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This Note is subject to mandatory redemption upon the occurrence of an Event of Default (as defined in the Agree- ment), upon the Borrower's failure to comply with its obli- gations following a Casualty to the Project (as provided in the Agreement), upon the occurrence of certain transfers or encumbrances of the Project (as provided in the Agreement), and in the event that excess proceeds of this Note remain in the Construction Fund following completion of the Project. Each such mandatory redemption shall be at a price of the Principal Balance of this Note and all accrued interest to the date of redemption, except that a prior redemption ar ising due to the availabili ty of excess Note proceeds shall be a redemption in part, to the extent of such pro- ceeds. In the event of prepayment of this Note, and except as otherwise provided herein, the Lender shall apply any such prepayment against the accrued interest on the pr incipal Balance and then against the Pr incipal Balance, and the monthly payments due on this Note shall be accordingly reduced to amortize the then remaining Principal Balance over the remaining term hereof at the interest rate then in effect. This Note is the sole obligation of a duly authorized issue designated as "Commercial Development Revenue Note (Paschke Project)," dated as of the date of delivery thereof (the "Note"), issued as a fully registered Note wi thout interest coupons in the principal amount of $l,700,000 pur- suant to and in full conformi ty wi th Minnesota Statutes, Chapter 474 (the "Act"), and a resolution of the City Coun- cil of the City, adopted on July 1, 1985 (the "Note Resolu- tion"). The Note is equally and ratably secured by a Mort- gage, Secur i ty Agreement, and Fixture Financing Statement (the "Mortgage") and an Assignment of Rents and Leases (the "Assignment"), both dated as of December 1, 1985, executed by Gerald W. Paschke (the "Borrower") and Rosemary E. Paschke, the Borrower's spouse, in favor of the Lender. The Note has been issued to provide funds to the Borrower to finance a portion of the cost of constructing a 30,000 square foot office/warehouse facility in the City (the "Project") pursuant to a Loan Agreement, dated as of December 1, 1985, between the Ci ty and the Borrower (the "Agreement"). All right, title, and interest of the City in the Agreement, except for the City's rights to indemnifica- tion and reimbursement of expenses, have been pledged to the Lender pursuant to a Pledge Agreement, dated as of December l, 1985 (the "Pledge Agreement"). The proceeds of the Note are required to be placed in the Construction Fund established pursuant to the Note Resolution, to be disbursed therefrom in accordance with the terms and conditions of a Construction Loan Agreement, dated as of December 1, 1985, by and between the Borrower, the Ci ty, the Lender, and A - 3