In Re Hennepin County 1986 Recycling Bond Litigation

540 N.W.2d 494, 1995 Minn. LEXIS 947, 1995 WL 656815

• Court: Supreme Court of Minnesota
• Decided: November 9, 1995
• Docket: C0-93-2251, C4-93-2253 and C6-93-2254
• Status: Published

Opinions

OPINION

STRINGER, Justice.

This class action arose when defendants Hennepin County (County) and Hennepin Energy Resource Co., Limited Partnership (HERO) (collectively, defendants) triggered mandatory redemption of over $124,000,000 in revenue bonds by declining to seek renewal of a Letter of Credit backing the bonds. We granted review to determine whether plaintiff bondholders (hereinafter, bondholders) properly stated claims for breach of express and implied contract provisions in bond agreements between the bondholders and defendants. We conclude that the bondholders’ claims for breach of express and implied contract provisions are sufficient to withstand defendants’ motions to dismiss pursuant to Minn.R.Civ.P. 12.02(e). Accordingly, we affirm in part and reverse in part the decision of the court of appeals, and remand for further proceedings in accordance with this opinion.

On October 1, 1986, the County issued $129,250,000 in tax-exempt, long-term revenue bonds known as the Hennepin County Solid Waste Resource Recovery Refunding Revenue Bonds Series 1986A (recycling bonds) to finance construction of a solid waste disposal and resource recovery facility near downtown Minneapolis. Defendant HERC (also referred to as Company in the Loan Agreement), a limited partnership, contracted with the County to own, construct, and operate the recycling facility. An underwriting syndicate purchased and offered the bonds to the public pursuant to an Official Statement on October 1, 1986.

The County issued the recycling bonds pursuant to several documents including the bond certificates, the Official Statement, a Loan Agreement between the County and HERC, and a Trust Indenture between the County and the Trustee. The Loan Agreement and Trust Indenture were entered into simultaneously on October 1,1986 (collectively, bond agreements), and the bond certificates expressly incorporate these agreements.

The recycling bonds were secured by a Letter of Credit issued by Banque Indosuez and Credit Lyonnais (banks) on October 8, 1986, scheduled to expire on October 15, 1992.

The bonds matured on various dates between 1995 and 2010, but the Trust Indenture and the Official Statement gave the County the right to redeem the bonds before maturity upon payment of a two percent premium if redemption occurred on October 1, 1996, the earliest date redemption could occur. Premium payments scaled down one-half percent each year thereafter until October 1, 2000, the first date the bonds could be redeemed without the County paying a premium to the bondholders. The bonds had a triple-A credit rating.

On December 20, 1989, HERC sold the recycling facility to the United States Trust Company of New York (USTC) and simultaneously leased back the facility pursuant to a lease agreement (Lease Agreement). At the same time, the County, HERC, and USTC entered into the County Assumption, Assignment and Amendment Agreement (Assumption Agreement), consenting to the terms of the Lease Agreement.

On January 7, 1992, the County’s financial advisor, noting a dramatic decline in market interest rates, recommended that the County refinance its obligations with respect to the recycling facility by permitting the Letter of Credit to expire and issuing new, lower interest-rate bonds. On July 31,1992, apparently persuaded that this was a prudent course of action, the County notified the banks that it would not approve an extension of or a replacement for the existing Letter of Credit. On approximately September 8, 1992, the County permitted the Letter of Credit to expire, an event triggering mandatory redemption of the bonds pursuant to Section 4.07 of the Loan Agreement and Section 3.01(e) of the Trust Indenture. The Trustee thereupon sent the bondholders a Notice of Redemption with an effective date of October 9, 1992.

By October 9, 1992, the bondholders had surrendered their bonds and the County redeemed them at par plus interest through October 9, 1992. No premium was paid. The Letter of Credit backing the bonds expired on October 15, 1992.

In the fall of 1992, the bondholders filed three separate class action complaints against defendants. A consolidated, amended class action complaint was filed in April 1993, alleging breach of contract, breach of an implied covenant of good faith and fair dealing, various fraud and securities claims, and seeking future interest and premiums lost as a result of the redemption.

Both defendants filed motions to dismiss pursuant to Minn.R.Civ.P. 12.02(e), with respect to the breach of contract claims and the claims for breach'of an implied covenant of good faith and fair dealing. Defendants also asserted several procedural bases for dismissal, including lack of subject matter jurisdiction, and moved to dismiss the securities and fraud claims. The procedural claims and the securities and fraud claims are not before the court on this appeal.

The district court concluded that the bond agreements imposed no express duty upon defendants to seek renewal of the Letter of Credit. The district court also found that although HERC agreed to use “best efforts to renew or extend” the Letter of Credit in the Lease Agreement of December 20, 1989, HERC contracted with USTC, not with the bondholders, and the Lease Agreement was not identified as an amendment to the bond agreements. Accordingly, the district court concluded that the Lease Agreement did not amend the bond agreements and declined to construe clauses in the Lease Agreement for the benefit of the bondholders. The district court dismissed the bondholders’ express breach of contract claims, but permitted the bondholders to maintain their claims for breach of an implied covenant of good faith and fair dealing.¹

Both the bondholders and defendants appealed. The County challenged the court’s subject matter jurisdiction, and both the County and HERC challenged whether the bondholders properly stated a claim for breach of an implied covenant of good faith and fair dealing. The bondholders challenged whether the district court erred in dismissing their express contract claims.

Reversing the district court’s resolution of the motions to dismiss, the court of appeals held that the bond agreements were ambiguous with respect to defendants’ duties concerning renewal of the Letter of Credit, and with respect to whether defendants’ conduct constituted a breach of those duties. In re Hennepin County 1986 Recycling Bond Litigation, 517 N.W.2d 63, 67 (Minn.App.1994). The court further held that the 1989 Lease Agreement effectively amended the earlier Loan Agreement because, according to the court of appeals, the “best efforts” provision of the Lease Agreement became an operational part of the bond agreements, thus defining HERC’s duties. Id. at 68. The court of appeals declined to reach the implied covenant issue. Id. This appeal followed.²

The bondholders urge us to review this ease as an appeal from summary judgment rather than an appeal from a dismissal pursuant to Minn.R.Civ.P. 12.02(e) because they provided the district court with an expert affidavit. Generally, the court may not consider extrinsic evidence on a motion to dismiss pursuant to Minn.R.Civ.P. 12.02(e). Rule 12.02 provides: “If, on a motion asserting the defense that the pleading fails to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment * * Consistent with Rule 12.02, the district court did not consider in its order the expert affidavit and other matters extraneous to the pleading offered by the bondholders, and thus was not required to treat the motion as one for summary judgment.

The bondholders also contend that the dismissal should have been treated as summary judgment because the district court considered the bond agreements in their entirety, rather than merely the provisions cited in the bondholders’ amended complaint. In deciding a motion to dismiss, however, the court may consider the entire written contract when the complaint refers to the contract and the contract is central to the claims alleged. See Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir.1993); Teagardener v. Republic-Franklin Inc. Pension Plan, 909 F.2d 947, 949-50 (6th Cir.1990), cert. denied, 498 U.S. 1027, 111 S.Ct. 678, 112 L.Ed.2d 670 (1991). Accordingly, we review this matter as an appeal from a dismissal pursuant to Minn.R.Civ.P. 12.02(e).

We turn first to the question whether the bondholders stated a claim upon which relief can be granted relating to their allegations of express breach of the bond agreements. Resolution of this question turns on whether the language of the bond agreements explicitly permitted the County to voluntarily trigger mandatory redemption of the bonds by declining to seek renewal of the Letter of Credit, or whether the language is ambiguous, permitting an interpretation that the County did not have the right to voluntarily invoke the mandatory redemption provisions.

We affirm the court of appeals’ holding that the language of the bond agreements was ambiguous. In re Hennepin County, 517 N.W.2d at 67. A bond is a contract, and a determination of “when bonds are callable for payment should be made from the recitals in the instruments themselves.” 15 Eugene McQuillin, The Law of Municipal Corporations § 43.117 (3d ed. 1995); Connell v. Bauer, 240 Minn. 280, 291, 61 N.W.2d 177, 184 (1953). Thus, resolution of this issue turns on simple and well established principles of contract interpretation.

Whether a contract is ambiguous is a question of law for the court. Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn.1979). The court generally does not consider extrinsic evidence when determining contractual ambiguity, and we abide by that general rule here. Blattner v. Forster, 322 N.W.2d 319, 321 (Minn.1982); Instrumentation Servs. v. General Resource Corp., 283 N.W.2d 902, 908 (Minn.1979). A contract is ambiguous if it is susceptible of more than one construction. Republic Nat’l Life Ins. Co. v. Lorraine Realty Corp., 279 N.W.2d 349, 354 (Minn.1979); Employers Liab. Assurance Corp. v. Morse, 261 Minn. 259, 264, 111 N.W.2d 620, 624 (1961).

The Loan Agreement and Trust Indenture entered in October 1986 contain several interrelated provisions relevant to this issue:

• Section 4.06 of the Loan Agreement pertains to optional prepayment of the loan. The fourth paragraph of Section 4.06 provides as follows:

In addition to the option granted by this Section to the Company to prepay the loan by optional redemption of Series 1986 Bonds, the County shall have the right of optional redemption of Series 1986 Bonds with the consent of the Company, if and to the extent that moneys are on deposit in the Redemption Fund and are available for the redemption of Series 1986 Bonds pursuant to paragraph (d) or (e) of Section 5.06 of the Indenture.³ Except for moneys deposited and available pursuant to paragraph (d) or (e) of Section 5.06 of the Indenture and for mandatory redemption of Bonds at the times and in the circumstances provided for in Section 3.01 of the Indenture, Series 1986 Bonds shall be called for redemption by the County only upon the direction of the Company.

(Emphasis added.)

• Section 3.01 of the Trust Indenture pertains to redemption of the bonds. Section 3.01(a) sets forth the optional right to prepay the bonds prior to maturity but at a premium to the County until October 1, 2000. Sections 3.01(b), (c), (e), and (f) set forth the circumstances pursuant to which the bonds are subject to mandatory redemption, for example, if the bonds lose their tax exempt status, if the project is condemned, or upon maturation of the bonds.⁴ Specifically, Section 3.01(e) of the Trust Indenture provides:

The Series 1986 bonds are subject to mandatory redemption in whole, but not in part, at par plus accrued interest, upon the occurrence of any of the events specified in paragraph (a), (b), (c), (d), (e) or (f) of Section 4.07 of the Loan Agreement, upon the terms and conditions prescribed in said Section 4.07 of the Loan Agreement.

• Section 4.07 of the Loan Agreement provides in part:

[T]he Series 1986 Bonds are subject to mandatory redemption, and the Company shall prepay the loan, upon the occurrence of any of the following events:

⅜ * * ⅜ * *

(f) The Company or the Banks shall not have furnished to the Trustee extension of the expiry date in [a] form satisfactory to the Trustee or issuance and acceptance of a Substitute Letter of Credit or other Alternate Credit Facility complying with the provisions of Section 12.0⅛ of the Indenture at least ⅛5 days prior to the expiry date of the Letter of Credit or Alternate Credit Facility then held by the Trustee.

(Emphasis added.)⁵

• Section 6.13 of the Loan Agreement pertains to renewal of the Letter of Credit. In pertinent part Section 6.13 states:

In the event that the Banks offer to renew the Letter of Credit, the acceptance of such offer shall require the agreement of both the County and the Company. * * * * In the event that the Letter of Credit is not renewed and that the Term Loan, as defined in the Reimbursement Agreement, is not available, the County and the Company shall agree upon alternative financing. The provisions of this Section 6.13 shall survive the payment of the Series 1986 Bonds.

Before we analyze the provisions of the bond agreements to determine whether there is an ambiguity with respect to defendants’ duties regarding mandatory redemption of the bonds through the failure of the Letter of Credit, we must deal with the effect of Section 8.09 of the Loan Agreement on the rights and obligations of the parties. Section 8.09 of the Loan Agreement provides:

This Loan Agreement is executed in part to induce the purchase by others of Bonds and Notes to be issued by the County, and accordingly all covenants and agreements on the part of the Company and the County as set forth in this Loan Agreement are hereby declared to be for the benefit of the Holders from time to time of the Bonds and Notes and the Banks in respect of Advances not repaid.

The court of appeals concluded that Section 8.09 of the Loan Agreement required defendants “to consider the bondholders’ best interests, and not [their] own,” when deciding whether to renew the Letter of Credit. In re Hennepin County, 517 N.W.2d at 67. We disagree with the court of appeals’ interpretation of Section 8.09.

The rights of third-party beneficiaries “depend upon, and are measured by, the terms of the contract.” Brix v. General Accident & Assurance Corp., 254 Minn. 21, 24, 93 N.W.2d 542, 544 (1958); Restatement (Second) of Contracts § 309 cmt. b (1981) (stating that a third-party beneficiary’s rights are subject to limitations in the contract). Section 8.09 of the Loan Agreement does not establish a separate or additional duty of care; rather, it merely establishes that the bondholders are entitled, as third-party beneficiaries, to enforce existing covenants in the bond agreements.

To introduce the powerful abstraction of “fiduciary duty” into the highly negotiated and exhaustively documented commercial relationship between an issuer of convertible securities and the holders of such securities would * * * risk greater insecurity and uncertainty than could be justified by the occasional increment in fairness that might be hoped for.

Simons v. Cogan, 542 A.2d 785, 791 (Del.Ch.1987), aff'd, 549 A.2d 300 (Del.1988). Further, the conclusion of the court of appeals could result in precluding any redemption, even with a premium payment, if the bonds considered for redemption had a higher yield than would be available in the current bond market. We do not read Section 8.09 of the Loan Agreement so broadly and hold that Section 8.09 of the Loan Agreement is a statement of the rights of the bondholders, as third-party beneficiaries, to enforce the provisions of the bond agreements.

We now turn to the question whether the bond agreement provisions set forth above are ambiguous with respect to defendants’ duties regarding mandatory redemption of the bonds as a result of defendants’ thwarting renewal of the Letter of Credit. The court of appeals held that the bond agreements are ambiguous with respect to whether the parties intended to provide the County with discretion to trigger mandatory redemption of the bonds at its option. We agree. When the relevant provisions in the bond agreements are read as a whole, considering the relative placement of the redemption provisions, it is unclear whether the bond agreements permit the County to voluntarily trigger mandatory redemption of the bonds.

Specifically, Section 3.01(a) of the Trust Indenture provides that the bonds are redeemable “at the option of the County” beginning in 1996 and pursuant to the terms of the redemption schedule. The redemption schedule provides for a significant premium to be paid by the County in exchange for exercising its right to redeem the bonds pri- or to their maturation. On the other hand, Sections 3.01(b), (c), (e), and (f) of the Trust Indenture set forth the circumstances pursuant to which mandatory redemption shall occur.⁶ The optional redemption provisions are an allocation of financial risk, but the mandatory redemption provisions are for an entirely different purpose. The mandatory redemption provisions are for the protection of the bondholders in the event of some unforeseen happening that would jeopardize the investment value of the bonds.

It is relevant to note a United States District Court’s view of the importance of such protective provisions:

[T]he significant fact which accounts in part for the detailed protective provisions of the typical long-term debt financing instrument, is that the lender (the purchaser of the debt security) can expect only interest at the prescribed rate plus the eventual return of the principle. Except for possible increases in the market value of the debt security because of changes in interest rates, the debt security will seldom be worth more than the lender paid for it * * * It may, of course, become worth much less. Accordingly, the typical investor in a long-term debt security is primarily interested in every reasonable assurance that the principal and interest will be paid when due. * * * Short of bankruptcy, the debt security holder can do nothing to protect himself against actions of the borrower which jeopardize its ability to pay the debt unless he * * * establishes his rights through contractual provisions set forth in the debt agreement or indenture.

Metropolitan Life Ins. Co. v. RJR Nabisco, Inc., 716 F.Supp. 1504, 1518 (S.D.N.Y.1989) (emphasis altered) (quoting American Bar Foundation, Commentaries on Indentures 1-2 (1971)). Thus, the structure and placement of the mandatory redemption provisions suggest they were not to be invoked voluntarily, but were intended for the protection of the bondholders in the event of some unforeseen event that put the value of the bondholders’ investment at risk.

In effect, when the County intentionally foreclosed extension of the Letter of Credit, it opted to redeem the bonds. Because the bonds were redeemed “at the option of the County,” it is arguable at the very least, that the County must comply with Section 3.01(a) of the Trust Indenture requiring the payment of a premium for the right to redeem the bonds prior to maturity. Logically, one must ask why the parties would have painstakingly negotiated an economic risk allocation in the bond agreements, permitting the County to redeem at its option prior to the October 1, 2000, maturity if it were willing to pay a premium to do so, but simultaneously permitting the County to redeem at the expiration of the Letter of Credit, without a premium penalty, simply by blocking renewal or extension of the Letter of Credit.

Our conclusion is consistent with our opinion in Space Center, Inc. v. 451 Corp., 298 N.W.2d 443 (Minn.1980), where this court addressed the issue of whether a party to a contract could avoid performance by affirmatively blocking the happening of a condition precedent. We held that it could not. “ ‘[A] party who has entered into an obligation to pay will not be permitted to set up his own voluntary default to defeat the same, unless such intention clearly and unequivocally appears’ in the contract.” Id. at 449 (quoting Dana v. St. Paul Inv. Co., 42 Minn. 194, 195, 44 N.W. 55, 55 (1889)).

Further, as the court of appeals observed, Section 4.07 of the Loan Agreement provides for mandatory redemption if “[t]he Company or the Banks shall not have furnished to the Trustee extension * * * [of the Letter of Credit].” In re Hennepin County, 517 N.W.2d at 65 (emphasis added). The plain language of Section 4.07 suggests that if an option to renew the Letter of Credit exists, as the County contends, it belongs to HERC and to the banks, not to the County.⁷

On the record before us on this appeal from a Rule 12 dismissal, we conclude that the bond agreements are at least ambiguous as to whether the County can, in effect, turn a shield intended for the bondholders’ protection into a sword for the County, permitting redemption of the bonds before maturity without payment of a premium. Consequently, we hold that the bondholders stated a claim upon which relief could be granted regarding the express breach of contract claim against the County.

The dissent simply fails to see the actions of the County here for what they are: the intentional obstruction of the issuance of the renewed Letter of Credit to obtain a premium-free redemption, nine years before maturity and four years before the optional right to redeem for a premium accrued. This is nothing more than an optional redemption, for which there is ample instruction in the bond agreements as to when, how, and at what price it can occur, masquerading as a mandatory redemption. We believe the dissent’s reading may seriously distort the intention of the parties in their rights and responsibilities, inter se, and for this reason have concluded that the right of the County to trigger redemption is ambiguous.

Because the court of appeals held that the 1989 Lease Agreement and Assumption Agreement amended the earlier bond agreements, we briefly address this issue for purposes of providing guidance to the trial court in considering this matter on remand.⁸

In 1989, HERC executed a sale and leaseback of the recycling facility to USTC pursuant to the Lease Agreement. In Section 13.13 of the 1989 Lease Agreement the parties agreed as follows:

[T]he Lessor and the Lessee shall use their reasonable best efforts whenever required to procure a renewal or extension of the Letter of Credit or the issuance of an Alternate Credit Facility on a timely basis prior to the expiration of the Letter of Credit or any Alternate Credit Facility then in effect.

The County simultaneously executed the Assumption Agreement, recognizing the Lease Agreement between HERC and USTC. In addition, Section 3.1(d) of the Assumption Agreement grants USTC certain rights regarding prepayment of the Loan, to the exclusion of HERC:

[T]he Owner Trustee shall have the sole right, to the exclusion of the Company (but subject to the provisions of Section 13.13 of the Lease, to which the parties hereto hereby consent), (i) to prepay the County Loan and require redemption of the Bonds pursuant to and in accordance with the provisions of Section 4.06 of the Original Loan Agreement, (ii) to consent to or direct redemption of the Bonds by the County in accordance with the provisions of such Section, * * * (v) to agree to any renewal of the Letter of Credit, to make a borrowing of the Term Loan or to furnish or agree to an alternative financing in accordance with Section 6.13 of the Original Loan Agreement.

The district court observed that the Lease Agreement was not identified in any way as an amendment to the original bond agreements, and that the bondholders were not third-party beneficiaries of the 1989 agreements because the agreements were among HERC, the County, and USTC. Thus, there was no reason to construe Section 13.13 of the Lease Agreement for the benefit of the bondholders.

The court of appeals reversed, holding that Section 13.13 of the 1989 Lease Agreement amended HERC’s duties with respect to the original Loan Agreement. In re Hennepin County, 517 N.W.2d at 68 (“Because the parties expressly consented to [the “reasonable best efforts”] language in the Amended Loan Agreement, this provision became an operational part of the bond agreements and, therefore, defines HERC’s duties.”).

We disagree with the court of appeals. First, HERC’s obligation to use its “reasonable best efforts” under Section 13.13 of the Lease Agreement to procure a renewal of the Letter of Credit is owed exclusively to the Owner Trustee, USTC, not the bondholders. See Buchman Plumbing Co. v. Regents of the Univ. of Minn., 298 Minn. 328, 215 N.W.2d 479 (1974). Moreover, under Section 3.1(d) of the Assumption Agreement USTC assumed the sole right, to the exclusion of HERC, to decide whether to consent to renewal of the Letter of Credit pursuant to Section 6.13 of the original Loan Agreement. Thus, USTC’s decision to seek renewal of the Letter of Credit under Section 6.13 was a condition precedent that never occurred to HERC’s obligation to use its “reasonable best efforts” under Section 13.13 of the Lease Agreement.

Second, the definition of the term “Bond Documents” in the Lease Agreement does not refer to the Lease Agreement itself, nor does Article IV of the Assumption Agreement, entitled “Amendments to Original Loan Agreement,” incorporate Section 13.13 of the Lease Agreement. Accordingly, we conclude that the 1989 agreements do not amend the original bond agreements to impose a duty upon defendants to seek renewal of the Letter of Credit on behalf of the bondholders.

Finally, we consider whether the bondholders stated claims for breach of an implied covenant of good faith and fair dealing.⁹ Under Minnesota law, every contract includes an implied covenant of good faith and fair dealing requiring that one party not “unjustifiably hinder” the other party’s performance of the contract. Zobel & Dahl Constr. v. Crotty, 356 N.W.2d 42, 45 (Minn.1984); see also Haase v. Stokely-Van Camp, Inc., 257 Minn. 7, 13, 99 N.W.2d 898, 902 (1959); Restatement (Second) of Contracts § 205 (1981). Similarly, we have held that the party to a contract cannot take advantage of the failure of a condition precedent when the party itself has frustrated performance of that condition. Space Center, 298 N.W.2d at 449; Nodland v. Chirpich, 307 , 240 N.W.2d 513, 516 (Minn.1976).

In Minnesota, the implied covenant of good faith and fair dealing does not extend to actions beyond the scope of the underlying contract. Here, however, the bondholders’ implied covenant claims are based on the underlying bond agreements. To allege an implied covenant claim the bondholders need not first establish an express breach of contract claim — indeed, a claim for breach of an implied covenant of good faith and fair dealing implicitly assumes that the parties did not expressly articulate the covenant allegedly breached. Metropolitan Life, 716 F.Supp. at 1516. Here, the bondholders properly stated a claim for breach of an implied covenant of good faith and fair dealing, and accordingly, we affirm the district court on this issue.

Affirmed in part, reversed in part, and remanded for further proceedings.

1 . The court also declined to entertain the bondholders' motion for declaratory judgment. See Culligan Soft Water Serv. of Inglewood, Inc. v. Culligan Int'l Co., 288 N.W.2d 213, 215-16 (Minn.1979); see also Twin City Fed. Sav. and Loan Ass’n v. Gelhar, 525 F.Supp. 802, 804 (D.Minn.1981), aff'd, 681 F.2d 528 (1982).

2 . The State of Minnesota, the City of St. Paul, the City of Minneapolis, the Metropolitan Council, the Minneapolis Community Development Agency, the Association of Minnesota Counties, and the Minnesota County Attorneys’ Association filed briefs as amici curiae.

3 . Section 5.06 of the Trust Indenture establishes the Redemption Fund.

4 . Section 3.01(g) specifies that the bonds are subject to "extraordinary optional redemption" in the event of damage to or destruction of the recycling facility.

5 . In addition, the Trust Indenture, § 2.01B, provides:

In the event that the Initial Letter of Credit is not renewed and an Alternate Credit Facility is not issued and accepted by the Trustee at the time and in compliance with the conditions specified in Section 12.04 hereof, the County shall refund the Series 1986 Bonds which have been called for redemption in accordance with the provisions of Section 3.01(e) hereof and Section 4.07(f) of the Loan Agreement by the issuance of its Term Loan Notes * * * issued in accordance with Section 3 of the Reimbursement Agreement.

Section 12.04 provides that if the Trustee accepts a Substitute Letter of Credit there will be no mandatory redemption. See Trust Indenture, § 12.04. However, Section 12.04 proceeds to outline circumstances pursuant to which the Trustee shall accept a Substitute Letter of Credit. Id.

6 . An "extraordinary optional redemption" is provided for in Section 3.01(g) in the event of damage or destruction of the recycling facility.

7 . We reject the County’s argument that Section 6.13 of the Loan Agreement accords them complete discretion in deciding whether to renew the Letter of Credit.

Section 6.13 of the Loan Agreement requires the agreement of both the County and HERC prior to acceptance of a renewed letter of credit. Read in context of the surrounding provisions, Section 6.13 appears to require defendants to ensure that any renewal or extension of the Letter of Credit complies with certain financial requirements. For example, Section 6.12 describes the requirements for Replacement Credit Enhancement pursuant to the terms of Section 12.04 of the Trust Indenture, and the remainder of Section 6.13 describes the requirements for alternative financing. Arguably, Section 6.13 imposes an obligation upon defendants to ensure that the terms of the renewed or extended Letter of Credit are sufficient to protect the bondholders’ investment.

8 . Defendants contend that the bondholders did not assert the Lease was incorporated into the bond agreements. However, the bondholders did plead the connection between Section 13.13 of the Lease Agreement and the bond agreements in their Amended Class Action Complaint.

9 . In Minnesota, appellate courts may review any order involving the merits or affecting the judgment of a case before the court. Minn.RXiv. App.P. 103.04.