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(1/8%). Installments of principal and interest shall be payable monthly commencing on the June 1 following each Adjustment Date in an amount equal to the amount necessary to amortize the Principal Balance in equal monthly installments of principal plus interest at the Adjusted Rate, assuming a maturity of May I, 2010. The Principal Balance plus accrued interest shall be due and payable in full on May 1, 1995 (the "Final Maturity Date"). . 3. Interest shall be computed on the basis of a 360 day year, but shall be charged for the actual days elapsed in a year of 365 days. All payments on this Note shall be applied first to accrued interest and the balance to principal. 4. In the event that the interest on this Note shall become subject to federal income taxation pursuant to a Determination of Taxability (as hereinafter defined), the interest rate on this Note shall be increased, retroactivelY effective from and after the Date of Taxability (as hereinafter defined) to an annual rate equal to two percent (2%) in excess of the Prime Rate (as hereinafter defined) of North Star State Bank as it may change from time to time. prime Rate shall mean the rate publicly announced as such by North Star State Bank or the reasonably equivalent successor rate. The City shall immediately upon demand pay to the Lender and to each prior holder affected by such Determination of Taxability an amount equal to the amount by which the interest accrued retroactively at such increased rate from the Date of Taxability to the date of payment exceeds the amount of interest actually accrued and paid to the Lender and any such prior holder during said . period. (Such obligation of the City shall survive the payment in full of the principal amount of this Note.) 5. The terms "Determination of Taxability," "Date of Taxability" and "Notice of Taxability" as used herein shall have the meanings ascribed to such terms in Section 4.07 of the Loan Agreement, dated the date hereof (the "Loan Agreement"), between the City and Pet Care Partnership (the "Borrower"). 6. The Lender shall give notice, as soon as practicable, but in any event before the right to appeal such Notice of Taxability has expired, to the Borrower, the City and any prior holder of its receipt of any Notice of Taxability and permit the Borrower to contest, litigate or appeal the same at its sole expense. In the event any such contest, litigation or appeal is undertaken, the increased interest provided in paragraph 4 shall, nevertheless, be payable to the Lender and, . 8