereof.
Upon the occurrence of an Event of Default, the Mortgagee may apply in any order as the
Mortgagee shall determine in its sole discretion, any Funds held by the Mortgagee at the time of
application to pay taxes and assessments which are then or will thereafter become due or as a
credit against the Indebtedness Secured Hereby. Upon payment in full of all Indebtedness
11
Secured Hereby, the Mortgagee shall promptl y refund to the Mortgagor any Funds held by the
Mortgagee.
ARTICLE II.
INSURANCE, CONDEMNATION AND USE OF PROCEEDS
SECTION 2.1. INSURANCE. Until the Indebtedness Secured Hereby has been paid in full, the
Mortgagor shall obtain and maintain the following:
(1) The Mortgagor shall keep the buildings, structures, fixtures and other
improvements now existing or hereafter erected on the Land insured against loss by fire,
vandalism, and malicious mischief, perils of extended coverage, and such other hazards,
casualties and contingencies as may be specified by the Mortgagee, in an amount not less
than the full replacement cost thereof, which in no event shall be less than the amount of
Indebtedness Secured Hereby, and naming the Mortgagee as mortgagee and lender loss
payee. The Mortgagor shall also maintain rent loss insurance with respect to such
exposures and perils in an amount sufficient to enable the Mortgagor to make the
required monthly payments under the Notes, to pay taxes and insurance and to continue
operations during an assumed reconstruction period of one (1) year, naming the
Mortgagee as mortgagee and loss payee. The Mortgagor shall also maintain
comprehensive general public liability insurance providing for limits of coverage of not
less than $5,000,000/$5,000,000 combined single limit coverage, and naming the
Mortgagee as an additional insured. The Mortgagor shall also maintain such insurance as
is required by the Loan Agreements.
(2) The Mortgagor shall also maintain flood insurance in the event the Mortgagee
notifies the Mortgagor that the Federal Emergency Management Agency (“FEMA”) has
determined that the Mortgaged Property is located in a flood hazard area. Such insurance
must meet FEMA coverage requirements, must name the Mortgagee as loss payee, and
must be in an amount equal to the lesser of the Mortgage Amount or the maximum
insurance available under the National Flood Insurance Program. The Mortgagor
understands and agrees that even though the Mortgaged Property may not be currently
located within a FEMA designated flood hazard area or that the community in which the
Mortgaged Property is located does not currently participate in the federal flood
insurance program, this may change in the future. In the event of the change of such
designation, the Mortgagor agrees to obtain the flood insurance required above within
forty-five (45) days after receipt of notice thereof from the Mortgagee. The Mortgagor
shall reimburse the Mortgagee for all costs and expenses incurred by the Mortgagee in
ascertaining from time to time whether the Mortgaged Property is located in a flood
hazard area.
(3) All insurance shall be carried in companies licensed to do business in the State of
Minnesota and approved by the Mortgagee and the policies and renewals thereof shall (i)
contain a waiver of defense based on coinsurance, (ii) be constantly assigned and pledged
to and held by the Mortgagee as additional security for the Indebtedness Secured Hereby,
(iii) have attached thereto loss payable clauses in favor of and in form acceptable to the
Mortgagee, and (iv) provide that the Mortgagee shall receive at least thirty (30) days’
prior written notice of cancellation or any substantial modification of the policy. The
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Mortgagor shall provide the Mortgagee with written evidence acceptable to the
Mortgagee of all such insurance on the date hereof and prior to each renewal date of such
policies of insurance. In default thereof, the Mortgagee may effect any insurance
required to be maintained by the Mortgagor pursuant to this Section 2.1 and the amount
paid therefor shall become immediately due and payable with interest at a rate equal to
the Default Rate or, if such rate is illegal or usurious, at the maximum rate permitted by
law, and shall be secured by this Mortgage. The Mortgagor acknowledges that any
insurance obtained by the Mortgagee hereunder may be more expensive than the
insurance which could be obtained by the Mortgagor and that such coverage may not be
as inclusive as the coverage obtained by the Mortgagor due to the fact that it may not
include contents coverage or liability coverage. In the event of loss or damage to the
Mortgaged Property, the Mortgagor will give immediate written notice thereof to the
Mortgagee, who may make proof of loss or damage if not made promptly by the
Mortgagor. The Mortgagor hereby authorizes the Mortgagee to settle and compromise
all claims on such policies and hereby authorizes and directs each insurance company
concerned to make payment for any such loss to the Mortgagor and the Mortgagee
jointly. In the event of foreclosure of this Mortgage, all right, title and interest of the
Mortgagor in and to any property insurance policies then in force shall pass to the
purchaser at the foreclosure sale.
SECTION 2.2. CONDEMNATION. The Mortgagor shall give the Mortgagee immediate written
notice of the actual or threatened commencement of any proceedings under condemnation or
eminent domain affecting all or any part of the Mortgaged Property or any easement therein or
appurtenance thereof. If all or any part of the Mortgaged Property is damaged, taken or
acquired, either temporarily or permanently, in any condemnation proceeding, or by exercise of
the right of eminent domain, the amount of any award or other payment for such taking,
acquisition or damages made in consideration thereof, to the extent of the full amount of the
remaining unpaid indebtedness secured by this instrument, is hereby assigned to the Mortgagee,
who is empowered to collect and receive the same and to give proper receipts therefor in the
name of the Mortgagor and the same shall be paid forthwith to the Mortgagee, to be applied to
the Indebtedness Secured Hereby, and any excess shall be paid to the Mortgagor.
SECTION 2.3. THE MORTGAGOR TO REPAIR, REPLACE, REBUILD OR RESTORE. If
any portion of the Mortgaged Property is damaged or destroyed:
(1) All proceeds of any insurance claim with respect to such destruction or damage
shall be paid directly to the Mortgagee. Unless the Mortgagor is in full compliance with
all of the terms and conditions contained in subsection (2) below, the Mortgagee may, at
its option, apply all such proceeds as a prepayment of the Notes;
(2) The Mortgagee shall make available such proceeds, less such sum, if any,
required for payment of all expenses incurred in collecting the same (the “Net
Proceeds”), to payment of the costs of repair, replacement, rebuilding or restoration of the
Mortgaged Property provided:
a) no Event of Default, and no event which with the giving of notice or
passage of time or both would constitute an Event of Default, has occurred or is
then continuing;
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b) the Mortgagor provides evidence to the Mortgagee that such repair,
replacement, rebuilding or restoration (collectively, “Restoration”) may be
completed within six (6) months from the date of such damage or destruction;
c) the damage or destruction occurs more than two (2) years prior to the
maturity date of the Notes;
d) the Net Proceeds shall be applied by the Mortgagee under such
construction and disbursement terms as the Mortgagee may deem reasonably
necessary, including deposit by the Mortgagor with the Mortgagee of such funds
of the Mortgagor as may be required to insure payment of all costs of Restoration;
e) the Mortgagee obtains, at the Mortgagor’s expense, an appraisal prepared
by an MAI designated appraiser acceptable to the Mortgagee certifying th at the
fair market value of the Mortgaged Property upon such Restoration, will not be
less than the appraised value of the Mortgaged Property as of the date hereof;
f) the amount necessary to repair, replace, or rebuild or restore the
Mortgaged Property does not exceed fifty (50%) of the appraised value of the
Mortgaged Property;
g) the Mortgagor pays all costs and expenses paid or incurred by the
Mortgagee in connection with the Restoration;
h) the Mortgagee receives evidence acceptable to it that the Mortgagor has
received all necessary zoning approvals, conditional use permits and/or building
permits to repair, rebuild, restore and operate the Mortgaged Property; and
i) the Mortgagor pays to the Mortgagee a disbursement fee in an amount
equal to one-quarter of one percent (0.25%) of the Net Proceeds.
Notwithstanding the foregoing, and provided no Event of Default, and no event which with the
giving of notice or the passage of time or both would constitute an Event of Default, has
occurred and is then continuing, if the amount of the Net Proceeds is less than $250,000, the
Mortgagor shall be entitled to directly apply the Net Proceeds to Restoration without complying
with the provisions set forth in this Section.
The balance of the Net Proceeds remaining after payment of all costs of any Restoration of the
Mortgaged Property shall be applied as a prepayment of the Indebtedness Secured Hereby, and
any excess shall be paid to the Mortgagor. The Mortgagor shall not, by reason of the payment of
any costs of Restoration, be entitled to any reimbursement from the Mortgagee or any abatement
or diminution of the amounts payable under the Notes or any other indebtedness secured hereby.
14
ARTICLE III.
REMEDIES
SECTION 3.1. REMEDIES. Upon the occurrence of an Event of Default or at any time
thereafter, the Mortgagee may, at its option, exercise any and all of the following rights and
remedies (and any other rights and remedies available to it under applicable law or any document
related hereto):
(1) the Mortgagee shall be entitled to seek immediate appointment of a receiver for
the Mortgaged Property; and
(2) the Mortgagee may foreclose this Mortgage by action or advertisement, and the
Mortgagor hereby authorizes the Mortgagee to do so, power being herein expressly
granted to sell the Mortgaged Property at public auction without any prior hearing thereof
and to convey the same to the purchaser, in fee simple, pursuant to the statutes of
Minnesota in such case made and provided and, out of the proceeds arising from such
sale, to pay all Indebtedness Secured Hereby with interest, and all legal costs and charges
of such foreclosure and the maximum attorney’s fees permitted by law, which costs,
charges and fees the Mortgagor herein agrees to pay, and to pay the surplus, if any, to the
Mortgagor, its successors or assigns; and
(3) the Mortgagee may exercise any of the remedies made available to a secured
party under the Uniform Commercial Code in effect in the State of Minnesota, or other
applicable law, with respect to any of the Mortgaged Property which constitutes personal
property, including without limitation the right to take possession thereof, proceeding
without judicial process or by judicial process (without a prior hearing or notice thereof,
which the Mortgagor hereby waives), and the right to sell, lease or otherwise dispose of
or use any or all of such personal property. The Mortgagee may require the Mortgagor to
assemble such personal property and make it available to the Mortgagee at a place
designated by the Mortgagee which is reasonably convenient to both the Mortgagor and
the Mortgagee. If notice to the Mortgagor of any intended disposition of any of the
Mortgaged Property constituting personal property or any other intended action is
required by law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 4.2 hereof) at least ten (10)
calendar days prior to the date of intended disposition or other action.
In the event of a sale under this Mortgage, whether by virtue of judicial proceedings or
otherwise, the Mortgaged Property may, at the option of the Mortgagee, be sold as one parcel
and as an entirety or in such parcels, manner and order as the Mortgagee in its sole discretion
may elect.
SECTION 3.2. PURCHASE OF MORTGAGED PROPERTY. In case of any sale of the
Mortgaged Property pursuant to any judgment or decree of any court or otherwise in connection
with the enforcement of any of the terms of this Mortgage, the Mortgagee, its successors and
assigns, may become the purchaser, and for the purpose of making settlement for or payment of
the purchase price, shall be entitled to turn in and use the Notes and any claims for interest, late
charges and prepayment premiums matured and unpaid thereon, together with any other
Indebtedness Secured Hereby, if any, in order that there may be credited as paid on the purchase
15
price the sum, or any part thereof, then due under the Notes, including principal thereof and
interest, late charges and prepayment premiums, if any, thereon, and any other Indebtedness
Secured Hereby.
ARTICLE IV.
MISCELLANEOUS
SECTION 4.1. SUCCESSORS AND ASSIGNS. The covenants and agreements contained
herein, including, without limitation, the provision of Section 1.8 hereof, shall bind, and the
rights hereunder shall inure to, the respective successors and assigns of the Mortgagor and the
Mortgagee, including among the Mortgagor’s assigns any purchasers or transferees of the
Mortgaged Property.
SECTION 4.2. NOTICES. Any notice, request, demand or other communication permitted or
required hereunder shall be deemed duly given if delivered or mailed postage prepaid, certified
or registered, addressed to the address of such party on page 2 of this Mortgage.
SECTION 4.3. HEADINGS. The headings of the sections contained herein are for convenience
only and are not to be construed to be a part of or limit or affect the terms hereof.
SECTION 4.4. EXPENSES. The Mortgagor shall reimburse the Mortgagee, upon demand, for
all costs and expenses, including without limitation reasonable attorneys’ fees, appraisal fees,
survey fees, closing charges, documentary or tax stamps, recording and filing fees, insurance
premiums and service charges, paid or incurred by the Mortgagee in connection with (i) the
preparation, negotiation, approval, execution and delivery of the Notes, the Loan Agreements,
the Mortgage and any other documents and instruments related hereto or thereto; (ii) the
negotiation of any amendments or modifications to any of the foregoing documents, instruments
or agreements and the preparation of any and all documents necessary or desirable to effect such
amendments or modifications; and (iii) the enforcement by the Mortgagee during the term hereof
or thereafter of any of the rights or remedies of the Mortgagee or any participant hereunder or
under any of the foregoing documents, instruments or agreements, including without limitation
costs and expenses of collection, whether or not suit is filed with respect thereto and whether
such costs are paid or incurred, or to be paid or incurred, prior to or after entry of judgment.
SECTION 4.5. DEFINITIONS. Unless otherwise defined herein, capitalized terms used herein
shall have the meanings assigned to such terms in the Loan Agreements.
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly executed and
delivered to the Mortgagee as of the day and year first above written.
8608.343
11885562v1
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE TO MORTGAGE, SECURITY AGREEMENT, FIXTURE
FINANCING STATEMENT AND ASSIGNMENT OF LEASES AND RENTS]
SHEPHERD’S PATH SENIOR HOUSING,
INC.
By:
Mark Meyer
Its: Chief Financial Officer
STATE OF MINNESOTA )
) ss
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ____ day of July, 2016, by
Mark Meyer, the Chief Financial Officer of Shepherd’s Path Senior Housing, Inc., a Minnesota
nonprofit corporation, for and on behalf of the nonprofit corporation.
Notary Public
EXHIBIT A
(Legal Description)
EXHIBIT B
(Permitted Encumbrances)
Matters set forth in that certain Loan Policy of Title Insurance (Commitment
No. _______________________) issued by First American Title Insurance Company.
ASSIGNMENT OF MORTGAGE, SECURITY AGREEMENT, FIXTURE FINANCING
STATEMENT AND ASSIGNMENT OF LEASES AND RENTS
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are
hereby acknowledged, the CITY OF PRIOR LAKE, a municipal corporation and political
subdivision of the State of Minnesota (“Prior Lake”), the CITY OF MAYER, a municipal
corporation and political subdivision of the State of Minnesota (“Mayer”), and the CITY OF
HAMPTON, a municipal corporation and political subdivision of the State of Minnesota
(“Hampton”) (Prior Lake, Mayer and Hampton are collectively referred to as the “Assignor”),
hereby sell, assign and transfer unto BREMER BANK, NATIONAL ASSOCIATION, a national
banking association (the “Assignee”), all of its right, title and interest in and to that certain
Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and
Rents dated as of July __, 2016, executed by Shepherd’s Path Senior Housing, Inc., a Minnesota
nonprofit corporation, in favor of the Assignor, filed of record in the office of the Scott County
____________________ on __________________, 2016, as Document No. __________,
securing an indebtedness in the amount of $25,155,000 and encumbering property legally
described on Exhibit A attached hereto and hereby made a part hereof; to have and to hold the
same unto the Assignee and to the successors, legal representatives and assigns of the Assignee
forever. This Assignment of Mortgage, Security Agreement, Fixture Financing Statement and
Assignment of Leases and Rents may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may execute this
Assignment of Mortgage, Security Agreement, Fixture Financing Statement and Assignment of
Leases and Rents by signing any such counterpart.
IN WITNESS WHEREOF, the undersigned have executed and delivered this Assignment of
Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and
Rents as of the ____ day of July, 2016.
8608.343
11886087v1
[SIGNATURE PAGES FOLLOW]
S-1
THE CITY OF PRIOR LAKE,
MINNESOTA
By:
Name:
Its:
By:
Name:
Its:
STATE OF MINNESOTA )
) ss
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this ____ day of __________, 2016, by
_______________, the _______________, and _______________, the _______________,
respectively, of the City of Prior Lake, Minnesota, a municipal corporation organized and
existing under the laws of the State of Minnesota, for and on behalf of said municipal
corporation.
Notary Public
S-2
THE CITY OF MAYER, MINNESOTA
By:
Name:
Its:
By:
Name:
Its:
STATE OF MINNESOTA )
) ss
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this ____ day of __________, 2016, by
_______________, the _______________, and _______________, the _______________,
respectively, of the City of Mayer, Minnesota, a municipal corporation organized and existing
under the laws of the State of Minnesota, for and on behalf of said municipal corporation.
Notary Public
S-3
THE CITY OF HAMPTON,
MINNESOTA
By:
Name:
Its:
By:
Name:
Its:
STATE OF MINNESOTA )
) ss
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this ____ day of __________, 2016, by
_______________, the _______________, and _______________, the _______________,
respectively, of the City of Hampton, Minnesota, a municipal corporation organized and existing
under the laws of the State of Minnesota, for and on behalf of said municipal corporation.
Notary Public
THIS INSTRUMENT DRAFTED BY:
Winthrop & Weinstine, P.A. (TJK)
225 South Sixth Street, Suite 3500
Minneapolis, MN 55402-4629
A-1
EXHIBIT A
(Legal Description)
7648780v2
JOINT POWERS AGREEMENT
PROVIDING FOR THE ISSUANCE OF REVENUE REFUNDING NOTES TO
REFINANCE SENIOR HOUSING FACILITIES
(McKENNA CROSSING SENIOR HOUSING PROJECT)
THIS AGREEMENT is entered into as of the 1st day of June, 2016, by and between the
City of Prior Lake, Minnesota ("Prior Lake"), the City of Hampton, Minnesota ("Hampton"), and
the City of Mayer, Minnesota ("Mayer" and, with Prior Lake and Hampton, the "Issuers" or, the
"Cities", or individually, a "City"). Each of the municipalities named above is a municipal
corporation duly organized under the laws of the State of Minnesota.
WHEREAS, Prior Lake and the Economic Development Authority of the City of Prior
Lake, Minnesota (the "Prior Lake EDA") have previously adopted a housing program (the
"Housing Program") in accordance with Minnesota Statutes, Chapter 462C in connection with
the issuance by the Prior Lake EDA and Prior Lake, of their respective $10,000,000, Series
2006A and $21,445,000, Series 2006B Senior Housing Revenue Bonds (Shepherd's Path Senior
Housing, Inc. Project) (the "Series 2006 Bonds"); and
WHEREAS, it has been proposed by Shepherd's Path Senior Housing, Inc., a Minnesota
nonprofit corporation (the "Borrower"), to refinance the Series 2006 Bonds through the issuance
by the Issuers of revenue notes in a principal amount not to exceed in the aggregate $26,000,000;
and
WHEREAS, the Issuers desire to assist the Borrower pursuant to this Joint Powers
Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants and
representations hereinafter contained, the parties hereto agree as follows:
1. Minnesota Statutes, Section 471.59 (the "Joint Powers Act") provides that
two or more governmental units, by agreement entered into through action of their governing
bodies, may jointly or cooperatively exercise any power common to the contracting parties, and
may provide for the exercise of such power by one of the participating governmental units.
2. In connection with revenue bonds issued under Minnesota Statutes,
Chapter 462C (the "Housing Programs Act"), Section 462C.14, Subd. 3 provides for joint action
between cities pursuant to the Joint Powers Act.
3. The Borrower has proposed, and the Issuers hereby agree, to enter into this
Joint Powers Agreement pursuant to the Housing Programs Act, pursuant to which the Issuers
will issue revenue notes (the "Notes") in the aggregate principal amount not to exceed
$26,000,000 and loan the proceeds thereof to the Borrower through agreements with the
Borrower which require Borrower to refund and refinance the project described in the next
paragraph. The Issuers currently anticipate that Hampton and Mayer will each issue Notes in
principal amounts not to exceed $10,000,000 and that Prior Lake shall issue a Note in a principal
amount not to exceed $5,250,000, but in no event in amounts that would cause the Notes not to
be designated as bank qualified.
7648780v2
2
4. The "project" consists of the refunding of the outstanding principal
amount of Prior Lake's $21,445,000 Senior Housing Revenue Bonds (Shepherd's Path Senior
Housing, Inc. Project) Series 2006B, and the Prior Lake EDA's $10,000,000 Senior Housing
Revenue Bonds (Shepherd's Path Senior Housing Project) Series 2006A (the "Series 2006
Bonds"), the proceeds of which were used to finance the acquisition, construction, and equipping
of an elderly housing development of 154 senior rental housing units including 82 independent
housing units, 54 assisted living units, and 18 memory care units, together with approximately
35,000 square feet of common space, located adjacent to the Shepherd of the Lake Lutheran
Church located at 13760 McKenna Road in Prior Lake (the "Project"). The Project, known as
McKenna Crossing, is and will be owned and operated by the Borrower.
5. Prior Lake EDA and Prior Lake, the City in which the 2006 Bonds
proceeds were used for a housing project, have adopted a housing program (the "Housing
Program") which describes the housing development to be refinanced by the Borrower in Prior
Lake.
6. Each of Hampton and Mayer hereby adopt the Housing Program.
7. Prior Lake will adopt a resolution evidencing its intent to enter into this
Agreement and granting host approval of the issuance of Notes by Hampton and Mayer as
required under the Internal Revenue Code of 1986, as amended (the "Code").
8. Each of the Issuers will adopt a resolution evidencing its intent to enter
into this Agreement and granting approval for the issuance of its respective Note, as required
under the Code.
9. The Issuers shall exercise the powers of the Housing Programs Act by
adopting, approving, and executing such resolutions, documents, and agreements as shall be
necessary or convenient to authorize, issue, and sell the Notes and such other resolutions,
documents, and agreements as shall be necessary or required in connection with the issuance of
the Notes and giving effect to or carrying out the provisions of this Agreement and documents
under which the Notes are issued and/or secured.
10. The Notes shall be special, limited obligations of each of the Issuers,
respectively, payable solely from proceeds, revenues and other amounts pledged thereto and
more fully described in the respective Loan Agreement executed in connection with the Project.
In no event shall the Notes ever be payable from or charged upon the general credit, taxing
powers or any funds of any of the Cities; the Cities are not subject to any liability thereon; no
owners of the Notes shall ever have the right to compel the exercise of the taxing power of any
of the Cities to pay any of the Notes or the interest thereon, nor to enforce payment t hereof
against any property of either of the Cities; the Notes shall not constitute a charge, lien or
encumbrance, legal or equitable, upon any property of any of the Cities; and the Notes do not
constitute an indebtedness of any of the Cities within the meaning of any constitutional,
statutory, or charter limitation.
7648780v2
3
11. This Agreement shall terminate upon the retirement or defeasance of all of
the Notes or any bonds issued to refund the Notes, and this Agreement may not be terminated in
advance of such retirement or defeasance.
7648780v2
S-1
IN WITNESS WHEREOF, each of the Cities has caused this Agreement to be executed on its
behalf by its duly authorized officers, all as of the day and year first above written.
CITY OF PRIOR LAKE, MINNESOTA,
an Issuer
By________________________________
Mayor
By________________________________
City Manager
STATE OF MINNESOTA )
) ss.
COUNTY OF SCOTT )
The foregoing instrument was acknowledged before me this ____ day of __________, 2016, by Ken
Hedberg and Frank Boyles, the Mayor and City Manager, respectively, of the City of Prior Lake,
Minnesota, a Minnesota municipal corporation, on behalf of said municipal corporation.
Notary Public
(NOTARIAL SEAL)
SIGNATURE PAGE TO JOINT POWERS AGREEMENT
7648780v2
S-2
CITY OF HAMPTON, MINNESOTA,
an Issuer
By________________________________
Mayor
By________________________________
City Administrator-Clerk
STATE OF MINNESOTA )
) ss.
COUNTY OF DAKOTA )
The foregoing instrument was acknowledged before me this ____ day of __________, 2016, by Timothy
Skog and Wendy Carpenter, the Mayor and City Administrator-Clerk, respectively, of the City of
Hampton, Minnesota, a Minnesota municipal corporation, on behalf of said municipal corporation.
______________________________________
Notary Public
(NOTARIAL SEAL)
SIGNATURE PAGE TO JOINT POWERS AGREEMENT
7648780v2
S-3
CITY OF MAYER, MINNESOTA,
an Issuer
By________________________________
Mayor
By________________________________
City Administrator
STATE OF MINNESOTA )
) ss.
COUNTY OF CARVER )
The foregoing instrument was acknowledged before me this ____ day of __________, 2016, by Gerald
Thomas and Luayn Ruch-Hammond, the Mayor and City Administrator, respectively, of the City of Mayer,
Minnesota, a Minnesota municipal corporation, on behalf of said municipal corporation.
______________________________________
Notary Public
(NOTARIAL SEAL)
SIGNATURE PAGE TO JOINT POWERS AGREEMENT
7663884v2
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF SCOTT
CITY OF PRIOR LAKE, MINNESOTA
Senior Housing Revenue Refunding Note, Series 2016A
(McKenna Crossing Senior Housing Project)
$5,155,000
FOR VALUE RECEIVED the City of Prior Lake, Minnesota, (the “City”) hereby
promises to pay to the order of Bremer Bank, National Association, a national banking
association, in Minneapolis, Minnesota, its successors or registered assigns (the “Lender”), from
the source and in the manner hereinafter provided, the principal sum of FIVE MILLION ONE
HUNDRED FIFTY-FIVE THOUSAND DOLLARS ($5,155,000), or so much thereof as has
been advanced and remains unpaid from time to time (the “Principal Balance”), with interest
thereon from the date hereof until paid or otherwise discharged as set forth in Paragraph 1 below,
in any coin or currency which at the time or times of payment is legal tender for the payment of
public or private debts in the United States of America, in accordance with the terms hereinafter
set forth.
1. Commencing on September 15, 2016 and on the 15th day of each month thereafter
(each such date, a “Payment Date”) to and including August 15, 2036 (the “Maturity Date”),
monthly installments of principal in the amount shown in Exhibit A hereto and interest at the
annual rate set forth below on the Principal Balance shall be payable in monthly installments.
Interest payments shall be computed on the basis of a 360-day year, actual days elapsed. The
entire outstanding Principal Balance and interest, if not sooner paid, shall be due and payable in
full on the Maturity Date. Payments shall be applied first to interest due on the unpaid principal
and thereafter to reduction of principal.
The per annum rate of interest payable hereunder shall initially be equal to ___ p ercent
per annum. On the first Payment Date, and each Reset Date (hereinafter defined) thereafter, the
interest rate on this Note will be adjusted to a rate per annum equal to (a) the sum of (i) 2.50%
and (ii) the 30-Day LIBOR Rate in effect as of the Reset Date, (b) multiplied by 0.67.
As used herein, “Reset Date” means the 15th day of each calendar month.
As used herein, the “30-Day LIBOR Rate” means a fluctuating rate of interest per annum
equal to the ICE London Interbank Offered Rate (“ICE LIBOR”), as published by
InterContinental Exchange (“ICE”) (or other commercially available source providing quotations
of ICE LIBOR as selected by Lender from time to time) as determined for each London Banking
Day at approximately 11:00 a.m., London time, two (2) London Banking Days (as hereinafter
defined) prior to the Reset Date, for U.S. Dollar deposits with a one (1) month term, as adjusted
from time to time in Lender’s sole discretion for reserve requirements, deposit insurance
assessment rates and other regulatory costs. If such rate is not available at such time for any
reason, then the rate will be determined by such alternate method as reasonably selected by
Lender.
7663884v2
2
As used herein, a “London Banking Day” is a day on which banks in London, United
Kingdom are open for business and dealing in offshore dollars.
If any payment of principal of or interest on this Note (including any payment due and
payable on the Maturity Date) is not paid within ten (10) days of the due date thereof, the
Borrower shall pay to the Lender a late charge equal to five percent (5.00%) of the amount of
such payment.
At all times after the occurrence of an Event of Default and during the continuance
thereof, interest shall accrue hereunder at a rate of interest equal to five percent (5 .00%) per
annum in excess of the rate of interest otherwise payable hereunder (the “Default Note”).
2. In any event, the payments hereunder shall be sufficient to pay all principal and
interest due, as such principal and interest becomes due, and to pay any premium or service
charge, at maturity, upon prepayment, or otherwise.
3. Principal and interest and premium, 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 pursuant to a Loan Agreement
dated as of the date hereof (the “Loan Agreement”) by and between the City and Shepherd’s Path
Senior Housing, Inc., a Minnesota nonprofit corporation and 501(c)(3) organization (the
“Borrower”), for refunding in part, the City’s $21,455,000 Senior Housing Revenue Bonds
(Shepherd’s Path Senior Housing Project) Series 2006B and the Economic Development
Authority of the City of Prior Lake’s $10,000,000 Senior Housing Revenue Bonds (Shepherd’s
Path Senior Housing Project) Series 2006A, the proceeds of which were loaned to the Borrower
to, in part, finance and refinance the Facility, as defined in the Loan Agreement. This Note is
further issued pursuant to and in full compliance with the Constitution and laws of the State of
Minnesota, particularly Minnesota Statutes, Chapter 462C, and pursuant to a resolution of the
City Council of the City duly adopted on May 23, 2014 (the “Resolution”).
5. This Note is secured by a Pledge Agreement dated as of the date hereof between
the City and the Lender (the “Pledge Agreement”) and is further secured by a Mortgage, Security
Agreement, Fixture Financing Statement and Assignment of Leases and Rents, dated as of the
date hereof between the Borrower, as mortgagor, and the City, as a mortgagee (the “Mortgage”),
as assigned by an Assignment of Mortgage, Security Agreement, Fixture Financing Statement
and Assignment of Leases and Rents by the City to the Lender (the “Assignment”), and by
certain other assignments, security agreements, guaranties, financing statements, and other
instruments evidencing or securing the Loan as may be required by the Lender. This Note is
subject to an Intercreditor and Parity Agreement by the Lender, dated as of the date hereof.
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 due on this Note, includin g
the Final Maturity Date, or release any part or parts of the property and interest subject to the
Mortgage or to any other security document from the same, all without notice to or consent of
any party liable hereon or thereon and without releasing any such party from such liability and
7663884v2
3
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 Maturity Date of the Note be extended
beyond 30 years from the date hereof.
7. This Note is subject to prepayment in immediately available funds on any date at
the option of the Borrower, in whole or in part as provided in Section 5.1 of the Loan
Agreement. To exercise this option, the Borrower must give written notice in the name of the
City to the Lender or the holder hereof (the “Holder”) not less than 30 days prior to the date
fixed for prepayment; provided that the Holder may waive or provide alternative notice
requirements. The prepayment price is equal to the outstanding principal amount of this Note to
be prepaid plus accrued interest, subject, however, to any termination payment for any interest
rate swap agreement related to this Note.
In the event of any partial prepayment of this Note, the Lender shall apply any such
prepayment first against amounts which are neither principal nor interest, including any
collection costs, late fees or prepayment or termination fees, then against the accrued interest on
the Principal Balance and then against the outstanding principal amount of this Note in the
inverse order of maturities. The monthly payments due under Paragraph 3 hereof, shall continue
to be due and payable in full until the entire Principal Balance, accrued interest and any premium
due on this Note have been paid.
8. Upon a Determination of Taxability, as defined in the Loan Agreement, this Note
shall convert to a taxable obligation and the interest rate for interest accruing from the Date of
Taxability, as defined in the Loan Agreement, shall be adjusted to an interest rate per annum
equal to the then current interest rate payable hereunder, divided by 0.67 (the “Taxable Rate”).
Any interest accruing from the Date of Taxability which is retroactively due as a result of the
interest rate adjustment shall be payable on the 15th day of the following month along with
regularly scheduled principal payment and interest accruing from the previous payment date at
the Taxable Rate.
9. As provided in the Resolution and subject to certain limitations set forth therein,
this Note is only transferable upon the books of the City at the office of the City Manager, by the
Lender in person or by its agent duly authorized in writing, at the Lender’s expense, upon
surrender hereof together with a written instrument of transfer satisfactory to the City Manager,
duly executed by the Lender or its duly authorized agent. Upon such transfer the City Manager
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 in 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 his 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.
10. All of the agreements, conditions, covenants, provisions and stipulations
contained in the Resolution, the Mortgage, the Assignment, the Loan Agreement, the Pledge
Agreement, and the Swap Agreements (as defined in the Loan Agreement) are hereby made a
7663884v2
4
part of this Note to the same extent and with the same force and effect as if they were fully set
forth herein.
11. This Note and interest thereon and any service charge or premium, if a ny, due
hereunder are payable solely from the revenues and proceeds derived from the Loan Agreement
and the Mortgage and do not constitute a debt of the City within the meaning of any
constitutional or statutory limitation, 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, lien 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 in accordance with the Loan Agreement, sufficient to pay
all costs of such performance or the enforcement thereof.
12. If an Event of Default (as that term is defined in the Mortgage or the Loan
Agreement) shall occur, then the Lender shall have the right and option, among other thi ngs, to
declare 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, and the Mortgage. Failure to exercise
such option at any time shall not constitute a waiver of the right to exercise the same at any
subsequent time.
13. The remedies of the Lender, as provided herein and in the Mortgage, the
Assignment, the Loan Agreement, and the Pledge Agreement, 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.
14. 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 in writing and signed by t he
Lender and, then only to the extent specifically set forth in the writing. A waiver with reference
to one event shall not be construed as continuing or as a bar to or waiver of any right or remedy
as to a subsequent event.
15. This Note has been issued without registration under state or federal or other
securities laws, pursuant to an exemption for such issuance; and accordingly this Note may not
be assigned or transferred in whole or part, nor may a participation interest in this Note be given
pursuant to any participation agreement, except to another “accredited investor” or “financial
institution” in accordance with an applicable exemption from such registration requirements and
with full and accurate disclosure of all material facts to the prospective purchaser(s) or
transferee(s).
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16. 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.
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IN WITNESS WHEREOF, the City has caused this Note to be duly executed in its name
by the manual signatures of the Mayor and City Manager, the seal of the City having been
intentionally omitted as permitted by law, and has caused this Note to be dated as of
___________, 2016.
CITY OF PRIOR LAKE, MINNESOTA
By ____________________________________
Its Mayor
And By ________________________________
Its City Manager
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PROVISIONS AS TO REGISTRATION
The ownership of the unpaid Principal Balance of this Note and the interest accruing
thereon is registered on the books of the City of Prior Lake, Minnesota in the name of the holder
last noted below.
Date of
Registration
Name and Address
Registered Owner
Signature of
City Manager
, 2016
Bremer Bank, National
Association
225 South Sixth Street
Suite 200
Minneapolis, MN 55402
7663884v2
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Exhibit A
Principal Payment Schedule
7663978v2
PLEDGE AGREEMENT
This Pledge Agreement is made as of July __, 2016 between the City of Prior Lake,
Minnesota, a municipal corporation and political subdivision of the State of Minnesota (the
“City”), and Bremer Bank, National Association, a national banking association (the “Lender”).
Recitals
WHEREAS, Shepherd’s Path Senior Housing, Inc., a Minnesota nonprofit corporation
and a 501(c)(3) organization (the “Borrower”), and the City have entered into a Loan Agreement
(the “Loan Agreement”) of even date herewith, pursuant to which the City will lend to the
Borrower the proceeds of the $5,155,000 Senior Housing Revenue Refunding Note, Series
2016A (McKenna Crossing Senior Housing Project) (the “Note”); and
WHEREAS, the Note is to be payable from and secured by the loan repayments to be
made by the Borrower under the Loan Agreement; and the Lender, as a condition to the purchase
of the Note, has required the execution of this Pledge Agreement.
NOW THEREFORE, as an inducement to the Lender to purchase the Note, and in
consideration of the premises and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. In order to secure the due and punctual payment of the Note and all other sums
due the Lender under the Loan Agreement, the City does hereby pledge and assign to the Lender
all of the City’s right, title and interest in and to the Loan Agreement, subject to the City’s rights
under the provisions of Section 7.9 thereof.
2. The City hereb y represents and warrants to the Lender that the City’s right, title
and interest in the Loan Agreement is free and clear of any lien, security interest or other
encumbrance other than that arising under this Pledge Agreement.
3. The City hereby authorizes the Lender to exercise, whether or not a default exists
under the Note or an Event of Default has occurred under the Loan Agreement, either in the
City’s name or the Lender’s name, any and all rights or remedies available to the City under the
Loan Agreement. The City agrees, on request of the Lender, to execute and deliver to the Lender
such other documents or instruments as shall be deemed necessary or appropriate by the Lender
at any time to confirm or perfect the security interest hereby granted. The Ci ty hereby appoints
the Lender its attorney-in-fact to execute on behalf of the City, and in its name, any and all such
assignments, financing statements or other documents or instruments which the Lender may
deem necessary or appropriate to perfect, protect or enforce the security interest hereby granted.
4. The City will not:
(a) exercise or attempt to exercise any remedies under the Loan Agreement,
except as permitted by Sections 6.2 and 7.9 of the Loan Agreement, or terminate, modify or
accept a surrender of the same, or by affirmative act, consent to the creation or existence of any
security interest or other lien in the Loan Agreement to secure payment of any other
indebtedness; or
7663978v2
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(b) receive or collect or permit the receipt or collection of any payments,
receipts, rentals, profits or other moneys under the Loan Agreement (except as allowed under
Section 7.9 thereof) or assign, transfer or hypothecate (other than to the Lender hereunder) any
of the same then due or to accrue in the future.
5. The City expressly covenants and agrees that the Lender shall be entitled to
receive all payments under the Loan Agreement (except any payments due the City under
Section 7.9 thereof), and hereby authorizes and directs the Borrower to make such payments
directly to the Lender. The Lender covenants and agrees that all payments received by the
Lender pursuant to the Loan Agreement shall be applied as provided in the Loan Agreement.
6. The Lender agrees to advance the purchase price of the Note directly to the
Borrower as provided in the Note, the Loan Agreement, and the Purchase Agreement. In
accordance with Section 7.9 of the Loan Agreement the Lender hereby assumes the City’s and
Lender’s obligations to the Borrower thereunder, except for the City’s obligations in connection
with its representations in Section 2.1 of the Loan Agreement, which are not being assumed.
7. If an Event of Default (as defined in the Loan Agreement) shall occur and be
continuing, the Lender may exercise any one or more or all, and in any order, of the remedies
hereinafter set forth, in addition to any other remedy at law or in equity or specified in the Loan
Agreement, it being expressly understood that no remedy herein conferred is intended to be
exclusive of any other remedy or remedies; but each and every rem edy shall be cumulative and
shall be in addition to every other remedy given herein or now or hereafter existing at law or in
equity or by statute:
(a) The Lender may, without prior notice of any kind, declare the principal of
and interest accrued and any premium (as defined in the Loan Agreement) on the Note
immediately due and payable.
(b) The Lender may exercise any rights and remedies and options of a secured
party under the Uniform Commercial Code as adopted in the State of Minnesota and any and all
rights available to it under the Loan Agreement, the Mortgage, and all other documents securing
payment of the Note and the Borrower’s obligations under the Loan Agreement.
8. Whenever any of the parties hereto is referred to, such reference shall be deemed
to include the successors and assigns of such party; and all the covenants, promises and
agreements in this Pledge Agreement contained by or on behalf of the City or the Lender shall
bind and inure to the benefit of the respective successors and assigns of such parties whether so
expressed or not.
9. The unenforceability or invalidity of any provision or provisions of this Pledge
Agreement shall not render any other provision or provisions herein contained unenforceable or
invalid.
10. This Pledge Agreement shall in all respects be construed in accordance with and
governed by the laws of the State of Minnesota. This Pledge Agreement may not be amended or
modified except in writing signed by the City and the Lender.
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11. This Pledge Agreement may be executed, acknowledged and delivered in any
number of counterparts and each of such counterparts shall constitute an original but all of which
together shall constitute one agreement.
12. The terms used in this Pledge Agreement which are defined in the Loan
Agreement shall have the meanings specified therein, unless the context of this Pledge
Agreement otherwise requires, or unless such terms are otherwise defined herein.
13. No obligation of the City hereunder shall constitute or give rise to a pecuniary
liability of the City or a charge against its general credit or taxing powers, but shall be payable
solely out of the proceeds and the revenues derived under the Loan Agreement.
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IN WITNESS WHEREOF, the City and the Lender have caused this Pledge Agreement
to be duly executed as of the day and year first above written.
City of Prior Lake, Minnesota
By______________________________
Its Mayor
By______________________________
Its City Manager
Signature page to Pledge Agreement
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Bremer Bank, National Association
By______________________________
Jason S. Ruppert, Vice President
Signature page to Pledge Agreement