HomeMy WebLinkAboutE-Packet 05-29-07_Learning Circle Montessori Elementary School, Inc__9
Commission Memorandum
REPORT TO: Honorable Mayor and City Commission
FROM: Brit Fontenot, City Clerk
Chris Kukulski, City Manager
SUBJECT: Commission Resolution 4024 - A resolution authorizing and
providing for the issuance and sale of a revenue note pursuant to
Montana Code Annotated, Title 90, Chapter 5, Part I, as amended, at
the request of Learning Circle Montessori Elementary School, Inc.,
and approving forms of certain documents in connection therewith
MEETING DATE: May 29, 2007
RECOMMENDATION: Adopt Resolution 4024 if, after the public hearing, the Commission
determines that the project is in the public interest of the City, 90-5-104 (1).
BACKGROUND: On May 7, 2007, the City Commission adopted Resolution 4020 which
authorized a public hearing on May 29, 2007 relating to a project on behalf of Learning
Circle Montessori Elementary School, Inc., a Montana non-profit corporation, and the issuance
of a revenue note to finance the costs of acquiring a building to be used as a private elementary
school under Montana Code Annotated, Title 90, Chapter 5, Part 1, as amended. Mr. Horatio
Potter, Board President of the Learning Circle Montessori Elementary School, will be
available to provide additional background information and answer related questions.
FISCAL EFFECTS: There are no fiscal impacts to the City. By law (90-5-103), this is not a
general obligation of the City. These bonds or loans do not create or give rise to any financial
(pecuniary) liability of the City. They are backed by revenue from the school and a mortgage on
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the property. To that end, the law requires that the bonds or notes be clearly labeled on their face
as to the fact that they are NOT a financial obligation of the City.
ALTERNATIVES: As suggested by the City Commission.
Respectfully submitted,
_________________________________ ____________________________
Brit Fontenot, City Clerk Chris A. Kukulski, City Manager
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COMMISSION RESOLUTION 4024
A RESOLUTION AUTHORIZING AND PROVIDING FOR THE ISSUANCE AND
SALE OF A REVENUE NOTE PURSUANT TO MONTANA CODE ANNOTATED,
TITLE 90, CHAPTER 5, PART I, AS AMENDED, AT THE REQUEST OF LEARNING
CIRCLE MONTESSORI ELEMENTARY SCHOOL, INC., AND APPROVING THE
FORMS OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH
BE IT RESOLVED BY THE CITY COMMISSION OF CITY OF BOZEMAN:
1. Authority. The City is authorized by Montana Code Annotated, Title 90,
Chapter 5, Part 1, as amended (the “Act”), to enter into agreements the governing body considers
advantageous and not in conflict with the provisions of the Act to issue revenue bonds or notes
and sell such bonds or notes at public or private sale in such manner and at such times as may be
determined by this body to be most advantageous; and to loan the proceeds of its revenue bonds
or notes for the purpose of defraying the cost of acquiring or improving projects consisting of
real and personal properties suitable for use as commercial, manufacturing, agricultural or
industrial enterprises, recreational or tourist facilities, multifamily housing, hospitals, long-term
care facilities or medical facilities within its boundaries, or to refund bonds or notes issued under
the Act. Such revenue bonds or notes may be secured by a pledge of the revenues to be derived
by the City from a loan agreement with the borrower, by a mortgage on the project and by such
other security devices as may be deemed advantageous. Under the provisions of the Act, any
bonds or notes so issued by the City shall be special, limited obligations of the City, and shall not
constitute nor give rise to a pecuniary liability of the City or a charge against its general credit or
taxing powers.
2. The Project and the Note. Learning Circle Montessori Elementary School, Inc., a
Montana nonprofit corporation (the “Borrower”) has proposed to undertake a project consisting
of the acquisition by the Borrower of the existing 4,875 square foot building located at 3001
West Villard Street, Bozeman, Montana, for use as a private elementary school (herein referred
to as the “Project”), and that the City issue and sell its Revenue Note (Learning Circle
Montessori Elementary School, Inc. Project), in substantially the form set forth in Exhibit B to
the Loan Agreement referred to below (the “Note”), pursuant to the Act, and loan the proceeds
thereof to the Borrower to finance the Project.
3. Public Hearing. This Board conducted a public hearing Monday, May 29, 2007,
on the proposal to undertake the Project and to issue the Note to provide financing therefor. All
persons present had an opportunity to express their views with respect to the Project and the
issuance of the Note. Based on the information presented, the City hereby finds and determines
that the Project is in the public interest of the City.
4. Approval of Project. The Project described above is hereby approved by the City.
5. Documents Presented. Forms of the following documents relating to the Note and
the Project have been submitted to the City and are now on file in the offices of the City Clerk:
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(a) Loan and Purchase Agreement (the “Loan Agreement”), by and between
the City, the Borrower and Wells Fargo Brokerage Services, LLC (the “Purchaser”),
whereby, among other things, the City agrees to sell and the Purchaser agrees to purchase
the Note, the City agrees to make a loan to the Borrower of the gross proceeds of the sale
of the Note and the Borrower agrees to complete the Project, and the Borrower covenants
to pay amounts sufficient to provide for the prompt payment of the principal of, premium,
if any, and interest on the Note;
(b) Loan Agreement Assignment (the “Loan Agreement Assignment”),
whereby the City assigns to the Purchaser all of its interest in the Loan Agreement and
Loan Repayments of the Borrower payable thereunder (except for its rights to indemnity
and payment of fees, expenses and advances); and
(c) Combination Mortgage, Security Agreement and Fixture Financing
Statement and Assignment of Leases and Rents (the “Mortgage”), from the Borrower to
the Purchaser, whereby the Borrower grants to the Purchaser a mortgage of, a security
interest in, and an assignment of leases and rents with respect to the Project, as security
for the Note.
6. Findings. It is hereby found, determined and declared that:
(a) There is no litigation pending or, to the knowledge of the City, threatened
against the City relating to the Project or to the Note, the Loan Agreement, the Loan
Agreement Assignment or the Mortgage or questioning the organization, powers or
authority of the City to issue the Note or execute such agreements.
(b) The execution, delivery and performance of the City’s obligations under
the Note, the Loan Agreement and the Loan Agreement Assignment do not and will not
violate any order of any court or any agency of government of which the City is aware or
in any proceeding to which the City is a party, or any indenture, agreement or other
instrument to which the City is a party or by which it or any of its property is bound, or
be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any such indenture, agreement or other instrument.
(c) The Loan Agreement provides for payments by the Borrower to the
Purchaser, as registered owner of the Note, for the account of the City of such amounts as
will be sufficient to pay the principal of, premium, if any, and interest on the Note when
due. Within the meaning of Section 90-5-106(1), the City hereby finds and declares, as
follows: (1) the amounts of principal and interest are set forth in the form of Note
attached to the Loan Agreement as Exhibit B; (2) the Loan Agreement obligates the
Borrower to provide for the operation and maintenance of the Project Facilities, including
adequate insurance, taxes and special assessments; and (3) no reserves have been
required to be established in connection with the issuance of the Note.
(d) Under the provisions of the Act and as provided in the Loan Agreement,
the Note is not and shall not be payable from or charged upon any funds other than
amounts payable pursuant to the Loan Agreement, which are pledged to the payment
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thereof pursuant to the Loan Agreement Assignment, and, in event of default, moneys
derived from foreclosure of the Mortgage; the City is not subject to any liability thereon;
no owner of the Note shall ever have the right to compel the exercise of the taxing power
of the City to pay the Note or the interest thereon, nor to enforce payment thereof against
any property of the City; neither the Note nor any document executed or approved in
connection with the issuance thereof shall constitute a pecuniary liability, general or
moral obligation, charge, lien or encumbrance, legal or equitable, upon any property of
the City; and the Note shall not constitute or give rise to a charge against the general
credit or taxing powers of the City.
7. Approval and Execution of Documents. The forms of Loan Agreement,
Mortgage and Loan Agreement Assignment referred to in paragraph 5, are approved. The Loan
Agreement and Loan Agreement Assignment shall be executed in the name and on behalf of the
City by the officers identified in paragraph 17, in substantially the forms on file, but with all such
changes therein as may be approved by the officers executing the same, which approval shall be
conclusively evidenced by the execution thereof.
8. Approval, Execution and Delivery of the Note. The City is hereby authorized and
directed to issue the Note, and the Note shall be substantially in the form, mature, bear interest,
and be payable in the installments and shall otherwise contain the terms and provisions
substantially to the effect set forth in the form of Note attached to the Loan Agreement as
Exhibit B, which terms are for this purpose incorporated in this resolution and made a part
hereof; provided, however, that the maturity of and principal payments with respect to the Note,
the interest rate thereon, the amount of the installment payments required to be made thereunder,
and the rights of optional or mandatory redemption with respect thereto shall all be as set forth in
the finally issued Note, all of which terms and provisions shall be approved by the officers
executing the Note, such approval to be conclusively evidenced by such execution; but provided
further, however, that, in no event shall the original principal amount of the Note exceed
$400,000, shall the final maturity of the Note be in excess of 20 years from the date of issuance
thereof, or shall the rate of interest thereon exceed 5.50% per annum.
The Note shall be issued and delivered to the Purchaser. The proposal of the Purchaser to
purchase the Note as provided in the Loan Agreement at a purchase price equal to 100% of the
par value thereof is hereby found and determined to be reasonable and is hereby accepted.
Pursuant to the Loan Agreement, payment by the Purchaser of the purchase price of the Note
shall constitute the loan of such funds from the City to the Borrower, as further provided in the
Loan Agreement.
9. Registration Records. The Clerk of the Commission, as Note registrar, shall keep
registration records which shall set forth the name and registered address of the registered owner
of the Note from time to time. Transfer of ownership of the Note shall be reflected in such
registration records, as provided in Section 11 below.
10. Mutilated, Lost, Stolen or Destroyed Note. If the Note is mutilated, lost, stolen or
destroyed, the City may execute and deliver to the Holder a new Note of like amount, date,
number and tenor as that mutilated, lost, stolen or destroyed; provided that, in the case of
mutilation, the mutilated Note shall first be surrendered to the City, and in the case of a lost,
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stolen or destroyed Note, there shall be first furnished to the City and the Borrower evidence of
such loss, theft or destruction satisfactory to the City and the Borrower, together with indemnity
satisfactory to them. The City and Borrower may charge the Holder with their reasonable fees
and expenses in replacing any mutilated, lost, stolen or destroyed Note.
11. Transfer of Note; Person Treated as Holder. The Note shall be transferable by the
Holder only on the registration records of the City, upon presentation of the Note for notation of
such transfer thereon at the office of the City Clerk, as note registrar, accompanied by a written
instrument of transfer in form satisfactory to the City Clerk duly executed by the Holder or its
attorney duly authorized in writing. The Note shall continue to be subject to successive transfers
in such manner at the option of the Holder of the Note. No service charge shall be made to the
Holder for any such transfer, but the City Clerk may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith, which the Borrower shall
pay under the Loan Agreement. The person in whose name the Note shall be issued or, if
transferred, shall be registered from time to time shall be deemed and regarded as the absolute
Holder thereof for all purposes, and payment of or on account of the principal of and interest on
the Note shall be made only to or upon the order of the Holder thereof, or its attorney duly
authorized in writing, and neither the City, the City Clerk, the Borrower, nor the Purchaser shall
be affected by any notice to the contrary. All such payments shall be valid and effectual to
satisfy and discharge the liability upon the Note to the extent of the sum or sums so paid. The
Note shall be initially registered in the name of the Purchaser.
12. Amendments, Changes and Modifications to Documents and Note Resolution.
Except as provided in the Loan Agreement, the City shall not enter into or make any change,
modification, alteration or termination of the Loan Agreement, the Loan Agreement Assignment
or this Note Resolution.
13. Pledge to Holder. Pursuant to the Loan Agreement Assignment, the City shall
pledge and assign to the Purchaser and its successor Holders of the Note all interest of the City in
the Loan Agreement (except for the interests of the City under Sections 5.02(b), 7.01, 7.07, 8.04
and 8.05). All collections of moneys by the City in any proceeding for enforcement of the
obligations of the Borrower pursuant to the Loan Agreement, except for the rights of the City
thereunder reserved under the Loan Agreement Assignment, shall be received, held and applied
for the benefit of the Holder of the Note.
14. Covenants with Holders; Enforceability. All provisions of the Note and of this
Resolution and all representations and undertakings by the City in the Loan Agreement and the
Loan Agreement Assignment are hereby declared to be covenants between the City and the
Purchaser and its successor Holders of the Note and shall be enforceable by the Purchaser or any
Holder in a proceeding brought for that purpose.
15. Certificates, etc. Officers of the City are authorized to prepare and furnish to
Dorsey & Whitney LLP, as Bond Counsel, to the Borrower and to the Purchaser, certified copies
of all proceedings and records of the City relating to the Note, and such other affidavits and
certificates as may be required to show the facts appearing from the books and records in the
officers’ custody and control or as otherwise known to them; and all such certified copies,
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certificates and affidavits, including any heretofore furnished, shall constitute representations of
the City as to the truth of all statements of fact contained therein.
16. Nature of City’s Obligations. All covenants, stipulations, obligations,
representations, and agreements of the City contained in this Resolution or contained in the
aforementioned documents shall be deemed to be the covenants, stipulations, obligations,
representations, and agreements of the City to the full extent authorized or permitted by law, and
all such covenants, stipulations, obligations, representations, and agreements shall be binding
upon the City. Except as otherwise provided in this Resolution, all rights, powers, and privileges
conferred, and duties and liabilities imposed upon the City by the provisions of this Resolution or
of the aforementioned documents shall be exercised or performed by such officers, board, body
or agency as may be required or authorized by law to exercise such powers and to perform such
duties. No covenant, stipulation, obligation, representation, or agreement herein contained or
contained in the documents referred to above shall be deemed to be a covenant, stipulation,
obligation, representation, or agreement of any board member, officer, agent, or employee of the
City in that person’s individual capacity, and neither the City Commission nor any officer or
employee executing the Note or such documents shall be liable personally on the Note or be
subject to any representation, personal liability or accountability by reason of the issuance
thereof. No provision, representation, covenant or agreement contained in the Note, this
Resolution or in any other document related to the Note, and no obligation therein or herein
imposed upon the City or the breach thereof, shall constitute or give rise to a general or moral
obligation, or indebtedness or pecuniary liability of the City or any charge upon its general credit
or taxing powers. In making the agreements, provisions, covenants and representations set forth
in the Note or in any other document related to the Note, the City has not obligated itself to pay
or remit any funds or revenues.
17. Authorized Officers. The Note and the documents referred to herein are
authorized to be executed on behalf of the City by either its Mayor or City Clerk; provided that
in the event any of the officers of the City authorized to execute documents on behalf of the City
under this Resolution shall have resigned or shall for any reason be unable to do so, the acting
Mayor or the acting City Clerk, as the case may be, is hereby directed and authorized to do so on
behalf of the City, with the same effect as if executed by any officer specifically authorized to do
so in this Resolution.
18. Bank-Qualified Bond. The Note is hereby designated as a “qualified tax-exempt
obligation” within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as
amended. The Note is to be issued on behalf of an organization described in Section 501(c)(3) of
the Code and is to be issued as a “qualified 501(c)(3) bond” under Section 145 of the Code. The
City, together with all subordinate entities thereof, does not reasonably expect to issue tax-
exempt obligations, including the Note (other than private activity bonds not constituting
“qualified 501(c)(3) bonds”), which, when added together with all such obligations heretofore
issued by the City, or such subordinate entities, in calendar year 2007, will be in an aggregate
amount exceeding $10,000,000 in calendar year 2007.
19. Definitions and Interpretation. Terms not otherwise defined in this Resolution but
defined in the Loan Agreement shall have the same meanings in this Resolution and shall be
interpreted herein as provided therein. Notices may be given as provided in the Loan
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Agreement. In case any provision of this Resolution is for any reason illegal or invalid or
inoperable, such illegality or invalidity or inoperability shall not affect the remaining provisions
of this Resolution, which shall be construed or enforced as if such illegal or invalid or inoperable
provision were not contained herein.
PASSED AND APPROVED BY THE CITY COMMISSION OF THE CITY OF
BOZEMAN, MONTANA, on this 29th day of May, 2007.
____________________________________
Mayor
Attest:
Clerk of the Commission
APPROVED AS TO FORM:
City Attorney
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CERTIFICATE AS TO RESOLUTION
I, the undersigned, being the duly qualified and acting recording officer of the City of
Bozeman, Montana (the “City”), hereby certify that the attached resolution is a true copy of a
Resolution entitled: “A RESOLUTION AUTHORIZING AND PROVIDING FOR THE
ISSUANCE AND SALE OF A REVENUE NOTE PURSUANT TO MONTANA CODE
ANNOTATED, TITLE 90, CHAPTER 5, PART I, AS AMENDED, AT THE REQUEST OF
LEARNING CIRCLE MONTESSORI ELEMENTARY SCHOOL, INC., AND APPROVING
THE FORMS OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH” (the
“Resolution”), on file in the original records of the City in my legal custody; that the Resolution
was duly adopted by the City Commission of the City at a regular meeting on May 29, 2007, and
that the meeting was duly held by the City Commission and was attended throughout by a
quorum, pursuant to call and notice of such meeting given as required by law; and that the
Resolution has not as of the date hereof been amended or repealed.
I further certify that, upon vote being taken on the Resolution at said meeting, the
following Commissioners voted in favor thereof _____________________________________
______________________________________________________; voted against the same:
________________________________________________; abstained from voting thereon:
________________; or were absent: __________________.
WITNESS my hand and seal officially this ____ day of May, 2007.
(SEAL) ____________________________________
Clerk of the Commission
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Extract of Minutes of Meeting of the
City Commission of City of Bozeman, Montana
Pursuant to due call and notice thereof, a regular meeting of the City Commission
of City of Bozeman, Montana (the “City”) was duly held in the Community Room, Third
Floor, Gallatin County Courthouse, on Monday, the 29th day of May, 2007, at 6:00
o’clock p.m.
The following Commission members were present:
and the following were absent:
* * * * * * * * *
The Mayor announced that this was the time and place for a public hearing on a
proposal for the undertaking of a project consisting of the acquisition of the existing
4,875 square foot building located at 3001 West Villard Street, Bozeman, Montana, for
use as a private elementary school, and the issuance of a revenue note by the City
therefor, all at the request of Learning Circle Montessori Elementary School, Inc., a
Montana nonprofit corporation. The following persons appeared:
After all persons present had an opportunity to express their views, the hearing
was closed.
* * * * * * * * *
Commissioner _____________ then introduced the following written resolution,
the reading in full thereof having been dispensed with by unanimous consent, and moved
the adoption thereof:
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June 1, 2007
Wells Fargo Brokerage Services, LLC
Minneapolis, Minnesota
Re: $400,000 Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project)
City of Bozeman, Montana
Ladies and Gentlemen:
We have acted as Bond Counsel in connection with the authorization, issuance and sale
by City of Bozeman, Montana (the “Issuer”), of its Revenue Note (Learning Circle Montessori
Elementary School, Inc. Project), in the authorized principal amount of $400,000 (the “Note”),
dated the date hereof, being a single, fully registered Note. The Note matures on the date, bears
interest at the rate and payable on the dates, and is subject to mandatory and optional redemption
on the conditions and dates and at the prices specified therein.
The Note is being issued for the purpose of funding a loan from the Issuer to Learning
Circle Montessori Elementary School, Inc., a Montana limited liability partnership (the
“Borrower”), to provide financing for the project described in the Loan and Purchase Agreement
referenced below.
For the purposes of rendering this opinion, we have examined: (1) a Loan and Purchase
Agreement dated as of June 1, 2007 (the “Loan Agreement”), between the Issuer, the Borrower
and Wells Fargo Brokerage Services, LLC as purchaser (the “Purchaser”), (2) the Loan
Agreement Assignment dated as of June 1, 2007 (the “Loan Agreement Assignment”), from the
Issuer to the Purchaser, (3) a certified copy of the Note Resolution adopted by the Board of
Commissioners of the Issuer on May 29, 2007 (the “Note Resolution”), authorizing execution
and delivery of the Loan Agreement, the Loan Agreement Assignment and other documents, and
(4) other documents and matters of law as we have deemed necessary in order to render this
opinion, including an opinion rendered by Paul J. Luwe, Esq., as counsel to the Issuer, and an
opinion rendered by Janice K. Whetstone, P.C., as counsel to the Borrower, upon which opinions
we rely as to matters set forth therein. As to questions of fact material to our opinion, we have
assumed the authenticity of and relied upon certified proceedings, affidavits and certificates
furnished to us without undertaking to verify the same by independent investigation.
We have not been engaged or undertaken to verify the accuracy, completeness or
sufficiency of any offering material relating to the Note, and we express no opinion relating
thereto.
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Wells Fargo Brokerage Services, LLC
June 1, 2007
Page 2
From such examination and on the basis of laws, regulations, rulings and decisions in
effect on the date hereof, it is our opinion that:
(1) The Issuer is authorized to issue the Note, to lend the proceeds thereof to the
Borrower pursuant to the Loan Agreement, and to execute and deliver the Loan Agreement and
the Loan Agreement Assignment.
(2) The Loan Agreement and the Loan Agreement Assignment have been duly and
validly authorized, executed and delivered by the Issuer and, assuming the due authorization,
execution and delivery thereof by the other parties thereto, are in full force and effect and are
valid and binding obligations of the Issuer enforceable in accordance with their terms.
(3) The Note has been duly and validly authorized, executed and delivered by the
Issuer and is a valid and binding special obligation of the Issuer in accordance with its terms and
the terms of the Note Resolution.
(4) The Note is not a general obligation or indebtedness of the Issuer within the
meaning of any constitutional or statutory limitation, and does not constitute or give rise to a
charge against its general credit or taxing powers, but is payable solely from revenues pledged
and assigned to the Purchaser under the Loan Agreement Assignment and the Note Resolution.
(5) The Note is a “private activity bond” within the meaning of Section 141 and a
“qualified 501(c)(3) bond” within the meaning of Section 145 of the Internal Revenue Code of
1986 (the “Code”). The Note bears interest that is not includable in gross income of the owner
thereof for federal income tax purposes. Interest on the Note is not an item of tax preference
includable in alternative minimum taxable income for purposes of the federal alternative
minimum tax applicable to all taxpayers, but is includable in adjusted current earnings of
corporations in determining alternative minimum taxable income for purposes of the federal
alternative minimum tax imposed on corporations.
Interest on the Note is not includable in gross income for State of Montana individual
income tax purposes, but is includable in the computation of income for purposes of the Montana
corporate income tax and the Montana corporate license tax.
The Code establishes certain requirements (the “Federal Tax Requirements”) that must be
met subsequent to the issuance of the Note in order that, for federal income tax purposes, interest
on the Note not be included in gross income. The Federal Tax Requirements include, but are not
limited to, requirements relating to the expenditure of Note proceeds, occupancy of the project
financed by the Note, restrictions on the investment of Note proceeds prior to expenditure and
the requirement that certain earnings on the “gross proceeds” of the Note be paid to the federal
government. Noncompliance with the Federal Tax Requirements may cause interest on the Note
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Wells Fargo Brokerage Services, LLC
June 1, 2007
Page 3
to become subject to federal and Montana income taxation retroactive to their date of issue,
irrespective of the date on which such noncompliance occurs or is ascertained. The Loan
Agreement contains covenants and other provisions which, if complied with, will satisfy the
Federal Tax Requirements. In expressing the opinion in paragraph (5), we have assumed
compliance by the Borrower, the Issuer and the Purchaser with the provisions of the Loan
Agreement. Except as expressly stated in this opinion, we express no opinion as to federal or
state tax consequence arising from ownership of the Note or receipt of interest thereon.
It is to be understood that the rights of the owners of the Note and the enforceability of
the Note, the Loan Agreement and the Loan Agreement Assignment may be subject to (i) state
and federal laws, rulings, decisions and principles of equity affecting remedies, and
(ii) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally
applicable and may also be subject to the exercise of judicial discretion in appropriate cases.
In rendering this opinion we have relied upon the opinion of Janice K. Whetstone, P.C.,
counsel to the Borrower, that the Borrower is an organization described in Section 501(c)(3) of
the Code and exempt from federal income taxation under Section 501(a) of the Code, that the
Loan Agreement has been duly authorized, executed and delivered by the Borrower, and as to
the characterization of the Borrower’s activities in connection with the properties financed with
proceeds of the Note as activities that do not constitute an unrelated trade or business under
Section 513(a) of the Code. In addition, we have relied upon the opinion of Paul J. Luwe, Esq.,
counsel to the Issuer, as to the matters set forth therein. Finally, we have relied upon
certifications made by officers of the Issuer and the Borrower as to the use of the proceeds of the
Note, the use of the facilities financed thereby, and other matters material to the tax-exempt
status of the interest borne by the Note.
Very truly yours,
4824-2724-5313\1
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[Form of Opinion of Counsel to the Issuer]
[Letterhead of City Attorney]
June 1, 2007
Wells Fargo Brokerage Services, LLC
Minneapolis, Minnesota
Dorsey & Whitney LLP
Minneapolis, Minnesota
Re: $400,000 Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project)
City of Bozeman, Montana,
Ladies and Gentlemen:
We have acted as legal counsel to City of Bozeman, Montana, a political subdivision
under the laws of Montana (the “Issuer”) in connection with the authorization, issuance and sale
of its Revenue Note (Learning Circle Montessori Elementary School, Inc. Project), in the
principal amount of $400,000 (the “Note”), which is being issued pursuant to Montana Code
Annotated, Title 90, Chapter 5, Part 1, as amended (the “Act”). The Note is being issued for the
purpose of funding a loan from the Issuer to Learning Circle Montessori Elementary School,
Inc., a Montana nonprofit corporation (the “Borrower”), to provide financing for the project
described in the Loan and Purchase Agreement referenced below. We have examined executed
copies of the following:
(a) the Loan and Purchase Agreement dated as of June 1, 2007 (the “Loan
Agreement”) between the Issuer, Wells Fargo Brokerage Services, LLC as purchaser (the
“Purchaser”) and the Borrower;
(b) the Loan Agreement Assignment dated as of June 1, 2007 (the “Loan
Assignment”) from the Issuer to the Purchaser;
(c) the note resolution adopted May 29, 2007, by the City Commissioners of
the Issuer, authorizing and approving the issuance of the Note (the “Note Resolution”);
and
(d) such other instruments and certifications as have been executed and
delivered by the Issuer pursuant to the terms of the Loan Agreement and the Loan
Assignment.
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Based upon our examination of the foregoing agreements, the Note Resolution,
certifications and such other documents and such matters of law as we have deemed necessary,
we are of the opinion that:
1. The Issuer is a duly organized and existing political subdivision under the laws of
the State of Montana. Under the provisions of the Act, the Issuer is authorized to undertake the
project and enter into the transactions contemplated by the Loan Agreement and the Loan
Assignment and to carry out its obligations thereunder. Pursuant to the Note Resolution, the
Issuer has been duly authorized to execute and deliver the Loan Agreement and the Loan
Assignment, and to issue, execute and deliver the Note, and to execute and deliver such other
documents and certificates as are contemplated thereby.
2. All proceedings and actions taken by the Issuer in connection with the project and
the issuance and sale of the Note were duly conducted in accordance with all procedural
requirements imposed by law, and the officials of the Issuer acting in such connection were duly
elected and qualified to serve as such officers.
3. The execution and delivery of the Loan Agreement, the Loan Assignment and the
Note do not violate any provision of any law, rule, regulation or ordinance, or any order,
judgment or decree of any federal, state or local court, and do not conflict with or constitute a
breach of or a default under any ordinance, rule, regulation or similar restriction, or under the
terms and conditions of any agreement or instrument to which the Issuer is a party or by which
the Issuer is bound.
4. The Note, the Loan Agreement and the Loan Assignment have been duly
authorized, executed and delivered by the Issuer, and are valid and binding obligations thereof
enforceable in accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting
creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable and that
their enforcement may also be subject to the exercise of judicial discretion in accordance with
general principles of law.
5. There are no legal or governmental proceedings pending or, to the best of our
knowledge, threatened, against the Issuer, wherein an unfavorable decision, ruling or finding
would have a material adverse effect on the legality, validity, or enforceability of the Note, the
Loan Agreement or the Loan Assignment.
Very truly yours,
2
4835-1776-4353\1
67
[Letterhead of Counsel to the Borrower]
June 1, 2007
Wells Fargo Brokerage Services, LLC
Minneapolis, Minnesota
Dorsey & Whitney LLP
Minneapolis, Minnesota
Re: $400,000 Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project)
City of Bozeman, Montana
Ladies and Gentlemen:
I have acted as legal counsel to Learning Circle Montessori Elementary School, Inc., a
Montana nonprofit corporation (the “Borrower”), in connection with the issuance by City of
Bozeman, Montana (the “Issuer”) of its Revenue Note (Learning Circle Montessori Elementary
School, Inc. Project), in the principal amount of $400,000 (the “Note”). This opinion is being
supplied to Wells Fargo Brokerage Services, LLC (the “Purchaser”) and Dorsey & Whitney
LLP, as Bond Counsel, at the request of the Borrower.
For the purpose of rendering this opinion, I have examined: (1) a Loan and Purchase
Agreement (the “Loan Agreement”), dated as of June 1, 2007, between the Issuer, the Purchaser
and the Borrower; (2) a Combination Mortgage, Security Agreement and Fixture Financing
Statement and Assignment of Leases and Rents (the “Mortgage”) dated as of June 1, 2007 from
the Borrower to the Purchaser; and (3) such other documents as I considered necessary in order
to render the opinions set forth below.
In rendering the opinions set forth below, I have assumed the authenticity of all
documents submitted to us as originals, the genuineness of all signatures and the conformity to
authentic originals of all documents submitted to me as copies. I have also assumed with respect
to all parties to agreements or instruments relevant hereto other than the Borrower, that such
parties had the requisite power and authority (corporate or otherwise) to execute, deliver and
perform such agreements or instruments, that such agreements or instruments have been duly
authorized by all requisite action (corporate or otherwise), executed and delivered by such parties
and that such agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to the opinions below, I have relied upon
representations made by officers of the Borrower, and upon certificates of officers of the
Borrower and public officials (including, without limitation, those certificates delivered to others
at the time of issuance and delivery by the Issuer of the Note).
68
Based on the foregoing, I am of the opinion that:
1. The Borrower is a nonprofit corporation, duly organized, validly existing and in
good standing under the laws of the State of Montana.
2. The Borrower is an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (the “Code”) (a “Tax-Exempt
Organization”); the Borrower is exempt from federal income taxation under
Section 501(a) of the Code, other than with respect to unrelated business income,
pursuant to Section 513 of the Code, if any; the Borrower is not a private
foundation, within the meaning of Section 509(a) of the Code; and none of the
activities of the Borrower in connection with the properties financed with the
proceeds of the Note constitute an unrelated trade or business under Section
513(a) of the Code.
3. The Borrower has full power and authority to execute and deliver the Loan
Agreement and the Mortgage and to carry out the terms thereof. The Loan
Agreement and the Mortgage have been duly authorized by all requisite action on
the part of the Borrower and have been duly executed and delivered by the
Borrower.
4. The Loan Agreement and the Mortgage constitute valid and binding obligations
of the Borrower enforceable in accordance with their terms.
5. I know of no pending or overtly threatened lawsuits against the Borrower (i) with
respect to the transactions contemplated by the Loan Agreement or the Mortgage,
or (ii) that if decided against the Borrower would have a materially adverse effect
on the financial condition or operations of the Borrower.
The opinions set forth above are subject to the following qualifications and exceptions:
The opinions in paragraph 4 above are subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar law of general application affecting
creditors’ rights.
The opinions in paragraph 4 above are subject to the effect of general principles of
equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair
dealing, and other similar doctrines affecting the enforceability of agreements generally
(regardless of whether considered in a proceeding in equity or at law).
The opinions expressed above are limited to the laws of the State of Montana and the
federal laws of the United States of America.
The foregoing opinions are being furnished to you solely for your benefit and may not be
relied upon by, nor may copies be delivered to, any other person without my prior written
consent.
Very truly yours,
2
4810-6199-9617\1
69
B. SEND ACKNOWLEDGMENT TO: (Name and Address)
FILING OFFICE COPY — NATIONAL UCC FINANCING STATEMENT (FORM UCC1) (REV. 07/29/98)
THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY
UCC FINANCING STATEMENT
FOLLOW INSTRUCTIONS (front and back) CAREFULLY
A. NAME & PHONE OF CONTACT AT FILER [optional]
1. DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (1a or 1b) - do not abbreviate or combine names
4. This FINANCING STATEMENT covers the following collateral:
COUNTRY
5. ALTERNATIVE DESIGNATION [if applicable]:NON-UCC FILINGAG. LIENSELLER/BUYERBAILEE/BAILORCONSIGNEE/CONSIGNORLESSEE/LESSOR
This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL
ESTATE RECORDS. Attach Addendum6.All Debtors Debtor 1 Debtor 2
Check to REQUEST SEARCH REPORT(S) on Debtor(s)
[ADDITIONAL FEE]7.[if applicable] [optional]
OR
SUFFIX
POSTAL CODECITY
FIRST NAME
2c. MAILING ADDRESS
OR
OR
2d. TAX ID #: SSN OR EIN ADD'L INFO RE
ORGANIZATION
DEBTOR
2e. TYPE OF ORGANIZATION 2f. JURISDICTION OF ORGANIZATION
3b. INDIVIDUAL'S LAST NAME FIRST NAME
POSTAL CODE3c. MAILING ADDRESS
1a. ORGANIZATION'S NAME
2b. INDIVIDUAL'S LAST NAME
CITY
MIDDLE NAME
STATE
2g. ORGANIZATIONAL ID #, if any
MIDDLE NAME
STATE
SUFFIX
COUNTRY
1d. TAX ID #: SSN OR EIN
2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b) - do not abbreviate or combine names
POSTAL CODECITY1c. MAILING ADDRESS
ADD'L INFO RE
ORGANIZATION
DEBTOR
1e. TYPE OF ORGANIZATION 1f. JURISDICTION OF ORGANIZATION
NONE
1b. INDIVIDUAL'S LAST NAME
2a. ORGANIZATION'S NAME
FIRST NAME MIDDLE NAME
STATE
1g. ORGANIZATIONAL ID #, if any
SUFFIX
COUNTRY
NONE
3a. ORGANIZATION'S NAME
3. SECURED PARTY'S NAME (or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P) - insert only one secured party name (3a or 3b)
8.OPTIONAL FILER REFERENCE DATA
70
Instructions for National UCC Financing Statement (Form UCC1)
Please type or laser-print this form. Be sure it is completely legible. Read all Instructions, especially Instruction 1; correct Debtor name is crucial. Follow
Instructions completely.
Fill in form very carefully; mistakes may have important legal consequences. If you have questions, consult your attorney. Filing office cannot give legal advice.
Do not insert anything in the open space in the upper portion of this form; it is reserved for filing office use.
When properly completed, send Filing Office Copy, with required fee, to filing office. If you want an acknowledgment, complete item B and, if filing in a filing
office that returns an acknowledgment copy furnished by filer, you may also send Acknowledgment Copy; otherwise detach. If you want to make a search
request, complete item 7 (after reading Instruction 7 below) and send Search Report Copy, otherwise detach. Always detach Debtor and Secured Party
Copies.
If you need to use attachments, use 8-1/2 X 11 inch sheets and put at the top of each sheet the name of the first Debtor, formatted exactly as it appears in
item 1 of this form; you are encouraged to use Addendum (Form UCC1Ad).
A.To assist filing offices that might wish to communicate with filer, filer may provide information in item A. This item is optional.
B.Complete item B if you want an acknowledgment sent to you. If filing in a filing office that returns an acknowledgment copy furnished by filer, present
simultaneously with this form a carbon or other copy of this form for use as an acknowledgment copy.
1.Debtor name: Enter only one Debtor name in item 1, an organization's
name (1a) or an individual’s name (1b). Enter Debtor’s exact full legal
name. Don’t abbreviate.
1a.Organization Debtor. “Organization” means an entity having a legal
identity separate from its owner. A partnership is an organization; a sole
proprietorship is not an organization, even if it does business under a
trade name. If Debtor is a partnership, enter exact full legal name of
partnership; you need not enter names of partners as additional Debtors.
If Debtor is a registered organization (e.g., corporation, limited partnership,
limited liability company), it is advisable to examine Debtor’s current filed
charter documents to determine Debtor's correct name, organization
type, and jurisdiction of organization.
1b.Individual Debtor. “Individual” means a natural person; this includes a
sole proprietorship, whether or not operating under a trade name. Don’t
use prefixes (Mr., Mrs., Ms.). Use suffix box only for titles of lineage (Jr.,
Sr., III) and not for other suffixes or titles (e.g., M.D.). Use married
woman’s personal name (Mary Smith, not Mrs. John Smith). Enter
individual Debtor’s family name (surname) in Last Name box, first given
name in First Name box, and all additional given names in Middle Name
box.
For both organization and individual Debtors: Don’t use Debtor’s trade
name, DBA, AKA, FKA, Division name, etc. in place of or combined with
Debtor’s legal name; you may add such other names as additional
Debtors if you wish (but this is neither required nor recommended).
1c. An address is always required for the Debtor named in 1a or 1b.
1d. Debtor’s taxpayer identification number (tax ID #) — social security
number or employer identification number — may be required in some
states.
1e,f,g. “Additional information re organization Debtor” is always required. Type
of organization and jurisdiction of organization as well as Debtor’s exact
legal name can be determined from Debtor’s current filed charter document.
Organizational ID #, if any, is assigned by the agency where the charter
document was filed; this is different from tax ID #; this should be entered
preceded by the 2-character U.S. Postal identification of state of
organization if one of the United States (e.g., CA12345, for a California
corporation whose organizational ID # is 12345); if agency does not
assign organizational ID #, check box in item 1g indicating “none.”
Note: If Debtor is a trust or a trustee acting with respect to property held in trust,
enter Debtor's name in item 1 and attach Addendum (Form UCC1Ad) and
check appropriate box in item 17. If Debtor is a decedent's estate, enter name
of deceased individual in item 1b and attach Addendum (Form UCC1Ad) and
check appropriate box in item 17. If Debtor is a transmitting utility or this
Financing Statement is filed in connection with a Manufactured-Home
Transaction or a Public-Finance Transaction as defined in applicable
Commercial Code, attach Addendum (Form UCC1Ad) and check appropriate
box in item 18.
2. If an additional Debtor is included, complete item 2, determined and
formatted per Instruction 1. To include further additional Debtors, or one
or more additional Secured Parties, attach either Addendum (Form
UCC1Ad) or other additional page(s), using correct name format. Follow
Instruction 1 for determining and formatting additional names.
3. Enter information for Secured Party or Total Assignee, determined and
formatted per Instruction 1. If there is more than one Secured Party, see
Instruction 2. If there has been a total assignment of the Secured Party’s
interest prior to filing this form, you may either (1) enter Assignor S/P‘s
name and address in item 3 and file an Amendment (Form UCC3) [see
item 5 of that form]; or (2) enter Total Assignee’s name and address in
item 3 and, if you wish, also attaching Addendum (Form UCC1Ad) giving
Assignor S/P’s name and address in item 12.
4. Use item 4 to indicate the collateral covered by this Financing Statement.
If space in item 4 is insufficient, put the entire collateral description or
continuation of the collateral description on either Addendum (Form
UCC1Ad) or other attached additional page(s).
5. If filer desires (at filer's option) to use titles of lessee and lessor, or
consignee and consignor, or seller and buyer (in the case of accounts or
chattel paper), or bailee and bailor instead of Debtor and Secured Party,
check the appropriate box in item 5. If this is an agricultural lien (as
defined in applicable Commercial Code) filing or is otherwise not a UCC
security interest filing (e.g., a tax lien, judgment lien, etc.), check the
appropriate box in item 5, complete items 1-7 as applicable and attach any
other items required under other law.
6. If this Financing Statement is filed as a fixture filing or if the collateral
consists of timber to be cut or as-extracted collateral, complete items 1-
5, check the box in item 6, and complete the required information (items
13, 14 and/or 15) on Addendum (Form UCC1Ad).
7. This item is optional. Check appropriate box in item 7 to request Search
Report(s) on all or some of the Debtors named in this Financing Statement.
The Report will list all Financing Statements on file against the designated
Debtor on the date of the Report, including this Financing Statement.
There is an additional fee for each Report. If you have checked a box in
item 7, file Search Report Copy together with Filing Officer Copy (and
Acknowledgment Copy). Note: Not all states do searches and not all
states will honor a search request made via this form; some states require
a separate request form.
8. This item is optional and is for filer's use only. For filer's convenience of
reference, filer may enter in item 8 any identifying information (e.g.,
Secured Party's loan number, law firm file number, Debtor's name or
other identification, state in which form is being filed, etc.) that filer may
find useful.
71
15.Name and address of a RECORD OWNER of above-described real estate
(if Debtor does not have a record interest):
17. Check only if applicable and check only one box.
Debtor is a Trust or Trustee acting with respect to property held in trust or Decedent's Estate
18. Check only if applicable and check only one box.
FILING OFFICE COPY — NATIONAL UCC FINANCING STATEMENT ADDENDUM (FORM UCC1Ad) (REV. 07/29/98)
Debtor is a TRANSMITTING UTILITY
Filed in connection with a Manufactured-Home Transaction — effective 30 years
Filed in connection with a Public-Finance Transaction — effective 30 years
THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY
FIRST NAME
CITY STATE
11e. TYPE OF ORGANIZATION
COUNTRY
11. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one name (11a or 11b) - do not abbreviate or combine names
11c. MAILING ADDRESS
OR
11a. ORGANIZATION'S NAME
11b. INDIVIDUAL'S LAST NAME
11d. TAX ID #: SSN OR EIN 11f. JURISDICTION OF ORGANIZATION
MIDDLE NAME
POSTAL CODE
SUFFIX
ADD'L INFO RE
ORGANIZATION
DEBTOR NONE
12. ADDITIONAL SECURED PARTY'S or ASSIGNOR S/P'S NAME - insert only one name (12a or 12b)
OR
14. Description of real estate:
fixture filing.
12c. MAILING ADDRESS CITY STATE
SUFFIXMIDDLE NAMEFIRST NAME12b. INDIVIDUAL'S LAST NAME
12a. ORGANIZATION'S NAME
collateral, or is filed as a
13. This FINANCING STATEMENT covers timber to be cut or as-extracted 16. Additional collateral description:
11g. ORGANIZATIONAL ID #, if any
POSTAL CODE COUNTRY
OR
UCC FINANCING STATEMENT ADDENDUM
FOLLOW INSTRUCTIONS (front and back) CAREFULLY
9. NAME OF FIRST DEBTOR (1a or 1b) ON RELATED FINANCING STATEMENT
9a. ORGANIZATION'S NAME
9b. INDIVIDUAL'S LAST NAME
10. MISCELLANEOUS:
MIDDLE NAME,SUFFIXFIRST NAME
72
Instructions for National UCC Financing Statement Addendum (Form UCC1Ad)
9. Insert name of first Debtor shown on Financing Statement to which this Addendum is related, exactly as shown in item 1 of Financing Statement.
10. Miscellaneous: Under certain circumstances, additional information not provided on Financing Statement may be required. Also, some states have
non-uniform requirements. Use this space to provide such additional information or to comply with such requirements; otherwise, leave blank.
11. If this Addendum adds an additional Debtor, complete item 11 in accordance with Instruction 1 on Financing Statement. To add more than one additional
Debtor, either use an additional Addendum form for each additional Debtor or replicate for each additional Debtor the formatting of Financing Statement
item 1 on an 8-1/2 X 11 inch sheet (showing at the top of the sheet the name of the first Debtor shown on the Financing Statement), and in either case
give complete information for each additional Debtor in accordance with Instruction 1 on Financing Statement. All additional Debtor information,
especially the name, must be presented in proper format exactly identical to the format of item 1 of Financing Statement.
12. If this Addendum adds an additional Secured Party, complete item 12 in accordance with Instruction 3 on Financing Statement. In the case of a total
assignment of the Secured Party’s interest before the filing of this Financing Statement, if filer has given the name and address of the Total Assignee
in item 3 of the Financing Statement, filer may give the Assignor S/P’s name and address in item 12.
13-15. If collateral is timber to be cut or as-extracted collateral, or if this Financing Statement is filed as a fixture filing, check appropriate box in item 13; provide
description of real estate in item 14; and, if Debtor is not a record owner of the described real estate, also provide, in item 15, the name and address
of a record owner. Also provide collateral description in item 4 of Financing Statement. Also check box 6 on Financing Statement. Description of real
estate must be sufficient under the applicable law of the jurisdiction where the real estate is located.
16. Use this space to provide continued description of collateral, if you cannot complete description in item 4 of Financing Statement.
17. If Debtor is a trust or a trustee acting with respect to property held in trust or is a decedent’s estate, check the appropriate box.
18. If Debtor is a transmitting utility or if the Financing Statement relates to a Manufactured-Home Transaction or a Public-Finance Transaction as defined
in the applicable Commercial Code, check the appropriate box.
73
B. SEND ACKNOWLEDGMENT TO: (Name and Address)
FILING OFFICE COPY — NATIONAL UCC FINANCING STATEMENT (FORM UCC1) (REV. 07/29/98)
THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY
UCC FINANCING STATEMENT
FOLLOW INSTRUCTIONS (front and back) CAREFULLY
A. NAME & PHONE OF CONTACT AT FILER [optional]
1. DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (1a or 1b) - do not abbreviate or combine names
4. This FINANCING STATEMENT covers the following collateral:
COUNTRY
5. ALTERNATIVE DESIGNATION [if applicable]:NON-UCC FILINGAG. LIENSELLER/BUYERBAILEE/BAILORCONSIGNEE/CONSIGNORLESSEE/LESSOR
This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL
ESTATE RECORDS. Attach Addendum6.All Debtors Debtor 1 Debtor 2
Check to REQUEST SEARCH REPORT(S) on Debtor(s)
[ADDITIONAL FEE]7.[if applicable] [optional]
OR
SUFFIX
POSTAL CODECITY
FIRST NAME
2c. MAILING ADDRESS
OR
OR
2d. TAX ID #: SSN OR EIN ADD'L INFO RE
ORGANIZATION
DEBTOR
2e. TYPE OF ORGANIZATION 2f. JURISDICTION OF ORGANIZATION
3b. INDIVIDUAL'S LAST NAME FIRST NAME
POSTAL CODE3c. MAILING ADDRESS
1a. ORGANIZATION'S NAME
2b. INDIVIDUAL'S LAST NAME
CITY
MIDDLE NAME
STATE
2g. ORGANIZATIONAL ID #, if any
MIDDLE NAME
STATE
SUFFIX
COUNTRY
1d. TAX ID #: SSN OR EIN
2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (2a or 2b) - do not abbreviate or combine names
POSTAL CODECITY1c. MAILING ADDRESS
ADD'L INFO RE
ORGANIZATION
DEBTOR
1e. TYPE OF ORGANIZATION 1f. JURISDICTION OF ORGANIZATION
NONE
1b. INDIVIDUAL'S LAST NAME
2a. ORGANIZATION'S NAME
FIRST NAME MIDDLE NAME
STATE
1g. ORGANIZATIONAL ID #, if any
SUFFIX
COUNTRY
NONE
3a. ORGANIZATION'S NAME
3. SECURED PARTY'S NAME (or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P) - insert only one secured party name (3a or 3b)
8.OPTIONAL FILER REFERENCE DATA
74
Instructions for National UCC Financing Statement (Form UCC1)
Please type or laser-print this form. Be sure it is completely legible. Read all Instructions, especially Instruction 1; correct Debtor name is crucial. Follow
Instructions completely.
Fill in form very carefully; mistakes may have important legal consequences. If you have questions, consult your attorney. Filing office cannot give legal advice.
Do not insert anything in the open space in the upper portion of this form; it is reserved for filing office use.
When properly completed, send Filing Office Copy, with required fee, to filing office. If you want an acknowledgment, complete item B and, if filing in a filing
office that returns an acknowledgment copy furnished by filer, you may also send Acknowledgment Copy; otherwise detach. If you want to make a search
request, complete item 7 (after reading Instruction 7 below) and send Search Report Copy, otherwise detach. Always detach Debtor and Secured Party
Copies.
If you need to use attachments, use 8-1/2 X 11 inch sheets and put at the top of each sheet the name of the first Debtor, formatted exactly as it appears in
item 1 of this form; you are encouraged to use Addendum (Form UCC1Ad).
A.To assist filing offices that might wish to communicate with filer, filer may provide information in item A. This item is optional.
B.Complete item B if you want an acknowledgment sent to you. If filing in a filing office that returns an acknowledgment copy furnished by filer, present
simultaneously with this form a carbon or other copy of this form for use as an acknowledgment copy.
1.Debtor name: Enter only one Debtor name in item 1, an organization's
name (1a) or an individual’s name (1b). Enter Debtor’s exact full legal
name. Don’t abbreviate.
1a.Organization Debtor. “Organization” means an entity having a legal
identity separate from its owner. A partnership is an organization; a sole
proprietorship is not an organization, even if it does business under a
trade name. If Debtor is a partnership, enter exact full legal name of
partnership; you need not enter names of partners as additional Debtors.
If Debtor is a registered organization (e.g., corporation, limited partnership,
limited liability company), it is advisable to examine Debtor’s current filed
charter documents to determine Debtor's correct name, organization
type, and jurisdiction of organization.
1b.Individual Debtor. “Individual” means a natural person; this includes a
sole proprietorship, whether or not operating under a trade name. Don’t
use prefixes (Mr., Mrs., Ms.). Use suffix box only for titles of lineage (Jr.,
Sr., III) and not for other suffixes or titles (e.g., M.D.). Use married
woman’s personal name (Mary Smith, not Mrs. John Smith). Enter
individual Debtor’s family name (surname) in Last Name box, first given
name in First Name box, and all additional given names in Middle Name
box.
For both organization and individual Debtors: Don’t use Debtor’s trade
name, DBA, AKA, FKA, Division name, etc. in place of or combined with
Debtor’s legal name; you may add such other names as additional
Debtors if you wish (but this is neither required nor recommended).
1c. An address is always required for the Debtor named in 1a or 1b.
1d. Debtor’s taxpayer identification number (tax ID #) — social security
number or employer identification number — may be required in some
states.
1e,f,g. “Additional information re organization Debtor” is always required. Type
of organization and jurisdiction of organization as well as Debtor’s exact
legal name can be determined from Debtor’s current filed charter document.
Organizational ID #, if any, is assigned by the agency where the charter
document was filed; this is different from tax ID #; this should be entered
preceded by the 2-character U.S. Postal identification of state of
organization if one of the United States (e.g., CA12345, for a California
corporation whose organizational ID # is 12345); if agency does not
assign organizational ID #, check box in item 1g indicating “none.”
Note: If Debtor is a trust or a trustee acting with respect to property held in trust,
enter Debtor's name in item 1 and attach Addendum (Form UCC1Ad) and
check appropriate box in item 17. If Debtor is a decedent's estate, enter name
of deceased individual in item 1b and attach Addendum (Form UCC1Ad) and
check appropriate box in item 17. If Debtor is a transmitting utility or this
Financing Statement is filed in connection with a Manufactured-Home
Transaction or a Public-Finance Transaction as defined in applicable
Commercial Code, attach Addendum (Form UCC1Ad) and check appropriate
box in item 18.
2. If an additional Debtor is included, complete item 2, determined and
formatted per Instruction 1. To include further additional Debtors, or one
or more additional Secured Parties, attach either Addendum (Form
UCC1Ad) or other additional page(s), using correct name format. Follow
Instruction 1 for determining and formatting additional names.
3. Enter information for Secured Party or Total Assignee, determined and
formatted per Instruction 1. If there is more than one Secured Party, see
Instruction 2. If there has been a total assignment of the Secured Party’s
interest prior to filing this form, you may either (1) enter Assignor S/P‘s
name and address in item 3 and file an Amendment (Form UCC3) [see
item 5 of that form]; or (2) enter Total Assignee’s name and address in
item 3 and, if you wish, also attaching Addendum (Form UCC1Ad) giving
Assignor S/P’s name and address in item 12.
4. Use item 4 to indicate the collateral covered by this Financing Statement.
If space in item 4 is insufficient, put the entire collateral description or
continuation of the collateral description on either Addendum (Form
UCC1Ad) or other attached additional page(s).
5. If filer desires (at filer's option) to use titles of lessee and lessor, or
consignee and consignor, or seller and buyer (in the case of accounts or
chattel paper), or bailee and bailor instead of Debtor and Secured Party,
check the appropriate box in item 5. If this is an agricultural lien (as
defined in applicable Commercial Code) filing or is otherwise not a UCC
security interest filing (e.g., a tax lien, judgment lien, etc.), check the
appropriate box in item 5, complete items 1-7 as applicable and attach any
other items required under other law.
6. If this Financing Statement is filed as a fixture filing or if the collateral
consists of timber to be cut or as-extracted collateral, complete items 1-
5, check the box in item 6, and complete the required information (items
13, 14 and/or 15) on Addendum (Form UCC1Ad).
7. This item is optional. Check appropriate box in item 7 to request Search
Report(s) on all or some of the Debtors named in this Financing Statement.
The Report will list all Financing Statements on file against the designated
Debtor on the date of the Report, including this Financing Statement.
There is an additional fee for each Report. If you have checked a box in
item 7, file Search Report Copy together with Filing Officer Copy (and
Acknowledgment Copy). Note: Not all states do searches and not all
states will honor a search request made via this form; some states require
a separate request form.
8. This item is optional and is for filer's use only. For filer's convenience of
reference, filer may enter in item 8 any identifying information (e.g.,
Secured Party's loan number, law firm file number, Debtor's name or
other identification, state in which form is being filed, etc.) that filer may
find useful.
75
15.Name and address of a RECORD OWNER of above-described real estate
(if Debtor does not have a record interest):
17. Check only if applicable and check only one box.
Debtor is a Trust or Trustee acting with respect to property held in trust or Decedent's Estate
18. Check only if applicable and check only one box.
FILING OFFICE COPY — NATIONAL UCC FINANCING STATEMENT ADDENDUM (FORM UCC1Ad) (REV. 07/29/98)
Debtor is a TRANSMITTING UTILITY
Filed in connection with a Manufactured-Home Transaction — effective 30 years
Filed in connection with a Public-Finance Transaction — effective 30 years
THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY
FIRST NAME
CITY STATE
11e. TYPE OF ORGANIZATION
COUNTRY
11. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one name (11a or 11b) - do not abbreviate or combine names
11c. MAILING ADDRESS
OR
11a. ORGANIZATION'S NAME
11b. INDIVIDUAL'S LAST NAME
11d. TAX ID #: SSN OR EIN 11f. JURISDICTION OF ORGANIZATION
MIDDLE NAME
POSTAL CODE
SUFFIX
ADD'L INFO RE
ORGANIZATION
DEBTOR NONE
12. ADDITIONAL SECURED PARTY'S or ASSIGNOR S/P'S NAME - insert only one name (12a or 12b)
OR
14. Description of real estate:
fixture filing.
12c. MAILING ADDRESS CITY STATE
SUFFIXMIDDLE NAMEFIRST NAME12b. INDIVIDUAL'S LAST NAME
12a. ORGANIZATION'S NAME
collateral, or is filed as a
13. This FINANCING STATEMENT covers timber to be cut or as-extracted 16. Additional collateral description:
11g. ORGANIZATIONAL ID #, if any
POSTAL CODE COUNTRY
OR
UCC FINANCING STATEMENT ADDENDUM
FOLLOW INSTRUCTIONS (front and back) CAREFULLY
9. NAME OF FIRST DEBTOR (1a or 1b) ON RELATED FINANCING STATEMENT
9a. ORGANIZATION'S NAME
9b. INDIVIDUAL'S LAST NAME
10. MISCELLANEOUS:
MIDDLE NAME,SUFFIXFIRST NAME
76
Instructions for National UCC Financing Statement Addendum (Form UCC1Ad)
9. Insert name of first Debtor shown on Financing Statement to which this Addendum is related, exactly as shown in item 1 of Financing Statement.
10. Miscellaneous: Under certain circumstances, additional information not provided on Financing Statement may be required. Also, some states have
non-uniform requirements. Use this space to provide such additional information or to comply with such requirements; otherwise, leave blank.
11. If this Addendum adds an additional Debtor, complete item 11 in accordance with Instruction 1 on Financing Statement. To add more than one additional
Debtor, either use an additional Addendum form for each additional Debtor or replicate for each additional Debtor the formatting of Financing Statement
item 1 on an 8-1/2 X 11 inch sheet (showing at the top of the sheet the name of the first Debtor shown on the Financing Statement), and in either case
give complete information for each additional Debtor in accordance with Instruction 1 on Financing Statement. All additional Debtor information,
especially the name, must be presented in proper format exactly identical to the format of item 1 of Financing Statement.
12. If this Addendum adds an additional Secured Party, complete item 12 in accordance with Instruction 3 on Financing Statement. In the case of a total
assignment of the Secured Party’s interest before the filing of this Financing Statement, if filer has given the name and address of the Total Assignee
in item 3 of the Financing Statement, filer may give the Assignor S/P’s name and address in item 12.
13-15. If collateral is timber to be cut or as-extracted collateral, or if this Financing Statement is filed as a fixture filing, check appropriate box in item 13; provide
description of real estate in item 14; and, if Debtor is not a record owner of the described real estate, also provide, in item 15, the name and address
of a record owner. Also provide collateral description in item 4 of Financing Statement. Also check box 6 on Financing Statement. Description of real
estate must be sufficient under the applicable law of the jurisdiction where the real estate is located.
16. Use this space to provide continued description of collateral, if you cannot complete description in item 4 of Financing Statement.
17. If Debtor is a trust or a trustee acting with respect to property held in trust or is a decedent’s estate, check the appropriate box.
18. If Debtor is a transmitting utility or if the Financing Statement relates to a Manufactured-Home Transaction or a Public-Finance Transaction as defined
in the applicable Commercial Code, check the appropriate box.
77
Information Return for Tax-Exempt
Private Activity Bond Issues8038Form OMB No. 1545-0720
(Under Internal Revenue Code section 149(e))Department of the Treasury
Internal Revenue Service See separate instructions.
Check if Amended Return Reporting Authority
2 Issuer’s employer identification number1Issuer’s name
4 Report number3Number and street (or P.O. box if mail is not delivered to street address)
1
6 Date of issue5City, town, or post office, state, and ZIP code
8 CUSIP number7Name of issue
Issue PriceType of Issue (check the applicable box(es) and enter the issue price for each)
Exempt facility bond:11
11aaAirport (sections 142(a)(1) and 142(c))
11bbDocks and wharves (sections 142(a)(2) and 142(c))
11dd
Water furnishing facilities (sections 142(a)(4) and 142(e))
11ee
Sewage facilities (section 142(a)(5))
11ff
Solid waste disposal facilities (section 142(a)(6))
Qualified residential rental projects (sections 142(a)(7) and 142(d)), as follows:
Meeting 20–50 test (section 142(d)(1)(A))
Meeting 40–60 test (section 142(d)(1)(B))
Meeting 25–60 test (NYC only) (section 142(d)(6))
Has an election been made for deep rent skewing (section 142(d)(4)(B))? NoYes
11gFacilities for the local furnishing of electric energy or gas (sections 142(a)(8) and 142(f))
h
i
11hFacilities allowed under a transitional rule of the Tax Reform Act of 1986 (see instructions)
Facility type
1986 Act section
11j
Qualified mortgage bond (section 143(a))
13Qualified veterans’ mortgage bond (section 143(b))
Check the box if you elect to rebate arbitrage profits to the United States
14Qualified small issue bond (section 144(a)) (see instructions)
12
Check the box for $10 million small issue exemption
16
Qualified student loan bond (section 144(b))
13
17
Qualified redevelopment bond (section 144(c))
14
18
Qualified hospital bond (section 145(c)) (attach schedule—see instructions)
15
Qualified 501(c)(3) nonhospital bond (section 145(b)) (attach schedule—see instructions)
16
19
Check box if 95% or more of net proceeds will be used only for capital expenditures
17
Other. Describe (see instructions)
18
20
Description of Bonds (Complete for the entire issue for which this form is being filed.)
(c) Stated redemption
price at maturity
(d) Weighted
average maturity
(e) Yield(b) Issue price(a) Final maturity date
years %21 $$
Form 8038 (Rev. 1-2002)For Paperwork Reduction Act Notice, see page 4 of the separate instructions.
Part III
Part I
Part II
Cat. No. 49973K
(Rev. January 2002)
Room/suite
Qualified enterprise zone facility bonds (section 1394) (see instructions)11i
10 Telephone number of officer or legal representative9Name and title of officer or legal representative whom the IRS may call for more information
()
c 11c
g
20
Nongovernmental output property bond (treated as private activity bond) (section 141(d))19
j Qualified empowerment zone facility bonds (section 1394(f)) (see instructions)
m Other. Describe (see instructions)11m
12
15
k District of Columbia Enterprise Zone facility bonds (section 1400A) (see instructions)11k
l Qualified public educational facility bonds (sections 142(a)(13) and 142(k))11l
78
Form 8038 (Rev. 1-2002)Page 2
Uses of Proceeds of Issue (including underwriters’ discount)Amount
22Proceeds used for accrued interest22
23Issue price of entire issue (enter amount from line 21, column (b))23
2424Proceeds used for bond issuance costs (including underwriters’ discount)
25Proceeds used for credit enhancement25
26Proceeds allocated to reasonably required reserve or replacement fund26
2727
29Add lines 24 through 2829
Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here)30 30
Description of Property Financed by Nonrefunding Proceeds
31 Type of Property Financed by Nonrefunding Proceeds:
31aaLand
31bbBuildings and structures
31cEquipment with recovery period of more than 5 yearsc
31dEquipment with recovery period of 5 years or lessd
e 31eOther (describe)
North American Industry Classification System (NAICS) of the projects financed by nonrefunding proceeds.32
Amount of nonrefunding proceedsNAICS CodeAmount of nonrefunding proceedsNAICS Code
a c
b d
Description of Refunded Bonds (Complete this part only for refunding bonds.)
yearsEnter the remaining weighted average maturity of the bonds to be currently refunded33
Enter the last date on which the refunded bonds will be called35
Enter the date(s) the refunded bonds were issued 36
Miscellaneous
Name of governmental unit(s) approving issue (see the instructions)37
Check the box if you have designated any issue under section 265(b)(3)(B)(i)(III)38
Volume Caps
42Amount of state volume cap allocated to the issuer. Attach copy of state certification42
4343Amount of issue subject to the unified state volume cap
44 Amount of issue not subject to the unified state volume cap or other volume limitations:
a Of bonds for governmentally owned solid waste facilities, airports, docks, wharves, environmental
enhancements of hydroelectric generating facilities, or high-speed intercity rail facilities
44
44a
b Under a carryforward election. Attach a copy of Form 8328 to this return 44b
c Under transitional rules of the Tax Reform Act of 1986. Enter Act section 44c
Under the exception for current refunding (section 146(i) and section 1313(a) of the Tax Reform
Act of 1986)
d
44d
45a
45b
46a
45a Amount of issue of qualified veterans’ mortgage bonds
b Enter the state limit on qualified veterans’ mortgage bonds
Under penalties of perjury, I declare that I have examined this return, and accompanying schedules and statements, and to the best of my knowledge
and belief, they are true, correct, and complete.
Sign
Here DateSignature of officer
Title of officer (type or print)Name of above officer (type or print)
Part VIII
Part VII
Part VI
Part V
Part IV
Amount
Amount
Check the box if you have elected to pay a penalty in lieu of arbitrage rebate39
$
$$
$
Check the box if you have identified a hedge (see instructions)40
Caution: The total of lines 31a through e below must equal line 30 above. Do not complete for qualified student loan
bonds, qualified mortgage bonds, or qualified veterans’ mortgage bonds.
46a Amount of section 1394(f) volume cap allocated to issuer. Attach copy of local government certification
b Name of empowerment zone
28
Proceeds used to currently refund prior issue (complete Part VI)
Proceeds used to advance refund prior issue (complete Part VI)28
Enter the remaining weighted average maturity of the bonds to be advance refunded34 years
47Amount of section 142(k)(5) volume cap allocated to issuer. Attach copy of state certification.47
Check the box if the issue is comprised of qualified redevelopment, qualified small issue, or exempt
facilities bonds and provide name and EIN of the primary private user
41
Name EIN
Form 8038 (Rev. 1-2002)
79
CERTIFICATE AS TO ARTICLES OF INCORPORATION
I, the undersigned, being a duly qualified and acting officer of Learning Circle
Montessori Elementary School, Inc., a Montana nonprofit corporation (the “Borrower”), hereby
certify that attached hereto is a true and correct copy of the Articles of Incorporation of the
Borrower, including all amendments thereto, as in force on May 1, 2007, and at all times
thereafter to and including the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of __________,
2007.
By __________________________________
Its _____________________
P-1
80
P-2
CERTIFICATE AS TO BYLAWS
I, the undersigned, being a duly qualified and acting officer of Learning Circle
Montessori Elementary School, Inc., a Montana nonprofit corporation (the “Borrower”), hereby
certify that attached hereto is a true and correct copy of the Bylaws of the Borrower, including all
amendments thereto, as in force on May 1, 2007, and at all times thereafter to and including the
date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of __________,
2007.
___
Its ___________________
By _______________________________
81
P-4
CERTIFICATE AS TO § 501 (c)(3) STATUS
I, the undersigned, being a duly qualified and acting officer of Learning Circle
Montessori Elementary School, Inc., a Montana nonprofit corporation (the “Borrower”), hereby
certify that:
a. n
en
d, rescinded or revoked, but is, as of the date hereof, in full force and
effect;
b.
s
ization that is not a
private foundation described in Section 509(a) of the Code;
c. ing to influence
legislation, within the meaning of Section 501(c)(3) of the Code;
d.
andidate for public office, within the meaning of
Section 501(c)(3) of the Code;
e.
s an unrelated trade or business within the meaning
of Section 513 of the Code;
f. resulted
benefit of a person other than another
charitable or religious organization;
g. basis
er’s status as an organization described in
Section 501 (c)(3) of the Code;
h.
re
Attached hereto is a true and correct copy of a Section 501(c)(3) determinatio
letter issued by the Internal Revenue Service to Learning Circle Montessori
Elementary School, Inc. dated March 23, 1998 recognizing the Borrower to be an
organization described in Section 501(c)(3) of the Internal Revenue Service Code
(the “Code”), and I further certify that said Section 501(c)(3) status has not be
modifie
The Borrower has not been notified by the IRS that the IRS has taken, is taking,
or intends to take, steps to modify, rescind, or revoke the status of the Borrower a
an organization described in Section 501(c)(3) or as an organ
No substantial part of the Borrower’s activities consists of attempt
The Borrower has never participated or intervened in any political campaign on
behalf of or in opposition to a c
The Borrower does not currently conduct, and has not within the past four years
conducted, any activity that i
The Borrower has not participated in any transaction or arrangement that
in inurement of the net earnings of the Borrower, within the meaning of
Section 501(c)(3) of the Code, to the
The Borrower has not engaged in any illegal activity that could provide the
for the revocation of the Borrow
All copies of IRS Forms 990 (including all schedules and attachments), audited
financial statements, annual reports, and By-Laws provided by the Borrower to
Dorsey & Whitney LLP on or before the date hereof are either original documents
or true and complete copies of the original documents in all material respects; a
82
2
y respect. The Borrower has
not filed nor has it been required to file a Form 990-T with the IRS with respect to
i.
n organization
described in Section 501(c)(3) of the Code or as an organization that is not a
WITNESS WHEREOF, I hereunto set my hand this ____ day of __________, 2007.
By_________________________________
Its___________________
the final version of such documents and have not been subsequently amended,
modified, or revoked; did not contain any untrue statement of a material fact; and
did not omit a material fact required to be stated or necessary in order to make
the documents and information not misleading in an
any of its five most recently completed fiscal years.
The undersigned has no knowledge of circumstances that s/he believes would
provide the basis for any change in the Borrower’s status as a
private foundation described in Section 509(a) of the Code.
IN
83
P-5
INCUMBENCY CERTIFICATE
I, the undersigned, being a duly qualified and acting officer of Learning Circle
Montessori Elementary School, Inc., a Montana nonprofit corporation (the “Borrower”) hereby
certify that attached hereto as Exhibit A is a true and complete schedule of the officers and
directors of the Borrower as of May 1, 2007, and at all times thereafter to and including the date
hereof.
IN WITNESS WHEREOF I have hereunto set my hand this ____ day of __________,
2007.
_
Its ____________________
By ________________________________
84
EXHIBIT A
(Schedule of Officers and Directors)
Name Position
Horatio Potter President
Shaunna Kersten Vice President
rown
Kristin Sutton Director
Nancy Characklis Secretary
Kelly Ann B Treasurer
K.C. Walsh Director
Matt Colón Director
85
P-6
CERTIFICATE AS TO RESOLUTION
I, the undersigned, being a duly qualified and acting officer of Learning Circle
Montessori Elementary School, Inc., a Montana nonprofit corporation (the “Borrower”), hereby
certify that attached hereto as Exhibit A is a compared, true and correct copy of a resolution duly
adopted on May 17, 2007 at a regular meeting of the Board of Directors of the Borrower in
connection with the issuance by City of Bozeman of its $400,000 Revenue Note (Learning Circle
Montessori Elementary School, Inc. Project), and that said resolution has not been modified,
amended, rescinded or revoked and has been in full force and effect since its adoption and at all
times thereafter, to and including the date hereof.
WITNESS My hand this ____ day of __________, 2007.
_____
Its ___________________
By _______________________________
86
P-7
CERT ZED
BORROWER REPRESENTATIVE
O:
Wells Fargo Brokerage Services, LLC, as Purchaser
The undersigned, being a duly elected, qualified and acting officer of Learning Circle
Montessori Elementary School, Inc., a Montana nonprofit corporation (the “Borrower”), acting
pursuant to the Loan and Purchase Agreement dated as of June 1, 2007, between City of
Bozeman, Montana, the Borrower and Wells Fargo Brokerage Services, LLC does hereby
appoint the following named persons:
ame
IFICATE APPOINTING AUTHORI
T City of Bozeman, Montana, and
N Title Specimen Signature
1. elly Ann Brown Treasurer ________________________
2.
as (1) Authorized Borrower Representative and, if named above, (2) as Alternate Authorized
Borrower Representative, to act on behalf of the Borrower in providing certifications and to do
all other things required or permitted to be done as Authorized Borrower Representative under
said Loan and Purchase Agreement on behalf of the Borrower.
WITNESS My hand this ____ day of __________, 2007.
RI
LEMENTARY SCHOOL, INC.
_____
Its ______________________
K _
LEARNING CIRCLE MONTESSO
E
By __________________________
87
P-8
REPRESENTATIVE PURSUANT TO SECTION 3.03(a)
AND (b) OF LOAN AND PURCHASE AGREEMENT
The undersigned, being a duly appointed authorized officer of Learning Circle
Montessori Elementary School, Inc., a Montana nonprofit corporation (the “Borrower”), under
the Loan and Purchase Agreement dated as of June 1, 2007 (the “Loan Agreement”), between
City of Bozeman, Montana, the Borrower and Wells Fargo Brokerage Services, LLC (the
“Purchaser”) does hereby certify that the representations and warranties of the Borrower set forth
in Section 2.02 of the Loan Agreement were true and correct in all material respects as of the
date thereof, and are true and correct in all material respects as of the date hereof, and that no
Event of Default and no event which, with the giving of notice or lapse of time or both, would
become an Event of Default, has occurred as of the date hereof.
WITNESS my hand as such Authorized Borrower Representative this ____ day of
__________, 2007.
_________________________
CERTIFICATE OF AUTHORIZED OFFICER
______________________________________
88
P-13
TAX CERTIFICATE
RE: f Bozeman, Montana
(Learning Circle Montessori Elementary School, Inc. Project)
tary School, Inc., a Montana nonprofit corporation (the “Borrower”), hereby
certify as follows:
$400,000 City o
Revenue Note
I, the undersigned, being a duly elected, qualified and acting officer of Learning Circle
Montessori Elemen
1. Definitions. For all purposes of this Certificate the terms used herein with initi
letters capitalized that are not required to be capitalized by proper rules of grammar have the
meanings assigned to such terms in the Loan and Purchase Agreement dated as of June 1, 200
(the “Loan Agreement”), between the Borrower, Ci
al
7
ty of Bozeman (the “Issuer”), and Wells
Fargo Brokerage Services, LLC (the “Purchaser”).
2. General Tax Representations and Covenants. The representations, warranties and
covenants of the Borrower set forth in Section 2.02 of the Loan Agreement were true
as of the date thereof and are true and correct as of the date of this Certificate. Such
representations and covenants, together with the certifications set forth herein, were and are
intended to satisfy all applicable requirements of Section 103 and related Sections of the Interna
Revenue Code of 1986, as am
and correct
l
ended (the “Code”), as the same may be applicable to the above-
described note (the “Note”).
3. Application of Note Proceeds. Proceeds of the Note in an amount of not less tha
$400,000 will be applied, together with other available funds, to finance the acquisition b
Borrower of the existing 4,875 square foot building located at 3001 West Villard Street,
Bozeman, Montana, for use as a private elementary school (the “Project”). The costs of the
Project for which proceeds of the Note are to provide financing consist entirely of costs of a type
that are properly chargeable to capital account (or would be so chargeable with a proper electio
or with the application of the definition of “placed in service” under Treas. Reg. § 1.150-2(c))
under general federal income tax principles, except for related working capital expenditures
any, to which the de minimus rule under § 1.148-6(d)(3)(ii)(A) applies. No portion of the
proceeds of the Note will be used to pay principal, interest or the redemption price of another
issue of bonds or other obligations. The Borrower is the underlying obligor on the Note.
n
y the
n
, if
The
Loan Agreement provides for the use of proceeds of the Note and the repayment thereof.
4. Certain Reimbursement Expenditures. No sale proceeds of the Note will be
applied to reimburse Project Costs paid by the Borrower prior to the issuance of the Note,
excluding: (a) architectural, engineering, surveying, soil testing, bond issuance expen
similar costs not exceeding in the aggregate 20% of the issue price of the Note; and
(b) reimbursement allocations of original expenditures for which the Borrower has adopted an
official intent satisfying Treas. Reg. § 1.150-2; and (c) “de minimus” reimbursements of capital
ses and
89
2
t improvements made with respect to the Note-Financed Facilities and not exceeding an amoun
equal to the lesser of (i) 5% of the proceeds of the Note, or (ii) $100,000.
5. Cost of the Project. The estimated total cost of the Project, including payment of
interest on that portion of the Note allocable to the Project during the acquisition period with
respect he P to t roject, is not less than $____________, as further set forth in Exhibit A hereto.
6. Certain Outstanding Tax-Exempt Bonds. [Intentionally Omitted].
7. Use of Financed Facilities. As further provided in Section 2.02(j) of the Loan
Agreement, the Borrower certifies that not more than 3.00% of the facilities (measured by squa
footage and fair market value) financed by the Note (such facilities generally referred to as the
“Note-Financed Facilities”) is or is to be used in the aggregate by persons not constituting u
of state or local government or organizations described in Section 501(c)(3) of the Code (such
use being referred to herein as “Private Business Use”). The Borrower acknowledges that the
measurement of Private Business Use is to be made in accordance with Treas. Reg. § 1.141-3 (
which generally provides that Private Business Use is determined according to the average
percentage of Private Business Use during the period beginning on the later of the issue date of
the bonds or the date the bond-financed facilities are placed in service and ending on the
of the last date of the reasonably expected economic life of the bond-financed facili
latest maturity date of the bonds (the “Measurement Period”). Treas. Reg. § 1.141-3 (g) further
provides that the average percentage of Private Business Use is the average of the percentag
Private Business Use during the 1-year periods within the Measurement Period (making
appropriate adjustments for the beginning and ending periods of less than 1 year).
Notwithstanding the foregoing, the amount of Private Business Use resulting from ownersh
a nongovernmental person is the greatest percentage of Private Business
re
nits
g)
earlier
ties or the
es of
ip by
Use in any 1-year
period. Treas. Reg. § 1.141-3 (g) also states that, generally, the percentage of Private Business
Use for
y
g
isting elementary school that are being financed by
the Note is equal in the aggregate to approximately 4,875 square feet. Of such approximately
4,875 s
any
e-
units of state or local government or
organizations described in Section 501(c)(3) of the Code whose use does not involve any
unrelat de e
any 1-year period is the average Private Business Use for such year determined by
comparing the amount of Private Business Use during to the total amount of all actual use
(whether Private Business Use or use that is not Private Business Use).
The Note-Financed Facilities are all to be owned and used directly by the Borrower.
None of such Note-Financed Facilities are to be leased to, managed by, or otherwise used in an
way by any person other than the Borrower. The number of square feet of space constitutin
Note-Financed Facilities in the Borrower’s ex
quare feet, -0- square feet in the aggregate are leased to any one or more persons for or
are devoted to any Private Business Use, or, in the alternative, are used with respect to
unrelated trade or business of the Borrower.
In addition to the service providers identified above, there are no other users of the Not
Financed Facilities (other than those constituting
ed tra or business) that derive any special economic benefit from their use, if any, of th
90
3
Note-Financed into consideration all relevant facts and circumstances,
including one or more of the following factors:
(A) rty is functionally related or physically proximate to
property used in the trade or business of a nongovernmental person;
Facilities, when taking
whether the financed prope
(B) whether only a small number of nongovernmental persons receive the special
economic benefit; and
(C) whether the cost of the financed property is treated as depreciable by any
nongovernmental person.
8. Change in Use. The Borrower acknowledges that, notwithstanding that the Note-
Financed Facilities will continue to be owned by the Borrower during the period the Note is
outstanding, if any portion of the Note-Financed Facilities is used in a trade or business of any
person other than the Borrower, another Section 501(c)(3) organization or a governmental unit or
in an unrelated trade or business of the Borrower or such other Section 501(c)(3) organization
(the “Private Use Portion”), the Borrower shall be treated for federal income tax purposes as
engaged in an unrelated trade or business as defined in Section 503(a) of the Code with respect
to such Private Use Portion for such period and will not be allowed to deduct interest paid on the
portion of the Loan used to finance such Private Use Portion. In that event, the amount of gross
income attributable to the Private Use Portion for any period will not be less than the fair rental
value of the Private Use Portion for such period. The Borrower also acknowledges that if at
time during the period the Note is outstanding, the Note-Financed Facilities are no longer owne
by the Borrower, another Section 501(c)(3) organization or a governmental unit, interest payable
any
d
on such ner
.
to, and not a substitution for,
the potential loss of the federal income tax exemption for interest on the Note as a result of the
events refe ed to here te a defa lt by e Borrower with r spect to its
representations and covenants under S n 2.02 ated f the Agre
9. Matur ty Lim
ow ’s financing relating to the Note-Financed Facilities which accrues during the
period of such ownership will not be deductible for federal income tax purposes by such owner
The tax consequences discussed in this paragraph are in addition
rr in which may constitu u th e
ectio and rel sections o Loan ement.
i itation. In order to comply with Section 147(b) of the Code, the
ower represents hat the ave ge rea ona ly expected econom f the Note-Financed
s financed b the N e, b types of assets, is as fo s:
Ty
Borr t ra s b ic life o
Facilitie y ot y llow
pe of Asset
Economic
Life(1)
Prior
Years(2)
Future
Years(3)
Adjusted
Economic
Life(4)
Asset
Cost(5)*
Adjusted
Economic Life
)x Asset Cost(6
Land
Building
Total
____ _______
Average economic weighted life.
___
*
91
The “Economic Life” of an asset is expressed in years and is the longer of (1) reasonably expected economic
4
(1) life of the
re 62-21, 1962-2 C.B. 418, in the case of structures.
ate hereof. The term “Prior
Years” refers to the number of years prior to the date hereof that an asset was placed in service by the Borrower.
(3) This applies only if the asset has not yet been placed in service as of the date the Note is issued. The term “Future
ined as of the later of, (i) the date of issuance of the
Note, o th
asset, or (2) the “midpoint life” under the Asset Depreciation Range (“ADR”) system, as set forth in Revenue
Procedure 77-10, 1977-1 C.B. 548, as modified by Revenue Procedure 83-85, 1983-1 C.B. 745, where applicable, and
the “guideline lives” under Revenue Procedu
(2) This applies only if the asset has already been placed in service by the Borrower as of the d
Years” refers to the number of years after the Closing Date that an asset is expected to be placed in service.
(4) The “Adjusted Economic Life” of an asset is equal either to the Economic Life minus Prior Years or the Economic Life
(for Future Years), whichever is applicable.
(5) The term “Asset Cost” refers to the purchase price or cost of the assets to the Borrower.
(6) The product of the Adjusted Economic Life and Asset Cost.
The “average reasonably expected economic life” of the Note-Financed Facilities
financed by the Note is _________ years, which is computed by dividing the total product of
Adjusted Economic Life and the Asset Cost, or ____________, by the total Asset Cost for assets
so financed (exclusive of land), or $__________. For this purpose, the reasonably expected
economic life of each asset has been determ
r (ii) e date on which such asset is expected to be placed in service.
10. Single Issue. The Borrower represents that no other governmental obligations
have been, or will be, sold within 15 days of the date on which the Note was sold, which were or
will be sold pursuant to the same plan of financing and which are to be paid out of substantially
the same source of funds as the Note, determined without regard to guarantees from unrelated
parties.
11. No Federal Guarantee. The Borrower represents, warrants and covenants that it
will not (directly or indirectly) use or permit the use of or otherwise invest any proceeds of the
Note or any other funds of the Borrower or take or omit to take any action that would cause the
Note to be an obligation which is “federally guaranteed” within the meaning of Section 149(b) of
the Code. In furtherance of this representation, warranty and covenant, the Borrower will not
allow the payment of the principal or interest with
respect to the Note to be guaranteed (directly
or indir ) iectly n whole or in part by the United States or any agency or instrumentality thereof.
12. Costs of Issuance. The Borrower represents, warrants and covenants that no
than $8,000 (which is equal to 2% of the proceeds of the Note) of the costs of issuance of the
Note will be financed (directly or indirectly) with the proceeds of the Note. Additional costs
more
of
issuanc any ill be e, if , incurred by the Borrower in connection with the issuance of the Note w
paid from other available funds of the Borrower.
13. Prohibited Facilities. The Borrower represents, warrants and covenants that none
of the proceeds of the Note have been or will be used to finance or refinance any airplane,
skybox or other private luxury box, facility primarily used for gambling, or any store the
principal business of which is the sale of alcoholic beverages for consumption off premises.
92
5
14. Not Hedge Bonds. As of the date of issuance of the Note, the Borrower
reasonably expects to expend at least 85% of the net sale proceeds of the Note to finance the
costs of the Project within three years of the date of issuance of the Note. Less than 50% of th
proceeds of the Note will be invested in nonpurpose investments with a substantially guaranteed
yield for four years or longer.
e
15. Information Reporting. The Borrower certifies that it has reviewed the Inte
Revenue Service Form 8038 to be filed in connection with the issuance of the Note and believe
that all of the information contained in the Form 8038 is true and complete. The Borrower
covenants that such Form 80 th
rnal
s
38 will be filed no later than the 15 day of the second calendar
month following the close of the calendar quarter in which the Note is issued at the appropriate
Internal Revenue Service Center therefor.
16. No Other Funds or Pledged Collateral. The Borrower has not and will not
establish any bond fund, sinking fund, reserve fund or similar fund dedicated to or reasonably
expected to be used or available to pay the Note, except as otherwise specifically established
under the Loan Agreement.
17. Investment Instructions. The Borrower will give no investment or redemption
instructions that might cause the Note to become an arbitrage bond. In this conne
Borrower has provided the Issuer and the Purchaser a copy of this Certificate and the Issuer’s
Non-Arbitrage Certificate. The Borrower agrees that it will give no instruction that is contra
thereto or hereto.
18.
ction, the
ry
No Abusive Arbitrage Device. The Borrower certifies, warrants and covenants
that the Note is not and will not be part of a transaction or series of transactions that has the
effect o en
est
bonds, or issuing them sooner, or allowing them to remain outstanding
longer, than would otherwise be necessary.
f (i) abling the Borrower or any related persons (within the meaning of
Section 147(a)(2) of the Code) to exploit the difference between tax-exempt and taxable inter
rates to obtain a material financial advantage, or (ii) overburdens the market for tax-exempt
obligations in any manner, including, without limitation, selling bonds that would not otherwise
be sold, or selling more
19. No Replacement. The Borrower represents, warrants and covenants that no
portion of the proceeds of the Note will be used directly or indirectly to replace funds of the
Borrower which were intended to be used for the refinancing of the Project or will be us
directly or indirectly to acquire investments reasonably expected to produce a Yield higher than
the Yield on the Note.
ed
20. Issuer’s Reliance. It is understood that this certificate will be relied upon by the
Issuer in giving its Non-Arbitrage Certificate under Section 1.148-2(b)(2) of the Treasury
Regulations relating to “arbitrage bonds” as defined in Section 148 of the Code. Each and every
certification, representation and covenant of the Issuer as set forth in its Non-Arbitrage
Certificate is hereby adopted and incorporated herein by reference as if fully made and set out
herein by the Borrower.
93
6
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of __________,
2007.
RI
LEMENTARY SCHOOL, INC.
Its _____________________
[Signature Page – Tax Certificate]
LEARNING CIRCLE MONTESSO
E
By _________________________________
94
EXHIBIT A
ourcesS
ther Funds of Borrower
Sale Proceeds of Note
O
Total Sources
ses
U
Land
Acquisition of Building
suance Costs
Is
Total Uses
95
P-14
TO: City of Bozeman, Montana
I, the undersigned, being authorized officer of Learning Circle Montessori
Elementary School, Inc., a Montana nonprofit corporation (the “Borrower”), hereby certify that
the information, facts, estimates, expectations and circumstances contained in the foregoing Non-
Arbitrage Certificate, with the respect to the $400,000 City of Bozeman, Montana Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project), were furnished by the Borrower,
are true and complete, and there are no other facts, estimates, expectations or circumstances
which would materially affect the conclusions set forth in the Non-Arbitrage Certificate.
Dated: ___________, 2007.
RI
LEMENTARY SCHOOL, INC.
___
Its ____________________
LEARNING CIRCLE MONTESSO
E
By_________________________________
96
P-15
CERT CER
WITH RESPECT TO FORM 8038
This certificate is given to City of Bozeman, Montana (the “Issuer”) and
Dorsey & Whitney LLP, as bond counsel (the “Bond Counsel”) by Learning Circle Montessori
Elementary School, Inc., a Montana nonprofit corporation (the “Borrower”), with respect to the
Department of Treasury, Internal Revenue Service Form 8038, Information Return for Private
Activity Bond Issues (“Form 8038”), accompanying this Certificate.
The undersigned, being an authorized officer of the Borrower, has reviewed the
completed Form 8038 accompanying this certificate, and hereby certifies to the Issuer and to
Bond Counsel that the information contained therein is true, complete and correct.
Date: ____________, 2007
RI
ELEMENTARY SCHOOL, INC.
Its__________________________________
IFICATE OF AUTHORIZED OFFI
LEARNING CIRCLE MONTESSO
By____________________________________
97
I-1
GENERAL CERTIFICATE OF ISSUER
I, the undersigned, being a duly qualified and acting officer of City of Bozeman, Montana
(the “City”), do hereby certify on behalf of the City as follows:
1. The City is a duly organized and existing municipal corporation and political
subdivision under and pursuant to the laws of the State of Montana and is a municipality within
the meaning of Montana Code Annotated, Title 90 Chapter 5, Part 1, as amended (the “Act”).
2. The following are City officers and commissioners and the dates on which their
respective terms of office will expire:
Name Office Term Expires
Jeff Krauss Mayor
Sean Becker Commissioner
Kaaren Jacobson
i er
Brit Fontenot City Clerk Appointed
3. Regular meetings of the City Commission are held in the Community Room,
Third Floor, Gallatin County Courthouse, located at 311 West Main Street, Bozeman, Montana
each Monday at 6:00 o’clock P.M.
4. The Bozeman Daily Chronicle
Commissioner
Jeff Rupp Commissioner
Steve Kirchhoff Commissioner
Chris Kukulsk City Manag Appointed
is the official newspaper of the City and is
published daily.
5. Attached hereto as Exhibits A and B, respectively, are compared, true and correct
copies of Resolutions duly adopted by the City Commission on May 7, 2007 and May 29, 2007,
at a regular meetings thereof duly called and held, in connection with the issuance by the City of
the Note, and said resolutions have not been modified, amended, rescinded or revoked and have
98
2
been in full force and effect since their adoption and at all times thereafter, to and including the
date hereof.
6. Attached hereto as Exhibit C is an Affidavit of Publication of a Notice of Public
Hearing published in the Bozeman Daily Chronicle, on May 8, 2007, May 15, 2007 and May 22,
2007 providing notice of a public hearing held by the City Commission on May 29, 2007, at
which hearing all persons present were afforded an opportunity to express their views with
respect to the Project and proposed issuance by the City of its Revenue Note (Learning Circle
Montessori Elementary School, Inc. Project), in the original principal amount of $400,000 (the
“Note”) pursuant to the Act.
WITNESS my hand and the seal of the City this ____ day of __________, 2007.
ITY OF BOZEMAN
___________________________
Its City Clerk
C
By ____________
99
I-4
NON-ARBITRAGE CERTIFICATE
(the “Issuer”),
a Montana political subdivision, hereby certify on behalf of the Issuer as follows:
evenue
ssuing the Note and hereby certifies in
good faith with respect to the Note as set forth below.
on the
at would cause it to question the accuracy or reasonableness of such
representations.
d 1.150-1, are used with the meanings assigned in the Code or such Regulations,
as applicable.
f the
Code and qualified 501(c)(3) bonds within the meaning of Section 145 (a) of the Code.
ave
y the
same source of funds, determined without regard to guarantees from unrelated parties.
I, the undersigned, a duly authorized officer of City of Bozeman, Montana
1. Purpose of Certificate. This Non-Arbitrage Certificate is being provided in
connection with the issuance by the Issuer of the Issuer’s $400,000 Revenue Note (Learning
Circle Montessori Elementary School, Inc. Project) (the “Note”) for the purpose of certifying the
expectations of the Issuer as of the date hereof pursuant to Section 148 of the Internal R
Code of 1986, as amended (the “Code”) and Treas. Reg. § 1.148-2(b) thereunder. The
undersigned is an officer of the Issuer responsible for i
2. Reasonable Expectations; Reliance. This certificate is made in reliance upon
representations of Learning Circle Montessori Elementary School, Inc. (the “Borrower”) as to its
reasonable expectations, the covenants set forth in the Loan and Purchase Agreement described
below requiring implementation of the expectations set forth herein, certain representations of
Wells Fargo Brokerage Services, LLC (the “Purchaser”) and the factual matters evidenced by the
various certificates and agreements executed or delivered in connection with the issuance of the
Note. The Issuer believes, under the circumstances, it is reasonable and prudent to rely
representations of the Borrower as to its expectations and is not aware of any facts or
circumstances th
3. Definitions. All capitalized terms used but not defined herein are used with the
meanings assigned to them in the Loan and Purchase Agreement. Except as otherwise defined
herein, uncapitalized terms that are used herein and which are defined in the Code or Treas. Reg.
§ 1.148-1(b) an
4. The Note. The terms of the Note are set forth in the Note and the Loan and
Purchase Agreement dated as of June 1, 2007 (the “Loan Agreement”) between the Issuer, the
Borrower and the Purchaser. Participation interests in the Note were privately placed by the
Purchaser for a price of $_____________ (reflecting a premium of $__________) plus accrued
interest of $ -0-. The Note is a private activity bond within the meaning of Section 141 o
The Note constitutes all of a single issue of bonds because there are no other obligations
of the Issuer which (a) are sold or are to be sold within 15 days of the sale of the Note, (b) h
been or are to be sold pursuant to the same plan of financing, including bonds for the same
facility or related facilities, and (c) are reasonably expected to be paid from substantiall
5. Governmental Purpose. The proceeds of the Note will be used, together with
other available funds, to finance the acquisition by the Borrower of the existing 4,875 square foot
100
building located at 3001 West Villard Street, Bozeman, Montana, for use as a private elementary
school (the “Project”). The Borrower represents that costs of the Project for which Note
proceeds are to provide financing consist entirely of costs of a type that are properly chargeable
to capital account (or would be so chargeable with a proper election or with the application of th
definition of “placed in service” under Treas. Reg. § 1.150-2(c)) under general federal income
tax principles, except for related working capital expenditures, if any, to which the de minimus
rule under § 1.148-6(d)(3)(ii)(A) applies. No portion of the proceeds of the Note are to be used
to pay principal, interest or the redemption price of another issue of bonds or other obligations.
The Borrower is the conduit borrower of the proceeds of the N
2
e
ote. The Issuer, the Borrower and
the Purchaser have entered into the Loan Agreement with respect to the use of proceeds of the
Note an rovi
Proceeds. The proceeds of the Note include the sale proceeds described in
paragraph 7 and the investment proceeds described in paragraph 8. There are no transferred
proceed
” of the Note (being the sale proceeds less the portion of the sale proceeds
invested in a reasonably required reserve or replacement fund and as part of a minor portion) are
$_____ ___
d to be equal to approximately $-0- (consisting of interest earnings on such proceeds
from the date of issuance thereof to and until the expected expenditure in full thereof on June 1,
2007).
9. Gross Proceeds. The proceeds of the Note as described in paragraphs 6 to 8 and
any replacement proceeds as described in paragraph 10 constitute the “gross proceeds” of the
Note.
or
t
-
nd
d p ding for the payment thereof by the Borrower.
6.
s.
7. Sale Proceeds; Minor Portion; Net Sale Proceeds. The sale proceeds of the
Note, consisting of all amounts actually or constructively received from the sale of the Note,
including amounts used to pay fees owing to the Purchaser and accrued interest other than pre-
issuance accrued interest, are $___________. The “minor portion” of the Note (being the lesser
of 5% of the sale proceeds or $100,000) is $________. $0 of the sale proceeds of the Note will
be invested in a reasonably required reserve fund under Section 148(d) of the Code. Therefore,
the “net sale proceeds
___ ____.
8. Investment Proceeds. The amounts actually or constructively received from
investing proceeds of the Note, and which will constitute “investment proceeds” of the Note are
expecte
10. Replacement Proceeds. Under Treas. Reg. § 1.148-1(c), amounts are
“replacement proceeds” of the Note if the amounts have a sufficiently direct nexus to the Note
the governmental purpose of the issue (including payment of principal or interest on the Note) to
conclude that amounts would have been used for the governmental purpose of the issue if the
proceeds of the Note were not used or to be used for that governmental purpose. The Issuer, the
Borrower, and the State of Montana are the only “substantial beneficiaries” of the Note within
the meaning of Treas. Reg. § 1.148-1(c)(1). It is not expected that there will be any replacemen
proceeds of the Note. There are no “sinking funds” within the meaning of Treas. Reg. § 1.148
1(c)(2). There is no other debt service fund, redemption fund, reserve fund or any similar fu
101
expected to be used directly or indirectly to pay principal or interest on the Note. Becau
other amounts are directly pledged or indirectly pledged to a guarantor or otherwise to pay
principal or interest on the Note, nor is there provided reasonable assurance that any other
amounts will be available to pay principal or interest on the Note even if the Borrower
encounters financial difficulties, there are no “pledged funds” within the meaning of Treas. Re
§ 1.148-1(c)(3)(i). Because no amount is or is expected to be held under an agreement to
maintain the amount at a particular level for the direct or indirect benefit of the notehol
any guarantor of the Note, there are no “negative pledges” within the meaning of Treas. Reg.
§ 1.148-1(c)(3)(ii). No “other replacement proceeds” are expected to arise under Treas. Reg.
§ 1.148-1(c)(4)(i)(A) because, under the safe harbor permitted by Treas. Reg.§ 1.148-
3
se no
g.
ders or
1(c)(4)(i)(B), the weighted average maturity of the Note (______ years) does not exceed 120
percent e a
(2)
t
t sale
timing of the issuance of the Note is in accordance with ordinary financial practices and the Note
is not is pr ts of new federal, state or local laws, to earn
additional arbitrage profits or for other reasons not consistent with ordinary financial practice.
(a) The date hereof is the issue date for the Note. On this date, the Issuer will
receive or has
(b) The issue price of the Note is $___________ (reflecting an original issue
iu
pre-
of th verage reasonably expected life of the financed capital projects (not less than
_______ years), determined in the same manner as under Section 147(b) of the Code.
11. Temporary Period. The net sale proceeds and investment proceeds of the Note
are reasonably expected to be allocated to expenditures for capital projects, subject to amounts of
related working capital expenditures to which the de minimus rule in § 1.148-6(d)(3)(ii)(A)
applies. Such proceeds qualify for the three-year temporary period of Treas. Reg. § 1.1482(e)
because the Issuer reasonably expects that the Borrower will satisfy the expenditure test, the time
test and the due diligence test as described in this paragraph, because the Project, as of June 1,
2007, is expected to be substantially completed. The expenditure test will be met because at
least 85 percent of the net sale proceeds of the Note ($___________) is expected to be allocated
to expenditures on the Project by said expected completion date. The time test is met because
the Borrower has incurred, in the form of one or more contracts not subject to contingencies
within the Borrower’s control, a substantial binding obligation to a third party to expend at leas
5 percent of the net sale proceeds of the Note ($___________) on the Project by the date hereof.
The due diligence test is met because completion of the Project and the allocation of the ne
proceeds of the Note to expenditures thereon are expected to proceed with due diligence. The
sued ematurely to avoid requiremen
12. Issue Date and Issue Price.
received the purchase price for the Note in exchange for delivery thereof.
Interest begins to accrue on the Note on the date hereof.
prem m of $____________). Based on representations of the Purchaser, the issue price
for the Note does not exceed the fair market value thereof as of the sale date.
13. Plain Par Bonds. The Note is a plain par bond that (a) is issued with not more
than two percent of original issue discount or premium determined on the stated redemption
price at maturity; (b) is issued for a price that does not include accrued interest other than
102
4
west stated redemption price
that is not less than the outstanding stated principal amount subject to such redemption.
14. Qualified Guaranty. The Note is not insured or guaranteed as to principal and
interest under any insu
party.
15. Yield on Note.
g
the yield on the Note. Such yield is the discount rate that,
when used in computing present value on the date hereof of all unconditionally payable
paymen f pr
ct to any
d
16. Status of Loan Agreement. The Loan Agreement was acquired for the
govern
he
the
ate. The Issuer and the Borrower have agreed in Section 5.05(d) of the Loan
Agreement to comply with the rebate requirements of Section 148(f) of the Code and regulations
thereun As
is
or
y device or take any action which has the effect of (a) enabling the Issuer or the
issuance accrued interest; (c) bears interest from the issue date at a single stated, fixed rate, with
interest unconditionally payable at least annually; and (d) has a lo
rance policy, letter of credit or guaranty issued by any nonaffiliated third
Accordingly, there is no qualified guarantee of the Note.
(a) The Note has a yield that is fixed and determinable on the issue date, usin
the assumptions and rules provided in Treas. Reg. § 1.148-4(b). The Note constitutes a
fixed yield issue.
(b) _________% is
ts o incipal, interest and fees for qualified guarantees, if any, and any amount
reasonably expected to be paid as fees for any such guarantee on the Note, produces an
amount equal to the present value (using the same discount rate) of the aggregate issue
price of the Note on this date.
(c) No transfer, waiver, modification or similar transaction with respe
right that is part of the terms of a Note or is otherwise associated with a Note is expecte
to occur in a transaction that is separate and apart from the original sale of the Note. No
qualified hedge is expected with respect to the Note.
mental purposes of the Note and constitutes the purpose investment for the Note. The
Issuer will not charge any administrative fee or other fee to the Borrower in connection with t
Note. The yield on the Loan Agreement to the Issuer will not exceed by more than 1/8 of 1%
yield on the Note.
17. Universal Cap. The Issuer expects that the universal cap provided for in Treas.
Reg. § 1.148-6 will not reduce the amount of gross proceeds allocable to the Note during the
term of the issue. Therefore, the universal cap need not be applied on any date on which the
Note has the characteristics described in Treas. Reg. § 1.148-6(b)(2).
18. Reb
der. provided in Treas. Reg. § 1.148-3(e), the Issuer will treat the last day of any
bond year ending on or before the last date which is the first date on which a rebate amount
required to be paid as a computation date but will not change that treatment after the first
computation date.
19. Compliance With Anti-Abuse Rules. Neither the Issuer nor the Borrower has
will use an
103
5
Borrower to exploit the difference between tax-exempt and taxable interest rates to obtain a
material financial advantage or (b) overburde n the
meaning of Treas. Reg. § 1.148-10. The proceeds of the Note do not exceed by more than the
minor portion ($________) the amount necessary to accomplish the governmental purposes of
the Note.
Dated: ____________, 2007
CITY OF BOZEMAN, MONTANA
By ________________________________
Its Mayor
ning the tax-exempt bond market withi
104
I-6
SIGNATURE AND NO-LITIGATION CERTIFICATE
Inc.
cute the
Note and holding the offices indicated by the official titles set forth opposite our names.
We further certify on behalf of the City that:
City
ded, nor the title of said
officers of the City to their respective offices is being contested.
n duly adopted by the City on May 29, 2007, has
been repealed, rescinded, amended or revoked.
ing on
ereby confirmed and approved as the official signatures of the undersigned
respectively.
WITNESS our hands and the official seal of the City this ____ day of __________, 2007.
Signature
We, the undersigned, respectively the Mayor and the City Clerk of City of Bozeman,
Montana (the “City”), do hereby certify that on the date hereof we officially signed by facsimile
or manual signature the fully registered Note of the City generally described as the $400,000
City of Bozeman, Montana Revenue Note (Learning Circle Montessori Elementary School,
Project) (the “Note”), being on the date of such signing and continuously thereafter to and
including the date hereof, the duly chosen, qualified and acting officers authorized to exe
1. To the best of our knowledge, there is no litigation of any nature pending or
threatened to which the City is a party (either in State or Federal Courts) restraining or enjoining
the issuance, sale, execution or delivery of the Note, the acquisition or operation of the Project
for which the Note is authorized to be issued, and neither the statutory powers granted the
by Montana Code Annotated, Title 90, Chapter 5, Part 1, as amen
2. No proceeding of the City for the issuance, execution or delivery of the Note or
the execution and delivery of the Loan Purchase Agreement or the Loan Agreement Assignment
referred to therein, including the Note Resolutio
3. The facsimile or manual signatures of the Mayor and the City Clerk appear
the Note are h
Official Title
____________________________________ Mayor
____________________________________ City Clerk
(Seal)
105
I-5
CERTIFICATE OF DELIVERY AND RECEIPT
The undersigned, a duly qualified and acting officer of City of Bozeman, Montana (the
“City”), does hereby certify as follows:
1. On the date hereof, I caused to be delivered to Wells Fargo Brokerage Services,
LLC, as purchaser thereof (the “Purchaser”), the fully registered Note of the City generally
described as the $400,000 City of Bozeman, Montana Revenue Note (Learning Circle
Montessori Elementary School, Inc. Project) (the “Note”).
2. Payment for the Note was received by the City in accordance with the terms of
the Loan and Purchase Agreement, dated as of June 1, 2007 (the “Loan Agreement”), between
the City, Learning Circle Montessori Elementary School, Inc., as Borrower, and the Purchaser
IN WITNESS WHEREOF, I hereunto set my hand this ____ day of __________, 2007.
ITY OF BOZEMAN, MONTANA
______________
City Clerk
C
By __________________
106
W-1
CERTIFICATE AND RECEIPT FOR NOTE
I, the undersigned, a duly qualified and acting officer of Wells Fargo Brokerage Services,
LLC, Minneapolis, Minnesota, hereby acknowledge that on the date hereof, upon payment of the
purchase price therefor, I received on behalf of the foregoing the fully registered Note of City of
Bozeman, Montana generally described as the $400,000 City of Bozeman, Montana Revenue
Note (Learning Circle Montessori Elementary School, Inc. Project) (the “Note”).
I further certify that the weighted average maturity for the Note, for purposes of IRS
Form 8038, is equal to ______ years, and the yield on the Note, within the meaning of
Section 148 of the Internal Revenue Code of 1986, as amended, is equal to ________%.
The issue price for the Note is equal to $______________. The issue price for the Note
does not exceed the fair market value thereof as of the sale date.
Dated: ___________, 2007.
S FARGO BROKERAGE SERVICES,
LC
_________________
Its Senior Vice President
WELL
L
By _____________________
107
to In mpt
Private Activity Note Issues
(Form 8038)
(Section 501(c)(3) Schedule as to Line 17)
1. Name of benefiting organization(s): Learning Circle Montessori Elementary School, Inc.
2. EIN: 84-1413419
3. Amount of issue benefiting each §501(c)(3) organization set forth above: $400,000
4. Amount of other nonhospital bonds outstanding: N/A
Schedule A
formation Return for Tax-Exe
108
Securities Commis
State of Montana
P. O. Box 4009
I-11
sioner
Helena, Montana 59604
Re: Notice of Issuance of Revenue Note
adies and Gentlemen:
ing
evenue Note are hereby filed with the Securities Commissioner of the State of
Montana:
(1) Name and address of issuing authority:
tana
treet
771-1230
Attn: City Clerk
(2) Name and address of person or entity on whose behalf the Note is issued:
ri Elementary School, Inc.
et
Attn: Kelly Ann Brown, Treasurer
(3) Principal amount and date of the Note:
(Prairie Ridge Village Project)
Date of Original Issuance: June 1, 2007
(4) Name of states where Note will be sold:
ells Fargo Brokerage Services,
LLC (the “Purchaser”), with offices located at:
4
Attention: Public Finance
L
Pursuant to Montana Code Annotated, Section 90-5-103(5), as amended, the follow
described R
City of Bozeman, Mon
411 East Main S
P.O. Box 1230
Bozeman, MT 59
Learning Circle Montesso
3001 West Villard Stre
Bozeman, MT 59718
$400,000 Revenue Note
South Dakota. The Note is being purchased by W
825 St. Joseph Street
Rapid City, SD 57701-631
109
2
The Purchaser’s principal offices are located at:
e South
-105
Minneapolis, MN 55479.
(5) Contact Person:
City Clerk
treet
Bozeman, MT 59771-1230
(6) Description of Project:
er of
Villard Street,
Bozeman, Montana, for use as a private elementary school.
(7) Number of Jobs to be Created as a Result of Project: -0-.
Number of Jobs to be Maintained as a Result of Project: ___.
During Construction: -0-.
mount of Issuance Used to Refinance Outstanding Health Care Facilities
Revenue Debt.
None
(9) ds or Notes
Attributable to Entity on Whose Behalf the Bond is Issued.
None
(10) e Numbers of All Professional Advisors Participating
in the Issuance of the Note.
608 Second Avenu
MAC N9303
Tenth Floor
Mr. Brit Fontenot,
City of Bozeman
411 East Main S
P.O. Box 1230
The Note will be issued to provide funds to be used with other available funds of
the Borrower to finance a project consisting of the acquisition by the Borrow
the existing 4,875 square foot building located at 3001 West
(8) A
Amount of Outstanding Health Care Facilities Revenue Bon
Names, Addresses and Phon
110
3
Bond Counsel:
2-1498
ard A. Helde
612-343-7912
Issuer Counsel:
ttorney
30
J. Luwe
406-582-2300
Borrower Counsel:
Suite 201
e K. Whetstone
406-582-9988
mation regarding the Note may be obtained from the issuing authority
described in (l) above.
Dated: __________, 2007.
ITY OF BOZEMAN, MONTANA
______________
City Clerk
Dorsey & Whitney LLP
50 South Sixth Street, Suite 1500
Minneapolis, Minnesota 5540
Attn: Mr. Rich
Bozeman City A
P.O. Box 1230
Bozeman, MT 59771-12
Attn: Mr. Paul
Janice K. Whetstone, P.C.
202 West Main Street,
Bozeman, MT 59715
Attn: Ms. Janic
Additional infor
C
By __________________
111
$400,000
City of Bozeman, Montana
Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project)
Date of Pre-Closing: May 31, 2007
Date of Closing: June 1, 2007
Place of Closing (by Mail): Dorsey & Whitney LLP
Suite 1500
50 South Sixth Street
Minneapolis, Minnesota 55402-1498
Parties:City of Bozeman, Montana (Issuer)
Learning Circle Montessori Elementary
School, Inc.
(Borrower)
Wells Fargo Brokerage Services, LLC (Purchaser)
Janice K. Whetstone, P.C. (Counsel to the Borrower)
Paul J. Luwe, Esq. (Issuer’s Counsel)
Dorsey & Whitney LLP (Bond Counsel)
Schedule of Closing Documents
Basic Documents
1. B-1 Loan and Purchase Agreement between the Issuer, the Purchaser and the
Borrower (8).
2. B-2 Loan Agreement Assignment from the Issuer to the Purchaser (8).
3. B-3 Combination Mortgage, Security Agreement and Fixture Financing
Statement and Assignment of Leases and Rents from the Borrower to the
Purchaser (10).
*Number of copies required indicated in parenthesis.
112
By Learning Circle Montessori Elementary School, Inc. (Borrower)
4. P-1 Articles of Incorporation, certified by corporate officer and Secretary of
State (1 + 8).
5. P-2 Certificate of Good Standing (1 + 8).
6. P-3 Copy of Bylaws, certified by corporate officer (1 + 8).
7. P-4 Certificate as to Section 501(c)(3) status, with certified copies of Section
501(c)(3) determination letter(s) issued by Internal Revenue Service (8).
8. P-5 Incumbency Certificate (8).
9. P-6 Certified copy of authorizing resolution (8).
10. P-7 Certificate Appointing Authorized Borrower Representative (8).
11. P-8 Certificate of Authorized Officer pursuant to Section 3.03(a) and (b)
of the Loan Agreement (8).
12. P-9 Financing Statement to Purchaser (1 + 8).
13. P-10 UCC Search (1 + 8).
14. P-11 Title insurance commitment (1+8).
15. P-12 Legal opinion of counsel to the Borrower (8).
16. P-13 Borrower Tax Certificate (8).
17. P-14 Certification of Borrower as to non-arbitrage (see I-4).
18. P-15 Certification of Borrower as to Form 8038 (see I-10).
By City of Bozeman (Issuer)
19. I-1 General Certificate of Issuer, together with the following exhibits (8):
A. Certified copy of Resolution Calling Public Hearing adopted on
May 7, 2007.
B. Certified copy of Note Resolution adopted on May 29, 2007.
C. Affidavit of publication of notice of public hearing in newspaper of
general circulation.
20. I-2 Financing Statement to the Purchaser (1 + 8).
21. I-3 U.C.C. Search (1 + 8).
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22. I-4 Non-Arbitrage Certificate (8).
23. I-5 Certificate of Delivery and Receipt (8).
24. I-6 Signature and No Litigation Certificate (8).
25. I-7 Executed Note and conformed copies (8).
26. I-8 Opinion of Counsel to the Issuer (8).
27. I-9 Opinion of Dorsey & Whitney LLP, as Bond Counsel (8).
28. I-10 Information Return for Private Activity Bond Issues (Form 8038) and
evidence of filing thereof (1 + 8).
29. I-11 Notice of Issuance to Montana Securities Commissioner (1 + 8).
By Wells Fargo Brokerage Services, LLC (Purchaser)
30. W-1 Certificate of Purchaser and Receipt for Note (8).
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LOAN AGREEMENT ASSIGNMENT
This LOAN AGREEMENT ASSIGNMENT is made as of the 1st day of June, 2007, from
CITY OF BOZEMAN, a municipal corporation and political subdivision of the State of Montana
(herein called the “City”), to WELLS FARGO BROKERAGE SERVICES, LLC, a Delaware
limited liability Company having its principal offices in Minneapolis, Minnesota (the
“Purchaser”).
Recitals
The City has executed and delivered to the Purchaser its Health Care Facilities Revenue
Note (Learning Circle Montessori Elementary School, Inc. Project), in the authorized principal
amount of $400,000 (the “Note”), dated the date of delivery thereof, pursuant to a resolution
adopted by the Board of Commissioners of the City on May 29, 2007 (the “Note Resolution”).
The proceeds of the Note are to be loaned to Learning Circle Montessori Elementary
School, Inc., a Montana nonprofit corporation (the “Borrower”), pursuant to a Loan and
Purchase Agreement dated as of June 1, 2007 (the “Loan Agreement”), between the City, the
Purchaser and the Borrower.
The Note is payable from and secured by the Loan Repayments, as defined in the Loan
Agreement, to be made by the Borrower under the Loan Agreement, and the Purchaser, as a
condition to the purchase of the Note, has required the execution of this Assignment.
ACCORDINGLY, as authorized by the Note Resolution and in consideration of the
promises and other good and valuable consideration, the receipt of which is hereby
acknowledged, the City does hereby grant, transfer and assign to the Purchaser and its successors
or assigns, all of the right, title and interest of the City in the Loan Agreement and the Loan
Repayments of the Borrower payable thereunder (except for the rights of the City under
Sections 5.02, 7.01, 7.07, 8.04 and 8.05 thereof relating to expenses and indemnity of the City
and the right to enforce said rights), together with all right to and interest of the City in the
Project Fund established under the Escrow Agreement of even date herewith, between and
among the City, the Borrower and the Purchaser, all for the purpose of securing the Note.
126
IN WITNESS WHEREOF, the City has executed this Loan Agreement Assignment as of
the date first above written.
CITY OF BOZEMAN
By
Mayor
And By
City Clerk
[Signature Page – Loan Agreement Assignment]
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Accepted this ______ day of June, 2007.
WELLS FARGO BROKERAGE
SERVICES, LLC
By
Its Senior Vice President
[Signature Page – Loan Agreement Assignment]
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LOAN AGREEMENT ASSIGNMENT
This LOAN AGREEMENT ASSIGNMENT is made as of the 1st day of June, 2007, from
CITY OF BOZEMAN, a municipal corporation and political subdivision of the State of Montana
(herein called the “City”), to WELLS FARGO BROKERAGE SERVICES, LLC, a Delaware
limited liability Company having its principal offices in Minneapolis, Minnesota (the
“Purchaser”).
Recitals
The City has executed and delivered to the Purchaser its Health Care Facilities Revenue
Note (Learning Circle Montessori Elementary School, Inc. Project), in the authorized principal
amount of $400,000 (the “Note”), dated the date of delivery thereof, pursuant to a resolution
adopted by the Board of Commissioners of the City on May 29, 2007 (the “Note Resolution”).
The proceeds of the Note are to be loaned to Learning Circle Montessori Elementary
School, Inc., a Montana nonprofit corporation (the “Borrower”), pursuant to a Loan and
Purchase Agreement dated as of June 1, 2007 (the “Loan Agreement”), between the City, the
Purchaser and the Borrower.
The Note is payable from and secured by the Loan Repayments, as defined in the Loan
Agreement, to be made by the Borrower under the Loan Agreement, and the Purchaser, as a
condition to the purchase of the Note, has required the execution of this Assignment.
ACCORDINGLY, as authorized by the Note Resolution and in consideration of the
promises and other good and valuable consideration, the receipt of which is hereby
acknowledged, the City does hereby grant, transfer and assign to the Purchaser and its successors
or assigns, all of the right, title and interest of the City in the Loan Agreement and the Loan
Repayments of the Borrower payable thereunder (except for the rights of the City under
Sections 5.02, 7.01, 7.07, 8.04 and 8.05 thereof relating to expenses and indemnity of the City
and the right to enforce said rights), together with all right to and interest of the City in the
Project Fund established under the Escrow Agreement of even date herewith, between and
among the City, the Borrower and the Purchaser, all for the purpose of securing the Note.
129
IN WITNESS WHEREOF, the City has executed this Loan Agreement Assignment as of
the date first above written.
CITY OF BOZEMAN
By
Mayor
And By
City Clerk
[Signature Page – Loan Agreement Assignment]
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Accepted this ______ day of June, 2007.
WELLS FARGO BROKERAGE
SERVICES, LLC
By
Its Senior Vice President
[Signature Page – Loan Agreement Assignment]
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______________________________________________________________________________
$400,000
City of Bozeman, Montana
Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project)
LOAN AND PURCHASE AGREEMENT
Dated as of June 1, 2007
By and between
CITY OF BOZEMAN, MONTANA,
LEARNING CIRCLE MONTESSORI ELEMENTARY SCHOOL, INC.
and
WELLS FARGO BROKERAGE SERVICES, LLC
______________________________________________________________________________
This instrument was drafted by
Dorsey & Whitney LLP
Suite 1500
50 South Sixth Street
Minneapolis, Minnesota 55402-1498
132
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$400,000
City of Bozeman, Montana
Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project)
TABLE OF CONTENTS
LOAN AND PURCHASE AGREEMENT
PARTIES AND RECITALS PAGE
Parties...............................................................................................................................................1
Recital..............................................................................................................................................1
ARTICLE I DEFINITIONS AND INTERPRETATION................................................................1
Section 1.01. Definitions....................................................................................................1
Section 1.02. Characteristics of Certificate or Opinion .....................................................5
Section 1.03. Description of Project ..................................................................................5
Section 1.04. Additional Provisions as to Interpretation ...................................................5
ARTICLE II REPRESENTATIONS AND COVENANTS ............................................................6
Section 2.01. Representations by the Issuer.......................................................................6
Section 2.02. Representations, Warranties and Covenants by the Borrower.....................6
ARTICLE III ISSUANCE AND PURCHASE OF NOTE............................................................10
Section 3.01. Issuance of Note by Issuer; Purchase by Purchaser...................................10
Section 3.02. Deposit of Proceeds in Project Fund..........................................................10
Section 3.03. Conditions to the Closing...........................................................................10
ARTICLE IV ISSUANCE OF THE NOTE; UNDERTAKING OF PROJECT ...........................12
Section 4.01. Agreement to Undertake and Complete Project ........................................12
Section 4.02. Loan of Proceeds........................................................................................12
Section 4.03. Borrower Required to Pay Project Costs in Event Proceeds Insufficient ..12
Section 4.04. Project Costs Defined ................................................................................12
Section 4.05. Completion of the Project ..........................................................................13
Section 4.06. Project Supervisor......................................................................................13
Section 4.07. Inspections .................................................................................................13
Section 4.08. Issuance Costs............................................................................................13
Section 4.09. Special Borrower Covenants for Project Construction Contracts..............13
ARTICLE V LOAN REPAYMENTS AND OTHER PAYMENTS ............................................14
Section 5.01. Repayment of Loan....................................................................................14
Section 5.02. Additional Payments..................................................................................14
Section 5.03. No Set-Off; Borrower’s Obligations Unconditional..................................14
Section 5.04. Option to Prepay Loan ...............................................................................15
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Section 5.05. Tax-Exempt Status of Interest on the Note................................................15
ARTICLE VI USE OF PROJECT FACILITIES...........................................................................17
Section 6.01. Use of Project Facilities .............................................................................17
Section 6.02. Ownership, Maintenance and Possession of Project by Borrower;
Operating Expenses ...................................................................................17
Section 6.03. Liens...........................................................................................................17
Section 6.04. Taxes and Other Governmental Charges ...................................................17
Section 6.05. [This Section intentionally omitted.].........................................................18
Section 6.06. Insurance ....................................................................................................18
Section 6.07. Damage or Destruction ..............................................................................18
ARTICLE VII SPECIAL COVENANTS......................................................................................19
Section 7.01. No Warranty of Condition or Suitability; Indemnification........................19
Section 7.02. Borrower to Maintain its Existence; Permitted Exceptions.......................19
Section 7.03. Reports .......................................................................................................20
Section 7.04. Inspection...................................................................................................20
Section 7.05. Further Assurances, Financing Statements, Maintenance of Lien.............20
Section 7.06. Assignments...............................................................................................20
Section 7.07. Observance of Note Resolution Covenants and Terms .............................20
Section 7.08. Financial Information and Reporting.........................................................21
Section 7.09. Additional Indebtedness.............................................................................22
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES ......................................................23
Section 8.01. Events of Default.......................................................................................23
Section 8.02. Remedies on Default..................................................................................24
Section 8.03. Remedies Cumulative, Delay Not to Constitute Waiver ...........................24
Section 8.04. Agreement to Pay Attorneys’ Fees and Expenses .....................................25
Section 8.05. Advances....................................................................................................25
ARTICLE IX MISCELLANEOUS ...............................................................................................26
Section 9.01. Notices .......................................................................................................26
Section 9.02. Binding Effect............................................................................................26
Section 9.03. Counterparts ...............................................................................................26
Section 9.04. Benefit of Holder .......................................................................................26
Section 9.05. Due Dates...................................................................................................26
Section 9.06. Captions .....................................................................................................26
Section 9.07. Term of Agreement....................................................................................26
Section 9.08. Severability ................................................................................................26
Section 9.09. Amendments, Consents, Changes and Modifications................................26
Exhibit A Schedule of Note Termination Values....................................................A-1
Exhibit B Form of Note............................................................................................B-1
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LOAN AND PURCHASE AGREEMENT
This LOAN AND PURCHASE AGREEMENT (the “Loan Agreement”), is made as of
the first day of June, 2007, by and between the CITY OF BOZEMAN, a municipal corporation
and political subdivision of the State of Montana (the “City” or the “Issuer”), LEARNING
CIRCLE MONTESSORI ELEMENTARY SCHOOL, INC., a Montana nonprofit corporation
(the “Borrower”) and WELLS FARGO BROKERAGE SERVICES, LLC, a Delaware limited
liability company having its principal offices in Minneapolis, Minnesota (the “Purchaser”).
Recitals
WHEREAS, Montana Code Annotated, Title 90, Chapter 5, Part 1, as amended (the
“Act”), authorizes and empowers municipalities and counties of the State of Montana to issue
and sell revenue bonds and notes and lend the proceeds thereof to a contracting party for the
purpose of financing or refinancing projects authorized thereby; and
WHEREAS, the Borrower has proposed to undertake a project in the City (as further
described in Section 1.03 hereof, the “Project”); and
WHEREAS, to provide financing for the Project, the Issuer has determined to issue and
sell to the Purchaser its Revenue Note (Learning Circle Montessori Elementary School, Inc.
Project) (the “Note”), and to make a loan of the proceeds thereof to the Borrower under this Loan
Agreement, all pursuant to the Act; and
WHEREAS, after a public hearing duly called and held, the City Commission of the
Issuer adopted a resolution on May 29, 2007, authorizing and approving the issuance and sale of
the Note and the execution and delivery of this Loan Agreement; and
WHEREAS, the Borrower has agreed to execute and deliver to the Purchaser a
Combination Mortgage, Security Agreement and Fixture Financing Statement and Assignment
of Leases and Rents, of even date herewith, granting, as security for the performance of its
obligations under this Loan Agreement, a mortgage and security interest in the Project, as
defined herein, and an assignment of leases and rents with respect thereto; and
NOW, THEREFORE, in consideration of the mutual agreements and covenants
hereinafter contained, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in
this Article I and in the succeeding Articles of this Loan Agreement shall, for all purposes of this
Loan Agreement and of any agreement supplemental hereto, have the meanings herein specified,
such definitions to be equally applicable to both the singular and plural forms of any of the terms
defined:
135
“Act” means Montana Code Annotated, Title 90, Chapter 5, Part 1, as amended from
time to time.
“Authorized Borrower Representative” means the person at the time designated to act on
behalf of the Borrower by written certificate furnished to the Issuer and the Purchaser, containing
the specimen signature of such person and signed on behalf of the Borrower by any officer or
member of the Board of Directors of the Borrower. Such certificate may designate an alternate
or alternates.
“Authorized Issuer Representative” means the person at the time designated to act on
behalf of the Issuer by written Certificate furnished to the Borrower and the Purchaser,
containing the specimen signature of such person and signed on behalf of the Issuer by its Mayor
or City Clerk. Such Certificate may designate an alternate or alternates.
“Bond Counsel” means Independent, nationally recognized bond counsel.
“Borrower” means Learning Circle Montessori Elementary School, Inc., a Montana
nonprofit corporation, its permitted successors and assigns hereunder.
“Certificate” means a certification in writing required or permitted by the provisions of
this Loan Agreement or the other Note Documents, signed and delivered to the Purchaser or
other proper person or persons. If and to the extent required by the provisions of Section 1.02
hereof, each Certificate shall include the statements provided for in said Section 1.02.
“Certified Resolution” means a copy of a resolution of the City Commission, certified by
the Clerk to have been duly adopted by the City Commission and to be in full force and effect on
the date of such certification.
“City” or “Issuer” means City of Bozeman, a municipal corporation and political
subdivision of the State of Montana, its successors and assigns.
“City Commission” or “Commissioners” means the City Commission of the Issuer or any
successor governing body of the Issuer.
“Closing Date” means the date of issuance and initial delivery to the Purchaser of the
Note as provided in Section 3.01 hereof.
“Completion Date” means the Closing Date, being the date on which the acquisition of
the Project is undertaken and completed, in accordance with this Loan Agreement.
“Default” means default by the Borrower in the performance or observance of any of the
covenants, agreements or conditions on its part contained in this Loan Agreement or the
Mortgage, exclusive of any notice or period of grace required for a default to constitute an
“Event of Default” as hereinafter provided.
“Determination of Taxability” means the issuance of a statutory notice of deficiency by
the Internal Revenue Service, or a ruling of the National Office or any District Office of the
Internal Revenue Service, or a final decision by any court of competent jurisdiction, to the effect
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that interest on the Note is includable in the gross income of the recipient under Section 103 of
the Internal Revenue Code, and regulations thereunder, if the period, if any, for contest or appeal
of such action, ruling or decision has expired without any such contest or appeal having been
properly instituted or, if instituted, such contest or appeal has been unsuccessfully concluded.
Inclusion of interest on the Note in any alternative minimum tax shall not be a Determination of
Taxability.
“Escrow Agreement” means the Escrow Agreement of even date herewith by and
between the Issuer, the Borrower and the Purchaser, as Escrow Agent, as amended or
supplemented from time to time.
“Event of Default” means an Event of Default described in Section 8.01 hereof, which
has not been cured.
“Holder” or “Noteholder” or “Owner” means the person or persons in whose name the
Note shall be registered in the registration records maintained by the Issuer.
“Independent”, when used with reference to an attorney, engineer, architect, certified
public accountant, or other professional person, means a person who (i) is in fact independent,
(ii) does not have any material financial interest in the Borrower or the transaction to which his
Certificate or opinion relates (other than the payment to be received for professional services
rendered), and (iii) is not connected with the Issuer or the Borrower as an officer, commissioner,
director or employee.
“Independent Counsel” means an Independent attorney duly admitted to practice law
before the highest court of any state.
“Internal Revenue Code” or “Code” means the Internal Revenue Code of 1986, as in
effect on the date of issuance of the Note.
“Issuer” means City of Bozeman, a municipal corporation and political subdivision of the
State of Montana, its successors and assigns.
“Land” means the real property and interests in real property constituting the site of the
Project, as legally described in Exhibit A to the Mortgage.
“Legal Investments” means any investment or investments permitted by applicable law to
be made with proceeds of the Note at the date hereof or the date of investment.
“Loan” means the loan from the Issuer to the Borrower provided for by Section 4.02
hereof.
“Loan Agreement” means this Loan and Purchase Agreement dated as of June 1, 2007,
by and between the Issuer, the Borrower and the Purchaser, as amended or supplemented from
time to time.
“Loan Agreement Assignment” means the Loan Agreement Assignment from the Issuer
to the Purchaser of even date herewith, and any amendments or supplements thereto.
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“Loan Repayments” means the payments made or to be made by the Borrower pursuant
to Section 5.01.
“Mortgage” means the Combination Mortgage, Security Agreement and Fixture
Financing Statement and Assignment of Leases and Rents of even date herewith from the
Borrower to the Purchaser, as amended or supplemented from time to time.
“Note” means the City of Bozeman, Montana, Revenue Note (Learning Circle
Montessori Elementary School, Inc. Project), authorized by this Loan Agreement and the Note
Resolution, dated the Closing Date, in the principal amount of $400,000, and substantially in the
form attached hereto as Exhibit B.
“Note Documents” means this Loan Agreement, the Loan Agreement Assignment, the
Mortgage and the Escrow Agreement.
“Note Resolution” means the resolution of the Issuer adopted by the City Commission on
May 29, 2007, authorizing the issuance and sale of the Note, as the same may be amended,
modified or supplemented by any amendments or modifications thereof.
“Opinion of Counsel” means a written opinion of counsel (who need not be Independent
Counsel unless so specified) appointed by the Borrower or Issuer. If and to the extent required
by the provisions of Section 1.02 hereof, each Opinion of Counsel shall include the statements
provided for in said Section 1.02.
“Outstanding” when used as of any particular time with reference to the Note, means the
then outstanding principal balance of the Note theretofore executed and delivered under the Note
Resolution, but excepting any Note in lieu of or in substitution for which another Note shall have
been executed and delivered pursuant to the terms of paragraph 9 of the Note Resolution.
“Permitted Encumbrances” means, with respect to the Land, those encumbrances set
forth on Exhibit B to the Mortgage and any other encumbrance which is hereafter approved in
writing by the Purchaser.
“Project” means the project described in Section 1.03 hereof.
“Project Building” means the building in Bozeman, Montana to be acquired by the
Borrower with proceeds of the Note, and to comprise a private elementary school, owned and
operated by the Borrower.
“Project Costs” means those costs defined as such in Section 4.04 hereof.
“Project Equipment” means the equipment and any other tangible personal property
financed with the proceeds of the Note, all to be installed and located permanently or used or
sited exclusively in the Project Building.
“Project Facilities” means, collectively, the Land, the Project Building and the Project
Equipment.
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“Project Fund” means the Project Fund established under the Escrow Agreement.
“Project Supervisor” means the person appointed by the Borrower as such, pursuant to
Section 4.06 of this Loan Agreement, and includes any Alternate Project Supervisor, if
appointed, pursuant to Section 4.06 of this Loan Agreement.
“Purchaser” or “Registered Owner” means Wells Fargo Brokerage Services, LLC, a
Delaware limited liability company, its successors and assigns.
“Redeem” or “redemption” means and includes “prepay” or “prepayment” as the case
may be.
“Termination Value” means, with respect to any monthly payment date for the Note, the
applicable amount set forth in Exhibit A hereto.
Section 1.02. Characteristics of Certificate or Opinion. Every Certificate or opinion
with respect to compliance with a condition or covenant provided for in this Loan Agreement or
the other Note Documents shall include: (i) a statement that the person or persons making such
certificate or opinion have read such covenant or condition and the definitions herein relating
thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such Certificate or opinion are based; (iii) a
statement that, in the opinion of the signers, they have made or caused to be made such
examination or investigation as is necessary to enable them to express an informed opinion as to
whether or not such covenant or condition has been complied with; and (iv) a statement as to
whether, in the opinion of the signers, such condition or covenant has been complied with.
Any such Certificate made or given by an officer of the Borrower or the Issuer may be
based, insofar as it relates to legal matters, upon an opinion of counsel. Any such opinion made
or given by counsel may be based (insofar as it relates to factual matters information with respect
to which is in the possession of the Issuer or the Borrower) upon the certificate or opinion of or
representations by an officer or officers of the Issuer or the Borrower.
Section 1.03. Description of Project. The term “Project” refers to the acquisition of the
existing 4,875 square foot building located at 3001 West Villard Street, Bozeman, Montana, to
be acquired, owned and operated by the Borrower, an organization described in
Section 501(c)(3) of the Internal Revenue Code, for use as a private elementary school.
Section 1.04. Additional Provisions as to Interpretation. All references herein to
“Articles”, “Sections” and other subdivisions are to the corresponding Articles, Sections or
subdivisions of this Loan Agreement; and the words “herein,” “hereof,” “hereunder” and other
words of similar import refer to this Loan Agreement as a whole and not any particular Article,
Section or subdivision hereof.
Any terms defined in any other Note Documents but not defined herein shall have the
same meaning herein unless the context hereof clearly requires otherwise.
This Loan Agreement is governed by and shall be construed in accordance with the laws
of Montana.
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ARTICLE II
REPRESENTATIONS AND COVENANTS
Section 2.01. Representations by the Issuer. The Issuer makes the following
representations as the basis for its undertakings herein:
(a) The Issuer is a duly organized and existing municipal corporation and
political subdivision of the State of Montana, under the laws of the State of Montana,
including the Act.
(b) On May 29, 2007, the City Commission conducted a public hearing on the
proposal of the Borrower to undertake the Project and finance the same through the
issuance of the Note, upon due notice and otherwise as required by the Act, and on said
date the City Commission adopted a resolution (the “Note Resolution”) giving final
approval to the Project and the issuance of the Note.
(c) The Project constitutes a “project” within the meaning of the Act.
(d) The Project, the issuance and sale of the Note, the execution and delivery
of this Loan Agreement, the Loan Agreement Assignment and the Escrow Agreement,
the performance of all covenants and agreements of the Issuer contained in this Loan
Agreement, the Loan Agreement Assignment and the Escrow Agreement and the Loan of
money hereunder are authorized and have been duly authorized by the Note Resolution
duly adopted at a meeting of the City Commission.
(e) To provide financing for the costs of the Project, the Issuer proposes to
issue the Note in the authorized principal amount of $400,000, to be dated the Closing
Date.
(f) To the best knowledge of the officers of the Issuer executing this Loan
Agreement, no Commissioner or other officer or employee of the Issuer is directly or
indirectly interested in the Note, the Note Documents, the Project, or any contract,
agreement or job hereby contemplated to be entered into or undertaken for completion of
the Project.
(g) There is no litigation pending, or to the best knowledge of the officers of
the Issuer executing this Loan Agreement, threatened questioning the authority of the
Issuer to undertake the Project or issue the Note or questioning the tax-exempt status of
interest on the Note or questioning the authority of any Commissioner or other officer or
employee of the Issuer to hold office or take part in any of the transactions contemplated
hereby.
(h) The execution and delivery by the Issuer of the Note Documents to which
it is a party does not violate or constitute a breach of or default under any document or
instrument to which the Issuer is a party or any court order to which the Issuer is subject.
Section 2.02. Representations, Warranties and Covenants by the Borrower. The
Borrower makes the following representations, warranties and covenants:
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(a) The Borrower is a nonprofit corporation duly organized and existing under
the laws of the State of Montana.
(b) Except as otherwise provided in Section 6.02 hereof, the Borrower intends
to own and operate the Project from the date hereof to the expiration or sooner
termination of this Loan Agreement, as provided herein, except to the extent such
operation may be interrupted by strikes, riots, acts of God or public enemy or other
circumstances beyond the control of the Borrower.
(c) The execution and delivery of this Loan Agreement and the other Note
Documents, and any other agreement or instrument to be entered into in connection with
the Project, and the consummation of the transactions herein and therein contemplated
will not conflict with or constitute a breach of or default under the articles of association
of the Borrower, or any note, debenture, lease or other evidence of indebtedness or any
contract, loan agreement or lease to which the Borrower is a party or by which it is
bound, or violate any law, regulation or order of the United States or the State of
Montana or agency or political subdivision thereof or of any court order or judgment in
any proceeding to which the Borrower is or was a party or by which it is bound.
(d) There has been no default by the Borrower or, to the best of the
knowledge of the Borrower, by any contractor or other person, under any purchase
agreement or contract between the Borrower and any other person relating to the
acquisition, construction or financing of the Project.
(e) There is no litigation pending, or to the best of its knowledge threatened,
against the Borrower affecting its ability to carry out the acquisition or financing of the
Project or the terms of this Loan Agreement, the other Note Documents, or any other
agreement or instrument to be entered into in connection with the Project.
(f) As of the Closing Date, the Borrower has or will have good and
marketable fee simple title to the Land and, except as may hereafter be approved in
writing by the Purchaser, there are and throughout the term hereof there shall be no
encumbrances against the Land except Permitted Encumbrances.
(g) To the best of the Borrower’s knowledge and belief, no Commissioner or
other officer or employee of the Issuer is directly or indirectly interested in this Loan
Agreement, the other Note Documents, the Project or any contract, agreement or job
hereby contemplated to be entered into or undertaken.
(h) The Project Facilities comprise a commercial facility, which constitutes a
“project” within the meaning of the Act.
(i) So long as the Note shall remain outstanding, the Borrower shall not take
or suffer to be taken any action which would have the effect of jeopardizing the tax-
exempt status of interest on the Note under the Internal Revenue Code or the authority of
the Borrower under the Act to undertake the Project.
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(j) All property to be provided with proceeds of the Note shall be owned
either by a governmental unit or an organization described in Section 501(c)(3) of the
Internal Revenue Code, all within the meaning of Section 145(a) of the Code.
(k) Not less than 95% of the proceeds of the Note will be used in accordance
with the requirements of Section 145(a) of the Internal Revenue Code.
(l) The Borrower is an organization described in Section 501(c)(3) of the
Internal Revenue Code, exempt from the payment of federal income taxes under
Section 501(a) of the Code, and no revenues derived or to be derived from any portion of
the Project are or shall be delivered from any “private business use” or from an
“unrelated trade or business,” within the meaning of Section 513(a) of the Code, except
as may be specifically contemplated by Section 145(a) of the Code in amounts that would
not require the interest on the Note to become includable in the gross income of the
recipients thereof, for purposes of Federal income taxation. In furtherance of this
covenant, at least 97% of the facilities (measured by reference to fair market value)
financed by the Note is to be used solely and exclusively by organizations described in
Section 501(c)(3) of the Internal Revenue Code (“Tax-Exempt Organizations”) in
activities which do not constitute unrelated trades or businesses, determined by applying
Section 513(a) of the Code, and the Borrower will not permit more than 3% of such
facilities (measured by reference to fair market value) to be used (i) by a Tax-Exempt
Organization in an unrelated trade or business or (ii) in the trade or business of any
person other than a unit of state or local government or a Tax-Exempt Organization
(whether pursuant to a lease, management agreement or other arrangement), unless such
use, according to an opinion of Bond Counsel, does not jeopardize the excludability from
gross income, for federal income tax purposes, of interest on the Note.
(m) None of the proceeds of the Note shall be used to provide an airplane,
skybox or other private luxury box, facility primarily used for gambling, or store the
principal business of which is the sale of alcoholic beverages for consumption off
premises, and the Borrower does not expect that the Project, or any portion thereof, shall
subsequently be used for any of such purposes.
(n) The weighted average maturity of the Note does not exceed 120% of the
average reasonably expected economic life of the Project Facilities, all within the
meaning of Section 147(b) of the Internal Revenue Code.
(o) Proceeds of the Note may be expended to pay amounts owing as interest
on the Note, provided, however, that such amounts shall not exceed the lesser of the
following: (i) an amount sufficient to pay interest on the Note only for a period of time
not exceeding the time from the Closing Date through the completion of construction,
plus six months; or (ii) in the aggregate, the amount permitted under Treasury
Regulation, Section 1.148 - 6(d)(3)(ii)(A)(3), such amount generally being equal to
interest owing on the Note for a period commencing on the Closing Date and ending on
the date that is the later of three years from the Closing Date or one year after the date on
which the Project is placed in service.
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(p) Proceeds of the Note shall not be applied to the reimbursement of Project
Costs paid or expended prior to the issuance of the Note (in order to reimburse the
amount of such prior expenditures), except to the extent permitted under Treasury
Regulation, Section 1.150-2; specifically, proceeds of the Note shall not be expended to
reimburse an expenditure made prior to the issuance of the Note unless (i) such
expenditure was made not prior to the date that is 60 days before the date on which there
was adopted an “official intent” therefor, within the meaning of Treasury Regulation,
Section 1.150-2, or (ii) such expenditure is in an amount within the “de minimis”
exception provided under Treasury Regulation, Section 1.150-2(f)(1) (such “de minimis”
amount being equal to the lesser of 5% of the proceeds of the Note or $100,000), or
(iii) such expenditure is a “preliminary expenditure” described in Treasury Regulation,
Section 1.150-2(f)(2), made with respect to architectural, engineering, surveying, soil
testing, reimbursement bond issuance, or similar costs (other than land acquisition, site
preparation, and similar costs incident to commencement of construction), the aggregate
amount of all such “preliminary expenditures” being limited to an amount not in excess
of 20% of the aggregate issue price of the Note.
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ARTICLE III
ISSUANCE AND PURCHASE OF NOTE
Section 3.01. Issuance of Note by Issuer; Purchase by Purchaser. To finance the
Project, the Issuer will issue the Note as provided in the Act and Note Resolution and sell the
same to the Purchaser and the Purchaser will purchase the Note on the Closing Date, all upon
satisfaction of the terms and conditions set forth in Section 3.03 (the “Closing”). The proceeds
of issuance of the Note shall be loaned to the Borrower as provided in Section 3.02 and
Section 4.02 of this Loan Agreement. The Issuer will issue the Note in the form of a single fully
registered note, numbered R-1, dated the date of delivery thereof. The Purchaser will purchase
the Note as provided herein at a price equal to 100% of the principal amount thereof ($400,000).
Section 3.02. Deposit of Proceeds in Project Fund. Payment for the Note shall be made
by depositing the entire proceeds of the sale thereof in the Project Fund to be held, invested and
disbursed by the Purchaser, as Escrow Agent, as provided in the Escrow Agreement. Such
deposit shall also constitute the loan of the Note proceeds from the Issuer to the Borrower under
Section 4.02 hereof. Moneys in the Project Fund shall, in accordance with Section 3 of the
Escrow Agreement, be disbursed by the Escrow Agent upon the direction of the Authorized
Borrower Representative, for the payment of Project Costs, pursuant to a Draw Request to be
substantially in the form of Exhibit A to the Escrow Agreement. Upon the completion of the
Project, the Completion Date shall be evidenced by delivery to the Escrow Agent of a Certificate
of the Authorized Borrower Representative.
Section 3.03. Conditions to the Closing. The obligation of the Purchaser to purchase the
Note under Section 3.01 is conditioned upon delivery to the Purchaser on the Closing Date of the
following, any of which may be waived by the Purchaser in its discretion:
(a) A Certificate dated the Closing Date and signed by an officer of the
Borrower stating that no Event of Default and no event which, with the giving of notice
or lapse of time or both, would become an Event of Default, shall have occurred and be
continuing or shall exist upon the completion of the Closing;
(b) A Certificate of the Authorized Borrower Representative, dated the
Closing Date, stating that as of such date the representations and warranties of the
Borrower contained in Section 2.02 hereof are true and correct in all material respects;
(c) An opinion of Dorsey & Whitney LLP, as Bond Counsel to the Purchaser;
(d) Certified copies of the Note Resolution authorizing the issuance and sale
of the Note and the execution and delivery of the Note Documents;
(e) Certified copy of a resolution of the Board of Directors of the Borrower
approving and authorizing the execution and delivery of the Note Documents;
(f) The executed Note and executed counterparts of this Loan Agreement, the
Loan Agreement Assignment, the Mortgage and the Escrow Agreement;
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(g) A Certificate of the Issuer pursuant to Section 148 of the Internal Revenue
Code and pertinent regulations as to absence of arbitrage expectation, which may be
given in reliance on the factual representations and/or certifications of the Borrower;
(h) Executed financing statements under the Uniform Commercial Code of
Montana, as the Purchaser may deem necessary or desirable in order to perfect the
security interests granted by the Issuer and the Borrower to secure the Note, and
completed requests for information, dated on or before the date of Closing, as to effective
financing statements filed in all filing offices in which the financing statements shall have
been filed;
(i) All other documents or certificates the Purchaser may reasonably request
relating to the existence and good standing of the Borrower, the due execution and
validity of the Note, the Note Resolution, the Mortgage, the Escrow Agreement, the Loan
Agreement Assignment and this Loan Agreement, the tax-exempt status of interest on the
Note for Federal income tax purposes, and all other relevant matters, all in form and
substance satisfactory to the Purchaser.
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ARTICLE IV
ISSUANCE OF THE NOTE;
UNDERTAKING OF PROJECT
Section 4.01. Agreement to Undertake and Complete Project. The Borrower agrees that
it will proceed on the Closing Date to complete the acquisition of the Project. No changes will
be made to the Project which would delete from the Project any essential characteristics of the
Project as specified in Section 1.03, and, if any such permitted changes are made, after any such
changes, the Project shall continue to constitute an authorized “project” within the meaning of
the Act. The Project shall be acquired in accordance with all applicable environmental, zoning,
planning and building regulations of governmental authorities having jurisdiction of the Project.
Section 4.02. Loan of Proceeds. The Issuer hereby lends to the Borrower the entire
gross proceeds of issuance of the Note ($400,000). The obligation of the Borrower to repay the
said loan (the “Loan”), together with interest and premium, if any, thereon shall become
effective immediately upon the deposit of the Note proceeds into the Project Fund, as provided in
Section 3.02 hereof, and as set forth in the Escrow Agreement.
Section 4.03. Borrower Required to Pay Project Costs in Event Proceeds Insufficient. In
the event that the proceeds of the Note available for payment of Project Costs should not be
sufficient to pay the Project Costs in full, the Borrower agrees, for the benefit of the Issuer and
the Purchaser, to complete the Project and to pay any such additional Project Costs. Neither the
Issuer nor the Purchaser makes any warranty, either express or implied, that the proceeds of the
Note, which under the provisions of this Loan Agreement will be available for payment of
Project Costs, will be sufficient to pay all the costs which will be incurred in that connection. If
the Borrower should pay any portion of the Project Costs in excess of the proceeds of the Note, it
shall not be entitled to any reimbursement therefor from the Issuer or the Purchaser, nor shall it
be entitled to any diminution in or postponement of payments to be made under Sections 5.01,
5.02, or 5.05 hereof.
Section 4.04. Project Costs Defined. For the purposes of this Loan Agreement, the
Project Costs shall include, without intending thereby to limit or restrict any proper definition of
such cost under any applicable laws or sound accounting practice, the following:
(a) Acquisition costs of land and interests in land required for the site of the
Project;
(b) Acquisition costs of the Project Building and the Project Equipment;
(c) [Intentionally Omitted]
(d) Expenses of administration, supervision and inspection properly
chargeable to the Project, administrative fees of the Issuer, abstracting and filing fees,
legal expenses and fees, fiscal consultant fees and expenses, cost of audits and all costs
and expenses of preparing, offering and issuing the Note;
(e) Interest on the Note during the construction period for the Project, plus six
months; and
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(f) Any other obligation or expense heretofore or hereafter incurred by the
Borrower in connection with the Project defined as and constituting a proper Project Cost
under the Act and approved by the Authorized Borrower Representative.
Provided, however, that Project Costs shall not include any costs expended by the
Borrower prior to the issuance of the Note, except for: (i) Preliminary Expenditures, but only in
an amount up to not more than 20 percent of the aggregate issue price of the Note, all within the
meaning of Treasury Regulation § 1.150-2(f)(2), (ii) Project Costs that in the aggregate are not in
excess of the lesser of $100,000 or five percent of the proceeds of the Note; and (iii) Project
Costs expended no earlier than the date 60 days prior to the date of adoption by the Borrower of
an “official intent,” within the meaning of Treasury Regulation § 1.150-2.
Section 4.05. Completion of the Project. The Completion Date shall be evidenced to the
Purchaser by a Certificate signed by the Authorized Borrower Representative as required by
Section 6 of the Escrow Agreement.
Section 4.06. Project Supervisor. [Intentionally Omitted]
Section 4.07. Inspections. It is expressly understood and agreed that the Purchaser may
conduct such inspections of the Project as it may deem necessary for the protection of its interest,
and that any inspections which may be made of the Project by the Purchaser will be made solely
for the benefit and protection of the Purchaser, and that the Borrower will not rely thereon.
Section 4.08. Issuance Costs. Notwithstanding any other provision hereof, the Borrower
covenants that issuance costs financed by the Note will not exceed 2.00% of the proceeds of the
Note.
Section 4.09. Special Borrower Covenants for Project Construction Contracts. In
accordance with Section 90-5-114(1) of the Act, the Borrower agrees to include in any contract
for construction of the Project a requirement that all contractors give preference to the
employment of bona fide Montana residents, as defined in Montana Code Annotated, Section 18-
2-401, in the performance of the work on the Project if their qualifications are “substantially
equal” (as defined in Section 90-5-114(1) of the Act) to those of nonresidents.
In accordance with Section 90-5-114(2) of the Act, the Borrower further agrees to include
in any contract let for the Project a provision requiring the contractor to pay the standard
prevailing wage rate in effect and applicable to the district in which the work is being performed.
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ARTICLE V
LOAN REPAYMENTS AND OTHER PAYMENTS
Section 5.01. Repayment of Loan. The Borrower covenants and agrees to repay the
Loan, together with interest and premium, if any, in Loan Repayments which shall be made on
the dates and in the amounts required under the Note to pay, in full and when due, all principal
of, interest and premium, if any, on the Note. The Borrower shall pay as an additional Loan
Repayment all amounts required under Section 5.05(d) hereof. Such payments by the Borrower
under this Section shall be made to the Purchaser in such coin or currency of the United States of
America as may be legal tender for the payment of public and private debts. The Borrower shall
furnish to the Issuer, if the Issuer so requests, the advice of transmittal of such payments at the
time of transmittal of payment. All payments under this Section 5.01 shall be Loan Repayments.
Section 5.02. Additional Payments. The Borrower also agrees to make the following
payments:
(a) To the Purchaser, all reasonable fees and expenses or advances of the
Purchaser charged or made in connection with the transactions contemplated by this Loan
Agreement and the other Note Documents, including attorneys’ fees.
(b) To the Issuer, all reasonable expenses of the Issuer incurred or made in
connection with the transactions contemplated by this Loan Agreement and the other
Note Documents, including attorneys’ fees and any fees or charges relating to the transfer
of the Note in accordance with the Note Resolution.
Section 5.03. No Set-Off; Borrower’s Obligations Unconditional. The obligation of the
Borrower to make the payments and to perform and observe the other agreements on its part
contained herein, in the other Note Documents and in the Note shall be absolute and
unconditional. So long as any principal of the Note is outstanding, the Borrower will pay
without abatement, diminution or deduction (whether for taxes or otherwise) all Loan
Repayments required to be paid hereunder, regardless of any cause or circumstance whatsoever
including, without limiting the generality of the foregoing: any defense, setoff, recoupment or
counterclaim which the Borrower may have or assert against the Issuer, the Purchaser or any
other Noteholder or any other person; any failure of the Issuer to perform any covenant or
agreement contained herein or in any other agreement between the Issuer or any Noteholder and
the Borrower; any indebtedness or liability at any time owing to the Borrower by the Issuer, the
Purchaser or any other Noteholder or any other person; any acts or circumstances that may
constitute failure of consideration; damage to or condemnation of the Project; failure or delay in
completion of the Project; eviction by paramount title; commercial frustration of purpose;
bankruptcy or insolvency of the Issuer, or the Purchaser; enforcement or foreclosure of the
Mortgage; any change in the tax or other laws of the United States of America or of any State or
any political subdivision of either; or any failure of the Issuer or the Purchaser to perform and
observe any agreement, whether express or implied, or any duty, liability or obligation, arising
out of or connected with this Loan Agreement, the other Note Documents or the Note
Resolution.
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Section 5.04. Option to Prepay Loan. On ______________, 2007 and each regularly
scheduled installment payment date thereafter, the Borrower shall have, and is hereby granted,
the option to prepay the Loan and cause to be prepaid the Note, in whole but not in part, on any
payment date therefor, upon 30 days’ notice thereof in writing to the Purchaser, at a prepayment
price equal to the regularly scheduled payment otherwise owing on such regular installment
payment date, together with an additional amount equal to the Termination Value, as set forth in
Exhibit A hereto.
In the event the Borrower elects to prepay the Loan, the Borrower shall cause to be given
due notice of redemption or prepayment of the Note as required by the provisions of the Note
Resolution and the Note, and shall pay the prepayment price when due to the Purchaser.
Section 5.05. Tax-Exempt Status of Interest on the Note. It is the intention of the parties
hereto that the interest paid on the Note will not be included in the gross income of the recipient
of said interest by reason of Section 103 and related Sections of the Internal Revenue Code,
including, particularly, Section 145 of the Code. In order to confirm and carry out such
intention:
(a) The Borrower shall (i) provide such Certificates of the Authorized
Borrower Representative, Opinions of Counsel, and other evidence as may be necessary
or reasonably requested by the Issuer or any Holder to establish the exemption of interest
on the Note under Section 103 and related Sections and the absence of arbitrage
expectation under Section 148 of the Internal Revenue Code, and (ii) file such
information and statements, acting alone or with the Issuer, with the Internal Revenue
Service, as may be required from the Borrower or the Issuer to establish or preserve such
exemption or as may be required by Section 103 and related Sections of the Internal
Revenue Code, including Section 149(e) of the Code, and regulations thereunder.
(b) If a Noteholder shall be given notice of a proposed deficiency by the
Internal Revenue Service, based upon a proposed Determination of Taxability, or if a
responsible officer of the Purchaser or other Holder shall have actual knowledge of a
proposed ruling by the Internal Revenue Service to the effect that interest on the Note is
includable in the gross income of the Holder, the Purchaser or other Holder shall give
notice to the Borrower of such proposed deficiency or ruling as promptly as possible and
permit the Borrower, to the extent reasonably possible, to participate in contesting any
such proposed deficiency or ruling. Any expenses incurred by the Borrower or by any
Holder at the request of the Borrower in connection with such contest shall be paid by the
Borrower. Notwithstanding the foregoing, the Holder shall have the right to control all
proceedings before the Internal Revenue Service and any judicial proceedings relating to
taxability of interest on the Note received by the Holder, including the compromise of
claims in such proceedings and abandonment of rights to appeal, and failure of the
Purchaser or other Holder to give notice to the Borrower under this paragraph (b) shall
not affect the Borrower’s obligation under paragraph (c) of this Section.
(c) If there shall occur a Determination of Taxability, the Note shall be
subject to mandatory redemption, in whole, on the sixtieth calendar day following notice
to the Borrower of the Determination of Taxability, at a redemption price equal to the
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applicable Termination Value for the monthly payment date next preceding such
redemption date, as set forth in Exhibit A hereto, plus accrued interest through the date of
redemption, together with all taxes, interest and penalties assessed or owing in connection
therewith.
(d) The Borrower hereby acknowledges and confirms its obligations under
Section 148 of the Internal Revenue Code and regulations thereunder, in order to
maintain the tax-exempt status of the Note. Specifically, the Borrower agrees to comply
with the rebate requirements imposed under Section 148(f) and pertinent regulations,
including the requirement to make annual (or other periodic) calculations of the amount
subject to rebate thereunder, and to maintain records of such determinations until six
years after the retirement of the Note, and the requirement to make all required rebate
payments to the United States not later than 60 days after the end of the fifth note year
and not later than 60 days after each fifth anniversary thereof, to and until the date which
is 60 days after the final retirement of the Note. If the Borrower shall fail to pay the full
amount of any rebate payment required to be paid by the Borrower when such deposit is
due, the Purchaser may make payment to the United States, and such payment or deposit
shall be an advance under Section 8.05 of this Loan Agreement. In construing the
Borrower’s obligations hereunder, all terms used in this paragraph (d) shall have the
meanings provided in said Section 148(f) and regulations thereunder. The Borrower
agrees to make all required rebate payments to the United States, as and when required,
and such payments shall constitute additional Loan Repayments under Section 5.01
hereof.
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ARTICLE VI
USE OF PROJECT FACILITIES
Section 6.01. Use of Project Facilities. The Borrower will use the Project Facilities only
in furtherance of its lawful purposes and will use and operate the Project Facilities only in
accordance with applicable requirements under the Act.
The Borrower will not use or permit any person to use the Project Facilities for any use or
purpose in violation of the laws of the United States, the State of Montana, or any ordinance of
the Issuer, and agrees to comply with all the orders, rules, regulations and requirements of the
Board of Fire Underwriters and officers or boards of the City, the City or the State of Montana or
other governmental authority having jurisdiction over the Project Facilities. The Borrower shall
have the right to contest by appropriate legal proceedings, without cost or expense to the Issuer,
the validity of any law, ordinance, order, rule, regulation or requirement of the nature herein
referred to.
Section 6.02. Ownership, Maintenance and Possession of Project by Borrower;
Operating Expenses. The Borrower agrees that so long as the Note is outstanding, the Borrower
will own the Project Facilities and will keep the Project Facilities in good repair and good
operating condition at its own cost, ordinary depreciation excepted, making such repairs and
replacements as are necessary in the judgment of the Borrower so that the Project Facilities will
continue to comply with all pertinent requirements of the Act and the interest on the Note will
remain excludible from gross income for purposes of federal income taxation. As required by
the Act, the Borrower will pay all expenses arising from the operation and maintenance of the
Project Facilities. The Borrower covenants that, so long as the Note shall remain outstanding,
the Borrower shall continue to own the Project Facilities and use the same in furtherance of its
lawful purposes and that no part of the Project Facilities shall be used in any unrelated trade or
business of the Borrower, within the meaning of Section 513 of the Internal Revenue Code, or
shall be leased to or used by any person not constituting a unit of state or local government or an
organization described in Section 501(c)(3) of the Internal Revenue Code, without furnishing to
the Purchaser an opinion of Bond Counsel concluding that such use shall not adversely affect the
exclusion from gross income of interest on the Note.
Section 6.03. Liens. The Borrower will pay or cause to be paid all utility charges and
other charges arising from its operations which, if unpaid, would become a lien on the Project
Facilities and will not permit any lien or encumbrance to be established or to remain unsatisfied
against the Project Facilities. The Borrower may in good faith contest any such lien filed or
established against the Project Facilities, and in such event may permit the items so contested to
remain undischarged and unsatisfied during the period of such contest and any appeal therefrom
unless the Purchaser shall notify the Borrower that, in the opinion of Independent Counsel, by
nonpayment of any such items the Project Facilities or any part thereof will be subject to loss or
forfeiture, in which event the Borrower shall promptly pay and cause to be satisfied and
discharged all such unpaid items.
Section 6.04. Taxes and Other Governmental Charges. As required by the Act, the
Borrower will pay, as the same respectively become due and before penalty attaches, any taxes,
license fees and governmental charges of any kind whatsoever that may at any time be lawfully
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assessed or levied against or with respect to the operation of the Project Facilities. The Borrower
may, at its expense, in good faith contest any such taxes, assessments, license fees and other
governmental charges by appropriate proceedings and, in the event of any such contest, may
permit the taxes, assessments, license fees or other charges so contested to remain unpaid during
the period of such contest and any appeal therefrom if funds sufficient to satisfy the contested
amount have been deposited in an escrow account satisfactory to the Purchaser.
Section 6.05. [This Section intentionally omitted.]
Section 6.06. Insurance. So long as the Note is outstanding, the Borrower agrees at all
times to keep all property included in the Project Facilities insured against risks of fire (including
so-called extended coverage), theft and such other risks and in such amounts as are customary
for a prudent owner of properties comparable to the Project Facilities, but in any event in an
amount not less than the principal amount of the Note outstanding from time to time.
Section 6.07. Damage or Destruction. In the event of damage to the Project Facilities
from any cause whatsoever, the Borrower will proceed to reconstruct, replace and repair the
damaged portion of the Project Facilities to the extent necessary to maintain the Project Facilities
to continue to comply with all pertinent requirements of the Act and to maintain the tax exempt
status of interest on the Note. Any such repair, rebuilding or reconstruction shall be without
expense to the Issuer. Notwithstanding the foregoing, in the event all or a major portion of the
Project Facilities is damaged or destroyed and the Borrower shall determine that it is not
practical or desirable to rebuild, repair or restore the Project Facilities, the Borrower shall have
no obligation to do so, provided that (i) the Borrower shall promptly have notified the Purchaser
and the Issuer of the damage or destruction and of its determination that it is not practical or
desirable to rebuild, repair or restore the Project Facilities, (ii) the Borrower shall furnish to the
Purchaser an opinion of Note Counsel to the effect that the failure to rebuild, repair or restore the
Project Facilities does not jeopardize the exclusion of interest on the Note from gross income for
purposes of federal income taxation under Section 103 and related Sections of the Internal
Revenue Code, and (iii) the Borrower shall promptly elect to prepay the Note in whole and shall
promptly apply the proceeds of any insurance and other money of the Borrower, to the extent
necessary, to pay the redemption price with respect to the Note on the applicable redemption date
therefor, such redemption price being established by reference to Section 5.04 and Exhibit A
hereto. Any such prepayment shall be effected as provided in Section 5.04. In the event that the
amount of any such insurance proceeds shall be insufficient to provide for payment in full of the
redemption price of the Note when due, the Borrower shall make payment of such deficiency as
an additional Loan Repayment under Section 5.01 hereof.
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ARTICLE VII
SPECIAL COVENANTS
Section 7.01. No Warranty of Condition or Suitability; Indemnification. The Issuer
does not make any warranty, either express or implied, as to the design or capacity of the Project,
as to the suitability for operation of the Project or as to the condition of the Project or that the
Project will be suitable for the Borrower’s purposes or needs. The Borrower releases the Issuer
from, agrees that the Issuer shall not be liable for, and agrees to hold the Issuer, its governing
bodies, and its respective officers, agents and employees, past, present and future, harmless
against, any claim, cause of action, suit or liability for any loss or damage to property or any
injury to or death of any person that may be occasioned by any cause whatsoever pertaining to
the Project or the use thereof, except such loss, damage or injury as results from the negligent
acts or omissions of the Issuer.
The Borrower further agrees to indemnify and hold harmless the Issuer, its governing
bodies, its officers, agents and employees, past, present and future, against any and all losses,
claims, damages or liability to which the Issuer, its governing bodies, its officers, agents and
employees, past, present and future, may become subject under any law in connection with the
issuance and sale of the Note and the carrying out of the transactions contemplated by this Loan
Agreement and the other Note Documents, and to reimburse the Issuer, its governing bodies, its
officers, agents and employees, past, present and future, for any out-of-pocket legal and other
expenses (including reasonable counsel fees) incurred by the Issuer, its governing bodies, its
officers, agents and employees, past, present and future, in connection with investigating any
such losses, claims, damages or liabilities or in connection with defending any actions relating
thereto. The Issuer agrees, at the request and expense of the Borrower, to cooperate in the
making of any investigation in defense of any such claim and promptly to assert any or all of the
rights and privileges and defenses identified in writing by the Borrower which may be available
to the Issuer. The Borrower further releases and agrees to hold harmless the Issuer, its governing
bodies, its officers, agents and employees, past, present and future, from any liability to the
Borrower arising out of any covenants, representations or undertakings contained in this Loan
Agreement or any of the Note Documents. The provisions of this Section shall survive the
payment and redemption of the Note.
Section 7.02. Borrower to Maintain its Existence; Permitted Exceptions. The Borrower
agrees that during the term of this Loan Agreement the Borrower will maintain its existence as a
nonprofit corporation and an organization described in Section 501(c)(3) of the Internal Revenue
Code qualified to do business in Montana and each other state where the nature of its business so
requires; will not dissolve or otherwise dispose of all or substantially all of its assets; and will not
merge into another corporation or permit one or more other corporations to consolidate with or
merge into it; provided that the Borrower may, without violating the agreement contained in this
Section, consolidate with or merge into another corporation, or permit one or more other of such
corporations to consolidate with or merge into it, or sell or otherwise transfer to another such
corporation all or substantially all of its assets as an entirety and thereafter dissolve if (i) such
surviving, resulting or transferee corporation assumes in writing all of the obligations of the
Borrower herein, (ii) such surviving, resulting or transferee corporation has a tangible net worth
at least equal to that of the Borrower at the time of the transaction, (iii) the Borrower shall
furnish the Purchaser with an opinion of Bond Counsel to the effect that the merger or
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consolidation will not result in the inclusion of interest on the Note in the gross income of the
Holder for federal income tax purposes, and (iv) immediately after giving effect to such
transaction no Event of Default, or an event which after notice or lapse of time, or both, would
become an Event of Default, would occur and be continuing.
If consolidation, merger, sale or other transfer is made as provided in this Section, the
provisions of this Section shall continue in full force and effect and no further consolidation,
merger, sale, or other transfer shall be made except in compliance with the provisions of this
Section.
Section 7.03. Reports. The Borrower shall render at its own expense to the Issuer and
the Purchaser such reports concerning the Note, the Project or the financial status of the
Borrower, as may be required by the Act or by any other law, regulation or ordinance of the State
of Montana or the Issuer.
Section 7.04. Inspection. The Borrower shall permit the Purchaser at all reasonable
times to enter upon the Project for purposes of inspection permitted by Section 4.07 hereof.
Section 7.05. Further Assurances, Financing Statements, Maintenance of Lien. At the
request of the Issuer or the Purchaser, the Borrower shall execute any financing statement,
amendment or supplement to the Mortgage, or other instrument which is or may be required to
carry out the intent of the parties as expressed in this Loan Agreement, the Mortgage, the Note
Resolution, or the other Note Documents. The Borrower shall, at its sole expense, file or cause
to be filed all financing statements under the Uniform Commercial Code or similar instruments
deemed necessary by the Purchaser to perfect and continue the security interest of the Purchaser
in the Project Equipment, and this Loan Agreement, including any financing statements which
the Issuer is required to file.
Section 7.06. Assignments. The Borrower consents to the pledge and assignment of the
Loan Repayments and other interests of the Issuer in this Loan Agreement by the Issuer to the
Purchaser as provided in the Note Resolution and the Loan Agreement Assignment. Except as
otherwise provided in Section 7.02 hereof, the interests and obligations of the Borrower under
this Loan Agreement are non-assignable and shall not be assigned except to a trustee in
bankruptcy or similar officer pursuant to the Bankruptcy Code or similar law.
Section 7.07. Observance of Note Resolution Covenants and Terms. The Borrower will
not do, in any manner, anything which will cause or permit to occur any violation of any
provision of the Note Resolution, but will faithfully observe and perform, and will do all things
necessary so that the Issuer may observe and perform, all the conditions, covenants and
requirements of the Note Resolution. The Issuer agrees that it will observe and perform all
obligations imposed upon it by the Note Documents; provided that the Issuer has no obligation to
use its own funds to perform or cause performance of any such obligations, and provided further
that no covenant, representation or undertaking shall ever give rise to any liability of the Issuer,
its officers, agents or employees or constitute a charge against its credit or taxing powers.
It is understood and agreed by the Borrower and the Purchaser that no covenant,
provision or agreement of the Issuer herein or in the Note, the Note Resolution, the other Note
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Documents or in any other document executed by the Issuer in connection with the issuance, sale
and delivery of the Note, or any obligation herein or therein imposed upon the Issuer or breach
thereof, shall give rise to a pecuniary liability of the Issuer or a charge against its general credit
or taxing powers or shall obligate the Issuer financially in any way except with respect to
amounts to be paid pursuant to this Loan Agreement and the application of revenues therefrom
and the proceeds of the Note, as provided in the Loan Agreement Assignment (the “Pledged
Revenues”). No failure of the Issuer to comply with any term, condition, covenant or agreement
therein shall subject the Issuer to liability for any claim for damages, costs or other financial or
pecuniary charges except to the extent that the same can be paid or recovered from the Pledged
Revenues. No execution on any claim, demand, cause of action or judgment shall be levied upon
or collected from the general credit, general funds or taxing powers of the Issuer. In making the
agreements, provisions and covenants set forth herein, the Issuer has not obligated itself except
with respect to the Pledged Revenues. The Note constitutes a special, limited obligation of the
Issuer, payable solely from the Pledged Revenues, and does not now and never shall constitute
an indebtedness or a loan of the credit of the Issuer, the State of Montana or any political
subdivision thereof or a charge against the general taxing powers of any of them within the
meaning of any constitutional or statutory provision whatsoever. It is further understood and
agreed by the Borrower and the Purchaser that the Issuer shall incur no pecuniary liability
hereunder and shall not be liable for any expenses related hereto, all of which the Borrower
agrees to pay. If, notwithstanding the provisions of this Section 7.07, the Issuer incurs any
expense, suffers any losses, claims or damages or incurs any liabilities relating to the Note or the
Note Documents, the Borrower will indemnify and hold harmless the Issuer from the same and
will reimburse the Issuer for any legal or other expenses incurred by the Issuer in relation
thereto, and this covenant to indemnify, hold harmless and reimburse the Issuer shall survive
delivery of and payment for the Note.
Section 7.08. Financial Information and Reporting. Except as otherwise stated in this
Loan Agreement, all financial information provided to the Purchaser shall be prepared using
generally accepted accounting principles consistently applied.
During the term of this Loan Agreement, and afterward until all amounts due under this
Loan Agreement are paid in full, unless the Purchaser shall otherwise agree in writing, the
Borrower agrees to:
(a) Provide the Purchaser within 90 days of the Borrower’s fiscal year end,
the Borrower’s annual financial statements for the fiscal year then ending, in form
acceptable to the Purchaser and certified as correct by an officer of the Borrower
acceptable to the Purchaser. The statements must be audited with an unqualified opinion
by a certified public accountant acceptable to the Purchaser, and must be accompanied by
a certificate of such accountants stating whether, in conducting their audit, they have
become aware of any event of default under this Loan Agreement, or of any event which
would, after lapse of time or the giving of notice, or both, constitute an event of default
under this Loan Agreement, specifying the nature and duration of the default.
(b) Provide the Purchaser within 30 days of each fiscal quarter, the
Borrower’s quarterly financial statements. The statements must be current through the
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end of that period and must be certified as correct by an officer of the Borrower in form
acceptable to the Purchaser.
(c) Provide the Purchaser with such other information as it may reasonably
request, and permit the Purchaser or its agent(s) to visit and inspect its properties and
examine its books and records.
Section 7.09. Additional Indebtedness. Following the date hereof, the Borrower may
incur indebtedness in addition to the indebtedness represented hereby only in accordance with
the terms and provisions of this Section.
(a) If any additional indebtedness to be incurred by the Borrower is to be
unsecured or secured by a lien or security interest expressly subordinate hereto, to the
Note and to the lien of the Mortgage, the Borrower shall provide advance written notice
thereof to the Purchaser prior to the incurrence of such indebtedness. Such notice must
include, at a minimum, a statement of the original principal amount thereof, the terms of
repayment, and copies of the loan documents to be entered into by the Borrower in
connection therewith.
(b) If any additional indebtedness to be incurred by the Borrower is to be
secured on a parity with the Note, this Loan Agreement and the Mortgage, then, as a prior
condition to the incurrence thereof, the Borrower must provide to the Purchaser advance
notice thereof, with the same information as is required by paragraph (a) above, together
with evidence, in form and substance satisfactory to the Purchaser, that, following the
incurrence of such additional parity indebtedness, the net income available to the
Borrower in the then current year and in each future year during which the Note shall
remain outstanding shall be sufficient, following payment in full of all reasonably
expected operating and other costs of the Borrower and the Project, to exceed all
scheduled payments of principal and interest to be owing in each such year on any then
outstanding indebtedness of the Borrower, including but not limited to the indebtedness
represented hereby and the additional parity indebtedness to be incurred, by a margin at
least equal to 1.20 to 1.00.
[The balance of this page is intentionally left blank.]
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ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.01. Events of Default. The following shall be “Events of Default” under this
Loan Agreement and the term “Event of Default” shall mean, whenever used in this Loan
Agreement, any one or more of the following events:
(a) If the Borrower fails to pay the amount of any Loan Repayment required
to be paid under Section 5.01 hereof when due (whether by acceleration, call for
prepayment or redemption of the Note, or otherwise); or
(b) If the Borrower shall default in the due and punctual performance of any
of the other covenants, conditions, agreements and provisions contained in this Loan
Agreement or in any instrument supplemental hereto, on the part of the Borrower to be
performed, and such default shall continue for 30 days after written notice thereof from
the Issuer or the Purchaser; or
(c) If an Event of Default shall occur under the Mortgage or any of the other
Note Documents; or
(d) If the Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee or liquidator for it or for any of its property, (ii) admit in writing its
inability to pay its debts as they become due, (iii) make a general assignment for the
benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, or (v) file a voluntary
petition in bankruptcy, or a petition or an answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer
admitting the material allegations of a petition filed against it in any proceeding under
such law; or
(e) If an order, judgment or decree shall be entered against the Borrower by
any court of competent jurisdiction, approving a petition seeking reorganization of the
Borrower or appointing a receiver, trustee or liquidator of the Borrower or of all or a
substantial part of the assets thereof.
The provisions of paragraph (b) of this Section are subject to the following limitations: If by
reason of force majeure the Borrower is unable in whole or in part to carry out its agreements on
its part contained herein (other than the payment of money), the Borrower shall not be deemed in
default during the continuance of such disability. The term “force majeure” as used herein
includes the following: acts of God; strikes, lockouts or other employee disturbances; acts of
public enemies; orders of any kind of the government of the United States of America or of the
State of Montana or any of their departments, agencies, political subdivisions or officials, or any
civil or military authority; insurrections; riots; epidemics; landslides; lightning; earthquakes;
fires; hurricanes, storms; floods; washouts; droughts; arrests; restraint of government and people;
civil disturbances; explosions, breakage or accident to machinery, transmission pipes or canals;
partial or entire failure of utilities; or any other cause or event not reasonably, within the control
of the Borrower. The provisions of paragraph (b) of this Section are subject to the further
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limitation that if the Default can be remedied but not within a period of thirty days after notice
and if the Borrower has taken all action reasonably possible to remedy such Default within such
thirty day period, the Default shall not become an Event of Default for so long as the Borrower
shall diligently proceed to remedy such Default and in accordance with any directions or
limitations of time made by the Purchaser. The Borrower agrees, however, to use its best efforts
to remedy with all reasonable dispatch any cause or causes preventing the Borrower from
carrying out its agreements.
Section 8.02. Remedies on Default. Whenever any Event of Default shall have
happened and be subsisting, any one or more of the following steps may be taken:
(a) The Purchaser may declare the unpaid principal of and interest on the
Note, and all or any amounts of Loan Repayments thereafter to become due and payable
under Section 5.01 hereof for the remainder of the term of this Loan Agreement to be
immediately due and payable, whereupon the same shall become immediately due and
payable, together with any additional payments due under Sections 5.02, 5.05, 8.04, 8.05
or otherwise under this Loan Agreement.
(b) The Purchaser may foreclose the Mortgage or take whatever action at law
or in equity that appears necessary or desirable to enforce this Loan Agreement, the
Mortgage or the other Note Documents in accordance with the provisions hereof or
thereof.
Any amounts collected by the Purchaser or any other Holder pursuant to action taken under the
foregoing paragraphs shall be applied first to advances and expenses of the Purchaser or other
Holder, then to payment of the Note (interest first, and then premium and principal), and any
excess to the Borrower.
Whenever any Default shall occur, the Purchaser or any other Holder (or the Issuer with
respect to its reserved rights under Sections 5.02, 7.01, 7.07 or 8.04 hereof) may take whatever
action at law or in equity which may appear necessary or desirable to collect any other payments
then due and thereafter to become due hereunder or to enforce performance and observance of
any obligation, agreement or covenant of the Borrower under this Loan Agreement.
Section 8.03. Remedies Cumulative, Delay Not to Constitute Waiver. No remedy
conferred upon or reserved to the Issuer, the Purchaser, any other Holder or a receiver by this
Loan Agreement or by the other Note Documents 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 Loan Agreement or the other Note Documents
or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise
any right or power accruing upon any Default shall impair any such right or power, and any such
right or power may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Issuer, the Purchaser, any other Holder or a receiver to exercise any remedy
reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as
may be herein expressly required. In the event any agreement contained in this Loan Agreement
or the other Note Documents should be breached by any party and thereafter waived by the other
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parties, such waiver shall be limited to a particular breach so waived and shall not be deemed to
waive any other breach hereunder.
Section 8.04. Agreement to Pay Attorneys’ Fees and Expenses. In the event the
Borrower should default under any of the provisions of this Loan Agreement and the Issuer or
the Purchaser should employ attorneys or incur other expenses for the collection of payments due
or to become due hereunder or the enforcement of performance or observance or any obligation
or agreement on the part of the Borrower contained in this Loan Agreement, the Borrower agrees
that it will on demand therefor reimburse the reasonable fees of such attorneys and such other
expenses so incurred. The Borrower also agrees to pay all costs of the Purchaser to appear in
and defend any action or proceeding purporting to affect the security of the Mortgage or the
rights or powers of the Purchaser under this Loan Agreement or the other Note Documents,
including the cost of reasonable attorney’s fees, and in any suit brought by the Purchaser to
foreclose the Mortgage.
Section 8.05. Advances. In the event the Borrower shall fail to pay any Loan
Repayments under Section 5.01 hereof, or to do any other thing or make any other payment
required to be done or made by any other provision of this Loan Agreement or the other Note
Documents, the Issuer or the Purchaser, in its own discretion, may do or cause to be done any
such thing or make or cause to be made any such payment at the expense or as an advance for the
account of the Borrower, and the Borrower shall pay to the Issuer or the Purchaser, as the case
may be, upon demand, all necessary costs and expenses so incurred and advances so made, with
interest at the lesser of (i) 8.00% per annum or (ii) the maximum rate permitted by law. Any
such advance shall be entitled to priority of payment from any funds thereafter received by the
Purchaser or such Holder from the Borrower.
[The balance of this page is intentionally left blank.]
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ARTICLE IX
MISCELLANEOUS
Section 9.01. Notices. All notices, certificates, requests or other communications
hereunder shall be sent by first class mail or certified mail, addressed, if to any party hereto, at its
address set forth on the execution page hereof. The Borrower, the Issuer and the Purchaser may,
by notice given hereunder, designate any further or different addresses to which subsequent
notices, certificates, requests or other communications shall be sent.
Section 9.02. Binding Effect. This Loan Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and assigns, subject to the
limitation that any obligation of the Issuer created by or arising out of this Loan Agreement shall
not be a general debt of the Issuer but shall be payable solely out of the proceeds derived from
this Loan Agreement or the other Note Documents as provided in the Loan Agreement
Assignment and Section 7.07 hereof.
Section 9.03. Counterparts. This Loan Agreement may be signed in any number of
counterparts. Complete sets of counterparts shall be lodged with the Issuer, the Borrower and
the Purchaser.
Section 9.04. Benefit of Holder. Except as otherwise provided herein, all covenants and
agreements on the part of the Borrower and the Issuer herein are hereby declared to be for the
benefit of the Purchaser or any Holder of the Note. Persons other than the parties hereto and
such other Holders are not intended to be beneficiaries of any of the covenants and agreements
set forth in this Loan Agreement.
Section 9.05. Due Dates. Should any payment on the Note become due and payable
upon a day not a business day, such payment shall be made on the next succeeding business day.
Section 9.06. Captions. The captions or headings in this Loan Agreement are for
convenience only and in no way define, limit or describe the scope or intent of any provision of
this Loan Agreement.
Section 9.07. Term of Agreement. Except as otherwise provided herein, the provisions
of this Loan Agreement shall remain in full force and effect from the date of execution hereof
until such time as the Note is not outstanding.
Section 9.08. Severability. Any provision of this Loan Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 9.09. Amendments, Consents, Changes and Modifications. Except as otherwise
provided in this Loan Agreement, subsequent to the issuance of the Note and prior to payment of
the Note in full, this Loan Agreement and the other Note Documents may not be effectively
amended, changed, modified, altered or terminated without the prior written consent of the
Holder of the Note.
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160
IN WITNESS WHEREOF, the undersigned have caused this Loan Agreement to be duly
executed by their duly authorized officers, all as of the day and year first above written.
CITY OF BOZEMAN
By
Mayor
And
City Clerk
Address: City Hall
411 East Main Street
Bozeman, Montana 59771
Attention: City Clerk
[Signature Page to Loan and Purchase Agreement dated as of June 1, 2007,
between City of Bozeman, Montana, Learning Circle Montessori Elementary School, Inc. and
Wells Fargo Brokerage Services, LLC]
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161
LEARNING CIRCLE MONTESSORI
ELEMENTARY SCHOOL, INC.
By
Its Chair
And by
Its Secretary
Address: 3001 West Villard Street
Bozeman, Montana 59718
Attention: Treasurer
[Signature Page to Loan and Purchase Agreement dated as of June 1, 2007,
between City of Bozeman, Montana Learning Circle Montessori Elementary School, Inc. and
Wells Fargo Brokerage Services, LLC]
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162
WELLS FARGO BROKERAGE
SERVICES, LLC
By
Its Senior Vice President
Address: 608 Second Avenue South
MAC N9303-105
Minneapolis, Minnesota 55479-0146
Attention: Public Finance Department
[Signature Page to Loan and Purchase Agreement dated as of June 1, 2007,
between City of Bozeman, Montana, Learning Circle Montessori Elementary School, Inc. and
Wells Fargo Brokerage Services, LLC]
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163
EXHIBIT A
to
Loan and Purchase Agreement
(Schedule of Note Termination Values,
according to regularly scheduled payment dates for the Note)
Monthly Payment Date Termination Value
A-1
164
EXHIBIT B
to
Loan and Purchase Agreement
(Form of Note)
UNITED STATES OF AMERICA
STATE OF MONTANA
CITY OF BOZEMAN
Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project)
No. R-1 $400,000
The City of Bozeman, a municipal corporation and political subdivision of the State of
Montana (hereinafter sometimes called the “Issuer”), for value received, hereby promises to pay,
but solely from the sources and in the manner hereinafter provided, to Wells Fargo Brokerage
Services, LLC (the “Purchaser” or the “Registered Owner”), or registered assigns, the principal
sum of Four Hundred Thousand Dollars, on June 1, 2027 upon the presentation and surrender
hereof, and to make prepayment of said principal sum in installments as hereinafter provided,
and to pay the Registered Owner hereof interest on the outstanding and unpaid balance of such
principal sum from the date hereof until said principal sum is paid, at the rate of _______% per
annum, calculated on the basis of the number of days elapsed in a year consisting of 360 days
made up of twelve 30-day months. Interest only shall be paid on ____________, 2007, and
thereafter on the ____ day of each ______, through __________, 200_, in the amount of
$__________. Principal and interest shall be payable in installment payments of
$_____________ each, beginning ____________, 2007, and continuing thereafter on the ____
day of each _______, to and including _______________, 2027, and on _____________, 2027,
all unpaid principal and interest shall be due and payable in full. Each such installment payment
shall be applied first to accrued interest and then to principal. Principal and interest shall be paid
to the Registered Owner hereof in lawful money of the United States as provided in the Loan
Agreement mentioned below, at its registered address.
This Note is issued pursuant to Montana Code Annotated, Title 90, Chapter 5, Part I, as
amended (the “Act”), and in conformity with the provisions, restrictions and limitations thereof.
This Note does not constitute or give rise to a pecuniary liability of the Issuer or to a charge
against the general credit or properties or taxing powers of the Issuer and does not grant to the
owner of this Note any right to have the Issuer levy any taxes or appropriate any funds for the
payment of the principal hereof or interest hereon, nor is this Note a general obligation of the
Issuer or the individual officers or agents thereof. This Note and interest hereon are payable
solely from the moneys received pursuant to the Loan Agreement, including loan repayments to
be made by Learning Circle Montessori Elementary School, Inc., a Montana nonprofit
corporation (hereinafter called the “Borrower”), and the security provided therefor, including the
Mortgage referred to therein, all as hereinafter referred to.
B-1
165
This Note is issued in the authorized principal amount of $400,000, and has been
authorized by law to be issued and has been issued for the purpose of funding a loan from the
Issuer to the Borrower in order to finance costs incurred with respect to the Project described in
the hereinafter referred to Loan Agreement. This Note is issued pursuant to a Loan and Purchase
Agreement (herein called the “Loan Agreement”) by and between the Issuer, the Borrower and
the Purchaser, dated as of June 1, 2007, and a Note Resolution of the City Commission duly
adopted May 29, 2007 (the “Note Resolution”). Pursuant to a Loan Agreement Assignment (the
“Loan Agreement Assignment”), the Issuer has assigned its interest in the Loan Agreement
(except for its rights to indemnity and payment of fees, expenses and advances) to the Purchaser.
This Note is secured by the Loan Agreement, the Loan Agreement Assignment and the Mortgage
dated as of June 1, 2007 (the “Mortgage”), executed by the Borrower to the Purchaser.
Reference is hereby made to all such documents and any supplements thereto for a description
and limitation of the property, revenues and funds pledged and appropriated to the payment of
the Note, the nature and extent of the security thereby created, the rights of the owner of the
Note, and the rights, immunities and obligations of the Issuer thereunder. Certified copies of the
Note Resolution and executed counterparts of the Loan Agreement, the Loan Agreement
Assignment and the Mortgage are on file at the office of the City Clerk.
On ____________, 2007, and each regularly scheduled installment payment date
thereafter, this Note shall be subject to optional prepayment, at the direction of the Borrower, in
whole but not in part, at a prepayment price equal to the regularly scheduled payment otherwise
owing on such date, together with an amount equal to the Termination Value, as set forth in
Exhibit A to the Loan Agreement.
This Note is also subject to mandatory redemption in the event of a Determination of
Taxability, as defined in the Loan Agreement, that interest upon the Note is includible in gross
income for purposes of federal income taxation. In the event of a Determination of Taxability,
the Borrower is obligated to cause the Note to be redeemed at a redemption price equal to the
Termination Value thereof for the monthly payment date next preceding such redemption date,
as set forth in Exhibit A to the Loan Agreement, plus accrued interest through the redemption
date, together with all taxes, interest and penalties assessed or owing in connection therewith.
Notice of any such prepayment or redemption shall be given to the Registered Owner of
this Note by first class mail, addressed to such owner at its registered address, not earlier than
sixty days nor later than thirty days prior to the date fixed for prepayment or redemption and
shall be published as may be required by law.
This Note is transferable, as provided in the Note Resolution, only upon the registration
records of the City Clerk, as bond registrar, by the registered owner hereof in person or by his
duly authorized attorney, as provided in the Note Resolution.
In case an event of default as defined in the Loan Agreement occurs, the principal of this
Note outstanding may be declared or may become due and payable prior to the stated maturity
hereof in the manner and with the effect and subject to the conditions provided in the Loan
Agreement.
B-2
166
The terms and provisions of the Note Resolution, Loan Agreement, Loan Agreement
Assignment and Mortgage or of any instrument supplemental thereto, may be modified or altered
only pursuant to Section 9.09 of the Loan Agreement and paragraph 12 of the Note Resolution.
It is hereby certified and recited: that all acts, conditions and things required to be done
precedent to and in the issuance of this Note have been properly done, have happened and have
been performed in regular and due time, form and manner as required by law; and that this Note
does not constitute a debt of the Issuer within the meaning of any constitutional or statutory
limitation.
IN WITNESS WHEREOF, City of Bozeman, by its City Commission, has caused this
Note to be executed in its name by the manual or facsimile signatures of its duly authorized
officers, all as of the ____ day of ________, 2007.
CITY OF BOZEMAN
By
Its Mayor
By
City Clerk
B-3
167
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
______________________________________________________________________
(Please Print or Typewrite Name and Address of Transferee)
the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints
_____________________________________________________________________ attorney
to transfer the within Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: __________________
Signature Guaranteed:
Signature(s) must be guaranteed by an
eligible guarantor institution meeting
the requirements of the Registrar, which
requirements include membership or
participation in STAMP or such other
signature guaranty program as may be
determined by the Registrar in addition
to or in substitution for STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE:
________________________________
Notice: The signature to this assignment must
correspond with the name as it appears on the
face of this Note in every particular, without
alteration or any change whatever.
B-4
4838-7008-5889\1
168
SECOND DRAFT 05/21/07
______________________________________________________________________________
$400,000
City of Bozeman, Montana
Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project)
LOAN AND PURCHASE AGREEMENT
Dated as of June 1, 2007
By and between
CITY OF BOZEMAN, MONTANA,
LEARNING CIRCLE MONTESSORI ELEMENTARY SCHOOL, INC.
and
WELLS FARGO BROKERAGE SERVICES, LLC
______________________________________________________________________________
This instrument was drafted by
Dorsey & Whitney LLP
Suite 1500
50 South Sixth Street
Minneapolis, Minnesota 55402-1498
169
-i-
$400,000
City of Bozeman, Montana
Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project)
TABLE OF CONTENTS
LOAN AND PURCHASE AGREEMENT
PARTIES AND RECITALS PAGE
Parties...............................................................................................................................................1
Recital..............................................................................................................................................1
ARTICLE I DEFINITIONS AND INTERPRETATION................................................................1
Section 1.01. Definitions....................................................................................................1
Section 1.02. Characteristics of Certificate or Opinion .....................................................5
Section 1.03. Description of Project ..................................................................................5
Section 1.04. Additional Provisions as to Interpretation ...................................................5
ARTICLE II REPRESENTATIONS AND COVENANTS ............................................................6
Section 2.01. Representations by the Issuer.......................................................................6
Section 2.02. Representations, Warranties and Covenants by the Borrower.....................6
ARTICLE III ISSUANCE AND PURCHASE OF NOTE............................................................10
Section 3.01. Issuance of Note by Issuer; Purchase by Purchaser...................................10
Section 3.02. Deposit of Proceeds in Project Fund..........................................................10
Section 3.03. Conditions to the Closing...........................................................................10
ARTICLE IV ISSUANCE OF THE NOTE; UNDERTAKING OF PROJECT ...........................12
Section 4.01. Agreement to Undertake and Complete Project ........................................12
Section 4.02. Loan of Proceeds........................................................................................12
Section 4.03. Borrower Required to Pay Project Costs in Event Proceeds Insufficient ..12
Section 4.04. Project Costs Defined ................................................................................12
Section 4.05. Completion of the Project ..........................................................................13
Section 4.06. Project Supervisor......................................................................................13
Section 4.07. Inspections .................................................................................................13
Section 4.08. Issuance Costs............................................................................................13
Section 4.09. Special Borrower Covenants for Project Construction Contracts..............13
ARTICLE V LOAN REPAYMENTS AND OTHER PAYMENTS ............................................14
Section 5.01. Repayment of Loan....................................................................................14
Section 5.02. Additional Payments..................................................................................14
Section 5.03. No Set-Off; Borrower’s Obligations Unconditional..................................14
Section 5.04. Option to Prepay Loan ...............................................................................15
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Section 5.05. Tax-Exempt Status of Interest on the Note................................................15
ARTICLE VI USE OF PROJECT FACILITIES...........................................................................17
Section 6.01. Use of Project Facilities .............................................................................17
Section 6.02. Ownership, Maintenance and Possession of Project by Borrower;
Operating Expenses ...................................................................................17
Section 6.03. Liens...........................................................................................................17
Section 6.04. Taxes and Other Governmental Charges ...................................................17
Section 6.05. [This Section intentionally omitted.].........................................................18
Section 6.06. Insurance ....................................................................................................18
Section 6.07. Damage or Destruction ..............................................................................18
ARTICLE VII SPECIAL COVENANTS......................................................................................19
Section 7.01. No Warranty of Condition or Suitability; Indemnification........................19
Section 7.02. Borrower to Maintain its Existence; Permitted Exceptions.......................19
Section 7.03. Reports .......................................................................................................20
Section 7.04. Inspection...................................................................................................20
Section 7.05. Further Assurances, Financing Statements, Maintenance of Lien.............20
Section 7.06. Assignments...............................................................................................20
Section 7.07. Observance of Note Resolution Covenants and Terms .............................20
Section 7.08. Financial Information and Reporting.........................................................21
Section 7.09. Additional Indebtedness.............................................................................22
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES ......................................................23
Section 8.01. Events of Default.......................................................................................23
Section 8.02. Remedies on Default..................................................................................24
Section 8.03. Remedies Cumulative, Delay Not to Constitute Waiver ...........................24
Section 8.04. Agreement to Pay Attorneys’ Fees and Expenses .....................................25
Section 8.05. Advances....................................................................................................25
ARTICLE IX MISCELLANEOUS ...............................................................................................26
Section 9.01. Notices .......................................................................................................26
Section 9.02. Binding Effect............................................................................................26
Section 9.03. Counterparts ...............................................................................................26
Section 9.04. Benefit of Holder .......................................................................................26
Section 9.05. Due Dates...................................................................................................26
Section 9.06. Captions .....................................................................................................26
Section 9.07. Term of Agreement....................................................................................26
Section 9.08. Severability ................................................................................................26
Section 9.09. Amendments, Consents, Changes and Modifications................................26
Exhibit A Schedule of Note Termination Values....................................................A-1
Exhibit B Form of Note............................................................................................B-1
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LOAN AND PURCHASE AGREEMENT
This LOAN AND PURCHASE AGREEMENT (the “Loan Agreement”), is made as of
the first day of June, 2007, by and between the CITY OF BOZEMAN, a municipal corporation
and political subdivision of the State of Montana (the “City” or the “Issuer”), LEARNING
CIRCLE MONTESSORI ELEMENTARY SCHOOL, INC., a Montana nonprofit corporation
(the “Borrower”) and WELLS FARGO BROKERAGE SERVICES, LLC, a Delaware limited
liability company having its principal offices in Minneapolis, Minnesota (the “Purchaser”).
Recitals
WHEREAS, Montana Code Annotated, Title 90, Chapter 5, Part 1, as amended (the
“Act”), authorizes and empowers municipalities and counties of the State of Montana to issue
and sell revenue bonds and notes and lend the proceeds thereof to a contracting party for the
purpose of financing or refinancing projects authorized thereby; and
WHEREAS, the Borrower has proposed to undertake a project in the City (as further
described in Section 1.03 hereof, the “Project”); and
WHEREAS, to provide financing for the Project, the Issuer has determined to issue and
sell to the Purchaser its Revenue Note (Learning Circle Montessori Elementary School, Inc.
Project) (the “Note”), and to make a loan of the proceeds thereof to the Borrower under this Loan
Agreement, all pursuant to the Act; and
WHEREAS, after a public hearing duly called and held, the City Commission of the
Issuer adopted a resolution on May 29, 2007, authorizing and approving the issuance and sale of
the Note and the execution and delivery of this Loan Agreement; and
WHEREAS, the Borrower has agreed to execute and deliver to the Purchaser a
Combination Mortgage, Security Agreement and Fixture Financing Statement and Assignment
of Leases and Rents, of even date herewith, granting, as security for the performance of its
obligations under this Loan Agreement, a mortgage and security interest in the Project, as
defined herein, and an assignment of leases and rents with respect thereto; and
NOW, THEREFORE, in consideration of the mutual agreements and covenants
hereinafter contained, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in
this Article I and in the succeeding Articles of this Loan Agreement shall, for all purposes of this
Loan Agreement and of any agreement supplemental hereto, have the meanings herein specified,
such definitions to be equally applicable to both the singular and plural forms of any of the terms
defined:
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“Act” means Montana Code Annotated, Title 90, Chapter 5, Part 1, as amended from
time to time.
“Authorized Borrower Representative” means the person at the time designated to act on
behalf of the Borrower by written certificate furnished to the Issuer and the Purchaser, containing
the specimen signature of such person and signed on behalf of the Borrower by any officer or
member of the Board of Directors of the Borrower. Such certificate may designate an alternate
or alternates.
“Authorized Issuer Representative” means the person at the time designated to act on
behalf of the Issuer by written Certificate furnished to the Borrower and the Purchaser,
containing the specimen signature of such person and signed on behalf of the Issuer by its Mayor
or City Clerk. Such Certificate may designate an alternate or alternates.
“Bond Counsel” means Independent, nationally recognized bond counsel.
“Borrower” means Learning Circle Montessori Elementary School, Inc., a Montana
nonprofit corporation, its permitted successors and assigns hereunder.
“Certificate” means a certification in writing required or permitted by the provisions of
this Loan Agreement or the other Note Documents, signed and delivered to the Purchaser or
other proper person or persons. If and to the extent required by the provisions of Section 1.02
hereof, each Certificate shall include the statements provided for in said Section 1.02.
“Certified Resolution” means a copy of a resolution of the City Commission, certified by
the Clerk to have been duly adopted by the City Commission and to be in full force and effect on
the date of such certification.
“City” or “Issuer” means City of Bozeman, a municipal corporation and political
subdivision of the State of Montana, its successors and assigns.
“City Commission” or “Commissioners” means the City Commission of the Issuer or any
successor governing body of the Issuer.
“Closing Date” means the date of issuance and initial delivery to the Purchaser of the
Note as provided in Section 3.01 hereof.
“Completion Date” means the Closing Date, being the date on which the acquisition of
the Project is undertaken and completed, in accordance with this Loan Agreement.
“Default” means default by the Borrower in the performance or observance of any of the
covenants, agreements or conditions on its part contained in this Loan Agreement or the
Mortgage, exclusive of any notice or period of grace required for a default to constitute an
“Event of Default” as hereinafter provided.
“Determination of Taxability” means the issuance of a statutory notice of deficiency by
the Internal Revenue Service, or a ruling of the National Office or any District Office of the
Internal Revenue Service, or a final decision by any court of competent jurisdiction, to the effect
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that interest on the Note is includable in the gross income of the recipient under Section 103 of
the Internal Revenue Code, and regulations thereunder, if the period, if any, for contest or appeal
of such action, ruling or decision has expired without any such contest or appeal having been
properly instituted or, if instituted, such contest or appeal has been unsuccessfully concluded.
Inclusion of interest on the Note in any alternative minimum tax shall not be a Determination of
Taxability.
“Event of Default” means an Event of Default described in Section 8.01 hereof, which
has not been cured.
“Holder” or “Noteholder” or “Owner” means the person or persons in whose name the
Note shall be registered in the registration records maintained by the Issuer.
“Independent”, when used with reference to an attorney, engineer, architect, certified
public accountant, or other professional person, means a person who (i) is in fact independent,
(ii) does not have any material financial interest in the Borrower or the transaction to which his
Certificate or opinion relates (other than the payment to be received for professional services
rendered), and (iii) is not connected with the Issuer or the Borrower as an officer, commissioner,
director or employee.
“Independent Counsel” means an Independent attorney duly admitted to practice law
before the highest court of any state.
“Internal Revenue Code” or “Code” means the Internal Revenue Code of 1986, as in
effect on the date of issuance of the Note.
“Issuer” means City of Bozeman, a municipal corporation and political subdivision of the
State of Montana, its successors and assigns.
“Land” means the real property and interests in real property constituting the site of the
Project, as legally described in Exhibit A to the Mortgage.
“Legal Investments” means any investment or investments permitted by applicable law to
be made with proceeds of the Note at the date hereof or the date of investment.
“Loan” means the loan from the Issuer to the Borrower provided for by Section 4.02
hereof.
“Loan Agreement” means this Loan and Purchase Agreement dated as of June 1, 2007,
by and between the Issuer, the Borrower and the Purchaser, as amended or supplemented from
time to time.
“Loan Agreement Assignment” means the Loan Agreement Assignment from the Issuer
to the Purchaser of even date herewith, and any amendments or supplements thereto.
“Loan Repayments” means the payments made or to be made by the Borrower pursuant
to Section 5.01.
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“Mortgage” means the Combination Mortgage, Security Agreement and Fixture
Financing Statement and Assignment of Leases and Rents of even date herewith from the
Borrower to the Purchaser, as amended or supplemented from time to time.
“Note” means the City of Bozeman, Montana, Revenue Note (Learning Circle
Montessori Elementary School, Inc. Project), authorized by this Loan Agreement and the Note
Resolution, dated the Closing Date, in the principal amount of $400,000, and substantially in the
form attached hereto as Exhibit B.
“Note Documents” means this Loan Agreement, the Loan Agreement Assignment and
the Mortgage.
“Note Resolution” means the resolution of the Issuer adopted by the City Commission on
May 29, 2007, authorizing the issuance and sale of the Note, as the same may be amended,
modified or supplemented by any amendments or modifications thereof.
“Opinion of Counsel” means a written opinion of counsel (who need not be Independent
Counsel unless so specified) appointed by the Borrower or Issuer. If and to the extent required
by the provisions of Section 1.02 hereof, each Opinion of Counsel shall include the statements
provided for in said Section 1.02.
“Outstanding” when used as of any particular time with reference to the Note, means the
then outstanding principal balance of the Note theretofore executed and delivered under the Note
Resolution, but excepting any Note in lieu of or in substitution for which another Note shall have
been executed and delivered pursuant to the terms of paragraph 9 of the Note Resolution.
“Permitted Encumbrances” means, with respect to the Land, those encumbrances set
forth on Exhibit B to the Mortgage and any other encumbrance which is hereafter approved in
writing by the Purchaser.
“Project” means the project described in Section 1.03 hereof.
“Project Building” means the building in Bozeman, Montana to be acquired by the
Borrower with proceeds of the Note, and to comprise a private elementary school, owned and
operated by the Borrower.
“Project Costs” means those costs defined as such in Section 4.04 hereof.
“Project Equipment” means the equipment and any other tangible personal property
financed with the proceeds of the Note, all to be installed and located permanently or used or
sited exclusively in the Project Building.
“Project Facilities” means, collectively, the Land, the Project Building and the Project
Equipment.
“Project Fund” means the Project Fund established by the Purchaser on the Closing Date
pursuant to Section 3.02 hereof.
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“Project Supervisor” means the person appointed by the Borrower as such, pursuant to
Section 4.06 of this Loan Agreement, and includes any Alternate Project Supervisor, if
appointed, pursuant to Section 4.06 of this Loan Agreement.
“Purchaser” or “Registered Owner” means Wells Fargo Brokerage Services, LLC, a
Delaware limited liability company, its successors and assigns.
“Redeem” or “redemption” means and includes “prepay” or “prepayment” as the case
may be.
“Termination Value” means, with respect to any payment date for the Note, the
applicable amount set forth in Exhibit A hereto.
Section 1.02. Characteristics of Certificate or Opinion. Every Certificate or opinion
with respect to compliance with a condition or covenant provided for in this Loan Agreement or
the other Note Documents shall include: (i) a statement that the person or persons making such
certificate or opinion have read such covenant or condition and the definitions herein relating
thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such Certificate or opinion are based; (iii) a
statement that, in the opinion of the signers, they have made or caused to be made such
examination or investigation as is necessary to enable them to express an informed opinion as to
whether or not such covenant or condition has been complied with; and (iv) a statement as to
whether, in the opinion of the signers, such condition or covenant has been complied with.
Any such Certificate made or given by an officer of the Borrower or the Issuer may be
based, insofar as it relates to legal matters, upon an opinion of counsel. Any such opinion made
or given by counsel may be based (insofar as it relates to factual matters information with respect
to which is in the possession of the Issuer or the Borrower) upon the certificate or opinion of or
representations by an officer or officers of the Issuer or the Borrower.
Section 1.03. Description of Project. The term “Project” refers to the acquisition of the
existing 4,875 square foot building located at 3001 West Villard Street, Bozeman, Montana, to
be acquired, owned and operated by the Borrower, an organization described in
Section 501(c)(3) of the Internal Revenue Code, for use as a private elementary school.
Section 1.04. Additional Provisions as to Interpretation. All references herein to
“Articles”, “Sections” and other subdivisions are to the corresponding Articles, Sections or
subdivisions of this Loan Agreement; and the words “herein,” “hereof,” “hereunder” and other
words of similar import refer to this Loan Agreement as a whole and not any particular Article,
Section or subdivision hereof.
Any terms defined in any other Note Documents but not defined herein shall have the
same meaning herein unless the context hereof clearly requires otherwise.
This Loan Agreement is governed by and shall be construed in accordance with the laws
of Montana.
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ARTICLE II
REPRESENTATIONS AND COVENANTS
Section 2.01. Representations by the Issuer. The Issuer makes the following
representations as the basis for its undertakings herein:
(a) The Issuer is a duly organized and existing municipal corporation and
political subdivision of the State of Montana, under the laws of the State of Montana,
including the Act.
(b) On May 29, 2007, the City Commission conducted a public hearing on the
proposal of the Borrower to undertake the Project and finance the same through the
issuance of the Note, upon due notice and otherwise as required by the Act, and on said
date the City Commission adopted a resolution (the “Note Resolution”) giving final
approval to the Project and the issuance of the Note.
(c) The Project constitutes a “project” within the meaning of the Act.
(d) The Project, the issuance and sale of the Note, the execution and delivery
of this Loan Agreement and the Loan Agreement Assignment, the performance of all
covenants and agreements of the Issuer contained in this Loan Agreement and the Loan
Agreement Assignment and the Loan of money hereunder are authorized and have been
duly authorized by the Note Resolution duly adopted at a meeting of the City
Commission.
(e) To provide financing for the costs of the Project, the Issuer proposes to
issue the Note in the authorized principal amount of $400,000, to be dated the Closing
Date.
(f) To the best knowledge of the officers of the Issuer executing this Loan
Agreement, no Commissioner or other officer or employee of the Issuer is directly or
indirectly interested in the Note, the Note Documents, the Project, or any contract,
agreement or job hereby contemplated to be entered into or undertaken for completion of
the Project.
(g) There is no litigation pending, or to the best knowledge of the officers of
the Issuer executing this Loan Agreement, threatened questioning the authority of the
Issuer to undertake the Project or issue the Note or questioning the tax-exempt status of
interest on the Note or questioning the authority of any Commissioner or other officer or
employee of the Issuer to hold office or take part in any of the transactions contemplated
hereby.
(h) The execution and delivery by the Issuer of the Note Documents to which
it is a party does not violate or constitute a breach of or default under any document or
instrument to which the Issuer is a party or any court order to which the Issuer is subject.
Section 2.02. Representations, Warranties and Covenants by the Borrower. The
Borrower makes the following representations, warranties and covenants:
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(a) The Borrower is a nonprofit corporation duly organized and existing under
the laws of the State of Montana.
(b) Except as otherwise provided in Section 6.02 hereof, the Borrower intends
to own and operate the Project from the date hereof to the expiration or sooner
termination of this Loan Agreement, as provided herein, except to the extent such
operation may be interrupted by strikes, riots, acts of God or public enemy or other
circumstances beyond the control of the Borrower.
(c) The execution and delivery of this Loan Agreement and the other Note
Documents, and any other agreement or instrument to be entered into in connection with
the Project, and the consummation of the transactions herein and therein contemplated
will not conflict with or constitute a breach of or default under the articles of association
of the Borrower, or any note, debenture, lease or other evidence of indebtedness or any
contract, loan agreement or lease to which the Borrower is a party or by which it is
bound, or violate any law, regulation or order of the United States or the State of
Montana or agency or political subdivision thereof or of any court order or judgment in
any proceeding to which the Borrower is or was a party or by which it is bound.
(d) There has been no default by the Borrower or, to the best of the
knowledge of the Borrower, by any contractor or other person, under any purchase
agreement or contract between the Borrower and any other person relating to the
acquisition, construction or financing of the Project.
(e) There is no litigation pending, or to the best of its knowledge threatened,
against the Borrower affecting its ability to carry out the acquisition or financing of the
Project or the terms of this Loan Agreement, the other Note Documents, or any other
agreement or instrument to be entered into in connection with the Project.
(f) As of the Closing Date, the Borrower has or will have good and
marketable fee simple title to the Land and, except as may hereafter be approved in
writing by the Purchaser, there are and throughout the term hereof there shall be no
encumbrances against the Land except Permitted Encumbrances.
(g) To the best of the Borrower’s knowledge and belief, no Commissioner or
other officer or employee of the Issuer is directly or indirectly interested in this Loan
Agreement, the other Note Documents, the Project or any contract, agreement or job
hereby contemplated to be entered into or undertaken.
(h) The Project Facilities comprise a commercial facility, which constitutes a
“project” within the meaning of the Act.
(i) So long as the Note shall remain outstanding, the Borrower shall not take
or suffer to be taken any action which would have the effect of jeopardizing the tax-
exempt status of interest on the Note under the Internal Revenue Code or the authority of
the Borrower under the Act to undertake the Project.
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(j) All property to be provided with proceeds of the Note shall be owned
either by a governmental unit or an organization described in Section 501(c)(3) of the
Internal Revenue Code, all within the meaning of Section 145(a) of the Code.
(k) Not less than 95% of the proceeds of the Note will be used in accordance
with the requirements of Section 145(a) of the Internal Revenue Code.
(l) The Borrower is an organization described in Section 501(c)(3) of the
Internal Revenue Code, exempt from the payment of federal income taxes under
Section 501(a) of the Code, and no revenues derived or to be derived from any portion of
the Project are or shall be delivered from any “private business use” or from an
“unrelated trade or business,” within the meaning of Section 513(a) of the Code, except
as may be specifically contemplated by Section 145(a) of the Code in amounts that would
not require the interest on the Note to become includable in the gross income of the
recipients thereof, for purposes of Federal income taxation. In furtherance of this
covenant, at least 97% of the facilities (measured by reference to fair market value)
financed by the Note is to be used solely and exclusively by organizations described in
Section 501(c)(3) of the Internal Revenue Code (“Tax-Exempt Organizations”) in
activities which do not constitute unrelated trades or businesses, determined by applying
Section 513(a) of the Code, and the Borrower will not permit more than 3% of such
facilities (measured by reference to fair market value) to be used (i) by a Tax-Exempt
Organization in an unrelated trade or business or (ii) in the trade or business of any
person other than a unit of state or local government or a Tax-Exempt Organization
(whether pursuant to a lease, management agreement or other arrangement), unless such
use, according to an opinion of Bond Counsel, does not jeopardize the excludability from
gross income, for federal income tax purposes, of interest on the Note.
(m) None of the proceeds of the Note shall be used to provide an airplane,
skybox or other private luxury box, facility primarily used for gambling, or store the
principal business of which is the sale of alcoholic beverages for consumption off
premises, and the Borrower does not expect that the Project, or any portion thereof, shall
subsequently be used for any of such purposes.
(n) The weighted average maturity of the Note does not exceed 120% of the
average reasonably expected economic life of the Project Facilities, all within the
meaning of Section 147(b) of the Internal Revenue Code.
(o) Proceeds of the Note may be expended to pay amounts owing as interest
on the Note, provided, however, that such amounts shall not exceed the lesser of the
following: (i) an amount sufficient to pay interest on the Note only for a period of time
not exceeding the time from the Closing Date through the completion of construction,
plus six months; or (ii) in the aggregate, the amount permitted under Treasury
Regulation, Section 1.148 - 6(d)(3)(ii)(A)(3), such amount generally being equal to
interest owing on the Note for a period commencing on the Closing Date and ending on
the date that is the later of three years from the Closing Date or one year after the date on
which the Project is placed in service.
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(p) Proceeds of the Note shall not be applied to the reimbursement of Project
Costs paid or expended prior to the issuance of the Note (in order to reimburse the
amount of such prior expenditures), except to the extent permitted under Treasury
Regulation, Section 1.150-2; specifically, proceeds of the Note shall not be expended to
reimburse an expenditure made prior to the issuance of the Note unless (i) such
expenditure was made not prior to the date that is 60 days before the date on which there
was adopted an “official intent” therefor, within the meaning of Treasury Regulation,
Section 1.150-2, or (ii) such expenditure is in an amount within the “de minimis”
exception provided under Treasury Regulation, Section 1.150-2(f)(1) (such “de minimis”
amount being equal to the lesser of 5% of the proceeds of the Note or $100,000), or
(iii) such expenditure is a “preliminary expenditure” described in Treasury Regulation,
Section 1.150-2(f)(2), made with respect to architectural, engineering, surveying, soil
testing, reimbursement bond issuance, or similar costs (other than land acquisition, site
preparation, and similar costs incident to commencement of construction), the aggregate
amount of all such “preliminary expenditures” being limited to an amount not in excess
of 20% of the aggregate issue price of the Note.
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ARTICLE III
ISSUANCE AND PURCHASE OF NOTE
Section 3.01. Issuance of Note by Issuer; Purchase by Purchaser. To finance the
Project, the Issuer will issue the Note as provided in the Act and Note Resolution and sell the
same to the Purchaser and the Purchaser will purchase the Note on the Closing Date, all upon
satisfaction of the terms and conditions set forth in Section 3.03 (the “Closing”). The proceeds
of issuance of the Note shall be loaned to the Borrower as provided in Section 3.02 and
Section 4.02 of this Loan Agreement. The Issuer will issue the Note in the form of a single fully
registered note, numbered R-1, dated the date of delivery thereof. The Purchaser will purchase
the Note as provided herein at a price equal to 100% of the principal amount thereof ($400,000).
Section 3.02. Deposit of Proceeds in Project Fund. Payment for the Note shall be made
by depositing proceeds of the sale thereof in an amount equal to the original principal amount
thereof in an account to be established by the Purchaser (herein referred to as the "Project Fund")
on the Closing Date. Such deposit shall also constitute the loan of the Note proceeds from the
Issuer to the Borrower under Section 4.02 hereof. Moneys in the Project Fund shall be disbursed
in full on the Closing Date, at the direction of the Borrower for payment of Project Costs,
pursuant to a Draw Request substantially in the form of Exhibit C hereto.
Section 3.03. Conditions to the Closing. The obligation of the Purchaser to purchase the
Note under Section 3.01 is conditioned upon delivery to the Purchaser on the Closing Date of the
following, any of which may be waived by the Purchaser in its discretion:
(a) A Certificate dated the Closing Date and signed by an officer of the
Borrower stating that no Event of Default and no event which, with the giving of notice
or lapse of time or both, would become an Event of Default, shall have occurred and be
continuing or shall exist upon the completion of the Closing;
(b) A Certificate of the Authorized Borrower Representative, dated the
Closing Date, stating that as of such date the representations and warranties of the
Borrower contained in Section 2.02 hereof are true and correct in all material respects;
(c) An opinion of Dorsey & Whitney LLP, as Bond Counsel to the Purchaser;
(d) Certified copies of the Note Resolution authorizing the issuance and sale
of the Note and the execution and delivery of the Note Documents;
(e) Certified copy of a resolution of the Board of Directors of the Borrower
approving and authorizing the execution and delivery of the Note Documents;
(f) The executed Note and executed counterparts of this Loan Agreement, the
Loan Agreement Assignment and the Mortgage;
(g) A Certificate of the Issuer pursuant to Section 148 of the Internal Revenue
Code and pertinent regulations as to absence of arbitrage expectation, which may be
given in reliance on the factual representations and/or certifications of the Borrower;
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(h) Executed financing statements under the Uniform Commercial Code of
Montana, as the Purchaser may deem necessary or desirable in order to perfect the
security interests granted by the Issuer and the Borrower to secure the Note, and
completed requests for information, dated on or before the date of Closing, as to effective
financing statements filed in all filing offices in which the financing statements shall have
been filed;
(i) All other documents or certificates the Purchaser may reasonably request
relating to the existence and good standing of the Borrower, the due execution and
validity of the Note, the Note Resolution, the Mortgage, the Loan Agreement Assignment
and this Loan Agreement, the tax-exempt status of interest on the Note for Federal
income tax purposes, and all other relevant matters, all in form and substance satisfactory
to the Purchaser.
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ARTICLE IV
ISSUANCE OF THE NOTE;
UNDERTAKING OF PROJECT
Section 4.01. Agreement to Undertake and Complete Project. The Borrower agrees that
it will proceed on the Closing Date to complete the acquisition of the Project. No changes will
be made to the Project which would delete from the Project any essential characteristics of the
Project as specified in Section 1.03, and, if any such permitted changes are made, after any such
changes, the Project shall continue to constitute an authorized “project” within the meaning of
the Act. The Project shall be acquired in accordance with all applicable environmental, zoning,
planning and building regulations of governmental authorities having jurisdiction of the Project.
Section 4.02. Loan of Proceeds. The Issuer hereby lends to the Borrower the entire
gross proceeds of issuance of the Note ($400,000). The obligation of the Borrower to repay the
said loan (the “Loan”), together with interest and premium, if any, thereon shall become
effective immediately upon the deposit of the Note proceeds into the Project Fund, as provided in
Section 3.02 hereof.
Section 4.03. Borrower Required to Pay Project Costs in Event Proceeds Insufficient. In
the event that the proceeds of the Note available for payment of Project Costs should not be
sufficient to pay the Project Costs in full, the Borrower agrees, for the benefit of the Issuer and
the Purchaser, to complete the Project and to pay any such additional Project Costs. Neither the
Issuer nor the Purchaser makes any warranty, either express or implied, that the proceeds of the
Note, which under the provisions of this Loan Agreement will be available for payment of
Project Costs, will be sufficient to pay all the costs which will be incurred in that connection. If
the Borrower should pay any portion of the Project Costs in excess of the proceeds of the Note, it
shall not be entitled to any reimbursement therefor from the Issuer or the Purchaser, nor shall it
be entitled to any diminution in or postponement of payments to be made under Sections 5.01,
5.02, or 5.05 hereof.
Section 4.04. Project Costs Defined. For the purposes of this Loan Agreement, the
Project Costs shall include, without intending thereby to limit or restrict any proper definition of
such cost under any applicable laws or sound accounting practice, the following:
(a) Acquisition costs of land and interests in land required for the site of the
Project;
(b) Acquisition costs of the Project Building and the Project Equipment;
(c) [Intentionally Omitted]
(d) Expenses of administration, supervision and inspection properly
chargeable to the Project, administrative fees of the Issuer, abstracting and filing fees,
legal expenses and fees, fiscal consultant fees and expenses, cost of audits and all costs
and expenses of preparing, offering and issuing the Note; and
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(e) Any other obligation or expense heretofore or hereafter incurred by the
Borrower in connection with the Project defined as and constituting a proper Project Cost
under the Act and approved by the Authorized Borrower Representative.
Provided, however, that Project Costs shall not include any costs expended by the
Borrower prior to the issuance of the Note, except for: (i) Preliminary Expenditures, but only in
an amount up to not more than 20 percent of the aggregate issue price of the Note, all within the
meaning of Treasury Regulation § 1.150-2(f)(2), (ii) Project Costs that in the aggregate are not in
excess of the lesser of $100,000 or five percent of the proceeds of the Note; and (iii) Project
Costs expended no earlier than the date 60 days prior to the date of adoption by the Borrower of
an “official intent,” within the meaning of Treasury Regulation § 1.150-2.
Section 4.05. Completion of the Project. [Intentionally Omitted]
Section 4.06. Project Supervisor. [Intentionally Omitted]
Section 4.07. Inspections. It is expressly understood and agreed that the Purchaser may
conduct such inspections of the Project as it may deem necessary for the protection of its interest,
and that any inspections which may be made of the Project by the Purchaser will be made solely
for the benefit and protection of the Purchaser, and that the Borrower will not rely thereon.
Section 4.08. Issuance Costs. Notwithstanding any other provision hereof, the Borrower
covenants that issuance costs financed by the Note will not exceed 2.00% of the proceeds of the
Note.
Section 4.09. Special Borrower Covenants for Project Construction Contracts. In
accordance with Section 90-5-114(1) of the Act, the Borrower agrees to include in any contract
for construction of the Project a requirement that all contractors give preference to the
employment of bona fide Montana residents, as defined in Montana Code Annotated, Section 18-
2-401, in the performance of the work on the Project if their qualifications are “substantially
equal” (as defined in Section 90-5-114(1) of the Act) to those of nonresidents.
In accordance with Section 90-5-114(2) of the Act, the Borrower further agrees to include
in any contract let for the Project a provision requiring the contractor to pay the standard
prevailing wage rate in effect and applicable to the district in which the work is being performed.
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ARTICLE V
LOAN REPAYMENTS AND OTHER PAYMENTS
Section 5.01. Repayment of Loan. The Borrower covenants and agrees to repay the
Loan, together with interest and premium, if any, in Loan Repayments which shall be made on
the dates and in the amounts required under the Note to pay, in full and when due, all principal
of, interest and premium, if any, on the Note. The Borrower shall pay as an additional Loan
Repayment all amounts required under Section 5.05(d) hereof. Such payments by the Borrower
under this Section shall be made to the Purchaser in such coin or currency of the United States of
America as may be legal tender for the payment of public and private debts. The Borrower shall
furnish to the Issuer, if the Issuer so requests, the advice of transmittal of such payments at the
time of transmittal of payment. All payments under this Section 5.01 shall be Loan Repayments.
Section 5.02. Additional Payments. The Borrower also agrees to make the following
payments:
(a) To the Purchaser, all reasonable fees and expenses or advances of the
Purchaser charged or made in connection with the transactions contemplated by this Loan
Agreement and the other Note Documents, including attorneys’ fees.
(b) To the Issuer, all reasonable expenses of the Issuer incurred or made in
connection with the transactions contemplated by this Loan Agreement and the other
Note Documents, including attorneys’ fees and any fees or charges relating to the transfer
of the Note in accordance with the Note Resolution.
Section 5.03. No Set-Off; Borrower’s Obligations Unconditional. The obligation of the
Borrower to make the payments and to perform and observe the other agreements on its part
contained herein, in the other Note Documents and in the Note shall be absolute and
unconditional. So long as any principal of the Note is outstanding, the Borrower will pay
without abatement, diminution or deduction (whether for taxes or otherwise) all Loan
Repayments required to be paid hereunder, regardless of any cause or circumstance whatsoever
including, without limiting the generality of the foregoing: any defense, setoff, recoupment or
counterclaim which the Borrower may have or assert against the Issuer, the Purchaser or any
other Noteholder or any other person; any failure of the Issuer to perform any covenant or
agreement contained herein or in any other agreement between the Issuer or any Noteholder and
the Borrower; any indebtedness or liability at any time owing to the Borrower by the Issuer, the
Purchaser or any other Noteholder or any other person; any acts or circumstances that may
constitute failure of consideration; damage to or condemnation of the Project; failure or delay in
completion of the Project; eviction by paramount title; commercial frustration of purpose;
bankruptcy or insolvency of the Issuer, or the Purchaser; enforcement or foreclosure of the
Mortgage; any change in the tax or other laws of the United States of America or of any State or
any political subdivision of either; or any failure of the Issuer or the Purchaser to perform and
observe any agreement, whether express or implied, or any duty, liability or obligation, arising
out of or connected with this Loan Agreement, the other Note Documents or the Note
Resolution.
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Section 5.04. Option to Prepay Loan. On ______________, 2007 and each regularly
scheduled installment payment date thereafter, the Borrower shall have, and is hereby granted,
the option to prepay the Loan and cause to be prepaid the Note, in whole but not in part, on any
payment date therefor, upon 30 days’ notice thereof in writing to the Purchaser, at a prepayment
price equal to the regularly scheduled payment otherwise owing on such regular installment
payment date, together with an additional amount equal to the Termination Value, as set forth in
Exhibit A hereto.
In the event the Borrower elects to prepay the Loan, the Borrower shall cause to be given
due notice of redemption or prepayment of the Note as required by the provisions of the Note
Resolution and the Note, and shall pay the prepayment price when due to the Purchaser.
Section 5.05. Tax-Exempt Status of Interest on the Note. It is the intention of the parties
hereto that the interest paid on the Note will not be included in the gross income of the recipient
of said interest by reason of Section 103 and related Sections of the Internal Revenue Code,
including, particularly, Section 145 of the Code. In order to confirm and carry out such
intention:
(a) The Borrower shall (i) provide such Certificates of the Authorized
Borrower Representative, Opinions of Counsel, and other evidence as may be necessary
or reasonably requested by the Issuer or any Holder to establish the exemption of interest
on the Note under Section 103 and related Sections and the absence of arbitrage
expectation under Section 148 of the Internal Revenue Code, and (ii) file such
information and statements, acting alone or with the Issuer, with the Internal Revenue
Service, as may be required from the Borrower or the Issuer to establish or preserve such
exemption or as may be required by Section 103 and related Sections of the Internal
Revenue Code, including Section 149(e) of the Code, and regulations thereunder.
(b) If a Noteholder shall be given notice of a proposed deficiency by the
Internal Revenue Service, based upon a proposed Determination of Taxability, or if a
responsible officer of the Purchaser or other Holder shall have actual knowledge of a
proposed ruling by the Internal Revenue Service to the effect that interest on the Note is
includable in the gross income of the Holder, the Purchaser or other Holder shall give
notice to the Borrower of such proposed deficiency or ruling as promptly as possible and
permit the Borrower, to the extent reasonably possible, to participate in contesting any
such proposed deficiency or ruling. Any expenses incurred by the Borrower or by any
Holder at the request of the Borrower in connection with such contest shall be paid by the
Borrower. Notwithstanding the foregoing, the Holder shall have the right to control all
proceedings before the Internal Revenue Service and any judicial proceedings relating to
taxability of interest on the Note received by the Holder, including the compromise of
claims in such proceedings and abandonment of rights to appeal, and failure of the
Purchaser or other Holder to give notice to the Borrower under this paragraph (b) shall
not affect the Borrower’s obligation under paragraph (c) of this Section.
(c) If there shall occur a Determination of Taxability, the Note shall be
subject to mandatory redemption, in whole, on the sixtieth calendar day following notice
to the Borrower of the Determination of Taxability, at a redemption price equal to the
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applicable Termination Value for the monthly payment date next preceding such
redemption date, as set forth in Exhibit A hereto, plus accrued interest through the date of
redemption, together with all taxes, interest and penalties assessed or owing in connection
therewith.
(d) The Borrower hereby acknowledges and confirms its obligations under
Section 148 of the Internal Revenue Code and regulations thereunder, in order to
maintain the tax-exempt status of the Note. Specifically, the Borrower agrees to comply
with the rebate requirements imposed under Section 148(f) and pertinent regulations,
including the requirement to make annual (or other periodic) calculations of the amount
subject to rebate thereunder, and to maintain records of such determinations until six
years after the retirement of the Note, and the requirement to make all required rebate
payments to the United States not later than 60 days after the end of the fifth note year
and not later than 60 days after each fifth anniversary thereof, to and until the date which
is 60 days after the final retirement of the Note. If the Borrower shall fail to pay the full
amount of any rebate payment required to be paid by the Borrower when such deposit is
due, the Purchaser may make payment to the United States, and such payment or deposit
shall be an advance under Section 8.05 of this Loan Agreement. In construing the
Borrower’s obligations hereunder, all terms used in this paragraph (d) shall have the
meanings provided in said Section 148(f) and regulations thereunder. The Borrower
agrees to make all required rebate payments to the United States, as and when required,
and such payments shall constitute additional Loan Repayments under Section 5.01
hereof.
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ARTICLE VI
USE OF PROJECT FACILITIES
Section 6.01. Use of Project Facilities. The Borrower will use the Project Facilities only
in furtherance of its lawful purposes and will use and operate the Project Facilities only in
accordance with applicable requirements under the Act.
The Borrower will not use or permit any person to use the Project Facilities for any use or
purpose in violation of the laws of the United States, the State of Montana, or any ordinance of
the Issuer, and agrees to comply with all the orders, rules, regulations and requirements of the
Board of Fire Underwriters and officers or boards of the City, the City or the State of Montana or
other governmental authority having jurisdiction over the Project Facilities. The Borrower shall
have the right to contest by appropriate legal proceedings, without cost or expense to the Issuer,
the validity of any law, ordinance, order, rule, regulation or requirement of the nature herein
referred to.
Section 6.02. Ownership, Maintenance and Possession of Project by Borrower;
Operating Expenses. The Borrower agrees that so long as the Note is outstanding, the Borrower
will own the Project Facilities and will keep the Project Facilities in good repair and good
operating condition at its own cost, ordinary depreciation excepted, making such repairs and
replacements as are necessary in the judgment of the Borrower so that the Project Facilities will
continue to comply with all pertinent requirements of the Act and the interest on the Note will
remain excludible from gross income for purposes of federal income taxation. As required by
the Act, the Borrower will pay all expenses arising from the operation and maintenance of the
Project Facilities. The Borrower covenants that, so long as the Note shall remain outstanding,
the Borrower shall continue to own the Project Facilities and use the same in furtherance of its
lawful purposes and that no part of the Project Facilities shall be used in any unrelated trade or
business of the Borrower, within the meaning of Section 513 of the Internal Revenue Code, or
shall be leased to or used by any person not constituting a unit of state or local government or an
organization described in Section 501(c)(3) of the Internal Revenue Code, without furnishing to
the Purchaser an opinion of Bond Counsel concluding that such use shall not adversely affect the
exclusion from gross income of interest on the Note.
Section 6.03. Liens. The Borrower will pay or cause to be paid all utility charges and
other charges arising from its operations which, if unpaid, would become a lien on the Project
Facilities and will not permit any lien or encumbrance to be established or to remain unsatisfied
against the Project Facilities. The Borrower may in good faith contest any such lien filed or
established against the Project Facilities, and in such event may permit the items so contested to
remain undischarged and unsatisfied during the period of such contest and any appeal therefrom
unless the Purchaser shall notify the Borrower that, in the opinion of Independent Counsel, by
nonpayment of any such items the Project Facilities or any part thereof will be subject to loss or
forfeiture, in which event the Borrower shall promptly pay and cause to be satisfied and
discharged all such unpaid items.
Section 6.04. Taxes and Other Governmental Charges. As required by the Act, the
Borrower will pay, as the same respectively become due and before penalty attaches, any taxes,
license fees and governmental charges of any kind whatsoever that may at any time be lawfully
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assessed or levied against or with respect to the operation of the Project Facilities. The Borrower
may, at its expense, in good faith contest any such taxes, assessments, license fees and other
governmental charges by appropriate proceedings and, in the event of any such contest, may
permit the taxes, assessments, license fees or other charges so contested to remain unpaid during
the period of such contest and any appeal therefrom if funds sufficient to satisfy the contested
amount have been deposited in an escrow account satisfactory to the Purchaser.
Section 6.05. [This Section intentionally omitted.]
Section 6.06. Insurance. So long as the Note is outstanding, the Borrower agrees at all
times to keep all property included in the Project Facilities insured against risks of fire (including
so-called extended coverage), theft and such other risks and in such amounts as are customary
for a prudent owner of properties comparable to the Project Facilities, but in any event in an
amount not less than the principal amount of the Note outstanding from time to time.
Section 6.07. Damage or Destruction. In the event of damage to the Project Facilities
from any cause whatsoever, the Borrower will proceed to reconstruct, replace and repair the
damaged portion of the Project Facilities to the extent necessary to maintain the Project Facilities
to continue to comply with all pertinent requirements of the Act and to maintain the tax exempt
status of interest on the Note. Any such repair, rebuilding or reconstruction shall be without
expense to the Issuer. Notwithstanding the foregoing, in the event all or a major portion of the
Project Facilities is damaged or destroyed and the Borrower shall determine that it is not
practical or desirable to rebuild, repair or restore the Project Facilities, the Borrower shall have
no obligation to do so, provided that (i) the Borrower shall promptly have notified the Purchaser
and the Issuer of the damage or destruction and of its determination that it is not practical or
desirable to rebuild, repair or restore the Project Facilities, (ii) the Borrower shall furnish to the
Purchaser an opinion of Note Counsel to the effect that the failure to rebuild, repair or restore the
Project Facilities does not jeopardize the exclusion of interest on the Note from gross income for
purposes of federal income taxation under Section 103 and related Sections of the Internal
Revenue Code, and (iii) the Borrower shall promptly elect to prepay the Note in whole and shall
promptly apply the proceeds of any insurance and other money of the Borrower, to the extent
necessary, to pay the redemption price with respect to the Note on the applicable redemption date
therefor, such redemption price being established by reference to Section 5.04 and Exhibit A
hereto. Any such prepayment shall be effected as provided in Section 5.04. In the event that the
amount of any such insurance proceeds shall be insufficient to provide for payment in full of the
redemption price of the Note when due, the Borrower shall make payment of such deficiency as
an additional Loan Repayment under Section 5.01 hereof.
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ARTICLE VII
SPECIAL COVENANTS
Section 7.01. No Warranty of Condition or Suitability; Indemnification. The Issuer
does not make any warranty, either express or implied, as to the design or capacity of the Project,
as to the suitability for operation of the Project or as to the condition of the Project or that the
Project will be suitable for the Borrower’s purposes or needs. The Borrower releases the Issuer
from, agrees that the Issuer shall not be liable for, and agrees to hold the Issuer, its governing
bodies, and its respective officers, agents and employees, past, present and future, harmless
against, any claim, cause of action, suit or liability for any loss or damage to property or any
injury to or death of any person that may be occasioned by any cause whatsoever pertaining to
the Project or the use thereof, except such loss, damage or injury as results from the negligent
acts or omissions of the Issuer.
The Borrower further agrees to indemnify and hold harmless the Issuer, its governing
bodies, its officers, agents and employees, past, present and future, against any and all losses,
claims, damages or liability to which the Issuer, its governing bodies, its officers, agents and
employees, past, present and future, may become subject under any law in connection with the
issuance and sale of the Note and the carrying out of the transactions contemplated by this Loan
Agreement and the other Note Documents, and to reimburse the Issuer, its governing bodies, its
officers, agents and employees, past, present and future, for any out-of-pocket legal and other
expenses (including reasonable counsel fees) incurred by the Issuer, its governing bodies, its
officers, agents and employees, past, present and future, in connection with investigating any
such losses, claims, damages or liabilities or in connection with defending any actions relating
thereto. The Issuer agrees, at the request and expense of the Borrower, to cooperate in the
making of any investigation in defense of any such claim and promptly to assert any or all of the
rights and privileges and defenses identified in writing by the Borrower which may be available
to the Issuer. The Borrower further releases and agrees to hold harmless the Issuer, its governing
bodies, its officers, agents and employees, past, present and future, from any liability to the
Borrower arising out of any covenants, representations or undertakings contained in this Loan
Agreement or any of the Note Documents. The provisions of this Section shall survive the
payment and redemption of the Note.
Section 7.02. Borrower to Maintain its Existence; Permitted Exceptions. The Borrower
agrees that during the term of this Loan Agreement the Borrower will maintain its existence as a
nonprofit corporation and an organization described in Section 501(c)(3) of the Internal Revenue
Code qualified to do business in Montana and each other state where the nature of its business so
requires; will not dissolve or otherwise dispose of all or substantially all of its assets; and will not
merge into another corporation or permit one or more other corporations to consolidate with or
merge into it; provided that the Borrower may, without violating the agreement contained in this
Section, consolidate with or merge into another corporation, or permit one or more other of such
corporations to consolidate with or merge into it, or sell or otherwise transfer to another such
corporation all or substantially all of its assets as an entirety and thereafter dissolve if (i) such
surviving, resulting or transferee corporation assumes in writing all of the obligations of the
Borrower herein, (ii) such surviving, resulting or transferee corporation has a tangible net worth
at least equal to that of the Borrower at the time of the transaction, (iii) the Borrower shall
furnish the Purchaser with an opinion of Bond Counsel to the effect that the merger or
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consolidation will not result in the inclusion of interest on the Note in the gross income of the
Holder for federal income tax purposes, and (iv) immediately after giving effect to such
transaction no Event of Default, or an event which after notice or lapse of time, or both, would
become an Event of Default, would occur and be continuing.
If consolidation, merger, sale or other transfer is made as provided in this Section, the
provisions of this Section shall continue in full force and effect and no further consolidation,
merger, sale, or other transfer shall be made except in compliance with the provisions of this
Section.
Section 7.03. Reports. The Borrower shall render at its own expense to the Issuer and
the Purchaser such reports concerning the Note, the Project or the financial status of the
Borrower, as may be required by the Act or by any other law, regulation or ordinance of the State
of Montana or the Issuer.
Section 7.04. Inspection. The Borrower shall permit the Purchaser at all reasonable
times to enter upon the Project for purposes of inspection permitted by Section 4.07 hereof.
Section 7.05. Further Assurances, Financing Statements, Maintenance of Lien. At the
request of the Issuer or the Purchaser, the Borrower shall execute any financing statement,
amendment or supplement to the Mortgage, or other instrument which is or may be required to
carry out the intent of the parties as expressed in this Loan Agreement, the Mortgage, the Note
Resolution, or the other Note Documents. The Borrower shall, at its sole expense, file or cause
to be filed all financing statements under the Uniform Commercial Code or similar instruments
deemed necessary by the Purchaser to perfect and continue the security interest of the Purchaser
in the Project Equipment, and this Loan Agreement, including any financing statements which
the Issuer is required to file.
Section 7.06. Assignments. The Borrower consents to the pledge and assignment of the
Loan Repayments and other interests of the Issuer in this Loan Agreement by the Issuer to the
Purchaser as provided in the Note Resolution and the Loan Agreement Assignment. Except as
otherwise provided in Section 7.02 hereof, the interests and obligations of the Borrower under
this Loan Agreement are non-assignable and shall not be assigned except to a trustee in
bankruptcy or similar officer pursuant to the Bankruptcy Code or similar law.
Section 7.07. Observance of Note Resolution Covenants and Terms. The Borrower will
not do, in any manner, anything which will cause or permit to occur any violation of any
provision of the Note Resolution, but will faithfully observe and perform, and will do all things
necessary so that the Issuer may observe and perform, all the conditions, covenants and
requirements of the Note Resolution. The Issuer agrees that it will observe and perform all
obligations imposed upon it by the Note Documents; provided that the Issuer has no obligation to
use its own funds to perform or cause performance of any such obligations, and provided further
that no covenant, representation or undertaking shall ever give rise to any liability of the Issuer,
its officers, agents or employees or constitute a charge against its credit or taxing powers.
It is understood and agreed by the Borrower and the Purchaser that no covenant,
provision or agreement of the Issuer herein or in the Note, the Note Resolution, the other Note
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Documents or in any other document executed by the Issuer in connection with the issuance, sale
and delivery of the Note, or any obligation herein or therein imposed upon the Issuer or breach
thereof, shall give rise to a pecuniary liability of the Issuer or a charge against its general credit
or taxing powers or shall obligate the Issuer financially in any way except with respect to
amounts to be paid pursuant to this Loan Agreement and the application of revenues therefrom
and the proceeds of the Note, as provided in the Loan Agreement Assignment (the “Pledged
Revenues”). No failure of the Issuer to comply with any term, condition, covenant or agreement
therein shall subject the Issuer to liability for any claim for damages, costs or other financial or
pecuniary charges except to the extent that the same can be paid or recovered from the Pledged
Revenues. No execution on any claim, demand, cause of action or judgment shall be levied upon
or collected from the general credit, general funds or taxing powers of the Issuer. In making the
agreements, provisions and covenants set forth herein, the Issuer has not obligated itself except
with respect to the Pledged Revenues. The Note constitutes a special, limited obligation of the
Issuer, payable solely from the Pledged Revenues, and does not now and never shall constitute
an indebtedness or a loan of the credit of the Issuer, the State of Montana or any political
subdivision thereof or a charge against the general taxing powers of any of them within the
meaning of any constitutional or statutory provision whatsoever. It is further understood and
agreed by the Borrower and the Purchaser that the Issuer shall incur no pecuniary liability
hereunder and shall not be liable for any expenses related hereto, all of which the Borrower
agrees to pay. If, notwithstanding the provisions of this Section 7.07, the Issuer incurs any
expense, suffers any losses, claims or damages or incurs any liabilities relating to the Note or the
Note Documents, the Borrower will indemnify and hold harmless the Issuer from the same and
will reimburse the Issuer for any legal or other expenses incurred by the Issuer in relation
thereto, and this covenant to indemnify, hold harmless and reimburse the Issuer shall survive
delivery of and payment for the Note.
Section 7.08. Financial Information and Reporting. Except as otherwise stated in this
Loan Agreement, all financial information provided to the Purchaser shall be prepared using
generally accepted accounting principles consistently applied.
During the term of this Loan Agreement, and afterward until all amounts due under this
Loan Agreement are paid in full, unless the Purchaser shall otherwise agree in writing, the
Borrower agrees to:
(a) Provide the Purchaser within 90 days of the Borrower’s fiscal year end,
the Borrower’s annual financial statements for the fiscal year then ending, in form
acceptable to the Purchaser and certified as correct by an officer of the Borrower
acceptable to the Purchaser. The statements must be audited with an unqualified opinion
by a certified public accountant acceptable to the Purchaser, and must be accompanied by
a certificate of such accountants stating whether, in conducting their audit, they have
become aware of any event of default under this Loan Agreement, or of any event which
would, after lapse of time or the giving of notice, or both, constitute an event of default
under this Loan Agreement, specifying the nature and duration of the default.
(b) Provide the Purchaser within 30 days of each fiscal quarter, the
Borrower’s quarterly financial statements. The statements must be current through the
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end of that period and must be certified as correct by an officer of the Borrower in form
acceptable to the Purchaser.
(c) Provide the Purchaser with such other information as it may reasonably
request, and permit the Purchaser or its agent(s) to visit and inspect its properties and
examine its books and records.
Section 7.09. Additional Indebtedness. Following the date hereof, the Borrower may
incur indebtedness in addition to the indebtedness represented hereby only in accordance with
the terms and provisions of this Section.
(a) If any additional indebtedness to be incurred by the Borrower is to be
unsecured or secured by a lien or security interest expressly subordinate hereto, to the
Note and to the lien of the Mortgage, the Borrower shall provide advance written notice
thereof to the Purchaser prior to the incurrence of such indebtedness. Such notice must
include, at a minimum, a statement of the original principal amount thereof, the terms of
repayment, and copies of the loan documents to be entered into by the Borrower in
connection therewith.
(b) If any additional indebtedness to be incurred by the Borrower is to be
secured on a parity with the Note, this Loan Agreement and the Mortgage, then, as a prior
condition to the incurrence thereof, the Borrower must provide to the Purchaser advance
notice thereof, with the same information as is required by paragraph (a) above, together
with evidence, in form and substance satisfactory to the Purchaser, that, following the
incurrence of such additional parity indebtedness, the net income available to the
Borrower in the then current year and in each future year during which the Note shall
remain outstanding shall be sufficient, following payment in full of all reasonably
expected operating and other costs of the Borrower and the Project, to exceed all
scheduled payments of principal and interest to be owing in each such year on any then
outstanding indebtedness of the Borrower, including but not limited to the indebtedness
represented hereby and the additional parity indebtedness to be incurred, by a margin at
least equal to 1.20 to 1.00.
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ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.01. Events of Default. The following shall be “Events of Default” under this
Loan Agreement and the term “Event of Default” shall mean, whenever used in this Loan
Agreement, any one or more of the following events:
(a) If the Borrower fails to pay the amount of any Loan Repayment required
to be paid under Section 5.01 hereof when due (whether by acceleration, call for
prepayment or redemption of the Note, or otherwise); or
(b) If the Borrower shall default in the due and punctual performance of any
of the other covenants, conditions, agreements and provisions contained in this Loan
Agreement or in any instrument supplemental hereto, on the part of the Borrower to be
performed, and such default shall continue for 30 days after written notice thereof from
the Issuer or the Purchaser; or
(c) If an Event of Default shall occur under the Mortgage or any of the other
Note Documents; or
(d) If the Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee or liquidator for it or for any of its property, (ii) admit in writing its
inability to pay its debts as they become due, (iii) make a general assignment for the
benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, or (v) file a voluntary
petition in bankruptcy, or a petition or an answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer
admitting the material allegations of a petition filed against it in any proceeding under
such law; or
(e) If an order, judgment or decree shall be entered against the Borrower by
any court of competent jurisdiction, approving a petition seeking reorganization of the
Borrower or appointing a receiver, trustee or liquidator of the Borrower or of all or a
substantial part of the assets thereof.
The provisions of paragraph (b) of this Section are subject to the following limitations: If by
reason of force majeure the Borrower is unable in whole or in part to carry out its agreements on
its part contained herein (other than the payment of money), the Borrower shall not be deemed in
default during the continuance of such disability. The term “force majeure” as used herein
includes the following: acts of God; strikes, lockouts or other employee disturbances; acts of
public enemies; orders of any kind of the government of the United States of America or of the
State of Montana or any of their departments, agencies, political subdivisions or officials, or any
civil or military authority; insurrections; riots; epidemics; landslides; lightning; earthquakes;
fires; hurricanes, storms; floods; washouts; droughts; arrests; restraint of government and people;
civil disturbances; explosions, breakage or accident to machinery, transmission pipes or canals;
partial or entire failure of utilities; or any other cause or event not reasonably, within the control
of the Borrower. The provisions of paragraph (b) of this Section are subject to the further
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limitation that if the Default can be remedied but not within a period of thirty days after notice
and if the Borrower has taken all action reasonably possible to remedy such Default within such
thirty day period, the Default shall not become an Event of Default for so long as the Borrower
shall diligently proceed to remedy such Default and in accordance with any directions or
limitations of time made by the Purchaser. The Borrower agrees, however, to use its best efforts
to remedy with all reasonable dispatch any cause or causes preventing the Borrower from
carrying out its agreements.
Section 8.02. Remedies on Default. Whenever any Event of Default shall have
happened and be subsisting, any one or more of the following steps may be taken:
(a) The Purchaser may declare the unpaid principal of and interest on the
Note, and all or any amounts of Loan Repayments thereafter to become due and payable
under Section 5.01 hereof for the remainder of the term of this Loan Agreement to be
immediately due and payable, whereupon the same shall become immediately due and
payable, together with any additional payments due under Sections 5.02, 5.05, 8.04, 8.05
or otherwise under this Loan Agreement.
(b) The Purchaser may foreclose the Mortgage or take whatever action at law
or in equity that appears necessary or desirable to enforce this Loan Agreement, the
Mortgage or the other Note Documents in accordance with the provisions hereof or
thereof.
Any amounts collected by the Purchaser or any other Holder pursuant to action taken under the
foregoing paragraphs shall be applied first to advances and expenses of the Purchaser or other
Holder, then to payment of the Note (interest first, and then premium and principal), and any
excess to the Borrower.
Whenever any Default shall occur, the Purchaser or any other Holder (or the Issuer with
respect to its reserved rights under Sections 5.02, 7.01, 7.07 or 8.04 hereof) may take whatever
action at law or in equity which may appear necessary or desirable to collect any other payments
then due and thereafter to become due hereunder or to enforce performance and observance of
any obligation, agreement or covenant of the Borrower under this Loan Agreement.
Section 8.03. Remedies Cumulative, Delay Not to Constitute Waiver. No remedy
conferred upon or reserved to the Issuer, the Purchaser, any other Holder or a receiver by this
Loan Agreement or by the other Note Documents 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 Loan Agreement or the other Note Documents
or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise
any right or power accruing upon any Default shall impair any such right or power, and any such
right or power may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Issuer, the Purchaser, any other Holder or a receiver to exercise any remedy
reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as
may be herein expressly required. In the event any agreement contained in this Loan Agreement
or the other Note Documents should be breached by any party and thereafter waived by the other
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parties, such waiver shall be limited to a particular breach so waived and shall not be deemed to
waive any other breach hereunder.
Section 8.04. Agreement to Pay Attorneys’ Fees and Expenses. In the event the
Borrower should default under any of the provisions of this Loan Agreement and the Issuer or
the Purchaser should employ attorneys or incur other expenses for the collection of payments due
or to become due hereunder or the enforcement of performance or observance or any obligation
or agreement on the part of the Borrower contained in this Loan Agreement, the Borrower agrees
that it will on demand therefor reimburse the reasonable fees of such attorneys and such other
expenses so incurred. The Borrower also agrees to pay all costs of the Purchaser to appear in
and defend any action or proceeding purporting to affect the security of the Mortgage or the
rights or powers of the Purchaser under this Loan Agreement or the other Note Documents,
including the cost of reasonable attorney’s fees, and in any suit brought by the Purchaser to
foreclose the Mortgage.
Section 8.05. Advances. In the event the Borrower shall fail to pay any Loan
Repayments under Section 5.01 hereof, or to do any other thing or make any other payment
required to be done or made by any other provision of this Loan Agreement or the other Note
Documents, the Issuer or the Purchaser, in its own discretion, may do or cause to be done any
such thing or make or cause to be made any such payment at the expense or as an advance for the
account of the Borrower, and the Borrower shall pay to the Issuer or the Purchaser, as the case
may be, upon demand, all necessary costs and expenses so incurred and advances so made, with
interest at the lesser of (i) 8.00% per annum or (ii) the maximum rate permitted by law. Any
such advance shall be entitled to priority of payment from any funds thereafter received by the
Purchaser or such Holder from the Borrower.
[The balance of this page is intentionally left blank.]
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ARTICLE IX
MISCELLANEOUS
Section 9.01. Notices. All notices, certificates, requests or other communications
hereunder shall be sent by first class mail or certified mail, addressed, if to any party hereto, at its
address set forth on the execution page hereof. The Borrower, the Issuer and the Purchaser may,
by notice given hereunder, designate any further or different addresses to which subsequent
notices, certificates, requests or other communications shall be sent.
Section 9.02. Binding Effect. This Loan Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and assigns, subject to the
limitation that any obligation of the Issuer created by or arising out of this Loan Agreement shall
not be a general debt of the Issuer but shall be payable solely out of the proceeds derived from
this Loan Agreement or the other Note Documents as provided in the Loan Agreement
Assignment and Section 7.07 hereof.
Section 9.03. Counterparts. This Loan Agreement may be signed in any number of
counterparts. Complete sets of counterparts shall be lodged with the Issuer, the Borrower and
the Purchaser.
Section 9.04. Benefit of Holder. Except as otherwise provided herein, all covenants and
agreements on the part of the Borrower and the Issuer herein are hereby declared to be for the
benefit of the Purchaser or any Holder of the Note. Persons other than the parties hereto and
such other Holders are not intended to be beneficiaries of any of the covenants and agreements
set forth in this Loan Agreement.
Section 9.05. Due Dates. Should any payment on the Note become due and payable
upon a day not a business day, such payment shall be made on the next succeeding business day.
Section 9.06. Captions. The captions or headings in this Loan Agreement are for
convenience only and in no way define, limit or describe the scope or intent of any provision of
this Loan Agreement.
Section 9.07. Term of Agreement. Except as otherwise provided herein, the provisions
of this Loan Agreement shall remain in full force and effect from the date of execution hereof
until such time as the Note is not outstanding.
Section 9.08. Severability. Any provision of this Loan Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 9.09. Amendments, Consents, Changes and Modifications. Except as otherwise
provided in this Loan Agreement, subsequent to the issuance of the Note and prior to payment of
the Note in full, this Loan Agreement and the other Note Documents may not be effectively
amended, changed, modified, altered or terminated without the prior written consent of the
Holder of the Note.
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197
IN WITNESS WHEREOF, the undersigned have caused this Loan Agreement to be duly
executed by their duly authorized officers, all as of the day and year first above written.
CITY OF BOZEMAN
By
Mayor
And
City Clerk
Address: City Hall
411 East Main Street
Bozeman, Montana 59771
Attention: City Clerk
[Signature Page to Loan and Purchase Agreement dated as of June 1, 2007,
between City of Bozeman, Montana, Learning Circle Montessori Elementary School, Inc. and
Wells Fargo Brokerage Services, LLC]
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198
LEARNING CIRCLE MONTESSORI
ELEMENTARY SCHOOL, INC.
By
Its Chair
And by
Its Secretary
Address: 3001 West Villard Street
Bozeman, Montana 59718
Attention: Treasurer
[Signature Page to Loan and Purchase Agreement dated as of June 1, 2007,
between City of Bozeman, Montana Learning Circle Montessori Elementary School, Inc. and
Wells Fargo Brokerage Services, LLC]
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199
WELLS FARGO BROKERAGE
SERVICES, LLC
By
Its Senior Vice President
Address: 608 Second Avenue South
MAC N9303-105
Minneapolis, Minnesota 55479-0146
Attention: Public Finance Department
[Signature Page to Loan and Purchase Agreement dated as of June 1, 2007,
between City of Bozeman, Montana, Learning Circle Montessori Elementary School, Inc. and
Wells Fargo Brokerage Services, LLC]
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200
EXHIBIT A
to
Loan and Purchase Agreement
(Schedule of Note Termination Values,
according to regularly scheduled payment dates for the Note)
Monthly Payment Date Termination Value
A-1
201
EXHIBIT B
to
Loan and Purchase Agreement
(Form of Note)
UNITED STATES OF AMERICA
STATE OF MONTANA
CITY OF BOZEMAN
Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project)
No. R-1 $400,000
The City of Bozeman, a municipal corporation and political subdivision of the State of
Montana (hereinafter sometimes called the “Issuer”), for value received, hereby promises to pay,
but solely from the sources and in the manner hereinafter provided, to Wells Fargo Brokerage
Services, LLC (the “Purchaser” or the “Registered Owner”), or registered assigns, the principal
sum of Four Hundred Thousand Dollars, on June 1, 2027 upon the presentation and surrender
hereof, and to make prepayment of said principal sum in installments as hereinafter provided,
and to pay the Registered Owner hereof interest on the outstanding and unpaid balance of such
principal sum from the date hereof until said principal sum is paid, at the rate of _______% per
annum, calculated on the basis of the number of days elapsed in a year consisting of 360 days
made up of twelve 30-day months. Interest only shall be paid on ____________, 2007, and
thereafter on the ____ day of each ______, through __________, 200_, in the amount of
$__________. Principal and interest shall be payable in installment payments of
$_____________ each, beginning ____________, 2007, and continuing thereafter on the ____
day of each _______, to and including _______________, 2027, and on _____________, 2027,
all unpaid principal and interest shall be due and payable in full. Each such installment payment
shall be applied first to accrued interest and then to principal. Principal and interest shall be paid
to the Registered Owner hereof in lawful money of the United States as provided in the Loan
Agreement mentioned below, at its registered address.
This Note is issued pursuant to Montana Code Annotated, Title 90, Chapter 5, Part I, as
amended (the “Act”), and in conformity with the provisions, restrictions and limitations thereof.
This Note does not constitute or give rise to a pecuniary liability of the Issuer or to a charge
against the general credit or properties or taxing powers of the Issuer and does not grant to the
owner of this Note any right to have the Issuer levy any taxes or appropriate any funds for the
payment of the principal hereof or interest hereon, nor is this Note a general obligation of the
Issuer or the individual officers or agents thereof. This Note and interest hereon are payable
solely from the moneys received pursuant to the Loan Agreement, including loan repayments to
be made by Learning Circle Montessori Elementary School, Inc., a Montana nonprofit
corporation (hereinafter called the “Borrower”), and the security provided therefor, including the
Mortgage referred to therein, all as hereinafter referred to.
B-1
202
This Note is issued in the authorized principal amount of $400,000, and has been
authorized by law to be issued and has been issued for the purpose of funding a loan from the
Issuer to the Borrower in order to finance costs incurred with respect to the Project described in
the hereinafter referred to Loan Agreement. This Note is issued pursuant to a Loan and Purchase
Agreement (herein called the “Loan Agreement”) by and between the Issuer, the Borrower and
the Purchaser, dated as of June 1, 2007, and a Note Resolution of the City Commission duly
adopted May 29, 2007 (the “Note Resolution”). Pursuant to a Loan Agreement Assignment (the
“Loan Agreement Assignment”), the Issuer has assigned its interest in the Loan Agreement
(except for its rights to indemnity and payment of fees, expenses and advances) to the Purchaser.
This Note is secured by the Loan Agreement, the Loan Agreement Assignment and the Mortgage
dated as of June 1, 2007 (the “Mortgage”), executed by the Borrower to the Purchaser.
Reference is hereby made to all such documents and any supplements thereto for a description
and limitation of the property, revenues and funds pledged and appropriated to the payment of
the Note, the nature and extent of the security thereby created, the rights of the owner of the
Note, and the rights, immunities and obligations of the Issuer thereunder. Certified copies of the
Note Resolution and executed counterparts of the Loan Agreement, the Loan Agreement
Assignment and the Mortgage are on file at the office of the City Clerk.
On ____________, 2007, and each regularly scheduled installment payment date
thereafter, this Note shall be subject to optional prepayment, at the direction of the Borrower, in
whole but not in part, at a prepayment price equal to the regularly scheduled payment otherwise
owing on such date, together with an amount equal to the Termination Value, as set forth in
Exhibit A to the Loan Agreement.
This Note is also subject to mandatory redemption in the event of a Determination of
Taxability, as defined in the Loan Agreement, that interest upon the Note is includible in gross
income for purposes of federal income taxation. In the event of a Determination of Taxability,
the Borrower is obligated to cause the Note to be redeemed at a redemption price equal to the
Termination Value thereof for the monthly payment date next preceding such redemption date,
as set forth in Exhibit A to the Loan Agreement, plus accrued interest through the redemption
date, together with all taxes, interest and penalties assessed or owing in connection therewith.
Notice of any such prepayment or redemption shall be given to the Registered Owner of
this Note by first class mail, addressed to such owner at its registered address, not earlier than
sixty days nor later than thirty days prior to the date fixed for prepayment or redemption and
shall be published as may be required by law.
This Note is transferable, as provided in the Note Resolution, only upon the registration
records of the City Clerk, as bond registrar, by the registered owner hereof in person or by his
duly authorized attorney, as provided in the Note Resolution.
In case an event of default as defined in the Loan Agreement occurs, the principal of this
Note outstanding may be declared or may become due and payable prior to the stated maturity
hereof in the manner and with the effect and subject to the conditions provided in the Loan
Agreement.
B-2
203
The terms and provisions of the Note Resolution, Loan Agreement, Loan Agreement
Assignment and Mortgage or of any instrument supplemental thereto, may be modified or altered
only pursuant to Section 9.09 of the Loan Agreement and paragraph 12 of the Note Resolution.
It is hereby certified and recited: that all acts, conditions and things required to be done
precedent to and in the issuance of this Note have been properly done, have happened and have
been performed in regular and due time, form and manner as required by law; and that this Note
does not constitute a debt of the Issuer within the meaning of any constitutional or statutory
limitation.
IN WITNESS WHEREOF, City of Bozeman, by its City Commission, has caused this
Note to be executed in its name by the manual or facsimile signatures of its duly authorized
officers, all as of the ____ day of ________, 2007.
CITY OF BOZEMAN
By
Its Mayor
By
City Clerk
B-3
204
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
______________________________________________________________________
(Please Print or Typewrite Name and Address of Transferee)
the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints
_____________________________________________________________________ attorney
to transfer the within Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: __________________
Signature Guaranteed:
Signature(s) must be guaranteed by an
eligible guarantor institution meeting
the requirements of the Registrar, which
requirements include membership or
participation in STAMP or such other
signature guaranty program as may be
determined by the Registrar in addition
to or in substitution for STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE:
________________________________
Notice: The signature to this assignment must
correspond with the name as it appears on the
face of this Note in every particular, without
alteration or any change whatever.
B-4
205
EXHIBIT C
To
Loan and Purchase Agreement
FORM OF DRAW REQUEST
To: Wells Fargo Brokerage Services, LLC
1. The undersigned Authorized Borrower Representative (the “Authorized Borrower
Representative”) of Learning Circle Montessori Elementary School, Inc. (the
“Borrower”) hereby authorizes and requests Wells Fargo Brokerage Servies, LLC
(the “Purchaser”) to disburse $_________ from the Project Fund (the “Project
Fund”) established under to the Loan and Purchase Agreement dated as of June 1,
2007, (the “Loan Agreement”), between the City of Winona (the “Issuer”), the
Borrower and the Purchaser, in order to (i) reimburse the Borrower for certain
expenditures paid by the Borrower prior to the issuance of the Bond described in
the Loan Agreement (the “Bond”) pursuant to the Loan Agreement, or (ii) pay
designated parties for expenditures by the Borrower paid after the issuance of the
Bond, all as more specifically described in the attachments hereto.
2. The Authorized Borrower Representative further certifies, pursuant to the Loan
Agreement, that (i) none of the items for which reimbursement or payment is
sought has formed the basis for any payment heretofore made from the Project
Fund, and (ii) each item for which reimbursement or payment is sought is or was
necessary in connection with the Project.
Answer Items 3 And 4 Only If Applying For Reimbursement Of
Expenditures Paid Before Bond Closing.
3. With respect to reimbursement of expenditures incurred and paid prior to the
issuance of the Bond, the Authorized Borrower Representative further certifies,
pursuant to Section 1.150-2 (the “Regulations”) of the Income Tax Regulations
under the Internal Revenue Code of 1986, as amended (the “Code”), that:
(a) De minimis Expenditures. The expenditure for which
reimbursement is hereby sought is/is not (circle one) a de minimis expenditure as
defined and within the permitted limit described in paragraph (f)(1) of the
Regulations (lesser of $100,000 or 5% of the proceeds).
(b) Preliminary Expenditures. The expenditure for which
reimbursement is hereby sought is/is not (circle one) a Preliminary Expenditure (as
defined and within the permitted limit described in paragraph (f)(2) of the
Regulations).
If the expenditure is described under (a) or (b), go to question 4 below.
C-1
206
(c) Declaration of Official Intent. The expenditure for which
reimbursement is hereby sought is not described under (a) or (b) above. On
_____________, _____, a date no later than 60 days after payment of the
expenditure for which reimbursement is hereby sought, the Borrower made a
written declaration of official intent, stating that: (i) the Borrower reasonably
expects to reimburse the expenditure with the Bond proceeds; (ii) a general
description of the project for which reimbursement is sought or an identification
by name and functional purpose of the fund or account from which the
expenditure is to be paid; and (iii) the maximum principal amount of Bonds
expected to be issued for the project.
(d) Reimbursement Period. The reimbursement is being sought for an
expenditure which has already been paid and such reimbursement would be on or
before the later of:
(i) eighteen months after the expenditure was paid; or
(ii) the date the property was placed in service or abandoned, but in
no event more than three years after the expenditure was paid.
(e) Capital Expenditure. The reimbursed expenditure is for a “capital
expenditure” as defined in Section 1.150-2(d)(3) of the Code.
4. The Authorized Borrower Representative hereby requests reimbursement for an
expenditure which meets the requirements of (i) paragraph 3(d) and (e) above,
and (ii) one of the following [check one or provide specific information for
multiple items on an attachment]:
(a) ____ de minimis
expenditures
(b) ___ preliminary
expenditures
(c) ____ declaration
of official intent
5. The undersigned further certifies that this statement and all exhibits and
attachments hereto, and documents furnished in connection herewith, shall be
conclusive evidence of the facts and statements set forth herein and shall
constitute full warrant, protection and authority to the Purchaser for its actions
taken pursuant hereto, and that this statement constitutes the approval of the
Borrower of each disbursement hereby requested and authorized.
6. The undersigned further certifies that the Borrower has general funds which,
together with amounts remaining in the Project Fund, are sufficient to complete the
Project.
Dated:_____________________
Authorized Borrower Representative
C-2
4838-7008-5889\2
207
SECOND DRAFT 05/21/07
$400,000
City of Bozeman, Montana
Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project)
COMBINATION MORTGAGE, SECURITY AGREEMENT
AND FIXTURE FINANCING STATEMENT AND
ASSIGNMENT OF LEASES AND RENTS
Dated as of June 1, 2007
from
LEARNING CIRCLE MONTESSORI ELEMENTARY SCHOOL, INC.
to
WELLS FARGO BROKERAGE SERVICES, LLC
This instrument was drafted
by Dorsey & Whitney LLP
Suite 1500
50 South Sixth Street
Minneapolis, Minnesota 55402-1498
208
COMBINATION MORTGAGE, SECURITY AGREEMENT AND
FIXTURE FINANCING STATEMENT AND
ASSIGNMENT OF LEASES AND RENTS
This COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE
FINANCING STATEMENT AND ASSIGNMENT OF LEASES AND RENTS dated as of
June 1, 2007 (this “Mortgage”), is from LEARNING CIRCLE MONTESSORI ELEMENTARY
SCHOOL, INC., a nonprofit corporation organized and existing under the laws of Montana,
whose address is set forth herein (sometimes referred to herein, together with its successors and
assigns, as the “Borrower,” as the “Mortgagor” or as the “Assignor”) to WELLS FARGO
BROKERAGE SERVICES, LLC, a Delaware limited liability company, as mortgagee, whose
address is set forth herein (sometimes referred to herein, together with its successors and assigns,
as the “Purchaser,” as the “Mortgagee” or as the “Assignee”).
WHEREAS, the Mortgagor, the Mortgagee and City of Bozeman, Montana (referred to
as the “City” or the “Issuer”), have entered into a Loan and Purchase Agreement (the “Loan
Agreement”) of even date herewith, pursuant to which the Purchaser agrees to purchase from the
Issuer its $400,000 Revenue Note (Learning Circle Montessori Elementary School, Inc. Project)
(the “Note”), issued pursuant to Montana Code Annotated, Title 90, Chapter 5, Part 1, as
amended (the “Act”), and the Issuer agrees to lend the proceeds of the Note to the Borrower; and
WHEREAS, the Mortgagor has agreed to mortgage and grant a security interest in the
Mortgaged Property, as defined herein and as further described in Exhibit A hereto, to secure the
obligations of the Borrower under the Loan Agreement, including the obligation of the Borrower
to make Loan Repayments at times and in amounts sufficient to pay when due the principal of,
premium (if any) on and interest on the Note;
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged; in
consideration of the purchase and acceptance of the Note by the persons who, from time to time,
may become the owners thereof; and to secure the due and punctual payment of any and all
liabilities of the Borrower under the Loan Agreement, including (without limitation) all Loan
Repayments payable thereunder, and the payment of all fees and expenses and advances of the
Mortgagee under the Loan Agreement and this Mortgage, the Mortgagor does hereby grant,
bargain, sell, convey, warrant and assign to the Mortgagee, its permitted successors and assigns,
a lien on and security interest in, and does hereby mortgage and pledge unto the Mortgagee, its
successors and assigns, forever, with power of sale, the following:
I
All of its right, title and interest in and to the tracts, parcels and interests in land described
in Exhibit A hereto (the “Land”) and the buildings, structures and other improvements now
standing or at any time hereafter constructed or placed upon the Land (the “Buildings”),
including but not limited to (i) all building materials, supplies and equipment now or hereafter
located on the Land and suitable or intended to be incorporated in any building, structure, or
other improvement located or to be erected on the Land, (ii) all heating, plumbing and lighting
apparatus, motors, engines and machinery, electrical equipment, incinerator apparatus, air
209
conditioning equipment, water and gas apparatus, pipes, faucets, and all building service
equipment and other fixtures of every description which are now or may hereafter be placed or
used upon the Land or in any building or improvement now or hereafter located thereon, (iii) all
additions, accessions, increases, parts, fittings, accessories, replacements, substitutions,
betterments, repairs and proceeds to and of any and all of the foregoing, and (iv) all
hereditaments, easements, appurtenances, estates, and other rights and interests now or hereafter
belonging to or in any way pertaining to the Land or to any building or improvement now or
hereafter located thereon.
II
All furnishings, furniture, equipment, fixtures and all other tangible personal property of
any nature whatever now or hereafter located in the Buildings or elsewhere on the Land,
exclusive of personal property owned by residents (the “Equipment”), including all additions,
accessions, increases, parts, fittings, accessories, replacements, substitutions, betterments, repairs
and proceeds to and of any and all such property, excluding any items released or disposed of in
accordance with the Loan Agreement.
III
All receivables, accounts, rents, issues, condemnation awards, insurance proceeds, and
similar revenues and income arising from the ownership of the Land, the Buildings and the
Equipment and all proceeds and products thereof (herein collectively called “Revenues and
Income.
To Have and To Hold the Land, Buildings and Equipment (the “Mortgaged Property”),
and the revenues and income thereof, together with all privileges, hereditaments and
appurtenances thereunto now or hereafter belonging, or in anywise appertaining, and the
proceeds thereof, unto the Mortgagee, its successors and assigns forever,
Provided, nevertheless, that these presents are upon the express condition that if the
Borrower shall pay all Loan Repayments under the Loan Agreement and cause to be paid the
principal of, premium (if any) on and interest on the Note, and if the Borrower shall strictly
observe and perform all of the terms, covenants and conditions contained in the Loan Agreement
and this Mortgage, then this Mortgage and the estate, right and interest of the Mortgagee in and
to the Mortgaged Property, and the Revenues and Income thereof, shall cease and be and become
void and of no force and effect, and shall be satisfied at the Borrower’s expense, otherwise to
remain in full force and effect.
The Mortgagor and the Mortgagee further agree as follows:
1. Definitions. Terms used in this Mortgage not otherwise defined in this Mortgage,
but defined in the Loan Agreement, shall have the same meaning as in the Loan Agreement
unless the context clearly indicates a contrary meaning.
2. Amount and Maturity of Note; Loan Repayments. The parties represent and
agree as follows:
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210
(a) The Note is in the principal amount of $400,000. The final stated maturity
thereof is __________, 2027.
(b) Loan Repayments are required to be made in installments by the Borrower
in order to pay principal, premium (if any) and interest of the Note when and as the same
shall become due, or when required to be redeemed, as more fully provided in the Loan
Agreement.
3. Additional Payments. Under the Loan Agreement, the Borrower will be
obligated, in addition to the Loan Repayments described above, to pay all required rebate
payments due to the United States in respect of the Note under Section 148(f) of the Internal
Revenue Code, the reasonable fees and expenses of the Mortgagee, and any advances by the
Mortgagee to meet obligations of the Borrower for (among other things) taxes, special
assessments, utility charges, insurance premiums, and liens in connection with the Mortgaged
Property and also to provide indemnity to the Mortgagee, all as more fully provided in the Loan
Agreement, which obligations are additional indebtedness intended to be secured by this
Mortgage.
4. Warranty of Title; Permitted Encumbrances. The Mortgagor does hereby
covenant, represent and warrant that it is the lawful owner of and has good right and lawful
authority to grant, bargain, sell, convey, warrant, mortgage, assign and pledge the Mortgaged
Property and Revenues and Income thereof as provided herein; that the Mortgagor is and will
continue to be well and truly seized of good and marketable title to the Mortgaged Property; that
the Mortgaged Property and Revenues and Income thereof are free and clear of all mortgages,
liens, pledges, charges and encumbrances, excepting only Permitted Encumbrances; and that the
Mortgagor does warrant and will defend the title to the Mortgaged Property and Revenues and
Income thereof against all claims and demands whatsoever not specifically excepted herein.
“Permitted Encumbrances” shall mean Permitted Encumbrances as defined in the Loan
Agreement, including those encumbrances identified in Exhibit B hereto.
5. [Intentionally Omitted]
6. Events of Default; Remedies. If any Event of Default as defined in the Loan
Agreement shall occur and be continuing, the Mortgagee shall have authority (i) to accelerate the
Loan Repayments and to declare the Note immediately due and payable as provided in the Loan
Agreement, and (ii) to pursue one or more of the remedies provided for in the Loan Agreement,
and in lieu thereof or addition thereto, one or more of the following remedies and provisions for
foreclosure or enforcement of this Mortgage:
(a) The Purchaser may proceed to protect and enforce its rights by a suit or
suits in equity or at law, either for the specific performance of any covenant or agreement
contained herein or in aid of the execution of any power herein granted, or for the
foreclosure of this Mortgage, or for the enforcement of any other appropriate legal or
equitable remedy.
(b) The Purchaser shall have and may exercise with respect to all personal
property and fixtures which are part of the Mortgaged Property all the rights and
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remedies accorded upon default to a secured party under the Uniform Commercial Code,
as in effect in the State of Montana. Notice to the Borrower of intended disposition of
such property shall be deemed commercially reasonable if given (in the manner specified
in the Loan Agreement) at least 10 calendar days prior to the date of intended disposition.
(c) The Purchaser shall be entitled, upon notice to the Mortgagor, as above
provided, and without any showing of waste of the Mortgaged Property, inadequacy of
the Mortgaged Property as security, or insolvency of the Borrower, to the appointment of
a receiver of the rents and profits of the Mortgaged Property including those past due.
The Purchaser or any receiver shall be entitled to receive and dispose of the Revenues
and Income of the Mortgaged Property and to sue for and recover any account or other
item of Revenues and Income from the Borrower or any account debtor or other third
person.
(d) The Purchaser may (and is hereby authorized and empowered to) foreclose
this Mortgage by action or advertisement, pursuant to the statutes of the State of Montana
in such case made and provided, power being expressly granted to sell the Mortgaged
Property at public auction and convey the same to the purchaser in fee simple and to
apply the proceeds arising from such sale, first, to the payment of the indebtedness
secured thereby and hereby, including all reasonable expenses, liabilities and advances of
the Purchaser and the Note and interest thereon and Loan Repayments relating thereto,
and all legal costs and charges of such foreclosure, which costs, charges and fees the
Borrower agrees to pay, and, second, to the payment of any obligations of the Borrower
to the Mortgagee under the Loan Agreement, and, third, to return any surplus to the
Borrower or such other person as may be entitled thereto. Such sale shall be made at
public auction and at such place or places and at such time or times and upon such notice
as the Purchaser may be advised by counsel to be consistent with the laws applicable
thereto, and upon such terms as the Purchaser or the public officer conducting such sale
may fix. Any such sale made pursuant to judicial proceedings or advertisement shall be
made either as an entirety or in such parcels as may be directed by the court or as the
Purchaser in its sole discretion may determine. The Mortgagor, for it and all persons and
Borrowers hereafter claiming through or under it, does hereby expressly waive and
release all right to have the properties and rights comprised in the Mortgaged Property
marshaled upon any foreclosure or other enforcement hereof. The Purchaser or public
officer conducting such sale from time to time may adjourn any such sale to be made by
it by announcement at the time and place appointed for such sale or for such adjourned
sale or sales, and without further notice or publication it may make such sale at the time
to which the same shall be so adjourned, but in the event of such adjournment or
adjournments, sale shall be made within any limitation of time or number of
adjournments prescribed by law and, in any event, within six months from the date of
sale fixed in the advertisement or court order, unless notice of sale on some later date
shall be given again in the manner provided by law.
(e) Upon any foreclosure sale, the Purchaser may bid for and purchase the
Mortgaged Property or any part thereof and upon compliance with the terms of sale may
hold, retain and possess and dispose of such property in his, their or its own absolute right
without further accountability, and any purchaser at any such sale may, in paying the
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purchase money, turn in the Note in lieu of cash to the amount which shall, upon
distribution of the net proceeds of such sale, be payable thereon.
(f) Upon the completion of any sale or sales made under or by virtue of this
Mortgage, the Purchaser shall execute and deliver, or cause to be executed and delivered,
to the accepted purchaser or purchasers the property sold with good and sufficient
transfers, assigning and transferring all its right, title and interest in and to the properties
sold. The Purchaser and its successor or successors are hereby appointed the true and
lawful attorney or attorneys irrevocable of the Mortgagor in its name and stead or in the
name of the Purchaser to make all necessary assignments, transfers and deliveries of the
property thus sold, and for that purpose, the Purchaser and its successors may execute all
necessary instruments of assignment and transfer, and may substitute one or more
persons with like power, the Mortgagor hereby ratifying and confirming all that said
attorney or attorneys or such substitute or substitutes shall lawfully do by virtue hereof.
Nevertheless, the Mortgagor, if so requested in writing by the Purchaser, shall ratify and
confirm any such sale or sales by executing and delivering to the Purchaser or to such
purchaser or purchasers all such instruments as may be advisable, in the judgment of the
Purchaser, for the purpose and as may be designated in such request.
(g) Upon any sale made under the power of sale hereby granted or under
judgment or decree in any judicial proceedings for the foreclosure or otherwise for the
enforcement of this Mortgage, the receipt of the Purchaser or of the officer making such
sale shall be a sufficient discharge to the purchaser or purchasers at any sale for his or
their purchase money, and such purchaser or purchasers, his or their assigns or personal
representatives shall not, after paying such purchase money and receiving such receipt of
the Purchaser or of such officer therefor, be obliged to see to the application of such
purchase money, or be in anywise answerable for any loss, misapplication, or
nonapplication thereof.
(h) The Mortgagor does hereby expressly consent to sale of the Mortgaged
Property by advertisement pursuant to the laws of Montana, which provide for sale after
service of notice thereof upon the occupant of the Mortgaged Property and publication of
said notice in the county in which the Mortgaged Property is located, notwithstanding
that service might not be made upon the Mortgagor personally, and that no hearing of any
type is required in connection with the sale. Except as required by the aforesaid statutory
provision, the Mortgagor hereby expressly waives any and all rights to notice of sale of
the Mortgaged Property and any and all rights to a hearing of any type in connection with
the sale of the Mortgaged Property.
(i) In case of any Event of Default as aforesaid, to the extent that such rights
may then lawfully be waived, neither the Mortgagor nor anyone claiming through or
under it shall or will set up, claim, or seek to take advantage of any appraisement,
valuation, stay, or extension laws now or hereafter in force in any locality where any of
the Mortgaged Property may be situated, in order to prevent or hinder the enforcement or
foreclosure of this Mortgage, or the absolute sale of the Mortgaged Property, or the final
and absolute putting into possession thereof, immediately after such sale, of the purchaser
or purchasers thereat, but the Mortgagor, for itself and all who may claim through or
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under it, hereby waives, to the extent that it lawfully may do so, the benefit of all such
laws and all right of appraisement to which it may be entitled under the laws of the State
in which it is situated.
(j) Any sale made under the power of sale granted hereby or under judgment
or decree in any judicial proceedings for foreclosure or otherwise for the enforcement of
this Mortgage shall, if and to the extent then permitted by law, operate to divest all right,
title, interest, claims and demand whatsoever, either at law or in equity, of the Mortgagor
of, in and to the property so sold, and be a perpetual bar both at law and in equity against
the Mortgagor and against any and all persons, firms or corporations claiming or who
may claim the property sold, or any part thereof, from, through or under the Mortgagor.
7. Possession of Borrower. Unless an Event of Default shall exist under the Loan
Agreement, the Borrower shall be entitled to the possession and disposition of the Mortgaged
Property and the Revenues and Income thereof subject, however, to the rights of the Purchaser to
the possession and disposition of the Project Fund provided for in the Loan Agreement.
8. Further Assurances. As provided in the Loan Agreement, the Borrower shall
execute, deliver, file and record at its expense such supplements to this Mortgage, financing
statements or other documents as may be required in the opinion of counsel, including (without
limitation) any supplement to this Mortgage to particularly describe any properties which have
been or are intended to become subject to the lien hereof.
9. Amendments. This Mortgage may be amended only as provided in the Loan
Agreement.
10. Loan Agreement Controls. Any provision in this Mortgage which is inconsistent
with the Loan Agreement or any provision thereof shall be interpreted as if such provision were
not contained herein and as if the provisions of the Loan Agreement had been fully incorporated
herein. In all cases of inconsistency, and in case of any amendment to or supplement to the Loan
Agreement entered into in accordance with the provisions thereof, the provisions of the Loan
Agreement (as amended and supplemented) shall control.
11. Fixture Filing. From the date of its recording, this Mortgage shall be effective as
a financing statement filed as a fixture filing with respect to all goods constituting part of the
Mortgaged Property which are or are to become fixtures related to the real estate described
herein. For this purpose, the following information is set forth:
(a) Name and Address of Debtor:
Learning Circle Montessori Elementary School, Inc.
3001 West Villard Street
Bozeman, Montana 59718
Attention: _____________________
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(b) Name and Main Office Address of Secured Party:
Wells Fargo Brokerage Services, LLC
608 Second Avenue South
MAC N9303-105
Minneapolis, Minnesota 55479-0146
Attention: Public Finance
(c) This document covers goods which are or are to become fixtures.
(d) Mortgagor’s Federal Tax Identification Number is: 84-1413419.
12. Assignment of Leases and Rents. The Assignor does hereby grant, transfer and
assign to the Assignee (the “Assignment”) all of the right, title and interest of the Assignor in and
to (i) any and all present or future leases or tenancies, whether written or oral, covering or
affecting any or all of the Mortgaged Property, (all of which, together with any and all
extensions, modifications and renewals thereof, are hereinafter collectively referred to as the
“Leases” and each of which is referred to as a “Lease”), and (ii) all rents, profits and other
income or payments of any kind due or payable or to become due or payable to the Assignor as
the result of any use, possession or occupancy of all or any portion of the Mortgaged Property or
as the result of the use of or lease of any personal property constituting a part of the Mortgaged
Property (all of which are hereinafter collectively referred to as “Rents”), and whether the Rents
accrue before or after foreclosure of the Mortgage or during the periods of redemption thereof,
all for the purpose of securing:
(a) All indebtedness under the Loan Agreement and all other sums secured by
this Mortgage and Assignment; and
(b) Performance and discharge of each and every obligation, covenant and
agreement of the Assignor contained herein and in the Loan Agreement.
13. Covenant. The Assignor warrants and covenants that it is and will remain the
absolute owner of the Rents and Leases free and clear of all liens and encumbrances other than
the lien granted herein and Permitted Encumbrances; that it has not heretofore assigned or
otherwise encumbered its interest in any of the Rents or Leases to any person other than as set
forth in the Permitted Encumbrances; that it has the right under applicable law, under the Leases,
and otherwise to execute and deliver this Assignment and keep and perform all of its obligations
hereunder; that it will warrant and defend the Leases and Rents against all adverse claims,
whether now existing or hereafter arising.
14. Performance of Leases. The Assignor will faithfully abide by, perform and
discharge each and every obligation, covenant and agreement which it is now or hereafter
becomes liable to observe or perform under any present or future Lease, and, at its sole cost and
expense, enforce or secure the performance of each and every obligation, covenant, condition
and agreement to be performed by the tenant under each and every Lease, subject to such
waivers or extensions of time as may be granted by Assignor, provided that Assignee shall have
the right, at any time, to rescind any such waiver or extension of time. The Assignor will
observe and comply with all provisions of law applicable to the operation and ownership of the
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Mortgaged Property. The Assignor will give prompt written notice to the Assignee of any notice
of default on the part of the Assignor with respect to any Lease received from the tenant
thereunder, and will also at its sole cost and expense, appear in and defend any action or
proceeding arising under, growing out of or in any manner connected with any Lease or the
obligations, duties or liabilities of the Assignor or any tenant thereunder.
15. Collection of Rents. Unless permitted by the Purchaser, the Assignor will not
collect or accept any Rents for the use or occupancy of the Mortgaged Property for more than
one month in advance. Security deposits shall not be deemed Rents for purposes of this Section.
16. Protecting the Security of This Assignment. Should the Assignor fail to perform
or observe any covenant or agreement contained in this Assignment, then the Assignee, but
without obligation to do so and without releasing the Assignor from any obligation hereunder,
may make or do the same in such manner and to such extent as the Assignee may deem
appropriate to protect the security hereof, including, specifically, without limiting its general
powers, the right to appear in and defend any action or proceeding purporting to affect the
security hereof or the rights or powers of the Assignee, and also the right to perform and
discharge each and every obligation, covenant and agreement of the Assignor contained in the
Leases and in exercising any such powers to pay necessary costs and expenses, employ counsel
and pay reasonable attorneys’ fees. The Assignor will pay immediately upon demand all sums
expended by the Assignee under the authority of this Assignment, together with interest thereon,
and the same shall be added to said indebtedness and shall be secured hereby and by the
Mortgage.
17. Present Assignment. This Assignment shall constitute a perfected, absolute and
present assignment, provided that the Assignor shall have the right to collect, but not prior to
accrual (except as permitted by Section 15 above), all of the Rents, and to retain, use and enjoy
the same unless and until an Event of Default shall occur under the Loan Agreement or the
Mortgage or the Assignor shall have breached any warranty or covenant in this Assignment.
Any Rents which accrue prior to an Event of Default under the Loan Agreement or the Mortgage
but are paid thereafter shall be paid to the Assignee.
18. Survival of Obligation to Comply with Mortgage and This Assignment. All of the
Assignor’s obligations under this Mortgage and Assignment shall survive foreclosure of this
Mortgage and the Assignor covenants and agrees to observe and comply with all terms and
conditions of this Mortgage and Assignment and to preclude any Event of Default from
occurring under the Loan Agreement or the Mortgage throughout any period of redemption after
foreclosure of the Mortgage.
19. Additional Remedies. Upon the occurrence of any Event of Default specified in
the Loan Agreement or herein, the Assignee may, at its option, in addition to any remedies set
forth in Section 6, at any time:
(a) in the name, place and stead of the Assignor and without becoming a
mortgagee in possession (i) enter upon, manage and operate the Mortgaged Property or
retain the services of one or more independent contractors to manage and operate all or
any part of the Mortgaged Property, (ii) make, enforce, modify and accept surrender of
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the Leases; (iii) obtain or evict tenants, collect, sue for, fix or modify the Rents and
enforce all rights of the Assignor under the Leases; and (iv) perform any and all other
acts that may be necessary or proper to protect the security of this Assignment.
(b) with or without exercising the rights set forth in subparagraph (a) above,
give or require the Assignor to give, notice to any or all tenants under the Leases
authorizing and directing the tenants to pay all Rents under the Leases directly to the
Assignee.
(c) without regard to waste, adequacy of the security or solvency of the
Assignor, apply for, and the Assignor hereby consents to, the appointment of a receiver
of the Mortgaged Property, whether or not foreclosure proceedings have been
commenced under the Mortgage, and if such proceedings have been commenced,
whether or not a foreclosure sale has occurred.
The exercise of any of the foregoing rights or remedies and the application of the
rents, profits and income pursuant to Section 20, shall not cure or waive any Event of
Default (or notice of default) under the Mortgage or invalidate any act done pursuant to
such notice.
20. Application of Rents, Profits and Income. All Rents collected by the Assignee or
the receiver each month shall be applied as provided hereinabove. The rights and powers of the
Assignee under this Assignment and the application of Rents under this Section 20 shall continue
until expiration of the redemption period from any foreclosure sale, whether or not any
deficiency remains after a foreclosure sale.
21. No Liability for Assignee. The Assignee shall not be obligated to perform or
discharge, nor does it hereby undertake to perform or discharge, any obligation, duty or liability
of the Assignor under the Leases. This Assignment shall not operate to place upon the Assignee
responsibility for the control, care, management or repair of the Mortgaged Property or for the
carrying out of any of the terms and conditions of the Leases. The Assignee shall not be
responsible or liable for any waste committed on the Mortgaged Property, for any dangerous or
defective condition of the Mortgaged Property, for any negligence in the management, upkeep,
repair or control of said Mortgaged Property or for failure to collect the Rents.
22. Assignor’s Indemnification. The Assignor shall and does hereby agree to
indemnify and to hold Assignee harmless of and from any and all claims, demands, liability, loss
or damage (including all costs, expenses, and reasonable attorney’s fees in the defense thereof)
asserted against, imposed on or incurred by the Assignee in connection with or as a result of this
Assignment or the exercise of any rights or remedies under this Assignment or under the Leases
or by reason of any alleged obligations or undertakings of the Assignee to perform or discharge
any of the terms, covenants or agreements contained in the Leases; provided, however, that the
obligation of the Assignor under this Section 22 shall not apply if and to the extent that the
Assignee’s liability is caused solely by the conduct of the Assignee. Should the Assignee incur
any such liability, the amount thereof, together with interest thereon, shall be secured hereby and
the Assignor shall reimburse the Assignee therefor immediately upon demand.
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23. Authorization to Tenant. Upon notice from the Assignee that it is exercising the
remedy set forth in Section 19(b) of this Assignment, the tenants under the Leases are hereby
irrevocably authorized and directed to pay to the Assignee all sums due under the Leases, and the
Assignor hereby consents and directs that said sums shall be paid to the Assignee without the
necessity for a judicial determination that a default has occurred hereunder or that Assignee is
entitled to exercise its rights hereunder, and to the extent such sums are paid to Assignee, the
Assignor agrees that the tenant shall have no further liability to Assignor for the same. The
signature of the Assignee alone shall be sufficient for the exercise of any rights under this
Assignment and the receipt of the Assignee alone for any sums received shall be a full discharge
and release therefor to any such tenant or occupant of the Mortgaged Property. Checks for all or
any part of the Rents collected under this Assignment shall upon notice from the Assignee be
drawn to the exclusive order of the Assignee.
24. Assignee an Attorney-In-Fact. Upon an Event of Default, the Assignor hereby
irrevocably appoints the Assignee, and its successors and assigns, as its agent and attorney-in-
fact, which appointment is coupled with an interest, with the right but not the duty to exercise
any rights or remedies hereunder and to execute and deliver during the term of this Assignment
such instruments as the Assignee may deem appropriate to make this Assignment and any further
assignment effective, including without limiting the generality of the foregoing, the right to
endorse on behalf and in the name of the Assignor all checks from tenants in payment of Rents
that are made payable to the Assignor.
25. Assignee Not a Mortgagee in Possession. Nothing herein contained and no
actions taken pursuant to this Assignment shall be construed as constituting the Assignee a
mortgagee in possession.
26. Specific Assignment of Leases. The Assignor will transfer and assign to the
Assignee, upon written notice by Assignee, any and all specific Leases that the Assignee
requests. Such transfer or assignment by the Assignor shall be upon the same or substantially the
same terms and conditions as are herein contained, and the Assignor will properly file or record
such assignments, at the Assignor’s expense, if requested by the Assignee.
27. Unenforceable Provisions Severable. All rights, powers and remedies provided
herein may be exercised only to the extent that the exercise thereof does not violate any
applicable law, and are intended to be limited to the extent necessary so that they will not render
this Assignment invalid, unenforceable or not entitled to be recorded, registered or filed under
any applicable law. If any term of this Assignment shall be held to be invalid, illegal or
unenforceable, the validity of other terms hereof shall in no way be affected thereby. It is the
intention of the parties hereto, however, that this Assignment shall confer upon the Assignee the
fullest rights, remedies and benefits available pursuant to the laws of Montana.
28. Successors and Assigns. The covenants and agreements herein contained shall
bind, and the rights hereunder shall inure to the respective successors and assigns of the Assignor
and the Assignee, including any purchaser at a foreclosure sale.
29. Captions; Amendments; Notices. The captions and headings of the Sections of
this Assignment are for convenience only and shall not be used to interpret or define the
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provisions of this Assignment. This Assignment may be amended only in a writing signed by
the Assignor and the Assignee. Any notice from the Assignee to the Assignor under this
Assignment shall be deemed to have been given when given by the Assignee in accordance with
the requirements for notice by the Mortgagee hereunder.
30. Counterparts. This instrument may be executed in any number of counterparts,
each of which shall be an original but all of which shall constitute one instrument.
31. Environmental Indemnification. Mortgagor covenants, represents and warrants to
Mortgagee, its successors and assigns, that, to the best of its knowledge, but without having
conducted any investigation as to acts, circumstances or conditions occurring or existing before
Mortgagee acquired its ownership interest in the Mortgaged Property, the Mortgaged Property
and its existing and prior uses comply and have at all times complied with, and Mortgagor is not
in violation of, has not violated and will not violate, in connection with the ownership, use,
maintenance or operation of the Mortgaged Property, and the conduct of the business related
thereto, any applicable federal, state, county or local statutes, laws, regulations, rules, ordinances,
codes, standards, orders, licenses and permits of any governmental authorities relating to
environmental matters (being hereinafter collectively referred to as the Environmental Laws),
including by way of illustration and not by way of limitation (a) the Clean Air Act, the Federal
Water Pollution Control Act of 1972, the Resource Conservation and Recovery Act of 1976, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, and the
Toxic Substances Control Act (including any amendments or extensions thereof and any rules,
regulations, standards or guidelines issued pursuant to any of said Environmental Laws), and
(b) all other applicable environmental standards or requirements.
Without limiting the generality of the foregoing:
(i) Mortgagor, its agents, employees and independent contractors, has and
will operate the Mortgaged Property and has and at all times will receive, handle, use,
store, treat, transport and dispose of all petroleum products and all other toxic dangerous
or hazardous chemicals, materials, substances, pollutants and wastes, and any chemical,
material or substance exposure to which is prohibited, limited or regulated by any federal,
state, county, regional or local authority or which even if not so prohibited, limited or
regulated, may or could pose a hazard to the health and safety of the occupants of the
Mortgaged Property or the occupants and/or owners of property near the Mortgaged
Property (all the foregoing being hereinafter collectively referred to as “Hazardous
Materials”) in strict compliance with all applicable environmental, health or safety
statutes, ordinances, orders, rules, standards, regulations or requirements;
(ii) to the best knowledge of the Mortgagor, there are no existing or pending
statutes, orders, standards, rules or regulations relating to environmental matters requiring
any remedial actions or other work, repairs, construction or capital expenditures with
respect to the Mortgaged Property, nor has Mortgagor received any notice of any of the
same;
(iii) to the best knowledge of the Mortgagor, but without having conducted any
investigation as to acts, circumstances or conditions occurring or existing before
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Mortgagor acquired its interest in the Mortgaged Property, no Hazardous Materials have
been or will be released into the environment, or have been or will be deposited, spilled,
discharged, placed or disposed of at, on, or near the Premises, nor has or will the
Mortgaged Property be used at any time by any person as landfill or a disposal site for
Hazardous Materials or for garbage, waste or refuse of any kind;
(iv) to the best knowledge of the Mortgagor, there are no electrical
transformers or other equipment containing dielectric fluid containing polychlorinated
biphenyls located in, on or under the Mortgaged Property, nor is there any friable
asbestos contained in, on or under the Mortgaged Property, nor will Mortgagor permit the
installation of same;
(v) to the best knowledge of the Mortgagor, there are no locations off the
Mortgaged Property, where Hazardous Materials generated by or on the Mortgaged
Property have been treated, stored, deposited or disposed of;
(vi) to the best knowledge of the Mortgagor, there is no fact pertaining to the
physical condition of either the Mortgaged Property or the area surrounding the
Mortgaged Property (a) which Mortgagor has not disclosed to Mortgagee in writing prior
to the date of this Mortgage, and (b) which materially adversely affects or will materially
adversely affect the Mortgaged Property or the use or enjoyment or the value thereof, or
Mortgagor’s ability to perform the transactions contemplated by this Mortgage;
(vii) to the best knowledge of the Mortgagor, the mortgaging of the Mortgaged
Property by Mortgagor to Mortgagee does not require notice to or the prior approval,
consent or permission of any federal, state or local governmental agency, body, board or
official;
(viii) to the best knowledge of the Mortgagor, no notices of any violation of any
of the matters referred to in the foregoing sections relating to the Mortgaged Property or
its use have been received by Mortgagor and there are no writs, injunctions, decrees,
orders or judgments outstanding, no lawsuits, claims, proceedings or investigations
pending or threatened, relating to the ownership, use, maintenance or operation of the
Mortgaged Property, nor is there any basis for any such lawsuit, claim, proceeding or
investigation being instituted or filed; and
(ix) to the best knowledge of the Mortgagor, the Mortgaged Property is not
listed in the United States Environmental Protection Agency’s National Priorities List of
Hazardous Waste Sites nor any other log, list, schedule, inventory or record of Hazardous
Materials or Hazardous Waste sites whether maintained by the United States, any state or
local governmental unit.
The Mortgagor agrees to indemnify and reimburse the Mortgagee, its successors and
assigns, for any breach of these representations and warranties and from any loss, damage,
expense or cost arising out of or incurred by Mortgagee which is the result of a breach of the
above covenants, representations and warranties, or for any loss, damage, expense or cost
sustained as a result of there being located on the Mortgaged Property any Hazardous Materials
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or dangerous, toxic or hazardous pollutants, chemicals, wastes or substances, together with all
attorneys’ fees incurred in connection with the defense of any action against the Mortgagee
arising out of the above. These covenants, representations, warranties and indemnities shall be
deemed to be for the benefit of the Mortgagee, and any successors and assigns of the Mortgagee,
including any purchaser at a mortgage foreclosure sale, any transferee of the title of the
Mortgagee or any subsequent purchaser at a foreclosure sale. The amount of all such
indemnified loss, damage, expense or cost, shall bear interest thereon at the rate of interest in
effect on the Note and shall become so much additional indebtedness secured hereby and shall
become immediately due and payable in full on demand of the Mortgagee, its successors and
assigns.
[The balance of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly executed
as of the day and year first above written.
LEARNING CIRCLE MONTESSORI
ELEMENTARY SCHOOL, INC.
By
Its Chair
STATE OF MONTANA )
) ss.
COUNTY OF GALLATIN )
The foregoing instrument was acknowledged before me this ______ day of June, 2007 by
__________________________, to me personally known, being the Chair of Learning Circle
Montessori Elementary School, Inc., a Montana nonprofit corporation, on behalf of said limited
corporation.
Notary Public
This instrument was drafted by:
Dorsey & Whitney LLP
Suite 1500
50 South Sixth Street
Minneapolis, Minnesota 55402-1498
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EXHIBIT A
to
Combination Mortgage, Security Agreement and
Fixture Financing Statement and Assignment of Leases and Rents
LEGAL DESCRIPTION
Those tracts or parcels situated in the County of Gallatin and State of Montana described as
follows:
Lot 3 in Block 1 of North Meadows Subdivision – Phase II, located in the NW ¼
of Section 11, Township 2 South, Range 5 East, P.M.M., Gallatin County,
Montana, according to the official plat thereof on file and of record in the office
of the County Clerk and Recorder of Gallatin County, Montana. [Plat J-244]
A-1
223
EXHIBIT B
to
Combination Mortgage, Security Agreement
and Fixture Financing Statement and
Assignment of Leases and Rents
(Additional Permitted Encumbrances)
Those encumbrances set forth on the Commitment for Title Insurance No. 1-85980 dated
_____________, 2007, issued by Chicago Title Insurance Company.
B-1
4841-0483-5841\2
224
FIRST DRAFT 05/10/07
$400,000
City of Bozeman, Montana
Revenue Note
(Learning Circle Montessori Elementary School, Inc. Project)
COMBINATION MORTGAGE, SECURITY AGREEMENT
AND FIXTURE FINANCING STATEMENT AND
ASSIGNMENT OF LEASES AND RENTS
Dated as of June 1, 2007
from
LEARNING CIRCLE MONTESSORI ELEMENTARY SCHOOL, INC.
to
WELLS FARGO BROKERAGE SERVICES, LLC
This instrument was drafted
by Dorsey & Whitney LLP
Suite 1500
50 South Sixth Street
Minneapolis, Minnesota 55402-1498
225
COMBINATION MORTGAGE, SECURITY AGREEMENT AND
FIXTURE FINANCING STATEMENT AND
ASSIGNMENT OF LEASES AND RENTS
This COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE
FINANCING STATEMENT AND ASSIGNMENT OF LEASES AND RENTS dated as of
June 1, 2007 (this “Mortgage”), is from LEARNING CIRCLE MONTESSORI ELEMENTARY
SCHOOL, INC., a nonprofit corporation organized and existing under the laws of Montana,
whose address is set forth herein (sometimes referred to herein, together with its successors and
assigns, as the “Borrower,” as the “Mortgagor” or as the “Assignor”) to WELLS FARGO
BROKERAGE SERVICES, LLC, a Delaware limited liability company, as mortgagee, whose
address is set forth herein (sometimes referred to herein, together with its successors and assigns,
as the “Purchaser,” as the “Mortgagee” or as the “Assignee”).
WHEREAS, the Mortgagor, the Mortgagee and City of Bozeman, Montana (referred to
as the “City” or the “Issuer”), have entered into a Loan and Purchase Agreement (the “Loan
Agreement”) of even date herewith, pursuant to which the Purchaser agrees to purchase from the
Issuer its $400,000 Revenue Note (Learning Circle Montessori Elementary School, Inc. Project)
(the “Note”), issued pursuant to Montana Code Annotated, Title 90, Chapter 5, Part 1, as
amended (the “Act”), and the Issuer agrees to lend the proceeds of the Note to the Borrower; and
WHEREAS, the Mortgagor has agreed to mortgage and grant a security interest in the
Mortgaged Property, as defined herein and as further described in Exhibit A hereto, to secure the
obligations of the Borrower under the Loan Agreement, including the obligation of the Borrower
to make Loan Repayments at times and in amounts sufficient to pay when due the principal of,
premium (if any) on and interest on the Note;
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged; in
consideration of the purchase and acceptance of the Note by the persons who, from time to time,
may become the owners thereof; and to secure the due and punctual payment of any and all
liabilities of the Borrower under the Loan Agreement, including (without limitation) all Loan
Repayments payable thereunder, and the payment of all fees and expenses and advances of the
Mortgagee under the Loan Agreement and this Mortgage, the Mortgagor does hereby grant,
bargain, sell, convey, warrant and assign to the Mortgagee, its permitted successors and assigns,
a lien on and security interest in, and does hereby mortgage and pledge unto the Mortgagee, its
successors and assigns, forever, with power of sale, the following:
I
All of its right, title and interest in and to the tracts, parcels and interests in land described
in Exhibit A hereto (the “Land”) and the buildings, structures and other improvements now
standing or at any time hereafter constructed or placed upon the Land (the “Buildings”),
including but not limited to (i) all building materials, supplies and equipment now or hereafter
located on the Land and suitable or intended to be incorporated in any building, structure, or
other improvement located or to be erected on the Land, (ii) all heating, plumbing and lighting
apparatus, motors, engines and machinery, electrical equipment, incinerator apparatus, air
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conditioning equipment, water and gas apparatus, pipes, faucets, and all building service
equipment and other fixtures of every description which are now or may hereafter be placed or
used upon the Land or in any building or improvement now or hereafter located thereon, (iii) all
additions, accessions, increases, parts, fittings, accessories, replacements, substitutions,
betterments, repairs and proceeds to and of any and all of the foregoing, and (iv) all
hereditaments, easements, appurtenances, estates, and other rights and interests now or hereafter
belonging to or in any way pertaining to the Land or to any building or improvement now or
hereafter located thereon.
II
All furnishings, furniture, equipment, fixtures and all other tangible personal property of
any nature whatever now or hereafter located in the Buildings or elsewhere on the Land,
exclusive of personal property owned by residents (the “Equipment”), including all additions,
accessions, increases, parts, fittings, accessories, replacements, substitutions, betterments, repairs
and proceeds to and of any and all such property, excluding any items released or disposed of in
accordance with the Loan Agreement.
III
All receivables, accounts, rents, issues, condemnation awards, insurance proceeds, and
similar revenues and income arising from the ownership of the Land, the Buildings and the
Equipment and all proceeds and products thereof (herein collectively called “Revenues and
Income.
To Have and To Hold the Land, Buildings and Equipment (the “Mortgaged Property”),
and the Revenues and Income thereof, together with all privileges, hereditaments and
appurtenances thereunto now or hereafter belonging, or in anywise appertaining, and the
proceeds thereof, unto the Mortgagee, its successors and assigns forever,
Provided, nevertheless, that these presents are upon the express condition that if the
Borrower shall pay all Loan Repayments under the Loan Agreement and cause to be paid the
principal of, premium (if any) on and interest on the Note, and if the Borrower shall strictly
observe and perform all of the terms, covenants and conditions contained in the Loan Agreement
and this Mortgage, then this Mortgage and the estate, right and interest of the Mortgagee in and
to the Mortgaged Property, and the Revenues and Income thereof, shall cease and be and become
void and of no force and effect, and shall be satisfied at the Borrower’s expense, otherwise to
remain in full force and effect.
The Mortgagor and the Mortgagee further agree as follows:
1. Definitions. Terms used in this Mortgage not otherwise defined in this Mortgage,
but defined in the Loan Agreement, shall have the same meaning as in the Loan Agreement
unless the context clearly indicates a contrary meaning.
2. Amount and Maturity of Note; Loan Repayments. The parties represent and
agree as follows:
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(a) The Note is in the principal amount of $400,000. The final stated maturity
thereof is __________, 2027.
(b) Loan Repayments are required to be made in installments by the Borrower
in order to pay principal, premium (if any) and interest of the Note when and as the same
shall become due, or when required to be redeemed, as more fully provided in the Loan
Agreement.
3. Additional Payments. Under the Loan Agreement, the Borrower will be
obligated, in addition to the Loan Repayments described above, to pay all required rebate
payments due to the United States in respect of the Note under Section 148(f) of the Internal
Revenue Code, the reasonable fees and expenses of the Mortgagee, and any advances by the
Mortgagee to meet obligations of the Borrower for (among other things) taxes, special
assessments, utility charges, insurance premiums, and liens in connection with the Mortgaged
Property and also to provide indemnity to the Mortgagee, all as more fully provided in the Loan
Agreement, which obligations are additional indebtedness intended to be secured by this
Mortgage.
4. Warranty of Title; Permitted Encumbrances. The Mortgagor does hereby
covenant, represent and warrant that it is the lawful owner of and has good right and lawful
authority to grant, bargain, sell, convey, warrant, mortgage, assign and pledge the Mortgaged
Property and Revenues and Income thereof as provided herein; that the Mortgagor is and will
continue to be well and truly seized of good and marketable title to the Mortgaged Property; that
the Mortgaged Property and Revenues and Income thereof are free and clear of all mortgages,
liens, pledges, charges and encumbrances, excepting only Permitted Encumbrances; and that the
Mortgagor does warrant and will defend the title to the Mortgaged Property and Revenues and
Income thereof against all claims and demands whatsoever not specifically excepted herein.
“Permitted Encumbrances” shall mean Permitted Encumbrances as defined in the Loan
Agreement, including those encumbrances identified in Exhibit B hereto.
5. [Intentionally Omitted]
6. Events of Default; Remedies. If any Event of Default as defined in the Loan
Agreement shall occur and be continuing, the Mortgagee shall have authority (i) to accelerate the
Loan Repayments and to declare the Note immediately due and payable as provided in the Loan
Agreement, and (ii) to pursue one or more of the remedies provided for in the Loan Agreement,
and in lieu thereof or addition thereto, one or more of the following remedies and provisions for
foreclosure or enforcement of this Mortgage:
(a) The Purchaser may proceed to protect and enforce its rights by a suit or
suits in equity or at law, either for the specific performance of any covenant or agreement
contained herein or in aid of the execution of any power herein granted, or for the
foreclosure of this Mortgage, or for the enforcement of any other appropriate legal or
equitable remedy.
(b) The Purchaser shall have and may exercise with respect to all personal
property and fixtures which are part of the Mortgaged Property all the rights and
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remedies accorded upon default to a secured party under the Uniform Commercial Code,
as in effect in the State of Montana. Notice to the Borrower of intended disposition of
such property shall be deemed commercially reasonable if given (in the manner specified
in the Loan Agreement) at least 10 calendar days prior to the date of intended disposition.
(c) The Purchaser shall be entitled, upon notice to the Mortgagor, as above
provided, and without any showing of waste of the Mortgaged Property, inadequacy of
the Mortgaged Property as security, or insolvency of the Borrower, to the appointment of
a receiver of the rents and profits of the Mortgaged Property including those past due.
The Purchaser or any receiver shall be entitled to receive and dispose of the Revenues
and Income of the Mortgaged Property and to sue for and recover any account or other
item of Revenues and Income from the Borrower or any account debtor or other third
person.
(d) The Purchaser may (and is hereby authorized and empowered to) foreclose
this Mortgage by action or advertisement, pursuant to the statutes of the State of Montana
in such case made and provided, power being expressly granted to sell the Mortgaged
Property at public auction and convey the same to the purchaser in fee simple and to
apply the proceeds arising from such sale, first, to the payment of the indebtedness
secured thereby and hereby, including all reasonable expenses, liabilities and advances of
the Purchaser and the Note and interest thereon and Loan Repayments relating thereto,
and all legal costs and charges of such foreclosure, which costs, charges and fees the
Borrower agrees to pay, and, second, to the payment of any obligations of the Borrower
to the Mortgagee under the Loan Agreement, and, third, to return any surplus to the
Borrower or such other person as may be entitled thereto. Such sale shall be made at
public auction and at such place or places and at such time or times and upon such notice
as the Purchaser may be advised by counsel to be consistent with the laws applicable
thereto, and upon such terms as the Purchaser or the public officer conducting such sale
may fix. Any such sale made pursuant to judicial proceedings or advertisement shall be
made either as an entirety or in such parcels as may be directed by the court or as the
Purchaser in its sole discretion may determine. The Mortgagor, for it and all persons and
Borrowers hereafter claiming through or under it, does hereby expressly waive and
release all right to have the properties and rights comprised in the Mortgaged Property
marshaled upon any foreclosure or other enforcement hereof. The Purchaser or public
officer conducting such sale from time to time may adjourn any such sale to be made by
it by announcement at the time and place appointed for such sale or for such adjourned
sale or sales, and without further notice or publication it may make such sale at the time
to which the same shall be so adjourned, but in the event of such adjournment or
adjournments, sale shall be made within any limitation of time or number of
adjournments prescribed by law and, in any event, within six months from the date of
sale fixed in the advertisement or court order, unless notice of sale on some later date
shall be given again in the manner provided by law.
(e) Upon any foreclosure sale, the Purchaser may bid for and purchase the
Mortgaged Property or any part thereof and upon compliance with the terms of sale may
hold, retain and possess and dispose of such property in his, their or its own absolute right
without further accountability, and any purchaser at any such sale may, in paying the
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purchase money, turn in the Note in lieu of cash to the amount which shall, upon
distribution of the net proceeds of such sale, be payable thereon.
(f) Upon the completion of any sale or sales made under or by virtue of this
Mortgage, the Purchaser shall execute and deliver, or cause to be executed and delivered,
to the accepted purchaser or purchasers the property sold with good and sufficient
transfers, assigning and transferring all its right, title and interest in and to the properties
sold. The Purchaser and its successor or successors are hereby appointed the true and
lawful attorney or attorneys irrevocable of the Mortgagor in its name and stead or in the
name of the Purchaser to make all necessary assignments, transfers and deliveries of the
property thus sold, and for that purpose, the Purchaser and its successors may execute all
necessary instruments of assignment and transfer, and may substitute one or more
persons with like power, the Mortgagor hereby ratifying and confirming all that said
attorney or attorneys or such substitute or substitutes shall lawfully do by virtue hereof.
Nevertheless, the Mortgagor, if so requested in writing by the Purchaser, shall ratify and
confirm any such sale or sales by executing and delivering to the Purchaser or to such
purchaser or purchasers all such instruments as may be advisable, in the judgment of the
Purchaser, for the purpose and as may be designated in such request.
(g) Upon any sale made under the power of sale hereby granted or under
judgment or decree in any judicial proceedings for the foreclosure or otherwise for the
enforcement of this Mortgage, the receipt of the Purchaser or of the officer making such
sale shall be a sufficient discharge to the purchaser or purchasers at any sale for his or
their purchase money, and such purchaser or purchasers, his or their assigns or personal
representatives shall not, after paying such purchase money and receiving such receipt of
the Purchaser or of such officer therefor, be obliged to see to the application of such
purchase money, or be in anywise answerable for any loss, misapplication, or
nonapplication thereof.
(h) The Mortgagor does hereby expressly consent to sale of the Mortgaged
Property by advertisement pursuant to the laws of Montana, which provide for sale after
service of notice thereof upon the occupant of the Mortgaged Property and publication of
said notice in the county in which the Mortgaged Property is located, notwithstanding
that service might not be made upon the Mortgagor personally, and that no hearing of any
type is required in connection with the sale. Except as required by the aforesaid statutory
provision, the Mortgagor hereby expressly waives any and all rights to notice of sale of
the Mortgaged Property and any and all rights to a hearing of any type in connection with
the sale of the Mortgaged Property.
(i) In case of any Event of Default as aforesaid, to the extent that such rights
may then lawfully be waived, neither the Mortgagor nor anyone claiming through or
under it shall or will set up, claim, or seek to take advantage of any appraisement,
valuation, stay, or extension laws now or hereafter in force in any locality where any of
the Mortgaged Property may be situated, in order to prevent or hinder the enforcement or
foreclosure of this Mortgage, or the absolute sale of the Mortgaged Property, or the final
and absolute putting into possession thereof, immediately after such sale, of the purchaser
or purchasers thereat, but the Mortgagor, for itself and all who may claim through or
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under it, hereby waives, to the extent that it lawfully may do so, the benefit of all such
laws and all right of appraisement to which it may be entitled under the laws of the State
in which it is situated.
(j) Any sale made under the power of sale granted hereby or under judgment
or decree in any judicial proceedings for foreclosure or otherwise for the enforcement of
this Mortgage shall, if and to the extent then permitted by law, operate to divest all right,
title, interest, claims and demand whatsoever, either at law or in equity, of the Mortgagor
of, in and to the property so sold, and be a perpetual bar both at law and in equity against
the Mortgagor and against any and all persons, firms or corporations claiming or who
may claim the property sold, or any part thereof, from, through or under the Mortgagor.
7. Possession of Borrower. Unless an Event of Default shall exist under the Loan
Agreement, the Borrower shall be entitled to the possession and disposition of the Mortgaged
Property and the Revenues and Income thereof subject, however, to the rights of the Purchaser to
the possession and disposition of the Project Fund provided for in the Loan Agreement and
Escrow Agreement.
8. Further Assurances. As provided in the Loan Agreement, the Borrower shall
execute, deliver, file and record at its expense such supplements to this Mortgage, financing
statements or other documents as may be required in the opinion of counsel, including (without
limitation) any supplement to this Mortgage to particularly describe any properties which have
been or are intended to become subject to the lien hereof.
9. Amendments. This Mortgage may be amended only as provided in the Loan
Agreement.
10. Loan Agreement Controls. Any provision in this Mortgage which is inconsistent
with the Loan Agreement or any provision thereof shall be interpreted as if such provision were
not contained herein and as if the provisions of the Loan Agreement had been fully incorporated
herein. In all cases of inconsistency, and in case of any amendment to or supplement to the Loan
Agreement entered into in accordance with the provisions thereof, the provisions of the Loan
Agreement (as amended and supplemented) shall control.
11. Fixture Filing. From the date of its recording, this Mortgage shall be effective as
a financing statement filed as a fixture filing with respect to all goods constituting part of the
Mortgaged Property which are or are to become fixtures related to the real estate described
herein. For this purpose, the following information is set forth:
(a) Name and Address of Debtor:
Learning Circle Montessori Elementary School, Inc.
3001 West Villard Street
Bozeman, Montana 59718
Attention: _____________________
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(b) Name and Main Office Address of Secured Party:
Wells Fargo Brokerage Services, LLC
608 Second Avenue South
MAC N9303-105
Minneapolis, Minnesota 55479-0146
Attention: Public Finance
(c) This document covers goods which are or are to become fixtures.
(d) Mortgagor’s Federal Tax Identification Number is: ___________.
12. Assignment of Leases and Rents. The Assignor does hereby grant, transfer and
assign to the Assignee (the “Assignment”) all of the right, title and interest of the Assignor in and
to (i) any and all present or future leases or tenancies, whether written or oral, covering or
affecting any or all of the Mortgaged Property, (all of which, together with any and all
extensions, modifications and renewals thereof, are hereinafter collectively referred to as the
“Leases” and each of which is referred to as a “Lease”), and (ii) all rents, profits and other
income or payments of any kind due or payable or to become due or payable to the Assignor as
the result of any use, possession or occupancy of all or any portion of the Mortgaged Property or
as the result of the use of or lease of any personal property constituting a part of the Mortgaged
Property (all of which are hereinafter collectively referred to as “Rents”), but not including any
general revenues, income or accounts receivable of the Assignor, and whether the Rents accrue
before or after foreclosure of the Mortgage or during the periods of redemption thereof, all for
the purpose of securing:
(a) All indebtedness under the Loan Agreement and all other sums secured by
this Mortgage and Assignment; and
(b) Performance and discharge of each and every obligation, covenant and
agreement of the Assignor contained herein and in the Loan Agreement.
13. Covenant. The Assignor warrants and covenants that it is and will remain the
absolute owner of the Rents and Leases free and clear of all liens and encumbrances other than
the lien granted herein and Permitted Encumbrances; that it has not heretofore assigned or
otherwise encumbered its interest in any of the Rents or Leases to any person other than as set
forth in the Permitted Encumbrances; that it has the right under applicable law, under the Leases,
and otherwise to execute and deliver this Assignment and keep and perform all of its obligations
hereunder; that it will warrant and defend the Leases and Rents against all adverse claims,
whether now existing or hereafter arising.
14. Performance of Leases. The Assignor will faithfully abide by, perform and
discharge each and every obligation, covenant and agreement which it is now or hereafter
becomes liable to observe or perform under any present or future Lease, and, at its sole cost and
expense, enforce or secure the performance of each and every obligation, covenant, condition
and agreement to be performed by the tenant under each and every Lease, subject to such
waivers or extensions of time as may be granted by Assignor, provided that Assignee shall have
the right, at any time, to rescind any such waiver or extension of time. The Assignor will
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observe and comply with all provisions of law applicable to the operation and ownership of the
Mortgaged Property. The Assignor will give prompt written notice to the Assignee of any notice
of default on the part of the Assignor with respect to any Lease received from the tenant
thereunder, and will also at its sole cost and expense, appear in and defend any action or
proceeding arising under, growing out of or in any manner connected with any Lease or the
obligations, duties or liabilities of the Assignor or any tenant thereunder.
15. Collection of Rents. Unless permitted by the Purchaser, the Assignor will not
collect or accept any Rents for the use or occupancy of the Mortgaged Property for more than
one month in advance. Security deposits shall not be deemed Rents for purposes of this Section.
16. Protecting the Security of This Assignment. Should the Assignor fail to perform
or observe any covenant or agreement contained in this Assignment, then the Assignee, but
without obligation to do so and without releasing the Assignor from any obligation hereunder,
may make or do the same in such manner and to such extent as the Assignee may deem
appropriate to protect the security hereof, including, specifically, without limiting its general
powers, the right to appear in and defend any action or proceeding purporting to affect the
security hereof or the rights or powers of the Assignee, and also the right to perform and
discharge each and every obligation, covenant and agreement of the Assignor contained in the
Leases and in exercising any such powers to pay necessary costs and expenses, employ counsel
and pay reasonable attorneys’ fees. The Assignor will pay immediately upon demand all sums
expended by the Assignee under the authority of this Assignment, together with interest thereon,
and the same shall be added to said indebtedness and shall be secured hereby and by the
Mortgage.
17. Present Assignment. This Assignment shall constitute a perfected, absolute and
present assignment, provided that the Assignor shall have the right to collect, but not prior to
accrual (except as permitted by Section 15 above), all of the Rents, and to retain, use and enjoy
the same unless and until an Event of Default shall occur under the Loan Agreement or the
Mortgage or the Assignor shall have breached any warranty or covenant in this Assignment.
Any Rents which accrue prior to an Event of Default under the Loan Agreement or the Mortgage
but are paid thereafter shall be paid to the Assignee.
18. Survival of Obligation to Comply with Mortgage and This Assignment. All of the
Assignor’s obligations under this Mortgage and Assignment shall survive foreclosure of this
Mortgage and the Assignor covenants and agrees to observe and comply with all terms and
conditions of this Mortgage and Assignment and to preclude any Event of Default from
occurring under the Loan Agreement or the Mortgage throughout any period of redemption after
foreclosure of the Mortgage.
19. Additional Remedies. Upon the occurrence of any Event of Default specified in
the Loan Agreement or herein, the Assignee may, at its option, in addition to any remedies set
forth in Section 6, at any time:
(a) in the name, place and stead of the Assignor and without becoming a
mortgagee in possession (i) enter upon, manage and operate the Mortgaged Property or
retain the services of one or more independent contractors to manage and operate all or
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any part of the Mortgaged Property, (ii) make, enforce, modify and accept surrender of
the Leases; (iii) obtain or evict tenants, collect, sue for, fix or modify the Rents and
enforce all rights of the Assignor under the Leases; and (iv) perform any and all other
acts that may be necessary or proper to protect the security of this Assignment.
(b) with or without exercising the rights set forth in subparagraph (a) above,
give or require the Assignor to give, notice to any or all tenants under the Leases
authorizing and directing the tenants to pay all Rents under the Leases directly to the
Assignee.
(c) without regard to waste, adequacy of the security or solvency of the
Assignor, apply for, and the Assignor hereby consents to, the appointment of a receiver
of the Mortgaged Property, whether or not foreclosure proceedings have been
commenced under the Mortgage, and if such proceedings have been commenced,
whether or not a foreclosure sale has occurred.
The exercise of any of the foregoing rights or remedies and the application of the
rents, profits and income pursuant to Section 20, shall not cure or waive any Event of
Default (or notice of default) under the Mortgage or invalidate any act done pursuant to
such notice.
20. Application of Rents, Profits and Income. All Rents collected by the Assignee or
the receiver each month shall be applied as provided hereinabove. The rights and powers of the
Assignee under this Assignment and the application of Rents under this Section 20 shall continue
until expiration of the redemption period from any foreclosure sale, whether or not any
deficiency remains after a foreclosure sale.
21. No Liability for Assignee. The Assignee shall not be obligated to perform or
discharge, nor does it hereby undertake to perform or discharge, any obligation, duty or liability
of the Assignor under the Leases. This Assignment shall not operate to place upon the Assignee
responsibility for the control, care, management or repair of the Mortgaged Property or for the
carrying out of any of the terms and conditions of the Leases. The Assignee shall not be
responsible or liable for any waste committed on the Mortgaged Property, for any dangerous or
defective condition of the Mortgaged Property, for any negligence in the management, upkeep,
repair or control of said Mortgaged Property or for failure to collect the Rents.
22. Assignor’s Indemnification. The Assignor shall and does hereby agree to
indemnify and to hold Assignee harmless of and from any and all claims, demands, liability, loss
or damage (including all costs, expenses, and reasonable attorney’s fees in the defense thereof)
asserted against, imposed on or incurred by the Assignee in connection with or as a result of this
Assignment or the exercise of any rights or remedies under this Assignment or under the Leases
or by reason of any alleged obligations or undertakings of the Assignee to perform or discharge
any of the terms, covenants or agreements contained in the Leases; provided, however, that the
obligation of the Assignor under this Section 22 shall not apply if and to the extent that the
Assignee’s liability is caused solely by the conduct of the Assignee. Should the Assignee incur
any such liability, the amount thereof, together with interest thereon, shall be secured hereby and
the Assignor shall reimburse the Assignee therefor immediately upon demand.
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23. Authorization to Tenant. Upon notice from the Assignee that it is exercising the
remedy set forth in Section 19(b) of this Assignment, the tenants under the Leases are hereby
irrevocably authorized and directed to pay to the Assignee all sums due under the Leases, and the
Assignor hereby consents and directs that said sums shall be paid to the Assignee without the
necessity for a judicial determination that a default has occurred hereunder or that Assignee is
entitled to exercise its rights hereunder, and to the extent such sums are paid to Assignee, the
Assignor agrees that the tenant shall have no further liability to Assignor for the same. The
signature of the Assignee alone shall be sufficient for the exercise of any rights under this
Assignment and the receipt of the Assignee alone for any sums received shall be a full discharge
and release therefor to any such tenant or occupant of the Mortgaged Property. Checks for all or
any part of the Rents collected under this Assignment shall upon notice from the Assignee be
drawn to the exclusive order of the Assignee.
24. Assignee an Attorney-In-Fact. Upon an Event of Default, the Assignor hereby
irrevocably appoints the Assignee, and its successors and assigns, as its agent and attorney-in-
fact, which appointment is coupled with an interest, with the right but not the duty to exercise
any rights or remedies hereunder and to execute and deliver during the term of this Assignment
such instruments as the Assignee may deem appropriate to make this Assignment and any further
assignment effective, including without limiting the generality of the foregoing, the right to
endorse on behalf and in the name of the Assignor all checks from tenants in payment of Rents
that are made payable to the Assignor.
25. Assignee Not a Mortgagee in Possession. Nothing herein contained and no
actions taken pursuant to this Assignment shall be construed as constituting the Assignee a
mortgagee in possession.
26. Specific Assignment of Leases. The Assignor will transfer and assign to the
Assignee, upon written notice by Assignee, any and all specific Leases that the Assignee
requests. Such transfer or assignment by the Assignor shall be upon the same or substantially the
same terms and conditions as are herein contained, and the Assignor will properly file or record
such assignments, at the Assignor’s expense, if requested by the Assignee.
27. Unenforceable Provisions Severable. All rights, powers and remedies provided
herein may be exercised only to the extent that the exercise thereof does not violate any
applicable law, and are intended to be limited to the extent necessary so that they will not render
this Assignment invalid, unenforceable or not entitled to be recorded, registered or filed under
any applicable law. If any term of this Assignment shall be held to be invalid, illegal or
unenforceable, the validity of other terms hereof shall in no way be affected thereby. It is the
intention of the parties hereto, however, that this Assignment shall confer upon the Assignee the
fullest rights, remedies and benefits available pursuant to the laws of Montana.
28. Successors and Assigns. The covenants and agreements herein contained shall
bind, and the rights hereunder shall inure to the respective successors and assigns of the Assignor
and the Assignee, including any purchaser at a foreclosure sale.
29. Captions; Amendments; Notices. The captions and headings of the Sections of
this Assignment are for convenience only and shall not be used to interpret or define the
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provisions of this Assignment. This Assignment may be amended only in a writing signed by
the Assignor and the Assignee. Any notice from the Assignee to the Assignor under this
Assignment shall be deemed to have been given when given by the Assignee in accordance with
the requirements for notice by the Mortgagee hereunder.
30. Counterparts. This instrument may be executed in any number of counterparts,
each of which shall be an original but all of which shall constitute one instrument.
31. Environmental Indemnification. Mortgagor covenants, represents and warrants to
Mortgagee, its successors and assigns, that, to the best of its knowledge, but without having
conducted any investigation as to acts, circumstances or conditions occurring or existing before
Mortgagee acquired its ownership interest in the Mortgaged Property, the Mortgaged Property
and its existing and prior uses comply and have at all times complied with, and Mortgagor is not
in violation of, has not violated and will not violate, in connection with the ownership, use,
maintenance or operation of the Mortgaged Property, and the conduct of the business related
thereto, any applicable federal, state, county or local statutes, laws, regulations, rules, ordinances,
codes, standards, orders, licenses and permits of any governmental authorities relating to
environmental matters (being hereinafter collectively referred to as the Environmental Laws),
including by way of illustration and not by way of limitation (a) the Clean Air Act, the Federal
Water Pollution Control Act of 1972, the Resource Conservation and Recovery Act of 1976, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, and the
Toxic Substances Control Act (including any amendments or extensions thereof and any rules,
regulations, standards or guidelines issued pursuant to any of said Environmental Laws), and
(b) all other applicable environmental standards or requirements.
Without limiting the generality of the foregoing:
(i) Mortgagor, its agents, employees and independent contractors, has and
will operate the Mortgaged Property and has and at all times will receive, handle, use,
store, treat, transport and dispose of all petroleum products and all other toxic dangerous
or hazardous chemicals, materials, substances, pollutants and wastes, and any chemical,
material or substance exposure to which is prohibited, limited or regulated by any federal,
state, county, regional or local authority or which even if not so prohibited, limited or
regulated, may or could pose a hazard to the health and safety of the occupants of the
Mortgaged Property or the occupants and/or owners of property near the Mortgaged
Property (all the foregoing being hereinafter collectively referred to as “Hazardous
Materials”) in strict compliance with all applicable environmental, health or safety
statutes, ordinances, orders, rules, standards, regulations or requirements;
(ii) to the best knowledge of the Mortgagor, there are no existing or pending
statutes, orders, standards, rules or regulations relating to environmental matters requiring
any remedial actions or other work, repairs, construction or capital expenditures with
respect to the Mortgaged Property, nor has Mortgagor received any notice of any of the
same;
(iii) to the best knowledge of the Mortgagor, but without having conducted any
investigation as to acts, circumstances or conditions occurring or existing before
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Mortgagor acquired its interest in the Mortgaged Property, no Hazardous Materials have
been or will be released into the environment, or have been or will be deposited, spilled,
discharged, placed or disposed of at, on, or near the Premises, nor has or will the
Mortgaged Property be used at any time by any person as landfill or a disposal site for
Hazardous Materials or for garbage, waste or refuse of any kind;
(iv) to the best knowledge of the Mortgagor, there are no electrical
transformers or other equipment containing dielectric fluid containing polychlorinated
biphenyls located in, on or under the Mortgaged Property, nor is there any friable
asbestos contained in, on or under the Mortgaged Property, nor will Mortgagor permit the
installation of same;
(v) to the best knowledge of the Mortgagor, there are no locations off the
Mortgaged Property, where Hazardous Materials generated by or on the Mortgaged
Property have been treated, stored, deposited or disposed of;
(vi) to the best knowledge of the Mortgagor, there is no fact pertaining to the
physical condition of either the Mortgaged Property or the area surrounding the
Mortgaged Property (a) which Mortgagor has not disclosed to Mortgagee in writing prior
to the date of this Mortgage, and (b) which materially adversely affects or will materially
adversely affect the Mortgaged Property or the use or enjoyment or the value thereof, or
Mortgagor’s ability to perform the transactions contemplated by this Mortgage;
(vii) to the best knowledge of the Mortgagor, the mortgaging of the Mortgaged
Property by Mortgagor to Mortgagee does not require notice to or the prior approval,
consent or permission of any federal, state or local governmental agency, body, board or
official;
(viii) to the best knowledge of the Mortgagor, no notices of any violation of any
of the matters referred to in the foregoing sections relating to the Mortgaged Property or
its use have been received by Mortgagor and there are no writs, injunctions, decrees,
orders or judgments outstanding, no lawsuits, claims, proceedings or investigations
pending or threatened, relating to the ownership, use, maintenance or operation of the
Mortgaged Property, nor is there any basis for any such lawsuit, claim, proceeding or
investigation being instituted or filed; and
(ix) to the best knowledge of the Mortgagor, the Mortgaged Property is not
listed in the United States Environmental Protection Agency’s National Priorities List of
Hazardous Waste Sites nor any other log, list, schedule, inventory or record of Hazardous
Materials or Hazardous Waste sites whether maintained by the United States, any state or
local governmental unit.
The Mortgagor agrees to indemnify and reimburse the Mortgagee, its successors and
assigns, for any breach of these representations and warranties and from any loss, damage,
expense or cost arising out of or incurred by Mortgagee which is the result of a breach of the
above covenants, representations and warranties, or for any loss, damage, expense or cost
sustained as a result of there being located on the Mortgaged Property any Hazardous Materials
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or dangerous, toxic or hazardous pollutants, chemicals, wastes or substances, together with all
attorneys’ fees incurred in connection with the defense of any action against the Mortgagee
arising out of the above. These covenants, representations, warranties and indemnities shall be
deemed to be for the benefit of the Mortgagee, and any successors and assigns of the Mortgagee,
including any purchaser at a mortgage foreclosure sale, any transferee of the title of the
Mortgagee or any subsequent purchaser at a foreclosure sale. The amount of all such
indemnified loss, damage, expense or cost, shall bear interest thereon at the rate of interest in
effect on the Note and shall become so much additional indebtedness secured hereby and shall
become immediately due and payable in full on demand of the Mortgagee, its successors and
assigns.
[The balance of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be duly executed
as of the day and year first above written.
LEARNING CIRCLE MONTESSORI
ELEMENTARY SCHOOL, INC.
By
Its Chair
STATE OF MONTANA )
) ss.
COUNTY OF GALLATIN )
The foregoing instrument was acknowledged before me this ______ day of June, 2007 by
__________________________, to me personally known, being the Chair of Learning Circle
Montessori Elementary School, Inc., a Montana nonprofit corporation, on behalf of said limited
corporation.
Notary Public
This instrument was drafted by:
Dorsey & Whitney LLP
Suite 1500
50 South Sixth Street
Minneapolis, Minnesota 55402-1498
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EXHIBIT A
to
Combination Mortgage, Security Agreement and
Fixture Financing Statement and Assignment of Leases and Rents
LEGAL DESCRIPTION
Those tracts or parcels situated in the County of Gallatin and State of Montana described as
follows:
Lot 3 in Block 1 of North Meadows Subdivision – Phase II, located in the NW ¼
of Section 11, Township 2 South, Range 5 East, P.M.M., Gallatin County,
Montana, according to the official plat thereof on file and of record in the office
of the County Clerk and Recorder of Gallatin County, Montana. [Plat J-244]
A-1
240
EXHIBIT B
to
Combination Mortgage, Security Agreement
and Fixture Financing Statement and
Assignment of Leases and Rents
(Additional Permitted Encumbrances)
Those encumbrances set forth on the Commitment for Title Insurance No. 1-85980 dated
_____________, 2007, issued by Chicago Title Insurance Company.
B-1
4841-0483-5841\1
241