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$2,655,000 Bond 2003 Broadway LaNel Project - Destroy 071539SHEILA A. PETERSON Transcript/Records Clerk (612) 492-5121 FAX (612) 340-2644 petemon.sheila@dorsey.com January 5, 2004 vMr. Kirk McDonald Mr. Greg Bronk Mr. Dave Mullen Ms. Gloria Kessler Mr. Steve Davis Mr. John Green Mr. Jim Schwert Mr. Bob Labes 0ORSEY Re: $2,655,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003 City of New Hope, Minnesota Ladies and Gentlemen: Enclosed is a copy of the Transcript of Proceedings in the above mentioned matter. Should you have questions or concerns, please feel free to call me. Sincerely, Sheila A. Peterson Enclosure DORSEY & WHITNEY LLP WWW.DORSEY.COM T 612.340.2600 F 612.340.2868 SUITE 1500 50 SOUTH SIXTH STREET MINNEAPOLIS. MINNESOTA 55402-1498 usn c<ti<on Euaoce osio $2,655,000 CITY OF NEW HOPE, MINNESOTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT), SERIES 2003 Closing Index Place Offices of Dorsey & Whitney LLP, 50 South Sixth Street, Suite 1500, Minneapoli§, Minnesota 55402 Time Preclosing: 9:00 a.m., Wednesday, August 13, 2003 Closing: 9:00 a.m., Thursday, August 14, 2003 Parties City of New Hope, Minnesota ("Issuer") Broadway LaNel, A Limited Partnership ( "Borrower") / Fannie Mae ("Fannie Mae") Glaser Financial Group ("Fannie Mae Lender/Servicer") U.S. Bancorp Piper Jaffray Inc. ("Underwriter") U.S. Bank National Association ("Trustee') Dorsey & Whitney LLP ("Bond Counsel") Gray, Plant, Mooty, Mooty & Bennett ("Underwriter's Counsel") Stephen J. Davis; Esq. (`'Borrower's Counsel") Squire, Sattders &. Dempsey L.L.P. ('°Fannie Mae Counsel") Oppenheimer, Wolff & Donnelly LLP ("Fannie Mae Lender's/Servicer Counsel's Moody's Investors Service (the "Rating Agency") I. BASIC DOCUMENTS: 1. Trust Indenture. 2. Financing Agreement. Deed and Covenants Running with the Land relating to the Mortgaged Property, dated as of December 1, 1985, between the Housing and Redevelopment Authority in and for the City of New Hope, Minnesota and the Borrower, as amended and supplemented by a First Amendment to Deed and Covenants Running with the Land, dated as of September 1, 1993, between the Borrower, the New Hope Economic Development Authority (the "EDA") and the Trustee, as amended and supplemented by a Second Amendment to Deed and Covenants Running with the Land, dated as of August 1, 2003 between the Borrower, the Trustee and the EDA. 4. Specimen Bond. Credit Enhancement Instrument (with Trustee's Receipt -see Tab No. 30). 6. Bond Purchase Agreement. II. ISSUER DOCUMENTS: Closing Certificate of the Issuer with attached exhibits. 8. Arbitrage Certificate. 9. Instructions to Trustee. 10. Internal Revenue Service Form 8038. 11. UCC -1 Financing Statement (Trust Estate). 12. Resolution of New Hope Economic Development Authority and Termination of Redevelopment Agreement. III. BORROWER DOCUMENTS: 13. Closing Certificate of Borrower with attached Partnership Documents and Partnership Resolution. 14. Borrower Tax Certificate. 2 } IV. OFFERING DOCUMENTS: 15. Underwriter's Certificate. 16. Underwriter's Receipt for Bonds. 17. Offering Circular. 18. Rating Letter of Rating Agency. 19. Remarketing Agreement. V. DOCUMENTS TO BE PROVIDED BY FANNIE MAE AND SERVICER: 20. Closing Certificate of Fannie Mae re: Offering Circular. 21. Tax Certificate of Fannie Mae. 22. Reimbursement Agreement. 23. Assignment and Intercreditor Agreement. 24. Hedge Reserve Escrow Account Security Agreement. 25. Pledged Bonds Custody and Security Agreement. r 26. Hedge Security Agreement (including Rate Cap Agreement) and related opinion. 27. Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Financing Statement. 28. Certificate of Borrower Pursuant to Reimbursement Agreement. 29. Assignment of Management Agreement. 30. Multifamily Note. VI. DOCUMENTS TO BE DELIVERED BY THE TRUSTEE: 31. Closing Certificate and Receipt of the Trustee with attached excerpt from Bylaws. VII. REFUNDING DOCUMENTS: 32. Certificate of Prior Bonds Trustee and Defeasance Opinion. 33. Satisfaction of Mortgage. 3 34. Termination of Assignment. 35. UCC Termination Statements. VIII. OPINIONS: 36. Bond Opinion of Bond Counsel. 37. Supplemental Opinion of Bond Counsel. 38. Opinion of Counsel to the Underwriter. 39. Opinion of Counsel to Borrower. 40. Opinion of Counsel to Fannie Mae. TRUSTINDENTURE This TRUST INDENTURE, dated as of August 1, 2003 ("Indenture"), is by the CITY OF NEW HOPE, MINNESOTA, a municipal corporation and political subdivision of the State of Minnesota (together with its successors and assigns, "Issuer"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association (together with its permitted successors and assigns, "Trustee"). The meaning of capitalized terms can be determined by reference to Article I of this Indenture. RECITALS A. The Issuer is authorized by the Act to issue revenue bonds for the purpose of financing the development of multifamily rental housing for persons of low and moderate income. B. The Issuer has previously issued its Prior Bonds pursuant to the Prior Indenture. C. Prior Bonds in the aggregate principal amount of $2,810,000 remain outstanding on the Closing Date. D. The Prior Bonds were issued in connection with the refinancing of the City's $3,350,000 Multifamily Housing Revenue Bonds (Broadway LaNel Project), Series 1985 (the "Series 1985 Bonds"), which Series 1985 Bonds were issued by the City to finance the acquisition, construction and equipping of the Mortgaged Property. E. The Borrower has requested that the Issuer refinance the Mortgaged Property by issuing the Bonds and by using the Net Bond Proceeds to fund the Loan, the proceeds of which will be used, directly or indirectly, to prepay the Prior Loan, discharge the Prior Mortgage and refund the Prior Bonds. F. The Issuer has, pursuant to the Act and the Bond Resolution, authorized (i) the issuance of the Bonds in the Principal Amount for the purpose of providing refinancing for the Mortgaged Property, (ii) the execution and delivery of this Indenture to establish the terms of the Bonds and the security for the Bonds and (iii) the execution and delivery of the Financing Agreement to establish certain terms and conditions of the Loan. G. By executing this Indenture, the Issuer is directing the deposit of the Net Bond Proceeds with the Trustee, to be used by the Trustee to fund the Loan to the Borrower. The proceeds of the Loan will be applied, together with other funds, to the prepayment, directly or indirectly, of the Prior Loan, and the refunding of the Prior Bonds in order to effect the refinancing of the Mortgaged Property. H. The Issuer, the Trustee and the Borrower are concurrently entering into the Financing Agreement. I. The Loan will be (i) made by the Issuer pursuant to the Financing Agreement, (ii) evidenced by the Note, (iii) secured by the Security Instrument and (iv) otherwise documented, evidenced and secured by the other Loan Documents. J. Fannie Mae has agreed, subject to the satisfaction of certain conditions, to facilitate the refinancing of the Mortgaged Property by providing credit enhancement and liquidity support for the Bonds pursuant to the Credit Facility. K. Pursuant to the Assignment, the Issuer will assign and deliver all of its right, title and interest in and to the Loan, including the Note, the Security Instrument and the other Loan Documents, to the Trustee and the Credit Provider, as their interests may appear. L. The Issuer has determined that all things necessary to make the Bonds, when executed by the Issuer and authenticated by the Trustee and issued in accordance with this Indenture, the valid, binding and legal special, limited obligations of the Issuer and to constitute this Indenture a valid assignment and pledge of the Trust Estate as security for the payment of the principal of and interest and any premium on, the Bonds, have been done, and the creation, execution and delivery of this Indenture and the creation, execution and delivery of the Bonds, subject to the terms of this Indenture, have been duly authorized by the Issuer. M. The operation of the Mortgaged Property will be subject to the Regulatory Agreement. N. The Trustee has trust powers and the power and authority to enter into this Indenture, to accept trusts generally and to accept and execute the trust created by this Indenture; the Trustee has accepted the trust so created, and to evidence such acceptance, has joined in the execution of this Indenture. GRANTING CLAUSES To secure the payment of the principal of and interest and any premium on, and the purchase price of, the Bonds according to their tenor and effect, to secure, on a parity basis, all obligations owed to the Credit Provider under the Credit Facility Documents and the Loan Documents, and to secure the performance and observance by the Issuer of the covenants expressed or implied in this Indenture and in the Bonds, the Issuer absolutely and irrevocably pledges and assigns the property described in the following paragraphs (1) through (5) to the Trustee for the benefit of the Bondholders and to the Credit Provider, as their interests may appear, subject to the Assignment and the provisions of this Indenture permitting the application of such property for the purposes set forth in this Indenture: 2 (1) all right, title and interest of the Issuer in and to the Loan, including the Note, the Security Instrument and the other Loan Documents and in and to the Financing Agreement, reserving, however, the Reserved Rights; (2) all rights to receive payments on the Note and under the other Loan Documents, including all proceeds of insurance or condemnation awards; (3) all right, title and interest of the Issuer in and to the Revenues, the Net Bond Proceeds and the accrued interest, if any, derived from the sale of the Bonds, and all Funds and Accounts under this Indenture (including, without limitation, moneys, documents, securities, investments, Investment Income, instruments and general intangibles on deposit or otherwise held by the Trustee) but excluding all moneys in the Fees Account, the Rebate Fund and the Costs of Issuance Fund unless and to the extent funded with Net Bond Proceeds (including within such exclusion Investment Income retained in the Costs of Issuance Fund and the Rebate Fund); (4) all funds, moneys and securities and any and all other rights and interests in property, whether tangible or intangible, from time to time conveyed, mortgaged, pledged, assigned or transferred by delivery or by writing of any kind to the Trustee as additional security under this Indenture for the benefit of the Bondholders and the Credit Provider; and (5) all of the proceeds of the foregoing, including, without limitation, Investments and Investment Income (except as excluded above); TO HAVE AND TO HOLD unto the Trustee and the Credit Provider, as their interests may appear; IN TRUST, NEVERTHELESS, upon the terms set forth in this Indenture for the equal and proportionate benefit, security and protection of (i) all Registered Owners of the Bonds, without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the other Bonds and (ii) the Credit Provider to secure the payment of all amounts owed to the Credit Provider under the Credit Facility Documents; PROVIDED, FURTHER, HOWEVER, that if the Issuer or its successors or assigns pay or cause to be paid to the Registered Owners of the Bonds the principal of and interest and any premium to become due on the Bonds at the times and in the manner provided in this Indenture, and if no amount is owing by the Borrower to the Issuer or the Trustee under the Financing Agreement or to the Credit Provider under the Credit Facility Documents, and if the Issuer keeps, performs and observes, or causes to be kept, performed and observed, all of its covenants, warranties and agreements contained in this Indenture, this Indenture and the estate and rights granted by this Indenture shall terminate and be discharged in accordance with its terms, upon which termination the Trustee shall execute and deliver to the Issuer such instruments in writing as shall be necessary to satisfy the lien of this Indenture, and, in accordance with Article IX, shall reconvey to the Issuer any property at the time subject to the lien of this Indenture which may then be in the Trustee's possession, except amounts held by the Trustee for the payment of principal of and interest and any premium on the Bonds, or moneys held in the Rebate Fund for payment to the United States Government or moneys held in the Fees Account for the payment of accrued and unpaid Third Party Fees; otherwise this Indenture 3 shall be and remain in full force and effect, upon the trusts and subject to the covenants and conditions set forth in this Indenture; UNDER THE PROVISIONS OF THE ACT the Bonds may not be payable from or be a charge upon any funds of the Issuer other than the revenue pledged to the payment thereof nor shall the Issuer be subject to any pecuniary liability thereon and no Holder or Holders of the Bonds shall ever have the right to compel any exercise of the taxing power of the Issuer to pay any Bonds or the interest and premium, if any, thereon, or to enforce payment thereof against any property of the Issuer, except as above provided; the Bonds shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the Issuer, except as above provided; and no Bond shall constitute a debt of the Issuer within the meaning of any constitutional or statutory limitation, but nothing in the Act impairs the rights of Holders of Bonds issued under this Indenture to enforce the covenants made for the security thereof as provided in this Indenture and in the Act; and FINALLY, all Bonds issued and secured under this Indenture are to be issued, authenticated and delivered, and all property, rights and interests, including, but not limited to, the amounts payable under the Financing Agreement and any other amounts assigned and pledged by this Indenture are to be dealt with and disposed of under, upon and subject to, the terns, conditions, stipulations, covenants, agreements, trusts, uses and purposes expressed in this Indenture, and the Issuer has agreed and covenanted, and agrees and covenants with the Trustee and with the Registered Owners of the Bonds as set forth in this Indenture. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions. All capitalized terms used in this Indenture have the meanings given to those terms in this Section 1.1 or elsewhere in this Indenture unless the context clearly indicates a different meaning. "Account" means an account established within a Fund. "Act" means Minnesota Statutes, Chapters 462A and 462C, as amended. "Act of Bankruptcy" means any proceeding instituted under the Bankruptcy Code or other applicable insolvency law by or against the Issuer. "Adjustment Date" means any date on which the interest rate on the Bonds is adjusted to a different Mode or to a different Reset Rate. An Adjustment Date may only occur on an Interest Payment Date or, if such date is not a Business Day, the following Business Day. Any Reset Date and the Fixed Rate Adjustment Date are Adjustment Dates. "Advance" means an advance made under the Credit Facility. "Affiliate" as applied to any person, means any other person directly or indirectly controlling, controlled by, or under common control with, that person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with'), as applied to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that person, whether through the ownership of voting securities, partnership interests or by contract or otherwise. "Alternate Credit Facility" means a letter of credit (whether or not so named), surety bond, insurance policy, standby bond purchase agreement, credit enhancement instrument, collateral purchase agreement, mortgage backed security or similar agreement, instrument or facility (other than the initial Credit Facility) provided in accordance with the Financing Agreement. "Alternate Credit Provider" means the provider of an Alternate Credit Facility. "as their interests may appear" or "as its interest may appear" means, with reference to any of the Assigned Rights, the respective interests, exclusive of the Reserved Rights of the Issuer, of Fannie Mae and of the Trustee to such documents and rights as set forth in the Assignment. "Assigned Rights" has the meaning given to that term in the Assignment. "Assignment" means the Assignment and Intercreditor Agreement, dated as of the date of this Indenture, among the Issuer, the Trustee and Fannie Mae, and acknowledged and agreed to by the Borrower, as it may be amended, supplemented or restated from time to time. "Authorized Attesting Officer" means the City Manager or the City Clerk of the Issuer, or such other officer or official of the Issuer who, in accordance with the laws of the State, the bylaws or other governing documents of the Issuer, or practice or custom, regularly attests or certifies official acts and records of the Issuer, and includes any assistant or deputy officer to the principal officer or officers exercising such responsibilities. "Authorized Borrower Representative" means any person who, at any time and from time to time, is designated as the Borrower's authorized representative by written certificate furnished to the Issuer, the Loan Servicer, the Credit Provider and the Trustee containing the specimen signature of such person and signed on behalf of the Borrower by or on behalf of any authorized general partner of the Borrower if the Borrower is a general or limited partnership, by any authorized managing member of the Borrower if the Borrower is a limited liability company, or by any authorized officer of the Borrower if the Borrower is a corporation, which certificate may designate an alternate or alternates. The Trustee may conclusively presume that a person designated in a written certificate filed with it as an Authorized Borrower Representative is an Authorized Borrower Representative until such time as the Borrower files with it (with a copy to the Issuer, the Loan Servicer and the Credit Provider) a written certificate revoking such person's authority to act in such capacity. "Authorized Denomination" means, (i) during any Weekly Variable Rate Period, $100,000 or any integral multiple of $5,000 in excess of $100,000, and (ii) during any Reset Period or the Fixed Rate Period, $5,000 or any integral multiple of $5,000. "Authorized Officer" means the Mayor and the City Manager and any other officer or employee of the Issuer designated by certificate of any of the foregoing as authorized by the Issuer to perform a specified act, sign a specified document or otherwise take action with respect to the Bonds. k "Available Moneys" means, as of any date of determination, any of (i) the proceeds of the Bonds, (ii) remarketing proceeds received from the Remarketing Agent or any purchaser of Bonds (other than funds provided by the Borrower, the Issuer, any Affiliate of either the Borrower or the Issuer or any guarantor of the Loan), (iii) moneys received by the Trustee pursuant to a draw on the Credit Facility, (iv) any other amounts, including the proceeds of refunding bonds, for which, in each case, the Trustee has received an Opinion of Counsel acceptable to each Rating Agency to the effect that the use of such amounts to make payments on the Bonds would not violate Section 362(a) of the Bankruptcy Code (or that relief from the automatic stay provisions of such Section 362(a) would be available from the bankruptcy court) or be avoidable as preferential payments under Section 547 or 550 of the Bankruptcy Code should the Issuer or the Borrower become a debtor in proceedings commenced under the Bankruptcy Code; (v) the price paid by the Credit Provider for the purchase of Bonds in lieu of redemption pursuant to Section 3.7; and (vi) Investment Income derived from the investment of moneys described in clause (i), (ii), (iii) or (iv). "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy," as in effect now and in the future, or any successor statute. "Beneficial Owner" means, for any Bond which is held by a nominee, the beneficial owner of such Bond. "BMA Index Rate" means the rate published in The Bond Market Association Municipal Swap Index, produced by Municipal Market Data, a Thomson Financial Services Company, or its successors. "Bond" or "Bonds" means the Issuer's Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003, in the original aggregate principal amount of $2,655,000. "Bond Counsel" means (i) on the Closing Date, the law firm or law firms delivering the approving opinion(s) with respect to the Bonds or (ii) after the Closing Date, any law firm selected by the Issuer and acceptable to the Credit Provider, of nationally recognized standing in matters pertaining to the exclusion from gross income for federal income tax purposes of the interest payable on bonds issued by states and political subdivisions. "Bond Documents" means the Assignment, the Bonds, the Bond Purchase Agreement, the Credit Facility, the Financing Agreement, this Indenture, the Regulatory Agreement (and any other agreement relating to rental restrictions on the Mortgaged Property), the Remarketing Agreement, the Tax Certificate, any Tender Agent Agreement, and all other documents, instruments and agreements executed and delivered in connection with the issuance, sale, delivery and/or remarketing of the Bonds, as each such agreement or instrument may be amended, supplemented or restated from time to time. "Bond Purchase Agreement" means the Bond Purchase Agreement, dated as of August 2003, among the Underwriter, the Issuer and the Borrower. "Bond Purchase Fund" means the Bond Purchase Fund created by Section 5.1. Gl 2.16. "Bond Register" means the Bond Register maintained by the Trustee pursuant to Section � "Bond Resolution" means the resolution adopted by the Issuer on July 28, 2003, authorizing and approving the issuance and sale of the Bonds and the execution and delivery of this Indenture, the Assignment, the Bond Purchase Agreement, the Financing Agreement, the Loan Documents, the Regulatory Agreement, the Tax Certificate and certain other documents, making certain appointments and determining certain details with respect to the Bonds. "Bondholder," "holder," "Owner," "owner," "Registered Owner" or "registered owner" means, with respect to any Bond, the owner of the Bond as shown on the Bond Register. "Bondholder Tender Notice" means a written notice meeting the requirements of Section 4.1(a). "Book -Entry Bonds" means that part of the Bonds for which a Securities Depository or its nominee is the Bondholder. "Book -Entry System" means an electronic system in which the clearance and settlement of securities transactions is made through electronic book -entry changes. "Borrower" means Broadway Lanel, a Limited Partnership. "Borrower Documents" means the Bond Documents to which the Borrower is a party, the Credit Facility Documents to which the Borrower is a party and the Loan Documents and all other documents to which the Borrower is a party and which are being executed and delivered by the Borrower in connection with the transactions provided for in the Bond Documents, the Loan Documents and the Credit Facility Documents. "Business Day" means any day other than (i) a Saturday or a Sunday, (ii) any day on which banking institutions located in the City of New York, New York are required or authorized by law or executive order to close, (iii) any day on which banking institutions located in the city or cities in which the Designated Office of the Trustee, the Remarketing Agent or the Loan Servicer is located are required or authorized by law or executive order to close, (iv) prior to the Fixed Rate Adjustment Date, a day on which the New York Stock Exchange is closed or (v) so long as a Credit Facility is in effect, any day on which the Credit Provider is closed. "Certificate of Borrower" means the Certificate of Borrower dated as of the Closing Date, as it may be amended, supplemented or restated from time to time. "Closing Date" means the date on which the Bonds are issued and delivered to or upon the order of the Underwriter. "Code" means the Internal Revenue Code of 1954, as amended ("1954 Code") and the Internal Revenue Code of 1986, as amended ("1986 Code"), in each case to the extent made applicable to matters relating to the Bonds and the Mortgaged Property by Section 1313(a) of the Tax Reform Act of 1986; each reference to the Code is deemed to include (i) any successor internal revenue law and (ii) the applicable regulations whether final, temporary or proposed under the Code or such successor law. Any reference to a particular provision of the Code is 7 deemed to include any successor provision of any successor internal revenue law and applicable regulations whether final, temporary or proposed under such provision or successor provision. "Conditional Redemption" means a redemption where the Trustee has stated in the notice of redemption that the redemption is conditioned upon deposit of funds as further described in Section 3.4. "Costs of Issuance" means: (a) the fees, costs and expenses of (i) the Issuer, the Issuer's counsel and the Issuer's financial advisor, if any, (ii) the Underwriter (including discounts to the Underwriter or other purchasers of the Bonds, other than original issue discount, incurred in the issuance and sale of the Bonds) and the Underwriter's counsel, (iii) Bond Counsel, (iv) the Trustee and the Trustee's counsel, (v) the Loan Servicer and the Loan Servicer's counsel, if any, (vi) the Credit Provider and the Credit Provider's counsel, (vii) the Borrower's counsel and the Borrower's financial advisor, if any, and (viii) the Rating Agency; (b) costs of printing the offering documents relating to the sale of the Bonds; and (c) all other fees, costs and expenses directly associated with the authorization, issuance, sale and delivery of the Bonds, including printing costs, costs of reproducing documents, filing and recording fees, and any fees, costs and expenses required to be paid to the Loan Servicer in connection with the origination of the Loan. "Costs of Issuance Deposit" means the deposit in the amount of $0 to be made by the Borrower with the Trustee on the Closing Date to pay Costs of Issuance. "Costs of Issuance Fund" means the Costs of Issuance Fund created by Section 5.1. "Credit Facility" means the Credit Enhancement Instrument, dated the Closing Date, issued by Fannie Mae to the Trustee, or any Alternate Credit Facility in effect at the time, as any such facility may be amended, supplemented or restated from time to time. "Credit Facility Account" means the Credit Facility Account of the Revenue Fund. "Credit Facility Documents" means the Reimbursement Agreement, the Certificate of Borrower, all Collateral Agreements, the Hedge Documents, the Hedge Reserve Escrow Security Agreement, the Hedge Security Agreement, the Pledge Agreement and all other agreements and documents securing the Credit Provider or otherwise relating to the provision of the Credit Facility, as any such agreement may be amended, supplemented or restated from time to time. "Credit Provider" means, so long as the initial Credit Facility is in effect, Fannie Mae, or so long as any Alternate Credit Facility is in effect, the Alternate Credit Provider then obligated under the Alternate Credit Facility. "Custodian" means the custodian under the Pledge Agreement. "Designated Office" of the Trustee, the Tender Agent, the Remarketing Agent or the Loan Servicer means, respectively, the office of the Trustee, the Tender Agent, the Remarketing Agent or the Loan Servicer at the respective address set forth in Section 13.4 or at such other 8 address as may be specified in writing by the Trustee, the Tender Agent, the Remarketing Agent or the Loan Servicer, as applicable, as provided in Section 13.4. it. "DTC" means The Depository Trust Company and any successor to it or any nominee of "DTC Participant" has the meaning given to that term in Section 2.15(b). "Electronic Means" means a facsimile transmission or any other electronic means of communication approved in writing by the Credit Provider. "Event of Default" means, as used in any Transaction Document, any event described in that document as an Event of Default. Any "Event of Default' as described in any Transaction Document is not an "Event of Default' in any other Transaction Document unless that other Transaction Document specifically so provides. "Extension Date" means, with respect to an Alternate Credit Facility, the date which is five Business Days prior to the expiration date of the Alternate Credit Facility. "Extraordinary Items" means, with respect to the Trustee, reasonable compensation for extraordinary services and/or reimbursement for reasonable extraordinary costs and expenses including reasonable fees and expenses of its counsel. "Facility Fee" has the meaning given to that term in the Reimbursement Agreement. "Fannie Mae" means Fannie Mae, a corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C., § 1716 et sem., and its successors and assigns. "Fees Account" means the Fees Account of the Revenue Fund. "Financing Agreement" means the Financing Agreement, dated as of the date of this Indenture, among the Issuer, the Trustee, and the Borrower, as amended, supplemented or restated from time to time. "Fixed Rate" means the rate of interest borne by the Bonds as determined in accordance with Section 2.7. "Fixed Rate Adjustment Date" means the date on which the interest rate on the Bonds adjusts from the Weekly Variable Rate or a Reset Rate to the Fixed Rate pursuant to Section 2.8. "Fixed Rate Period" means the period beginning on the Fixed Rate Adjustment Date and ending on the Maturity Date. "Fund" means any fund created by Section 5.1. "Government Obligations" means direct obligations of, and obligations on which the full and timely payment of principal and interest is unconditionally guaranteed by, the full faith and credit of the United States of America. 0 "Hedge Security Agreement" means the Hedge Security Agreement dated as of the date hereof among the Borrower, the Loan Servicer and Fannie Mae. "Hedge Documents" has the meaning given that term in the Hedge Security Agreement. "Hedge Reserve Escrow Account Security Agreement" means the Hedge Reserve Escrow Account Security Agreement dated as of the date hereof among the Borrower, the Loan Servicer and Fannie Mae, as amended, supplemented or restated from time to time. "Highest Rating Category" has the meaning, with respect to an Investment, given in this definition. If the Bonds are rated by a Rating Agency, the term "Highest Rating Category" means, with respect to an Investment, that the Investment is rated by each Rating Agency in the highest rating given by that Rating Agency for that general category of security. If at any time the Bonds are not rated (and, consequently, there is no Rating Agency), then the term "Highest Rating Category" means, with respect to an Investment, that the Investment is rated by S&P or Moody's in the highest rating given by that rating agency for that general category of security. By way of example, the Highest Rating Category for tax-exempt municipal debt established by S&P is "A-1+" for debt with a term of one year or less and "AAA" for a term greater than one year, with corresponding ratings by Moody's of "MIG -1" (for fixed rate) or "VMIG-1" (for variable rate) for one year or less and "Aaa" for greater than one year. If at any time (i) the Bonds are not rated, (ii) both S&P and Moody's rate an Investment and (iii) one of those ratings is below the Highest Raring Category, then such Investment will, nevertheless, be deemed to be rated in the Highest Rating Category if the lower rating is no more than one rating category below the highest rating category of that rating agency. For example, an Investment rated "AAA" by S&P and "Aa3" by Moody's is rated in the Highest Rating Category. If, however, the lower rating is more than one full rating category below the Highest Rating Category of that rating agency, then the Investment will be deemed to be rated below the Highest Rating Category. For example, an Investment rated "AAA" by S&P and "Al" by Moody's is not rated in the Highest Rating Category. "Indenture" means this Trust Indenture, as amended, supplemented or restated from time to time. "Interest Account" means the Interest Account of the Revenue Fund. "Interest Payment Date" means (i) during any Weekly Variable Rate Period, the 15th day of each calendar month commencing September 15, 2003; (ii) during any Reset Period and during the Fixed Rate Period each January 15 and July 15 following the Adjustment Date, provided that the first Interest Payment Date during any such period may only occur on a date which is at least 30 days after the Adjustment Date; (iii) each Adjustment Date; (iv) for Bonds subject to redemption in whole or in part on any date, the date of such redemption, (v) the Maturity Date and (vi) for all Bonds any date determined pursuant to Section 10.10(c). "Interest Requirement" means (i) during the Weekly Variable Rate Period, 34 days interest on the Bonds at the Maximum Rate on the basis of a 365- or 366 -day year, as applicable, for the actual number of days elapsed, and (ii) during a Reset Period or the Fixed Rate Period, l 210 days interest at, respectively, the Reset Rate or the Fixed Rate, as the case may be, on the basis of a year of 360 days of twelve 30 -day months; or, in the case of either (i) or (ii), such other number of days as may be required by the Rating Agency. "Investment" means any Permitted Investment and any other investment held under this Indenture that does not constitute a Permitted Investment. "Investment Income" means the earnings, profits and accreted value derived from the investment of moneys pursuant to Article VI. "Issuer" means the City of New Hope, Minnesota, a municipal corporation and political subdivision of the State, and its successors and assigns. "Issuer Documents" means the Assignment, the Bonds, Financing Agreement, this Indenture, the Loan Documents to which the Issuer is a party, the Regulatory Agreement and the Tax Certificate. "Issuer's Fee" means the Issuer's one-time fee in an amount equal to one-half of one percent (.5%) of the original principal amount of the Bonds ($13,275.00) payable in immediately available funds on the Closing Date by the Borrower under the Financing Agreement. "Letter of Representations" means when all the Bonds are Book -Entry Bonds, the Letter of Representations executed by the Issuer and the Trustee and delivered to the Securities Depository, as amended, supplemented or restated from time to time, or any agreement entered into in substitution therefor. "Loan" means the loan made by the Issuer to the Borrower pursuant to the Financing Agreement for the purpose of providing funds to the Borrower to repay the Prior Loan and cause the refunding of the Prior Bonds. "Loan Documents" means, collectively, the Note, the Security Instrument and all other documents, agreements and instruments evidencing, securing or otherwise relating to the Loan, as each such document, agreement or instrument may be amended, supplemented or restated from time to time. Neither the Financing Agreement nor the Regulatory Agreement is a Loan Document and neither document is secured by the Security Instrument. "Loan Fund" means the Loan Fund created by Section 5.1. "Loan Servicer" means the multifamily mortgage loan servicer designated from time to time by the Credit Provider. "Mandatory Tender Date" means any date on which Bonds are required to be tendered pursuant to Section 4.2, including any Adjustment Date, Substitution Date, Extension Date or date specified by the Trustee as provided in Section 4.2(b). "Maturity Date" means July 15, 2033 or in the event the Bonds are adjusted to the Fixed Rate Mode and a Sinking Fund Schedule is established, the maturity date of all serial Bonds, if any. "Maximum Rate" means 12 percent per annum; provided, however, that the Maximum Rate may be increased if the Trustee receives (i) the written consent of the Credit Provider and the Borrower to a specified higher Maximum Rate not to exceed the lesser of the maximum rate permitted by law to be paid on the Bonds and the maximum rate chargeable on the Loan, (ii) an opinion of Bond Counsel to the effect that such higher Maximum Rate is permitted by law and 11 will not adversely affect either the validity of the Bonds or the exclusion of the interest payable on the Bonds from gross income for federal income tax purposes, and (iii) a new or amended Credit Facility in an amount equal to the sum of (A) the then outstanding principal amount of the Bonds and (B) the new Interest Requirement calculated using the new Maximum Rate. "Mode" means any of the Weekly Variable Rate, the Reset Rate and the Fixed Rate. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation, and its successors and assigns, or if it is dissolved or no longer assigns credit ratings, then any other nationally recognized statistical rating agency, designated by the Credit Provider, as assigns credit ratings. "Mortgaged Property" means the real property described in the Security Instrument, together with all improvements, fixtures and personal property (to the extent of the Borrower's interest therein) and located on such real property. "Net Bond Proceeds" means the total proceeds derived from the issuance, sale and delivery of the Bonds, representing the total purchase price of the Bonds, including any premium paid as part of the purchase price of the Bonds, but excluding the accrued interest, if any, on the Bonds paid by the initial purchaser(s) of the Bonds. "Note" means the Multifamily Note (together with all addenda thereto) dated as of August 1, 2003, executed by the Borrower in favor of the Issuer, as it may be amended, supplemented or restated from time to time or any mortgage note executed in substitution therefor in accordance with the Bond Documents, as such substitute note may be amended, supplemented or restated from time to time. "Note Interest" has the meaning given to that term in the Note. "Opinion of Counsel" means a written opinion of legal counsel, acceptable to the recipient(s) of such opinion. If the opinion is with respect to an interpretation of federal tax laws or regulations or bankruptcy matters, such legal counsel also must be an attorney or firm of attorneys experienced in such matters. "Outstanding" means, when used with reference to the Bonds at any date as of which the amount of Outstanding Bonds is to be determined, all Bonds which have been authenticated and delivered under this Indenture except: (a) Bonds cancelled or delivered for cancellation at or prior to such date; (b) Bonds deemed to be paid in accordance with Article IX; and (c) Bonds in lieu of which others have been authenticated under Article II. In determining whether the owners of a requisite aggregate principal amount of Outstanding Bonds have concurred in any request, demand, authorization, direction, notice, consent or waiver under the provisions of this Indenture, Bonds which are owned or held by or for the account of the Borrower and Pledged Bonds will be disregarded and deemed not to be Outstanding under this Indenture for the purpose of any such determination unless all Bonds are Pledged Bonds, Bonds owned or held by or for the account of the Borrower or a combination of Pledged Bonds 12 and Bonds owned by or held for the account of the Borrower. In determining whether the Trustee will be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which are registered in the name of or known by the Trustee to be held for the account of the Borrower, including Pledged Bonds, will be disregarded. "Permitted Investments" means, to the extent authorized by law for investment of moneys of the Issuer: (a) Government Obligations. (b) Direct obligations of, and obligations on which the full and timely payment of principal and interest is unconditionally guaranteed by, any agency or instrumentality of the United States of America (other than the Federal Home Loan Mortgage Corporation) or direct obligations of the World Bank, which obligations are rated in the Highest Rating Category. (c) Obligations, in each case rated in the Highest Rating Category, of (i) any state or territory of the United States of America, (ii) any agency, instrumentality, authority or political subdivision of a state or territory or (iii) any public benefit or municipal corporation the principal of and interest on which are guaranteed by such state or political subdivision. (d) Any written repurchase agreement entered into with a Qualified Financial Institution whose unsecured short-term obligations are rated in the Highest Rating Category. (e) Commercial paper rated in the Highest Rating Category. (f) Interest-bearing negotiable certificates of deposit, interest-bearing time deposits, interest-bearing savings accounts and bankers' acceptances, issued by a Qualified Financial Institution if either (A) the Qualified Financial Institution's unsecured short -tern obligations are rated in the Highest Rating Category or (B) such deposits, accounts or acceptances are fully insured by the Federal Deposit Insurance Corporation. (g) an agreement held by the Trustee for the investment of moneys at a guaranteed rate with (i) the Credit Provider or (ii) a Qualified Financial Institution whose unsecured long- term obligations are rated in the Highest Rating Category, or whose obligations are unconditionally guaranteed or insured by a Qualified Financial Institution whose unsecured long- term obligations are rated in the Highest Rating Category; provided that such agreement is in a form acceptable to the Credit Provider; and provided further that such agreement includes the following restrictions: (1) the invested funds will be available for withdrawal without penalty or premium, at any time that (A) the Trustee is required to pay moneys from the Fund(s) established under this Indenture to which the agreement is applicable, or (B) any Rating Agency indicates that it will lower or actually lowers, suspends or withdraws the rating on the Bonds on account of the rating of the Qualified Financial Institution providing, guaranteeing or insuring, as applicable, the agreement; (2) the agreement, and if applicable the guarantee or insurance, is an unconditional and general obligation of the provider and, if applicable, the guarantor or 13 insurer of the agreement, and ranks pan passu with all other unsecured unsubordinated } obligations of the provider, and if applicable, the guarantor or insurer of the agreement; (3) the Trustee receives an Opinion of Counsel, which may be subject to customary qualifications, that such agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and, if applicable, an Opinion of Counsel that any guaranty or insurance policy provided by a guarantor or insurer is legal, valid, binding and enforceable upon the guarantor or insurer in accordance with its terms; and (4) the agreement provides that if during its term the rating of the Qualified Financial Institution providing, guaranteeing or insuring, as applicable, the agreement, is withdrawn, suspended by any Rating Agency or falls below the Highest Rating Category, the provider must, within 10 days, either: (A) collateralize the agreement (if the agreement is not already collateralized) with Permitted Investments described in paragraph (a) or (b) by depositing collateral with the Trustee or a third party custodian, such collateralization to be effected in a manner and in an amount sufficient to maintain the then current rating of the Bonds, or, if the agreement is already collateralized, increase the collateral with Permitted Investments described in paragraph (a) or (b) by depositing collateral with the Trustee or a third party custodian, so as to maintain the then current rating of the Bonds, (B) at the request of the Trustee or the Credit Provider, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium unless required by law or (C) transfer the agreement, guarantee or insurance, as applicable, to a replacement provider, guarantor or insurer, as applicable, then meeting the requirements of a Qualified Financial Institution and whose unsecured long-term obligations are then rated in the Highest Rating Category. The agreement may provide that the down -graded provider may elect which of the remedies to the down- grade (other than the remedy set out in (B)) to perform. (h) Subject to the ratings requirements set forth in this definition, shares in any money market mutual fund (including those of the Trustee or any of its affiliates) registered under the Investment Company Act of 1940, as amended, that have been rated AAAm-G or AAAm by S&P or Aaa by Moody's so long as the portfolio of such money market mutual fund is limited to Government Obligations and agreements to repurchase Government Obligations. If approved in writing by the Credit Provider, a money market mutual fund portfolio may also contain obligations and agreements to repurchase obligations described in paragraphs (b) or (c). If the Bonds are rated by a Rating Agency, the money market mutual fund must be rated AAAm- G or AAAm by S&P, if S&P is a Rating Agency, or Aaa by Moody's, if Moody's is a Rating Agency. If at any time the Bonds are not rated (and, consequently, there is no Rating Agency), then the money market mutual fund must be rated AAAm-G or AAAm by S&P or Aaa by Moody's. If at any time (i) the Bonds are not rated, (ii) both S&P and Moody's rate a money market mutual fund and (iii) one of those ratings is below the level required by this paragraph, then such money market mutual fund will, nevertheless, be deemed to be rated in the Highest Rating Category if the lower rating is no more than one rating category below the highest rating category of that rating agency. (i) Any other investment authorized by the laws of the State, if such investment is 1 approved in writing by the Credit Provider. Permitted Investments shall not include any of the following: 14 (1) Except for any investment described in the next sentence, any investment with a final maturity or any agreement with a term greater than one year from the date of the investment. This exception (1) shall not apply to any obligation that provides for the optional or mandatory tender, at par, by the holder of such obligation at least once within one year of the date of purchase, Government Obligations irrevocably deposited with the Trustee for payment of Bonds pursuant to Section 9.3, and Permitted Investments listed in paragraphs (g) and (i)). (2) Except for any obligation described in paragraph (a) or (b), any obligation with a purchase price greater or less than the par value of such obligation. (3) Any asset-backed security, including mortgage-backed securities, real estate mortgage investment conduits, collateralized mortgage obligations, credit card receivable asset- backed securities and auto loan asset-backed securities. (4) Any interest -only or principal -only stripped security. (5) Any obligation bearing interest at an inverse floating rate. (6) Any investment which may be prepaid or called at a price less than its purchase price prior to stated maturity. (7) Any investment the interest rate on which is variable and is established other than by reference to a single index plus a fixed spread, if any, and which interest rate moves proportionately with that index. (8) Any investment described in paragraph (d) or (g) with, or guaranteed or insured by, a Qualified Financial Institution described in clause (iv) of the definition of Qualified Financial Institution if such institution does not agree to submit to jurisdiction, venue and service of process in the United States of America in the agreement relating to the investment. (9) any investment to which S&P has added an "r" or "t" highlighter. "Person" means a natural person, estate, trust, corporation, partnership, limited liability company, association, public body or any other organization or entity (whether governmental or private). "Pledge Agreement" means the Pledged Bonds Custody and Security Agreement dated as of the date of this Indenture, among the Borrower, the Trustee, as collateral agent for the Credit Provider, and the Credit Provider, as such agreement may be amended, supplemented or restated from time to time, or any agreement entered into in substitution therefor. "Pledged Bond" means any Bond during the period from and including the date of its purchase by the Trustee on behalf of and as agent for the Borrower with the proceeds of an Advance under the Credit Facility, to, but excluding, the date on which the Pledged Bonds Advance made by the Credit Provider on account of such Pledged Bond is reinstated under the Credit Facility. "Potential Default" means, as used in any Transaction Document, any event that has occurred which, with the giving of notice or the passage of time or both, would constitute an Event of Default as described in that document. Any "Potential Default" as described in any 15 Transaction Document is not a "Potential Default' in any other Transaction Document unless that other Transaction Document specifically so provides. "Preference Claim" has the meaning given that term in Section 8.8. "Principal Amount" means $2,655,000, the original principal amount of the Bonds on the Closing Date. "Principal Reserve Amount" means an amount equal to 20% of the principal amount of the Bonds ($531,000). "Principal Reserve Fund" means the Principal Reserve Fund created by Section 5.1. "Principal Reserve Schedule" means the Schedule of Deposits to Principal Reserve Fund attached to the Reimbursement Agreement, as such schedule may be amended, supplemented or restated from time to time. "Prior Bonds" means the Multifamily Housing Refunding Revenue Bonds (Broadwy LaNel Project), Series 1993, issued in the original principal amount of $3,300,000 issued by the Issuer pursuant to the Prior Indenture. "Prior Indenture" means the Indenture of Trust, dated as of September 1, 1993, between the Issuer and the Prior Trustee, as amended, supplemented or restated to the Closing Date, pursuant to which the Prior Bonds were issued. "Prior Loan" means the loan with respect to the Mortgaged Property funded with proceeds of the Prior Bonds. "Prior Mortgage" means the Combination Mortgage, Security Agreement and Fixture Financing Statement, dated as of September 1, 1993 from the Borrower to the Prior Trustee (as amended, supplemented or restated to the Closing Date) on the Mortgaged Property granted to secure the Prior Loan. "Prior Trustee" means U.S. Bank National Association (successor in interest to First Trust National Association), the trustee under the Prior Indenture. "Qualified Financial Institution" means any of. (i) bank or trust company organized under the laws of any state of the United States of America, (ii) national banking association, (iii) savings bank, a savings and loan association, or an insurance company or association chartered or organized under the laws of any state of the United States of America, (iv) federal branch or agency pursuant to the International Banking Act of 1978 or any successor provisions of law or a domestic branch or agency of a foreign bank which branch or agency is duly licensed or authorized to do business under the laws of any state or territory of the United States of America, (v) government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York, (vi) securities dealer approved in writing by the Credit Provider the liquidation of which is subject to the Securities Investors Protection Corporation or other similar corporation and (vii) any other entity which is acceptable to the Credit Provider. With respect to an entity which provides an agreement held by the Trustee for the investment of moneys at a guaranteed rate as set out in paragraph (g) of the definition of the term "Permitted Investments" or an entity which guarantees or insures, as applicable, the agreement, a "Qualified 16 Financial Institution" may also be a corporation or limited liability company organized under the laws of any state of the United States of America. "Rate Determination Date" means (i) with respect to the Weekly Variable Rate, Wednesday of each week, or if such Wednesday is not a Business Day the immediately succeeding day, or if such immediately succeeding day is not a Business Day, then the first Business Day preceding such Wednesday; provided, however, that upon any adjustment to the Weekly Variable Rate Mode from a Reset Rate, the first Rate Determination Date will be the Business Day prior to the Adjustment Date, and (ii) with respect to any Reset Rate and the Fixed Rate, the date selected by the Remarketing Agent which date must be a Business Day not less than five Business Days prior to the Adjustment Date. The first such Rate Determination Date shall be Wednesday, August 20, 2003. "Rating Agency" means any nationally recognized statistical rating agency then maintaining a rating on the Bonds. "Rebate Analyst" means a Person that is (i) qualified and experienced in the calculation of rebate payments under Section 148 of the Code and compliance with the arbitrage rebate regulations promulgated under the Code, (ii) chosen by the Borrower and (iii) engaged for the purpose of determining the amount of required deposits, if any to the Rebate Fund. "Rebate Fund" means the Rebate Fund created by Section 5.1. "Record Date" means, with respect to any Interest Payment Date, (i) if the Bonds bear interest at the Weekly Variable Rate, the Business Day before the Interest Payment Date and (ii) if the Bonds bear interest at a Reset Rate or the Fixed Rate, the first day of the month in which the Interest Payment Date occurs. "Redemption Account" means the Redemption Account of the Revenue Fund. "Redemption Date" means any date upon which Bonds are to be redeemed pursuant to this Indenture. "Regulatory Agreement" means the Deed and Covenants Running With the Land dated as of December 1, 1985, between the New Hope Housing and Redevelopment Authority, as grantor, and the Borrower, as grantee, as amended and supplemented by the First Amendment to Deed and Covenants running with the Land, dated as of September 1, 1993, between the Borrower, the Prior Trustee and the New Hope Economic Development Authority, as amended and supplemented by the Second Amendment to Deed and Covenants Running With the Land, dated as of the date of this Indenture, between the Borrower, the Trustee and the New Hope Economic Development Authority, as it may be subsequently amended, supplemented or restated from time to time. "Reimbursement Agreement" means the Reimbursement Agreement, dated as of the date of this Indenture, by the Credit Provider and the Borrower, as amended, supplemented or restated from time to time, or any agreement entered into in substitution therefor. "Remarketing Agent" means U.S. Bancorp Piper Jaffray Inc., or any successor as Remarketing Agent designated in accordance with Section 4.3. 17 "Remarketing Agreement" means the Remarketing Agreement, dated as of the date of this Indenture between the Borrower and the Remarketing Agent, as amended, supplemented or restated from time to time, or any agreement entered into in substitution therefor. "Remarketing Notice Parties" means the Borrower, Issuer, Trustee, Tender Agent, Remarketing Agent, Credit Provider and Loan Servicer. "Reserved Rights" means those certain rights of the Issuer under the Financing Agreement to indemnification and to payment or reimbursement of fees and expenses of the Issuer, its right to receive notices and to enforce notice and reporting requirements, its right to inspect and audit the books, records and premises of the Borrower and of the Mortgaged Property, its right to collect attorneys' fees and related expenses, its right to specifically enforce the Borrower's covenant to comply with applicable federal tax law and State law (including the Act and the rules and regulations of the Issuer, if any), and its right to give or withhold consent to amendments, changes, modifications and alterations to the Financing Agreement relating to the Reserved Rights. "Reset Date" means any date upon which the Bonds begin to bear interest at a Reset Rate for the Reset Period then beginning. "Reset Period" means each period of ten years or more selected by the Borrower, or such shorter period as may be selected by the Borrower with the prior written consent of the Credit Provider, during which the Bonds bear interest at a Reset Rate. "Reset Rate" means the rate of interest bome by the Bonds as determined in accordance with Section 2.6. "Revenue Fund" means the Revenue Fund created by Section 5.1. "Revenues" means all (i) payments made under the Credit Facility, (ii) Investment Income (excluding Investment Income earned from moneys on deposit in the Principal Reserve Fund, the Rebate Fund, the Fees Account and the Costs of Issuance Fund, but including Investment Income earned on Net Bond Proceeds deposited into the Costs of Issuance Fund and Investment Income on such Investment Income) and (iii) payments made under the Note. "Securities Depository" means, initially, DTC and any replacement securities depository appointed under this Indenture. "Security" means the Trust Estate and the Credit Facility. "Security Instrument" means the Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, dated as of August 1, 2003, together with all riders and exhibits, securing the Note and the obligations of the Borrower to the Credit Provider under the Credit Facility Documents, executed by the Borrower with respect to the Mortgaged Property, as it may be amended, supplemented or restated from time to time, or any security instrument executed in substitution therefor, as such substitute security instrument may be amended, supplemented or restated from time to time. "Sinking Fund Payment" means, as of any particular date of calculation, the amount required to be paid by the Issuer on a single future date for the retirement of Outstanding Bonds 18 which mature after such future date, but excluding any amount payable by the Issuer by reason of the maturity of a Bond or by optional redemption at the election of the Issuer. "Sinking Fund Payment Date" means any of the dates on which any of the Bonds matures or is subject to redemption through the application of Sinking Fund Payments as set out in a Sinking Fund Schedule. "Sinking Fund Schedule" means a schedule of principal amounts of Bonds to mature or be subject to redemption through the application of Sinking Fund Payments on the specified dates and/or a schedule of principal amounts of Bonds maturing as serial Bonds. "S&P" means Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., and its successors and assigns, or if it is dissolved or no longer assigns credit ratings, then any other nationally recognized statistical rating agency, designated by the Credit Provider, as assigns credit ratings. "State" means the State of Minnesota. "Substitution Date" means the date upon which an Alternate Credit Facility is to be substituted for the Credit Facility then in effect, which date must be an Interest Payment Date during a Weekly Variable Rate Period or an Adjustment Date which immediately follows a Reset Period. "Tax Certificate" means the Tax Certificate, dated the Closing Date, executed and delivered by the Issuer and the Borrower, as amended, supplemented or restated from time to time. "Tax Event" has the meaning given to that term in Section 10.1(c). "Tender Agent" means the Tender Agent named in Article XI or its successor as Tender Agent under this Indenture named in accordance with such Article. "Tender Agent Agreement" means any Tender Agent Agreement entered into by the Issuer, the Trustee and the Tender Agent in the event that the Trustee does not serve as Tender Agent under this Indenture, as such agreement may be amended, supplemented or restated from time to time. "Tender Date" means any Mandatory Tender Date or any other date on which Bondholders are permitted under this Indenture to tender their Bonds for purchase. "Tendered Bond" means any Bond which has been tendered for purchase pursuant to Sections 4.1 or 4.2. "Third Party Fees" has the meaning given to that term in Section 5.7(a). "Transaction Documents" means the Bond Documents, the Loan Documents and the Credit Facility Documents. "Trust Estate" means the property, interests, rights, money, securities and other amounts pledged and assigned pursuant to this Indenture and the property, rights, money, securities and 19 other amounts pledged and assigned by the Issuer to the Trustee and the Credit Provider pursuant to the Assignment. "Trustee" means U.S. Bank National Association, a a national banking association, duly organized and existing under the laws of the United States of America, or its successors or assigns, or any other corporation or association resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at any time serving as successor trustee under this Indenture. "Trustee's Annual Fee" means the annual continuing trust administration fee of the Trustee as provided in the Financing Agreement, computed and payable semiannually in advance on each January 15 and July 15. "UCC" means the Uniform Commercial Code of the State as in effect now or in the future, whether or not such Uniform Commercial Code is applicable to the parties or the transactions. "Underwriter" means U.S. Bancorp Piper Jaffray Inc.. "Week" means any seven-day period during a Weekly Variable Rate Period beginning on Thursday and ending on and including the following Wednesday; except that: (a) the first Week will begin on the Closing Date and end on and include Wednesday, August 20, 2003; (b) the first Week of a Weekly Variable Rate Period immediately following an Adjustment Date will begin on such Adjustment Date and end on and include the following Wednesday; (c) any Week ending immediately before an Adjustment Date will begin on a Thursday and end on the day before such Adjustment Date; (d) the final Week will begin on a Thursday and end on the earlier of an Adjustment Date or the Maturity Date; and (e) the first and last Weeks of a Weekly Variable Rate Period may consist of more (but not more than 13) or less than 7 days. "Weekly Variable Rate" means the variable rate of interest per annum for the Bonds determined from time to time during the Weekly Variable Rate Period in accordance with Section 2.5. "Weekly Variable Rate Period" means the period commencing on the Closing Date or an Adjustment Date on which the interest rate on the Bonds is adjusted from the Reset Rate to the Weekly Variable Rate and ending on the day preceding the following Adjustment Date or the Maturity Date. "Wrongful Dishonor" means an uncured failure by the Credit Provider to make an Advance to the Trustee upon proper presentation of documents which conform to the terms and conditions of the Credit Facility. 20 SECTION 1.2 Rules of Construction. The rules of construction set forth in this Section 1.2 apply to this Indenture. (a) The singular form of any word includes the plural, and vice versa, unless the context otherwise requires. The use of a pronoun of any gender includes correlative words of the other genders. (b) All references to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or other subdivisions of this Indenture; and the words "in this Indenture," "of this Indenture," "under this Indenture" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision. (c) Any captions, headings or titles of the several Articles, Sections and other subdivisions, and the table of contents are solely for convenience of reference and do not limit or otherwise affect the meaning, construction or effect of this Indenture or describe the scope or intent of any provision. (d) All accounting terms not otherwise defined have the meanings assigned to them in accordance with applicable generally accepted accounting principles as in effect from time to time. (e) Every "request," "order," "demand," "application," "appointment," "notice," "statement," "certificate," "consent," "direction" or similar action under this Indenture by any party must be in writing and signed by a duly authorized representative of such party with a duly authorized signature. (f) All references in this Indenture to "counsel fees," "attorneys fees" or the like mean and include fees and disbursements allocable to in-house or outside counsel, whether or not suit is instituted, and including fees and disbursements preparatory to and during trial and appeal and in any bankruptcy or arbitration proceedings. (g) Whenever the word "includes" or "including" is used, such word means "includes or including by way of example and not limitation." ARTICLE II THE BONDS SECTION 2.1 Authorized Amount of Bonds. No Bonds may be issued under this Indenture except as provided in this Article. The total principal amount of Bonds that may be issued and outstanding under this Indenture is expressly limited to the Principal Amount. SECTION 2.2 Issuance of Bonds. The Bonds are authorized to be issued pursuant to and in accordance with this Indenture, substantially in the form set forth in Exhibit A with such appropriate variations, legends, omissions and insertions as permitted by this Indenture. The Bonds shall (i) be designated "Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003", (ii) be issued in the Principal Amount, (iii) be dated the Closing Date, (iv) bear interest from the Closing Date at the rate or rates determined as provided in Sections 2.5, 2.6 and 2.7, payable on each Interest Payment Date and (v) mature on the Maturity Date, subject to prior redemption as provided in Article III. The Bonds shall be 21 issued as registered bonds without coupons in Authorized Denominations. The Bonds shall be numbered consecutively from R-1 upwards. SECTION 2.3 Payment of Principal and Interest. The principal of and the interest and any premium on the Bonds are payable in lawful money of the United States of America to the Registered Owners at the close of business on the applicable Record Date. Payment of interest on the Bonds shall be made on each Interest Payment Date by check drawn upon the Trustee and mailed by first class mail, postage prepaid, to the addresses of the Registered Owners as they appear on the Bond Register or to such other address as may be furnished in writing by any Registered Owner to the Trustee prior to the applicable Record Date. Payment of the principal of any Bond and premium, if any, together with interest (other than interest payable on a regularly scheduled Interest Payment Date) shall be made by check only upon presentation and surrender of the Bond on or after its maturity date or date fixed for purchase, redemption or other payment at the office of the Trustee designated for that purpose. Notwithstanding the foregoing, payment of principal of and interest and any premium on any Bond shall be made by wire transfer to any account within the United States of America designated by a Registered Owner owning $1,000,000 or more in aggregate principal amount of Bonds if a written request for wire transfer in form and substance satisfactory to the Trustee is delivered to the Trustee by any such Registered Owner not less than five Business Days prior to the applicable payment date. A request for wire transfer that specifies that it is effective with respect to all succeeding payments of principal, interest and any premium will be so effective unless and until rescinded in writing by the Registered Owner at least five Business Days prior to a Record Date. If interest on the Bonds is in default, the Trustee, prior to the payment of interest, shall establish a special record date ("Special Record Date") for such payment. A Special Record Date may not be more than 15 nor less than ten days prior to the date of the proposed payment. Payment of defaulted interest shall then be made by check or wire transfer, as permitted above, mailed or remitted to the Registered Owners in whose names the Bonds are registered on the Special Record Date. SECTION 2.4 Limited Obligations. The Bonds are special, limited obligations of the Issuer, payable solely from the Security. The Bonds are not a debt of the State or of any other political subdivision of the State, and neither the State nor any other political subdivision of the State will be liable for the payment of the Bonds. The faith and credit of the Issuer, the State or any political subdivision of the State are not pledged to the payment of the principal of or interest on the Bonds. SECTION 2.5 Weekly Variable Rate Mode. (a) Weekly Variable Rate. Except during a Reset Period or a Fixed Rate Period, the Bonds shall bear interest at the Weekly Variable Rate, determined from time to time pursuant to Section 2.5(b). During the Weekly Variable Rate Period, interest shall accrue on the basis of a 365- or 366 -day year, as applicable, for the actual number of days elapsed. (b) Determination of Weekly Variable Rate. During each Weekly Variable Rate Period, the Remarketing Agent shall determine the Weekly Variable Rate for each Week not later than 4:00 p.m. Eastern time on each Rate Determination Date. The Weekly Variable Rate shall be the minimum rate of interest necessary, in the professional judgment of the Remarketing Agent, taking into consideration prevailing market conditions, to enable the Remarketing Agent to remarket all of the Bonds on the applicable Rate Determination Date at par plus accrued interest on the Bonds for that Week. The Weekly Variable Rate so determined shall be effective 22 for the Week for which such rate was determined. The Remarketing Agent shall provide notice of the Weekly Variable Rate before 5:00 p.m. Eastern time on the Rate Determination Date by telephone to any Beneficial Owner upon request and to the Trustee and the Loan Servicer, and not later than the next Business Day to the Remarketing Notice Parties by Electronic Means. The Weekly Variable Rate so determined by the Remarketing Agent will be conclusive and binding upon the Remarketing Notice Parties and the Registered Owners. SECTION 2.6 Reset Rate Mode. (a) Reset Rate. During any Reset Period, the Bonds shall bear interest at the Reset Rate determined pursuant to Section 2.6(b) for such Reset Period. During each Reset Period, interest shall accrue on the basis of a year of 360 days of twelve 30 -day months. (b) Determination of Reset Rate. The Remarketing Agent shall determine the Reset Rate not later than 4:00 p.m. Eastern time on the applicable Rate Determination Date. The Reset Rate shall be the minimum rate of interest necessary, in the professional judgment of the Remarketing Agent, taking into consideration prevailing market conditions, to enable the Remarketing Agent to remarket all of the Bonds on the applicable Rate Determination Date at par for the applicable Reset Period. The Remarketing Agent will provide notice of the Reset Rate before 5:00 p.m. Eastern time on the Rate Determination Date by telephone to any Beneficial Owner upon request and to the Trustee and the Loan Servicer, and not later than the next Business Day to the other Remarketing Notice Parties by Electronic Means. The Reset Rate so determined by the Remarketing Agent will be conclusive and binding upon the Remarketing Notice Parties and the Registered Owners. SECTION 2.7 Fixed Rate Mode. (a) Fixed Rate. During the Fixed Rate Period, the Bonds shall bear interest at the Fixed Rate determined pursuant to Section 2.7(b). During the Fixed Rate Period, interest shall accrue on the basis of a year of 360 days of twelve 30 -day months. (b) Determination of Fixed Rate. The Remarketing Agent shall determine the Fixed Rate not later than 4:00 p.m. Eastern time on the applicable Rate Determination Date. The Fixed Rate shall be the minimum rate of interest necessary, in the professional judgment of the Remarketing Agent, taking into consideration prevailing market conditions, to enable the Remarketing Agent to remarket all of the Bonds on the Rate Determination Date at par for the Fixed Rate Period. The Remarketing Agent shall provide notice of the Fixed Rate before 5:00 p.m. Eastern time on the Rate Determination Date by telephone to the Loan Servicer, and not later than the next Business Day to the other Remarketing Notice Parties by Electronic Means. The Fixed Rate so determined by the Remarketing Agent will be conclusive and binding upon the Remarketing Notice Parties and the Registered Owners. SECTION 2.8 Mode Adiustments. (a) Adjustment to Reset Rate from Weekly Variable Rate or from prior Reset Rate. At the option of the Borrower, the interest rate on all Outstanding Bonds may be adjusted on any Interest Payment Date from the Weekly Variable Rate to a Reset Rate for a Reset Period of ten years or more selected by the Borrower, or such shorter period as may be selected by the Borrower with the prior written consent of the Credit Provider. Any Reset Period must end 23 immediately before an Interest Payment Date. In addition, the interest rate on all Outstanding Bonds may be adjusted from a prior Reset Rate to a new Reset Rate on the Adjustment Date immediately following the Reset Period then in effect. Each such adjustment is subject to satisfaction of the following conditions precedent: (1) not less than 45 days before the proposed Reset Date, the Borrower delivers (A) written notice to the other Remarketing Notice Parties of the proposed adjustment and designating the proposed Reset Date and the duration of the Reset Period to commence on such Reset Date and (B) the written preliminary consent of the Credit Provider to such adjustment which consent may be subject to the satisfaction of conditions prior to such adjustment; (2) not less than 30 days before the proposed Reset Date, the Trustee gives written notice to the Bondholders by first class mail, postage prepaid, stating: (A) the proposed Reset Date; (B) that from and after the proposed Reset Date, if the conditions specified in this Indenture to such adjustment are satisfied, the Bonds will bear interest at a Reset Rate (which rate need not be stated); and (C) that all Bonds are subject to mandatory tender and purchase on the proposed Reset Date, whether or not such conditions are satisfied, and no holder of any Bond shall have the right to elect to retain such Bond; (3) on or prior to the proposed Reset Date, the Borrower delivers (A) to the Trustee and the Loan Servicer, written notice from the Credit Provider consenting to the adjustment to the Reset Rate, together with confirmation that the Credit Facility will be sufficient in amount and term to satisfy the requirements of Section 2.9 and (B) to the other Remarketing Notice Parties, an opinion of Bond Counsel to the effect that the adjustment of the interest rate on the Bonds to the Reset Rate is authorized and permitted by this Indenture and the laws of the State (including the Act), and will not adversely affect the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds; and (4) on or prior to the proposed Reset Date, the Remarketing Agent has given notice pursuant to Section 4.3(d) to the effect that all Outstanding Bonds have been remarketed for the Reset Period at the Reset Rate determined pursuant to Section 2.6(b). (b) Adjustment from Reset Rate to Weekly Variable Rate. At the option of the Borrower, the interest rate on all Outstanding Bonds may be adjusted from a Reset Rate to the Weekly Variable Rate on the day following the last day of a Reset Period. Each such adjustment is subject to the satisfaction of the following conditions precedent: (1) not less than 45 days before the proposed Adjustment Date, the Borrower delivers (A) written notice to the other Remarketing Notice Parties electing the proposed adjustment and (B) the written preliminary consent of the Credit Provider to such adjustment which consent may be subject to the satisfaction of conditions prior to such adjustment; (2) not less than 30 days before the proposed Adjustment Date, the Trustee gives written notice to the Bondholders by first class mail, postage prepaid, stating: (A) the proposed Adjustment Date; (B) that from and after the proposed Adjustment Date, if the 24 conditions specified in this Indenture to such adjustment are satisfied, the Bonds will bear interest at the Weekly Variable Rate (which rate need not be stated); and (C) that all Bonds are subject to mandatory tender and purchase on the proposed Adjustment Date, and that no holder of any Bond will have the right to elect to retain such Bond; (3) on or prior to the proposed Adjustment Date, the Borrower delivers (A) to the Trustee and the Loan Servicer written notice from the Credit Provider consenting to the adjustment to the Weekly Variable Rate, together with confirmation that the Credit Facility will be sufficient in amount and term to satisfy the requirements of Section 2.9 and (B) to the other Remarketing Notice Parties, an opinion of Bond Counsel to the effect that the adjustment of the interest rate on the Bonds to the Weekly Variable Rate is authorized and permitted by this Indenture and the laws of the State, and will not adversely affect the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds; and (4) on or prior to the proposed Adjustment Date, the Remarketing Agent has given notice pursuant to Section 4.3(d) to the effect that all Outstanding Bonds have been remarketed for the first Week of the Weekly Variable Rate Period at the Weekly Variable Rate determined pursuant to Section 2.5(b). (c) Adjustment to Fixed Rate. At the option of the Borrower, the interest rate on all Outstanding Bonds may be adjusted to the Fixed Rate (i) from the Weekly Variable Rate on any Interest Payment Date designated by the Borrower, or (ii) from a Reset Rate (A) on the day following the last day of any Reset Period or (B) on any Interest Payment Date during a Reset Period on which the Bonds are subject to redemption pursuant to Section 3.2(a) at par without any premium. Such adjustment is subject to the satisfaction of the following conditions precedent: (1) not less than 45 days before the proposed Fixed Rate Adjustment Date, the Borrower delivers (A) written notice to the other Remarketing Notice Parties designating the proposed Fixed Rate Adjustment Date and (B) the written preliminary consent of the Credit Provider to such adjustment which consent may be subject to the satisfaction of conditions prior to such adjustment; (2) not less than 30 days before the proposed Fixed Rate Adjustment Date, the Trustee gives written notice to the Bondholders by first class mail, postage prepaid, stating the following: (A) the proposed Fixed Rate Adjustment Date; (B) that from and after the proposed Fixed Rate Adjustment Date, if the conditions specified in this Indenture to such adjustment are satisfied, the Bonds will bear interest at the Fixed Rate (which rate need not be stated); and (C) that all Bonds are subject to mandatory tender and purchase on the proposed Fixed Rate Adjustment Date, whether or not such conditions are satisfied and no holder of any Bond(s) will have the right to elect to retain its Bonds; (3) on or prior to the proposed Fixed Rate Adjustment Date, the Borrower delivers (A) to the Trustee, either (1) written notice from the Credit Provider consenting to the adjustment to the Fixed Rate, together with confirmation that the Credit Facility will be sufficient in amount and term to satisfy the requirements of Section 2.9 or (2) a written waiver from the Issuer of the requirement for a Credit Facility during the Fixed Rate Period so long as the Credit Facility then in effect remains in effect for the 25 mandatory tender of the Bonds on the proposed Fixed Rate Adjustment Date (which waiver will acknowledge that the Rating Agency has been notified not less than ten days prior to the Fixed Rate Adjustment Date that the Credit Facility will be terminated on the Fixed Rate Adjustment Date); and (B) to the other Remarketing Notice Parties, an opinion of Bond Counsel to the effect that the adjustment of the interest rate on the Bonds to the Fixed Rate is authorized and permitted by this Indenture and the laws of the State (including the Act), and will not adversely affect the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds; and (4) on or prior to the proposed Fixed Rate Adjustment Date, the Remarketing Agent has given notice pursuant to Section 4.3(d) to the effect that all Outstanding Bonds have been remarketed for the Fixed Rate Period at the Fixed Rate determined pursuant to Section 2.7(b). (5) on or prior to the proposed Fixed Rate Adjustment Date (A) the Issuer, at the written direction of the Borrower and with the prior written consent of the Credit Provider, establishes a Sinking Fund Schedule, (B) the Issuer, the Trustee and the Credit Provider receive an opinion of Bond Counsel to the effect that establishing a Sinking Fund Schedule will not adversely affect the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds, and (C) the Note is amended, with the prior written consent of the Credit Provider, to provide for principal amortization of the Loan consistent with the Sinking Fund Schedule. The Trustee shall provide a copy of the Sinking Fund Schedule, Opinion of Bond Counsel and Note amendment to the Loan Servicer on or before the proposed Adjustment Date. SECTION 2.9 Credit Facility Requirement. So long as the Bonds bear interest at the Weekly Variable Rate or at a Reset Rate, one or more Credit Facilities providing credit support for the Loan or the Bonds and liquidity support for the Bonds must be in effect. If the Bonds bear interest at the Fixed Rate, one or more Credit Facilities providing credit support for the Loan or the Bonds must be in effect unless the Issuer has expressly waived such requirement in writing. When delivered, each Credit Facility shall satisfy the following requirements: (a) the Credit Facility shall be in an amount equal to the aggregate principal amount of the Bonds Outstanding from time to time plus the Interest Requirement; (b) the Credit Facility shall provide for payment in immediately available funds to the Trustee, upon receipt of the Trustee's request for such payment with respect to any Interest Payment Date, purchase date (if applicable) or mandatory redemption date pursuant to this Indenture; (c) if the Credit Facility is provided to secure Bonds during a Reset Period, the Credit Facility shall provide an expiration date no earlier than the earliest of (i) the day following the Adjustment Date immediately succeeding the Reset Period; (ii) ten days after the Trustee receives notice from the Credit Provider of an Event of Default under the Reimbursement Agreement and a direction to redeem all Outstanding Bonds; (iii) the date on which all Bonds are paid in full and this Indenture is discharged in accordance with its terms; and (iv) the date on which the Bonds become secured by an Alternate Credit Facility in accordance with the terms of this Indenture and the Credit Facility; and 26 (d) unless waived by the Issuer in its sole discretion, the Credit Facility shall result in the Bonds receiving a short-term rating in the highest rating category of each Rating Agency or a long-term rating in one of the three highest rating categories of each Rating Agency, or both, as applicable for the Mode then in effect. SECTION 2.10 Certain General Provisions Concernine Modes and Interest Rates. (a) Failure to Satisfy Conditions Precedent to Mode Change. If the conditions precedent to a change in Mode set forth in Sections 2.8 and 2.9 have not been satisfied, then the following will apply: (1) The new Mode shall not take effect. (2) The Bonds shall be subject to mandatory tender on the proposed Adjustment Date and the holders of the Bonds will not have the right to elect to retain their Bonds. (3) If the Mode in effect immediately prior to the proposed Adjustment Date is the Weekly Variable Rate, the interest rate on the Bonds shall continue at the Weekly Variable Rate from and after the proposed Adjustment Date, without any further action by any party. (4) If the Mode in effect immediately prior to the proposed Adjustment Date is a Reset Rate, the interest rate on the Bonds shall be adjusted on the proposed Adjustment Date to the Weekly Variable Rate if the Trustee and the Credit Provider receive an opinion of Bond Counsel to the effect that the change to a Weekly Variable Rate will not adversely affect the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds. If such an opinion is not delivered, the interest rate on the Bonds shall be adjusted on the proposed Adjustment Date to a new Reset Rate for the shortest Reset Period ending on an Interest Payment Date which would enable the Remarketing Agent to remarket the Bonds on the proposed Adjustment Date at par with the Bonds bearing interest at the lowest possible rate, but in no event greater than the Reset Rate in effect for the Reset Period immediately prior to the proposed Adjustment Date or such higher rate to which the Credit Provider may consent from time to time without any further action by any party other than the selection of the Reset Period and the remarketing of the Bonds so long as the Trustee and the Credit Provider receive an opinion of Bond Counsel to the effect that the change to such Reset Period will not adversely affect the exclusion of the interest on the Bonds from gross income for federal income tax purposes. If such opinion is not delivered, the Bonds shall remain at the Reset Rate in effect for the immediately prior Reset Period, with a Reset Period equal to the Reset Period previously in effect without any further action by any party other than the remarketing of the Bonds. (5) The Remarketing Agent will remarket the Bonds on the Adjustment Date at the applicable interest rate. (b) Failure by Remarketing Agent to Determine Weekly Variable Rate. If the Remarketing Agent fails or refuses to determine the Weekly Variable Rate applicable for any Week, the interest rate to be borne by the Bonds during such Week shall be the latest BMA 27 Index Rate published on or before the Rate Determination Date, or, in the event the BMA Index Rate is no longer published, the last Weekly Variable Rate determined by the Remarketing Agent. (c) Maximum Interest Rate. Notwithstanding any other provision of this Indenture, the interest rate on the Bonds may not exceed the Maximum Rate. (d) Alternate Credit Facility. Notwithstanding anything to the contrary in this Indenture, the consent of the Credit Provider to a change in Mode shall not be required if (i) an Alternate Credit Facility satisfying the requirements of Section 2.9 will be in effect on the Adjustment Date and (ii) the Credit Facility then in effect will remain available for mandatory tenders of Bonds on the Adjustment Date. Each opinion of Bond Counsel relating to a change in Mode required to be delivered to the Credit Provider must also be delivered to the Alternate Credit Provider. (e) Reimbursement Agreement Default. Notwithstanding anything to the contrary contained in this Indenture, in the event that the Credit Provider gives written notice to the Issuer and the Trustee that the Borrower has defaulted in performing any of its obligations under Section 6.5 (Fannie Mae Right to Convert to Reset Rate, Fixed Rate) of the Reimbursement Agreement, then the Credit Provider shall be entitled to exercise all rights of the Borrower to adjust the Mode and the Borrower shall not be entitled to exercise any such rights unless and until the Borrower gives written notice, acknowledged in writing by the Credit Provider, to the Issuer, the Loan Servicer and the Trustee that either (i) such default has been cured or waived or (ii) the Credit Provider has consented to the Borrower's resumption of the exercising of such rights. Such acknowledgement or consent by the Credit Provider shall not preclude the Credit Provider from exercising its rights under this subsection upon the occurrence of any subsequent default by the Borrower under the Reimbursement Agreement. Any notice from the Credit Provider to the Issuer and the Trustee of a default under the Reimbursement Agreement as set forth in this subsection must state whether or not it is also intended to constitute a notice described in Section 10.1(a)(4). SECTION 2.11 Temporary Bonds. If definitive Bonds are not ready for delivery on the Closing Date, the Issuer shall execute, and at the request of the Issuer, the Trustee shall authenticate and deliver, one or more temporary typewritten, printed or lithographed Bonds, in any Authorized Denomination, in fully registered form, and in substantially the form provided for definitive Bonds with appropriate omissions, insertions and variations. The Issuer shall cause definitive Bonds to be prepared and to be executed and delivered to the Trustee. Upon presentation to it of any temporary Bond, the Trustee shall cancel the same and authenticate and deliver in exchange therefor, without charge to the owner of such Bond, a definitive Bond or Bonds of an equal aggregate principal amount of Authorized Denominations, of the same maturity and series, and bearing interest at the same rate as the temporary Bond surrendered. Until so exchanged, the temporary Bonds will in all respects be entitled to the same benefit and security of this Indenture as the definitive Bonds. SECTION 2.12 Execution. The Bonds shall be signed by the manual or facsimile signature of an Authorized Officer. The official seal, or a facsimile of the official seal, of the i Issuer need not be affixed to or imprinted on any Bond. In case any officer whose signature or a facsimile of whose signature appears on any Bonds ceases to be such officer before the delivery FT 1 of such Bonds, such signature or such facsimile will nevertheless be valid and sufficient for all purposes as if such officer had remained in office until delivery. SECTION 2.13 Authentication. Only such Bonds as have endorsed on them a certificate of authentication substantially in the form set forth in Exhibit A to this Indenture duly executed by the Trustee shall be entitled to any right or benefit under this Indenture. No Bond shall be valid or obligatory for any purpose unless and until such certificate of authentication has been manually executed by the Trustee. Such executed certificate upon any Bond shall be conclusive evidence that such Bond has been authenticated and delivered under this Indenture. The Trustee's certificate of authentication on any Bond shall be deemed to have been executed by it if signed by an authorized representative of the Trustee, but it shall not be necessary that the same person sign the certificates of authentication on all of the Bonds. SECTION 2.14 Mutilated, Lost, Stolen or Destroyed Bonds. If any Bond is mutilated, lost, stolen or destroyed, the Issuer shall execute and the Trustee shall authenticate and deliver a new Bond of the same maturity, interest rate, principal amount, series and tenor in lieu of and in substitution for the mutilated, lost, stolen or destroyed Bond, provided, however, that in the case of any mutilated Bond, the mutilated Bond must first be surrendered to the Trustee, and in the case of any lost, stolen or destroyed Bond, there must be first furnished to the Trustee evidence satisfactory to it of the ownership of the Bond, and of the loss, theft or destruction, together with indemnity satisfactory to the Trustee and the Issuer and compliance with such other reasonable requirements as the Trustee and the Issuer may prescribe. If any such Bond will mature within the ensuing 60 -days, or if such Bond has been called for redemption or a redemption date pertaining to such Bond has passed, instead of replacing the Bond, the Trustee may, upon receipt of such indemnity, pay the Bond on such maturity date or redemption date. The Trustee shall cancel any mutilated Bond surrendered to it. In connection with any such substitution or payment, the Issuer and the Trustee may charge the holder of such Bond their reasonable fees and expenses, including attorneys' fees and expenses. If, after the delivery of such replacement Bond, the original Bond in lieu of which such replacement Bond was issued is presented for payment or registration, the Trustee shall seek to recover such replacement Bond from the person to whom it was delivered or any person taking therefrom and shall be entitled to recover from the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Trustee, the Borrower or the Issuer in connection therewith. SECTION 2.15 Securities Depository Provisions. (a) Registration in the Book -Entry System. Initially, all Bonds shall be Book - Entry Bonds. All Bonds shall be registered initially in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"). The Issuer acknowledges that it has executed and delivered a Letter of Representations with DTC. All payments of principal of, redemption premium, if any, and interest on the Book -Entry Bonds and all notices with respect thereto, including notices of full or partial redemption, shall be made and given at the times and in the manner set out in the Letter of Representations. This Indenture shall govern in the event of any inconsistency between this Indenture and the Letter of Representations. The Letter of Representations may be amended without Bondholder consent. W (b) Exculpation. With respect to Book -Entry Bonds, neither the Issuer, the Trustee, the Credit Provider, the Loan Servicer nor the Borrower will have any responsibility or obligation to any broker-dealer, bank or other financial institution for which DTC holds Bonds from time to time as securities depository ("DTC Participant') or to any person on behalf of whom such a DTC Participant directly or indirectly holds an interest in the Bonds ("Indirect Participant'). Without limiting the immediately preceding sentence, the Issuer, the Trustee, the Credit Provider, the Loan Servicer and the Borrower will have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any Indirect Participant or any other person, other than DTC, as Bondholder, of any notice with respect to the Bonds, including any notice of redemption, (iii) the payment to any DTC Participant or Indirect Participant or any other Person, other than DTC, as Bondholder, of any amount with respect to principal of, premium, if any, or interest on, the Bonds, (iv) any consent given by DTC or (v) selection of Bonds for redemption. The Issuer, the Borrower, the Credit Provider, the Loan Servicer and the Trustee shall treat DTC or any successor securities depository as, and deem DTC or any successor securities depository to be, the absolute owner of the Bonds for all purposes whatsoever and neither the Issuer, the Borrower nor the Trustee shall have any responsibility or obligation to any Beneficial Owner of any Book -Entry Bond. While in the DTC system, no person other than DTC will receive a Bond certificate with respect to any Bond. (c) Successor Securities Depository; Transfers Outside Book -Entry System. DTC may discontinue providing its services with respect to the Bonds at any time by giving written notice to the Issuer, the Trustee, the Remarketing Agent, the Tender Agent and the Borrower and by discharging its responsibilities with respect to the Bonds under applicable law. The Issuer or the Borrower, with the consent of the other, may terminate the services of DTC. If the Borrower is in default under any Bond Document or any Loan Document, the Issuer will not be required to obtain the consent of the Borrower to terminate the services of DTC. Without the consent of the Issuer, the Borrower may terminate the services of DTC if the Tender Agent is not a DTC Participant. Upon the discontinuance or termination of the services of DTC, unless a substitute securities depository is appointed to undertake the functions of DTC under this Indenture, the Issuer, at the expense of the Borrower, shall provide Bond certificates to the Trustee for delivery to the Beneficial Owners of the Bonds, and the Bonds may be registered in whatever name or names the Registered Owners transferring or exchanging Bonds designate to the Trustee in writing. The Trustee may appoint a successor depository operating a securities depository system, qualified to act as such under Section 17A of the Securities Exchange Act of 1934, as amended, as may be acceptable to the Issuer. SECTION 2.16 Bond Registrar; Exchange and Transfer of Bonds,• Persons Treated as the Bondholders. (a) Bond Registrar; Bond Register. The Trustee shall act as the initial Bond Registrar and in such capacity shall keep the Bond Register for the registration of the Bonds and for the registration of transfer of the Bonds. (b) Transfers and Exchanges. Any Bondholder or its attorney duly authorized in writing may transfer title to or exchange a Bond upon surrender of the Bond at the Designated Office of the Trustee together with a written instrument of transfer (in substantially the form of assignment, including signature guarantee, attached to the Bond) satisfactory to the Trustee 30 executed by the Bondholder or its attorney duly authorized in writing. Upon surrender for registration of transfer of any Bond, the Issuer shall execute and the Trustee shall authenticate and deliver in the name of the Bondholder or its transferee or transferees a new Bond or Bonds of the same aggregate principal amount, rate of interest, maturity, series and tenor as the Bond surrendered and of any Authorized Denomination. If Fannie Mae is the Credit Provider, any purported transfer to Fannie Mae (other than a transfer of Pledged Bonds if Fannie Mae has become the owner of the Mortgaged Property and would be required to advance funds under the Credit Facility in connection with a mandatory purchase of Bonds) must be accompanied by the written consent of the General Counsel and the Controller of Fannie Mae. (c) Exceptions to Transfers and Exchanges. Except as provided in Section 4.1, the Trustee will not be required to register any transfer or exchange of any Bond (or portion of any Bond) during the 15 -day period immediately before the selection of Bonds for redemption, and from and after notice calling such Bonds (or portion of such Bonds) for redemption or partial redemption has been given and prior to such redemption. (d) Charges. Registrations of transfers or exchanges of Bonds shall be without charge to the Bondholders, but any taxes or other governmental charges required to be paid with respect to a transfer or exchange shall be paid by the Bondholder requesting the registration of transfer or exchange as a condition precedent to the exercise of such privilege. Any service charge made by the Trustee for any such registration, transfer or exchange shall be paid by the Borrower. (e) Recognized Owners. The person in whose name any Bond is registered on the Bond Register will be deemed the absolute owner of such Bond for all purposes, and payment of any principal, interest and premium will be made only to or upon the order of such person or its attorney duly authorized in writing, but such registration may be changed as provided above. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. (f) Bonds Protected. All Bonds issued upon any registration of transfer or exchange of Bonds will be legal, valid and binding limited obligations of the Issuer, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Bonds surrendered upon such transfer or exchange. (g) Issuer's Reliance. hi executing any Bond upon any exchange or registration of ~ transfer provided for in this Section, the Issuer may rely conclusively on a representation of the Trustee that such execution is required. SECTION 2.17 Cancellation. All Bonds which have been surrendered pursuant to Section 2.3 or Article III for payment upon maturity or redemption prior to maturity or Bonds which are deemed canceled or are canceled pursuant to Section 4.4(b) will be canceled by the Trustee and will not be reissued. Unless otherwise directed by the Issuer, the Trustee shall treat such Bonds in accordance with its document retention policies or as may be directed by the law of the State. ? SECTION 2.18 Conditions for Delivery of Bonds. Upon the execution and delivery of this Indenture, the Issuer shall execute and deliver to the Trustee, and the Trustee shall 31 authenticate, the Bonds and deliver them to or for the account of the Underwriter or to such persons as the Underwriter specifies, in each case in the records of DTC, provided, however, that prior to delivery of the Bonds to the Underwriter each of the following must be delivered to the Trustee: (a) a certified copy of the Bond Resolution authorizing the execution and delivery on behalf of the Issuer of the Bond Documents to which it is a party and related matters; (b) executed original counterparts of the Bond Documents, the Loan Documents and all other agreements, documents and instruments to be executed and delivered on the Closing Date by the parties to those agreements, documents and instruments, and the original executed Credit Facility; (c) an opinion of Bond Counsel to the effect that the Bonds have been duly and validly authorized, issued and delivered and constitute valid and binding special, limited obligations of the Issuer, enforceable against the Issuer in accordance with their terms, that the interest payable on the Bonds is excludable from gross income for federal income tax purposes (except if a Bond is owned by a substantial user of the Mortgaged Property or a related person) and that the Issuer has the power to enter into the Bond Documents to which it is a party and each of the Bond Documents to which the Issuer is a party has been duly and validly authorized, executed and delivered by the Issuer and each constitutes the legal, valid and binding special, limited obligation of the Issuer, enforceable against the Issuer in accordance with its terms, subject to customary qualifications on enforceability; (d) a written request and authorization by the Issuer (acting through an Authorized Officer) to the Trustee to authenticate and deliver the Bonds to or for the account of the Underwriter upon receipt from the Underwriter of $2,655,000; (e) receipt from the Underwriter of $2,655,000; (f) receipt from the Borrower of the Costs of Issuance Deposit; (g) evidence, acceptable to the Credit Provider and the Loan Servicer, of proper recordation of the Security Instrument, the Regulatory Agreement and the Assignment or a title insurance binder acceptable to the Credit Provider and the Loan Servicer insuring the "gap" in a manner acceptable to the Credit Provider and the Loan Servicer; (h) written evidence that the Bonds have been assigned a rating in the Highest Rating Category by the Rating Agency rating the Bonds; and (i) the Letter of Representations if required by DTC. 32 ARTICLE III REDEMPTION OF BONDS SECTION 3.1 Redemption. The Bonds are subject to redemption prior to maturity only as set forth in this Article III. All redemptions must be in Authorized Denominations. SECTION 3.2 Optional Redemption. (a) General Provisions. The Bonds are subject to optional redemption in whole or in part upon optional prepayment of the Loan by the Borrower. Redemptions pursuant to this Section 3.2 will be made at the following times and at the following prices: (1) On any Interest Payment Date within a Weekly Variable Rate Period and on any Adjustment Date at a redemption price equal to 100 percent of the principal amount redeemed plus accrued interest to the Redemption Date. (2) On any date within a Reset Period at the respective redemption prices set forth in the table below expressed as percentages of the principal amounts of the Bonds called for redemption, such redemption prices declining .5 percent each year until such redemption price equals 100 percent of the principal amount of the Bonds, plus accrued interest, if any, to the Redemption Date: The Borrower and the Remarketing Agent, not less than 15 days before any Reset Date, may give notice to the Issuer, the Credit Provider, the Loan Servicer and the Trustee setting forth a redemption schedule different from that set forth above, accompanied by (A) the written consent of the Credit Provider of the Credit Facility to be in effect for the ensuing Reset Period, and (B) an opinion of Bond Counsel to the effect that such change will not adversely affect the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds. Such different redemption schedule will apply to any redemption pursuant to this Section 3.2(a)(2) for the new Reset Period, without further action by any party. (3) On any date within the Fixed Rate Period, at the respective redemption prices set forth below expressed as percentages of the principal amounts of the Bonds called for redemption, such redemption prices declining .5 percent each year until such tic] Redemption Term of Reset Period No -Call Period Price No Premium 10 or more years First 8 years from and after 101 % 10th year and Reset Date thereafter 5 years or more (but less First 5 years from and after 100.5% 6th year and than 10 Reset Date thereafter More than 2 years (but Period until 2nd year 101% Final year less than 5) preceding end of Reset Period 2 years or less Until one year before end 100% Final year of Reset Period The Borrower and the Remarketing Agent, not less than 15 days before any Reset Date, may give notice to the Issuer, the Credit Provider, the Loan Servicer and the Trustee setting forth a redemption schedule different from that set forth above, accompanied by (A) the written consent of the Credit Provider of the Credit Facility to be in effect for the ensuing Reset Period, and (B) an opinion of Bond Counsel to the effect that such change will not adversely affect the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds. Such different redemption schedule will apply to any redemption pursuant to this Section 3.2(a)(2) for the new Reset Period, without further action by any party. (3) On any date within the Fixed Rate Period, at the respective redemption prices set forth below expressed as percentages of the principal amounts of the Bonds called for redemption, such redemption prices declining .5 percent each year until such tic] redemption price equals 100 percent of the principal amount of the Bonds, plus accrued interest, if any, to the Redemption Date: The Borrower and the Remarketing Agent may, not less than 15 days before the Fixed Rate Adjustment Date, give notice to the Issuer, the Credit Provider, the Loan Servicer and the Trustee setting forth a redemption schedule different from that set forth in this paragraph, accompanied by (A) the written consent of the Credit Provider of the Credit Facility, if any, to be in effect for the ensuing Fixed Rate Period, and (B) an opinion of Bond Counsel to the effect that such change will not adversely affect the exclusion from gross income for federal income tax purposes of interest payable on the Bonds. Such different redemption schedule shall apply to any redemption pursuant to this Section 3.2(a)(3) for the Fixed Rate Period, without further action by any party. (b) Premium from Available Moneys other than the Credit Facility. The principal of and accrued interest on any Bond being redeemed under Section 3.2(a) shall be paid from an Advance under the Credit Facility and the premium, if any, must be paid with other Available Moneys. Neither the Issuer, the Trustee, the Credit Provider nor the Loan Servicer shall have any obligation to provide funds to be included in any premium. SECTION 3.3 Mandatory Redemption. The Bonds are subject to mandatory redemption as provided in this Section 3.3 on the earliest practicable Redemption Date for which timely notice of redemption can be given pursuant to Section 3.4 following the occurrence of the event requiring such redemption. The principal of and accrued interest on any Bond being redeemed under this Section shall be paid from an Advance under the Credit Facility. Bonds will be redeemed at a redemption price equal to 100 percent of the principal amount of such Bonds plus accrued interest to the Redemption Date without premium. Bonds subject to mandatory redemption in part shall be redeemed in Authorized Denominations or shall be redeemed in such amounts so that the Bonds Outstanding following the redemption are in Authorized Denominations. If the Trustee receives an amount for the mandatory redemption of Bonds which is not equal to a whole integral multiple of the Authorized Denomination, the Trustee shall redeem Bonds in an amount equal to the next lowest whole integral multiple of the Authorized Denomination to the amount received by the Trustee and hold any excess amount in the Redemption Account. 34 Redemption Term of Fixed Rate No -Call Period Price No Premium Period 10 or more years First 8 years from and after 101% 10th year and Reset Date thereafter 5 years or more (but less First 5 years from and after 100.5% 6th year and than 10 Reset Date thereafter More than 2 years (but Period until 2nd year 101% Final year less than 5) preceding end of Reset Period 2 years or less Until one year before end 100% Final year of Reset Period The Borrower and the Remarketing Agent may, not less than 15 days before the Fixed Rate Adjustment Date, give notice to the Issuer, the Credit Provider, the Loan Servicer and the Trustee setting forth a redemption schedule different from that set forth in this paragraph, accompanied by (A) the written consent of the Credit Provider of the Credit Facility, if any, to be in effect for the ensuing Fixed Rate Period, and (B) an opinion of Bond Counsel to the effect that such change will not adversely affect the exclusion from gross income for federal income tax purposes of interest payable on the Bonds. Such different redemption schedule shall apply to any redemption pursuant to this Section 3.2(a)(3) for the Fixed Rate Period, without further action by any party. (b) Premium from Available Moneys other than the Credit Facility. The principal of and accrued interest on any Bond being redeemed under Section 3.2(a) shall be paid from an Advance under the Credit Facility and the premium, if any, must be paid with other Available Moneys. Neither the Issuer, the Trustee, the Credit Provider nor the Loan Servicer shall have any obligation to provide funds to be included in any premium. SECTION 3.3 Mandatory Redemption. The Bonds are subject to mandatory redemption as provided in this Section 3.3 on the earliest practicable Redemption Date for which timely notice of redemption can be given pursuant to Section 3.4 following the occurrence of the event requiring such redemption. The principal of and accrued interest on any Bond being redeemed under this Section shall be paid from an Advance under the Credit Facility. Bonds will be redeemed at a redemption price equal to 100 percent of the principal amount of such Bonds plus accrued interest to the Redemption Date without premium. Bonds subject to mandatory redemption in part shall be redeemed in Authorized Denominations or shall be redeemed in such amounts so that the Bonds Outstanding following the redemption are in Authorized Denominations. If the Trustee receives an amount for the mandatory redemption of Bonds which is not equal to a whole integral multiple of the Authorized Denomination, the Trustee shall redeem Bonds in an amount equal to the next lowest whole integral multiple of the Authorized Denomination to the amount received by the Trustee and hold any excess amount in the Redemption Account. 34 (a) Casualty or Condemnation. The Bonds shall be redeemed in whole or in part in the event and to the extent that proceeds of insurance from any casualty to, or proceeds of any award from any condemnation of, or any award as part of a settlement in lieu of condemnation of, the Mortgaged Property ("Proceeds") are applied in accordance with the Security Instrument to the prepayment of the Loan. (b) After an Event of Default under the Reimbursement Agreement. The Bonds shall be redeemed in whole or in part in an amount specified by and at the direction of the Credit Provider requiring that the Bonds be redeemed pursuant to this subsection following any Event of Default under the Reimbursement Agreement. The Redemption Date shall be the earliest practicable date, but in no event shall such redemption occur later than two Business Days prior to the date, if any, that the Credit Facility terminates on account of the Credit Provider's giving of direction to the Trustee pursuant to this subsection to redeem all of the Bonds. (c) Principal Reserve Fund. The Bonds shall be redeemed in whole or in part as follows: (1) on each Adjustment Date in an amount equal to the amount which has been transferred from the Principal Reserve Fund on such Adjustment Date to the Redemption Account pursuant to Section 5.11(b)(5); and (2) on any Interest Payment Date in an amount equal to the amount which has been transferred from the Principal Reserve Fund on such Interest Payment Date to the Redemption Account pursuant to Section 5.11(b)(6). (d) Sinking Fund Redemption. The Bonds shall be redeemed during the Fixed Rate Period if the Issuer has established a Sinking Fund Schedule, at the times and in the amounts set forth in the Sinking Fund Schedule (subject to the provisions of Section 5.5(c) permitting amounts to be credited toward part or all of any one or more Sinking Fund Payments). SECTION 3.4 Notice of Redemption to Registered Owners. (a) Notice Requirement. For any redemption of Bonds pursuant to Section 3.2 or 3.3(a) or (c), the Trustee shall give notice of redemption by first class mail, postage prepaid, not less than ten days prior to the specified Redemption Date, to the Registered Owner of each Bond to be redeemed at the address of such Registered Owner as shown on the Bond Register. With respect to Book -Entry Bonds, if the Trustee sends notice of redemption to the Securities Depository pursuant to the Letter of Representations, the Trustee shall not be required to give the notice set forth in the immediately preceding sentence. In the case of any redemption of Bonds pursuant to Section 3.3(b) immediate notice of redemption may be given on or before the Redemption Date. In the case of any redemption pursuant to Section 3.3(d), the Trustee will give notice of redemption as provided in Section 5.5(c)(3). In the case of an optional redemption under Section 3.2, the notice of redemption shall state that it is conditioned upon receipt by the Trustee of sufficient moneys to redeem the Bonds including Available Moneys to pay any redemption premium in full ("Conditional Redemption"), and such notice and optional redemption shall be of no effect if either (i) by no later than the scheduled redemption date, sufficient moneys to redeem the Bonds and sufficient Available Moneys to pay any redemption premium have not been deposited with the Trustee, or if such moneys are deposited, are not 35 available or (ii) the Trustee at the direction of the Credit Provider rescinds such notice on or prior to the scheduled redemption date. The Trustee shall cause a second notice of redemption to be sent by first class mail, postage prepaid, on or within ten days after the 30th day after the Redemption Date to any Bondholder who has not submitted its Bond to the Trustee for payment. The Trustee shall provide copies of all notices given under this Section and of all revocations of notices to the Credit Provider and the Loan Servicer at the same time it gives notices to Bondholders. (b) Content of Notice. Each notice of redemption must state: (i) the date of the redemption notice; (ii) the Closing Date and the complete official name of the Bonds, including the series designation; (iii) for each Bond to be redeemed, the interest rate or that the interest rate is variable, maturity date and in the case of a partial redemption of Bonds, the principal amount of each Bond to be redeemed; (iv) the CUSIP numbers of all Bonds being redeemed; (v) the place or places where the Bonds to be redeemed must be surrendered for payment and where amounts due upon such redemption will be payable upon surrender of the Bonds to be redeemed; (vi) the Redemption Date and redemption price of each Bond to be redeemed; (vii) the name, address, telephone number and contact person at the office of the Trustee with respect to such redemption; (viii) that interest on all Bonds to be redeemed will not accrue from and after the Redemption Date; (ix) if a redemption is a Conditional Redemption, that redemption is conditional upon receipt by the Trustee of sufficient moneys to redeem the Bonds including Available Moneys to pay any redemption premium and (x) that the Credit Provider may direct the Trustee to cancel such redemption upon the occurrence of any Event of Default under the Reimbursement Agreement. (c) Additional Notice. At the same time notice of redemption is sent to the Registered Owners the Trustee shall send notice of redemption by first class mail, overnight delivery service or other overnight means, postage or service prepaid (or as specified below) (i) to the Rating Agency, (ii) if the Bonds are not subject to the Book -Entry System, to certain municipal registered Securities Depositories (described below) which are known to the Trustee, on the second Business Day prior to the date the notice of redemption is mailed to the Bondholders, to be holding Bonds, and (iii) at least two of the national Information Services (described below) that disseminate securities redemption notices. For this purpose: (1) Securities Depositories include: The Depository Trust Company, 711 Stewart Avenue, Garden City, New York 11530, Fax -(516) 227-4039 or 4190; or, in accordance with the then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories or any such other depositories as the Issuer may designate in writing to the Trustee; and (2) Information Services include: Financial Information, Inc. "Daily Called Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information Services, "Called Bond Service," 65 Broadway, 16th Floor, New York, New York 10004; Moody's Investors Service "Municipal and Govemment," 99 Church Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; and Standard and Poor's Ratings Group "Called Bond Record," 55 Water, New York, New York 10041; or, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other services providing information with respect to called bonds, or any other such services as the Issuer may designate in writing to the Trustee. 36 (d) Validity of Proceedings for the Redemption of Bonds. If notice is given as stated in subsection (a), failure of any Bondholder to receive such notice, or any defect in the notice, shall not affect the redemption or the validity of the proceedings for the redemption of the Bonds. (e) Rescission of Conditional Redemption; Cancellation of Optional Redemption. The Trustee shall rescind any Conditional Redemption if the requirements of Section 3.2(b) have not been met on or before the Redemption Date or the Trustee has received a direction to cancel the Conditional Redemption from the Credit Provider. The Trustee shall give notice of rescission by the same means as is provided in this Section for the giving of notice of redemption or by Electronic Means confirmed in writing. The optional redemption shall be canceled once the Trustee has given notice of rescission. Any Bonds subject to Conditional Redemption where redemption has been rescinded shall remain Outstanding, and neither the rescission nor the failure of funds being made available in part or in whole on or before the Redemption Date shall constitute an Event of Default. Notwithstanding notice having been given in the manner provided above, any optional redemption of Bonds shall be canceled with the consent of or at the direction of the Credit Provider if the Credit Provider has notified the Trustee in writing that an Event of Default under the Reimbursement Agreement has occurred. SECTION 3.5 Redemption Payments. If notice of redemption has been given and the conditions for such redemption, if applicable, have been met, the Bonds called for redemption shall become due and payable on the Redemption Date, interest on those Bonds will cease to accrue from and after the Redemption Date and the called Bonds will no longer be Outstanding. The holders of the Bonds so called for redemption shall thereafter no longer have any security or benefit under this Indenture except to receive payment of the redemption price for such Bonds upon surrender of such Bonds to the Trustee. All moneys held by or on behalf of the Trustee for the redemption of particular Bonds will be held in trust for the account of the holders of the Bonds to be redeemed. If less than the entire principal amount of a Bond is called for redemption, the Issuer shall execute, and the Trustee shall authenticate and deliver, upon the surrender of such Bond to the Trustee, without charge by the Issuer or the Trustee to the Bondholder, in exchange for the unredeemed principal amount of such Bond, a new Bond or Bonds of the same interest rate, maturity and term, in any Authorized Denomination, in aggregate principal amount equal to the unredeemed balance of the principal amount of the Bond so surrendered. SECTION 3.6 Selection of Bonds to be Redeemed Upon Partial Redemption. If less than all the Outstanding Bonds are called for redemption, the Trustee shall select by lot, in such manner as it determines in its discretion, the Bonds, or portions of the Bonds in Authorized Denominations, to be redeemed. In the selection process (i) any Pledged Bonds Outstanding will be called for redemption before any other Bonds are selected for redemption and (ii) if applicable, the Bonds with the highest interest rate will be called for redemption before any other Bonds are selected for redemption. For the purposes of this Section, Bonds which have previously been selected for redemption will not be deemed Outstanding. Notwithstanding the foregoing, the Securities Depository for Book -Entry Bonds shall select the Bonds for redemption within particular maturities according to its stated procedures. SECTION 3.7 Purchase of Bonds in Lieu of Redemption. If the Bonds are called for redemption in whole or in part, the Bonds called for redemption may be purchased in lieu of redemption in accordance with this Section. 37 (a) Purchase in Lieu of Redemption. Purchase in lieu of redemption shall be available for all of the Bonds called for redemption or for such lesser portion of such Bonds as constitute Authorized Denominations. The Credit Provider or the Borrower with the written consent of the Credit Provider may direct the Trustee to purchase all or such lesser portion of the Bonds so called for redemption. In no event will Fannie Mae in its capacity as Credit Provider purchase Bonds for its own account in lieu of redemption without the prior written consent of the General Counsel to Fannie Mae. Any such direction to the Trustee must: (1) be in writing; (2) state either that all of the bonds called for redemption are to be purchased or, if less than all of the bonds called for redemption are to be purchased, identify those bonds to be purchased by maturity date and outstanding principal amount in Authorized Denominations; and (3) be received by the Trustee no later than 12:00 noon one Business Day prior to the Redemption Date. If so directed, the Trustee shall purchase such Bonds on the date which otherwise would be the Redemption Date. Any of the Bonds called for redemption that are not purchased in lieu of redemption shall be redeemed as otherwise required by this Indenture on the Redemption Date. (b) Withdrawal of Direction to Purchase. On or prior to the scheduled redemption date, any direction given to the Trustee pursuant to this Section or any consent given by the Credit Provider to such a direction may be withdrawn by written notice to the Trustee. Subject generally to this Indenture, should a direction to purchase or the consent of the Credit Provider be withdrawn, the scheduled redemption of such Bonds shall occur. (c) Purchaser. If the purchase is directed by the Credit Provider, the purchase shall be made for the account of the Credit Provider or its designee. If the purchase is directed by the Borrower with the consent of the Credit Provider, the purchase shall be made for the account of the Borrower or its designee. (d) Purchase Price. The purchase price of the Bonds shall be equal to the outstanding principal of, accrued and unpaid interest on and the redemption premium, if any, which would have been payable on such Bonds on the Redemption Date for such redemption. To pay the purchase price of such Bonds, the Trustee shall use such funds, if any, in: (1) the Credit Facility Account to pay the principal and interest components of the purchase price; and (2) the Redemption Account to pay the redemption premium component of the purchase price; that the Trustee would have used to pay the outstanding principal of, accrued and unpaid interest on and the redemption premium, if any, that would have been payable on the redemption of such Bonds on the Redemption Date. Otherwise, the Trustee shall pay the purchase price only from Available Moneys. The Trustee shall not purchase the Bonds pursuant to this Section if by no W later than the Redemption Date, sufficient moneys have not been deposited with the Trustee, or such moneys are deposited, but are not available. (e) No Notice to Bondholders. No notice of the purchase in lieu of redemption shall be required to be given to the Bondholders (other than the notice of redemption otherwise required under this Indenture). ARTICLE IV PURCHASE AND REMARKETING OF BONDS SECTION 4.1 Purchase of Bonds on any Business Day. (a) Optional Tender. During any Weekly Variable Rate Period, the Trustee shall purchase any Bond on behalf of and as agent for the Borrower, but solely from the sources provided in Section 4.1(g), on the demand of the Beneficial Owner of such Bond. The purchase price of any Bond tendered for purchase shall be 100 percent of the principal amount of such Bond plus accrued interest, if any, to the date of purchase. The Beneficial Owner may demand purchase of its Bond by delivery of a Bondholder Tender Notice complying with the requirements of this subsection to the Tender Agent at its Designated Office on any Business Day. Any Bondholder Tender Notice received by the Tender Agent after 3:30 p.m. Eastern time on a Business Day will be treated as received at 9:00 a.m. Eastern time on the following Business Day. The date of purchase shall be the date selected by the Beneficial Owner in the Bondholder Tender Notice; provided, however, that such date is a Business Day which is at least seven days after the date of the delivery of the Bondholder Tender Notice to the Tender Agent. A Bondholder Tender Notice complies with the requirements of this subsection if it: (1) is accompanied by a guaranty of signature acceptable to the Tender Agent; and (2) contains the CUSIP number of the Bond, the principal amount to be purchased (or portion of a Bond, provided that the retained portion is an Authorized Denomination), the name, address and tax identification number or social security number of the Beneficial Owner of the Bond demanding such payment and the purchase date. (b) Irrevocability of Tender. Subject to Section 4.1(h), by delivering a Bondholder Tender Notice the Beneficial Owner irrevocably agrees to deliver the Tendered Bond (with an appropriate transfer of registration form executed in blank and accompanied by a guaranty of signature satisfactory to the Tender Agent) to the Designated Office of the Tender Agent or any other address designated by the Tender Agent at or prior to 10:00 a.m. Eastern time on the date of purchase specified in the Bondholder Tender Notice. Any election by a Beneficial Owner to tender a Bond or Bonds (or portion of a Bond or Bonds) for purchase on a Business Day in accordance with Section 4.1(a) shall also be binding on any transferee of the Beneficial Owner making such election. (c) Compliance with Tender Requirements. Bonds shall be required to be 1 purchased pursuant to Section 4.1(a) only if the Bonds so delivered to the Tender Agent conform in all respects to the description of such Bonds in the Bondholder Tender Notice. The Tender 39 Agent shall determine in its sole discretion whether a Bondholder Tender Notice complies with the requirements of Section 4.1(a) and whether Bonds delivered conform in all respects to the description of the Bonds in the Bondholder Tender Notice. Such determination shall be binding on the other Remarketing Notice Parties and the Beneficial Owner of the Bonds. (d) Notice of Bondholder Tender Notice. Immediately upon receipt of a copy of a Bondholder Tender Notice, the Tender Agent shall notify the other Remarketing Notice Parties by telephone, promptly confirmed in writing, of such receipt, specifying the contents of such Bondholder Tender Notice. (e) Untendered Bonds. If after delivery of a Bondholder Tender Notice to the Tender Agent the holder making such election fails to deliver any of the Bonds described in the Bondholder Tender Notice as required by Section 4.1(b), each untendered Bond or portion of such untendered Bond ("Untendered Bond") described in such Bondholder Tender Notice shall be deemed to have been tendered to the Tender Agent for purchase, to the extent that there is on deposit in the Bond Purchase Fund on the applicable purchase date an amount sufficient to pay the purchase price of such Untendered Bond, and such Untendered Bond from and after such purchase date will cease to bear interest and no longer be considered to be Outstanding. The Trustee shall promptly give notice by registered or certified first class mail, postage prepaid, to each Beneficial Owner of any Bond which has been deemed to have been purchased pursuant to this Section, stating that interest on such Untendered Bond ceased to accrue from and after the date of purchase and that moneys representing the purchase price of such Untendered Bond are available against delivery of such Untendered Bond at the Designated Office of the Tender Agent. The Issuer shall sign and the Tender Agent shall authenticate and deliver for redelivery a new Bond or Bonds in replacement of the Untendered Bond not so delivered. The replacement of any Bond will not be deemed to create new indebtedness, but will be deemed to evidence the indebtedness previously evidenced by the Untendered Bond. (f) Purchase of Bond in Part. Upon surrender of any Bond for purchase in part only, the Issuer shall execute and the Tender Agent shall authenticate and deliver to the holder of such Bond a new Bond or Bonds of the same maturity and interest rate, of Authorized Denominations, in an aggregate principal amount equal to the unpurchased portion of the Bond surrendered. (g) Payment and Sources of Purchase Price. The Tender Agent shall make payment for any Tendered Bond to the Registered Owner at or before 4:00 p.m. Eastern time on the date for purchase specified in the Bondholder Tender Notice, first from remarketing proceeds on deposit in the Bond Purchase Fund, second, from proceeds of a payment under the Credit Facility, and third, from funds provided by the Borrower. (h) Book -Entry -Only. Notwithstanding the above, during any period that the Bonds are Book -Entry Bonds, (i) any Bondholder Tender Notice also must (A) provide evidence satisfactory to the Tender Agent that the party delivering the notice is the Beneficial Owner of the Bond(s) or a custodian for the Beneficial Owner referred to in the notice, and (B) if the Beneficial Owner is other than a DTC Participant, identify the DTC Participant through whom the Beneficial Owner will direct transfer; (ii) on or before the purchase date, the Beneficial Owner must direct (or if the Beneficial Owner is not a DTC Participant, cause its DTC Participant to direct) the transfer of said Bond(s) on the records of DTC to the account of, or as directed by, the Trustee; (iii) Tendered Bond(s) will be purchased without physical delivery as if 40 such Bond(s) had been so delivered and (iv) the purchase price of such Bond(s) will be paid to DTC. SECTION 4.2. Mandatory Tender and Purchase. (a) Mandatory Tender Dates (Other Than Upon Default); Notice. The holders of the Bonds shall be required to tender their Bonds to the Tender Agent for purchase on each Mandatory Tender Date by the Trustee acting on behalf of and as agent for the Borrower, but solely from the sources provided in Section 4.2(d), at a purchase price equal to 100 percent of the principal amount of the Bonds plus accrued interest to the applicable Mandatory Tender Date. The Owner of any Bond may not elect to retain its Bond. Mandatory Tender Dates include each Adjustment Date (even if a proposed change in Mode fails to occur), each Substitution Date and each Extension Date. The Trustee shall give notice of Mandatory Tender Dates as follows: (1) Not less than 30 days before any proposed Adjustment Date, the Trustee shall give notice by first class mail, postage prepaid, to the Bondholders stating the information required to be set forth in notices pursuant to the applicable provisions of Sections 2.8(a)(2), 2.8(b)(2) or 2.8(c)(2). (2) Not less than ten days before any Substitution Date, the Trustee shall give notice by first class mail, postage prepaid, to the Bondholders stating (A) an Alternate Credit Facility will be substituted for the Credit Facility then in effect, (B) the Substitution Date, (C) that the Bonds are required to be tendered on the Substitution Date and (D) that Bondholders will not have the right to elect to retain their Bonds. (3) Not less than ten days before any Extension Date, if the Trustee has not received a binding commitment to extend the applicable Credit Facility, the Trustee shall give notice by first class mail, postage prepaid, to the Bondholders stating (i) the Extension Date and that no commitment to extend the Credit Facility then in effect has been received by the Trustee, (ii) that such Bonds are required to be tendered on the Extension Date (unless an extension of the Alternate Credit Facility is received prior to the Extension Date), and (iii) that the Bondholders will not have the right to elect to retain such Bonds if an extension of the Credit Facility is not received. (b) Mandatory Tender upon Default; Notice, The Bonds shall be subject to mandatory tender upon receipt by the Trustee of written notice from the Credit Provider stating that an Event of Default under the Reimbursement Agreement has occurred and directing that the Bonds be subject to mandatory tender. Such mandatory tender shall be made on the earliest practicable date, after notice of tender has been given to Bondholders and shall be payable solely from the sources provided in Section 4.2(d)(2) at a purchase price equal to 100 percent of the principal amount of the Bonds plus accrued interest to the Mandatory Tender Date. The Owner of any Bond may not elect to retain its Bond. Immediately upon receipt by the Trustee of such written notice from the Credit Provider, the Trustee shall give notice by first class mail, postage prepaid, to the owners of the Bonds stating that (i) such event has occurred, (ii) the Bonds are required to be tendered on the Mandatory Tender Date specified in such notice, and (iii) the Bondholders will not have the right to elect to retain their Bonds. (c) Untendered Bond. Any Bond which is not tendered on a Mandatory Tender Date ("Untendered Bond") will be deemed to have been tendered to the Tender Agent as of 41 such Mandatory Tender Date, and, from and after such Mandatory Tender Date, shall cease to bear interest and no longer will be considered to be Outstanding. In the event of a failure by owners to deliver Bonds on the Mandatory Tender Date, such Owners will not be entitled to any payment (including any interest to accrue from and after the Mandatory Tender Date) other than the purchase price for such Untendered Bond, and any Untendered Bond will no longer be entitled to the benefits of this hidenture, except for the purpose of payment of the purchase price for such Untendered Bond. The Issuer shall sign, and the Tender Agent shall authenticate and deliver to the Remarketing Agent for redelivery to the purchaser, a new Bond in replacement of the Untendered Bond. The replacement of any such Untendered Bond shall not be deemed to create new indebtedness, but shall be deemed to evidence the indebtedness previously evidenced by the Untendered Bond. (d) Payment and Sources of Purchase Price. The Tender Agent shall make payment for Bonds purchased pursuant to this Section at or before 4:00 p.m. Eastern time on the Mandatory Tender Date. The Trustee shall pay the purchase price: (1) for Bonds purchased pursuant to Section 4.2(a), first from remarketing proceeds on deposit in the Bond Purchase Fund, second, from proceeds of a payment under the Credit Facility, and third, from funds provided by the Borrower. (2) for Bonds purchased pursuant to Section 4.2(b) first, from proceeds of a payment under the Credit Facility, and second, from funds provided by the Borrower. (e) Purchase Price Moneys Held in Trust. Following any Mandatory Tender Date, moneys deposited with the Tender Agent for the purchase of Bonds shall be held in trust in the Bond Purchase Fund and shall be paid to the former owners of such Bonds upon presentation of such Bonds at the Designated Office of the Tender Agent. The Tender Agent shall promptly give notice by registered or "certified first class" mail, postage prepaid, to each Registered Owner of Bonds whose Bonds are deemed to have been purchased stating that interest on such Bonds ceased to accrue on the date of purchase and that moneys representing the purchase price of such Bonds are available against delivery of such Bonds at the Designated Office of the Tender Agent. During any period that the Bonds are Book -Entry Bonds, (i) any notice delivered pursuant to this Section 4.2(e) shall be given only to the entity designated in the Letter of Representations, as required by Section 3.4(a) and (ii) it shall not be necessary for Bond(s) to be physically delivered on the date specified for purchase of such Bond(s), but such purchase shall be made as if such Bond(s) had been so delivered, and the purchase price of such Bond(s) shall be paid to DTC. SECTION 4.3. Remarketine of Bonds. (a) Resignation and Removal of Remarketing Agent. (1) Resignation of Remarketing Agent; Termination of Existence. The Remarketing Agent may resign by giving no less than 30 days prior written notice to the other Remarketing Notice Parties, but in no event shall such resignation take effect prior to the date a successor Remarketing Agent is appointed and is serving under this Indenture and the Remarketing Agreement. Upon receipt of such notice or upon termination of the Remarketing Agent's corporate existence, the Borrower, with the prior written consent of the Credit Provider, shall appoint a successor Remarketing Agent, 42 which must be a trust company or bank or investment bank in good standing, within or without the State. If the Borrower fails or refuses to make such appointment prior to the effective date of the resignation set forth in such notice, or upon such termination of existence, the Credit Provider may appoint a successor Remarketing Agent by written notice to the other Remarketing Notice Parties. (2) Removal of Remarketing Agent. The Borrower may remove the Remarketing Agent, with the prior written consent of the Credit Provider, at any time by a written notice to the other Remarketing Notice Parties, but unless specifically approved by the Credit Provider, such removal will not become effective until a successor Remarketing Agent satisfactory to the Credit Provider is appointed. If (A) an Event of Default has occurred and is continuing under the Reimbursement Agreement or (B) the Remarketing Agent has failed to fulfill any of its duties and obligations under this Indenture or the Remarketing Agreement, the Credit Provider may remove the Remarketing Agent by written notice to the other Remarketing Notice Parties and appoint a successor Remarketing Agent. (b) Best Efforts to Remarket Tendered Bonds. In accordance with Sections 2.5, 2.6 and 2.7, the Remarketing Agent shall offer for sale and use its best efforts to remarket, on or prior to each applicable Tender Date: (1) all Bonds identified in a Bondholder Tender Notice delivered to the Tender Agent; (2) all Bonds required to be tendered upon delivery of notice under Section 4.2(a)(1) and 4.2(a)(2); (3) all Bonds required to be tendered pursuant to Section 4.2(a)(3) but only if an Alternate Credit Facility has been delivered to the Trustee; and (4) all Bonds required to be tendered upon delivery of notice pursuant to Section 4.2(b) but only if the Credit Provider directs that such Bonds be remarketed. The Remarketing Agent shall offer such Bonds for sale at par plus accrued interest, if any. (c) Preliminary Notice of Remarketing. The Remarketing Agent will give notice by telephone (immediately confirmed by Electronic Means) not later than 4:00 p.m. Eastern time (unless a mandatory tender pursuant to Section 4.2(b) is scheduled, in which case the Remarketing Agent will give such notice not later than 11:00 a.m. Eastern time) on the Business Day preceding each Tender Date, as follows: (1) to the other Remarketing Notice Parties specifying the total principal amount of Tendered Bonds, if any, (A) that have been remarketed for settlement on such Tender Date, (B) that remain unremarketed at such time, and (C) that in its best good faith estimate will remain unremarketed as of 10:00 a.m. Eastern time on the Tender Date; and 43 (2) to the Trustee, specifying the name, address and taxpayer identification number or social security number of each purchaser as well as the denominations of the Bonds to be issued to such purchaser. (d) Final Notice of Remarketing. Not later than 10:00 a.m. Eastern time on the Tender Date, the Remarketing Agent shall give notice by Electronic Means to the other Remarketing Notice Parties (immediately confirmed in writing, together with instructions to the Tender Agent as to the manner in which any Bonds that have been remarketed are to be registered) specifying as follows: (1) the principal amount of Bonds remarketed (together with the information required to be specified in Section 4.3(c) if not already provided); (2) the amount of remarketing proceeds on deposit with the Tender Agent; (3) the amount of Bonds to be purchased that have not been remarketed at the time of such notice; and (4) the amount required to be paid under the Credit Facility, except that; the information specified in paragraphs (3) and (4) is not relevant to a remarketing described in Section 4.3(b)(4) and the Remarketing Agent need not give such information in that circumstance. Upon receipt of such notice, the Trustee shall draw on the Credit Facility pursuant to Section 8.2 in the amount necessary to pay the purchase price of the Bonds for which remarketing proceeds are not available. (e) Payment of Purchase Price. Upon delivery (except as otherwise provided in, but subject to the tendering Beneficial Owner's compliance with, Section 4.1(h)) of Tendered Bonds to or upon the order of the Remarketing Agent, the Remarketing Agent shall deliver to the Tender Agent at its Designated Office, in immediately available funds, an amount equal to the purchase price of the total principal amount of Bonds specified in the notice given by the Remarketing Agent pursuant to Section 4.3(d), plus accrued interest, if any, on such Bonds. (f) Prohibited Remarketing. Except as otherwise provided in this Indenture, the Remarketing Agent shall not remarket any Bonds directly to the Issuer, the Borrower, any Affiliate of the Borrower, any Affiliate of the Issuer or any guarantor of the Loan. (g) Remarketing Agent's Own Account. The Remarketing Agent may, but is not obligated to, acquire for its own account any Bonds delivered to it, but not otherwise remarketed. The Remarketing Agent may purchase and sell Bonds for its own account at any time. (h) Periodic Notice to Credit Provider. The Remarketing Agent shall provide the Credit Provider with a notice, in form satisfactory to the Credit Provider, by the next Business Day after the first Rate Determination Date in each calendar month, setting forth the name and telephone number of the person providing the notice, the name of the Remarketing Agent and the principal amount of Bonds tendered for remarketing that remain unremarketed as of the close of business on such Rate Determination Date, or, if no Bonds were so tendered, indicating that no Bonds were tendered. The Credit Provider may waive its right to receive such notice(s) from time to time in writing. Cil (i) Notices of Rate Determination Date and Nonpayment of Fees. On or before a Rate Determination Date other than during a Weekly Variable Rate Period, the Remarketing Agent shall notify the other Remarketing Notice Parties of the date selected as the Rate Determination Date. The Remarketing Agent will promptly notify the Loan Servicer if the fees and expenses of the Remarketing Agent have not been paid under the Remarketing Agreement. 0) Duties of Trustee Concerning Remarketed Bonds. Unless the Bonds are then Book -Entry Bonds, the Trustee shall deliver, or cause to be delivered, at the Designated Office of the Tender Agent, Bonds remarketed by the Remarketing Agent, before 1:00 p.m. Eastern time on the applicable purchase date or Mandatory Tender Date; provided, however, that prior to delivery of the Bonds (including Bonds delivered pursuant to Section 4.4(c)) to such purchasers the amount available under the Credit Facility to secure the Bonds must equal the principal amount of the Bonds Outstanding (other than Pledged Bonds) plus the Interest Requirement. SECTION 4.4. Pledged Bonds. (a) No Credit Facility Support. The Credit Facility shall not constitute security or provide liquidity for Pledged Bonds. (b) Ownership and Pledge of Pledged Bonds. Pledged Bonds shall be owned by the Borrower and pledged to the Custodian under the Pledge Agreement for the benefit of the Credit Provider. As set forth in the Pledge Agreement, the Tender Agent shall either (i) ensure that Pledged Bonds are delivered to the Custodian or (ii) if, and only if, delivery of the Bonds is not possible, deliver a written entitlement order to the applicable financial intermediaries on whose records ownership of the Pledged Bonds is reflected directing the intermediaries to credit the security entitlement to the Pledged Bonds to the account of the Custodian for the benefit of the Credit Provider and deliver to the Custodian a written confirmation of such credit, whether or not the Borrower notifies the Remarketing Agent to do so. The Trustee shall cancel Pledged Bonds upon written direction of the Credit Provider. (c) Remarketing of Pledged Bonds. At such time as a Pledged Bond is remarketed by the Remarketing Agent, the Trustee or the Tender Agent, as appropriate, shall (i) remit the proceeds from the remarketing to the Credit Provider, (ii) pursuant to Section 8(e) of the Credit Facility, submit a Certificate in the form of Exhibit F attached to the Credit Facility and (iii) give written notice to the Remarketing Agent, the Borrower, the Loan Servicer and the Credit Provider that such Bond is no longer a Pledged Bond. During the occurrence and continuation of an Event of Default under this Indenture or the Reimbursement Agreement, no Pledged Bond shall be remarketed without the consent of the Credit Provider. No Pledged Bond shall be remarketed unless the Trustee takes such action, if any, required by the Credit Facility to reinstate the Credit Facility for a like amount. SECTION 4.5. No Sales After Wrongful Dishonor: No Purchase After Acceleration. Notwithstanding anything in this Indenture to the contrary, no Bonds shall be remarketed if the Trustee has given notice to the Remarketing Agent that a Wrongful Dishonor has occurred and is continuing. No Bonds, other than Pledged Bonds, shall be purchased if the Trustee has given notice to the Remarketing Agent that there has occurred and is continuing an acceleration of the Bonds pursuant to Section 10.2. 45 ARTICLE V FUNDS AND ACCOUNTS SECTION 5.1 Creation of Funds and Accounts. The following Funds and Accounts are created with the Trustee: (a) the Loan Fund; (b) the Revenue Fund and within the Revenue Fund, the Interest Account, the Credit Facility Account, the Redemption Account, and the Fees Account; (c) the Costs of Issuance Fund; (d) the Rebate Fund; (e) so long as any Bonds are Outstanding and have not been adjusted to the Fixed Rate, the Bond Purchase Fund; and (f) the Principal Reserve Fund. The Trustee shall hold and administer the Funds and Accounts in accordance with this Indenture SECTION 5.2 Initial Deposits. On the Closing Date, the Trustee shall make the following deposits: (a) $2,655,000, representing the Net Bond Proceeds, into the Loan Fund; and (b) $0, received from the Borrower, representing the Costs of Issuance Deposit into the Costs of Issuance Fund. SECTION 5.3 Loan Fund. Amounts on deposit in the Loan Fund shall be disbursed by the Trustee to the Prior Trustee on the date of issuance to pay the outstanding principal of the Prior Bonds upon satisfaction of the conditions to delivery of the Bonds as provided in Section 2.18. SECTION 5.4 Revenue Fund - Interest Account. (a) Deposits into the Interest Account. The Trustee shall deposit each of the following amounts into the Interest Account: (1) moneys provided by or on behalf of the Borrower relating to an interest payment under the Note; (2) all Investment Income on the Funds and Accounts (except that Investment Income earned on amounts on deposit in the Loan Fund, Rebate Fund, Costs of Issuance Fund, and the Principal Reserve Fund shall be credited to and retained in those respective Funds or Accounts); and M4 (3) any other moneys made available for deposit into the Interest Account from any other source, including, but not limited to, any excess amounts in the Bond Purchase Fund pursuant to Section 5.10. (b) Disbursements from the Interest Account. The Trustee shall disburse or transfer, as applicable, moneys on deposit in the Interest Account at the following times and apply such moneys in the following manner and in the following order of priority: (1) On each Interest Payment Date during any Reset Period or Fixed Rate Period, Redemption Date and any date of acceleration of the Bonds, the Trustee shall disburse (x) to the Credit Provider, the amount of any Advance under the Credit Facility relating to the payment of interest on the Bonds or (y) in the event of a Wrongful Dishonor until such Wrongful Dishonor is cured, to the Bondholders, an amount equal to the interest due on the Bonds on such date; (2) If the Credit Provider or the Loan Servicer gives a written notice to the Trustee at any time to the effect that there is any unreimbursed Advance under the Credit Facility or any other amount required to be paid by the Borrower to the Credit Provider under the Loan Documents, the Bond Documents or the Credit Facility Documents remains unpaid, then the Trustee shall transfer any Investment Income earned on the Interest Account from and after the preceding Interest Payment Date or the Closing Date, as applicable, to the Credit Provider but not in an amount which exceeds the amount stated as unpaid by the Credit Provider in its notice to the Trustee; and (3) Unless there is (A) a deficiency in the Principal Reserve Fund, the Fees Account or the Rebate Fund or (B) an Event of Default under the Reimbursement Agreement or any Bond Document or a default under any Loan Document has occurred and is continuing, on each Interest Payment Date the Trustee shall disburse to the Borrower the Investment Income earned on the Interest Account from and after the preceding Interest Payment Date or the Closing Date, as applicable. If a deficiency exists in the Principal Reserve Fund, the Fees Account or the Rebate Fund, such Investment Income shall be transferred to the Principal Reserve Fund, the Fees Account and/or the Rebate Fund, in that order of priority, prior to any payment to the Borrower. SECTION 5.5 Revenue Fund - Redemption Account. (a) Deposits into the Redemption Account. The Trustee shall deposit each of the following amounts into the Redemption Account: (1) Available Moneys provided by or on behalf of the Borrower to fund the premium payable on Bonds in connection with a redemption of such Bonds, which amounts shall be held in a segregated subaccount in the Redemption Account; (2) moneys provided by or on behalf of the Borrower relating to a principal payment, including any prepayment under the Note; (3) moneys transferred from the Principal Reserve Fund pursuant to Section 1 5.11; and 47 (4) any other amount received by the Trustee and required by the terms of this Indenture or the Financing Agreement to be deposited into the Redemption Account. (b) Disbursements from the Redemption Account. On each Redemption Date, date of acceleration of the Bonds and Maturity Date, the Trustee shall disburse from the Redemption Account (x) to the Credit Provider, the amount of any Advance under the Credit Facility relating to the payment of principal on the Bonds or (y) in the event of a Wrongful Dishonor, to the Bondholders, an amount equal to the principal due on the Bonds on such date. In addition, on any date on which premium payable on Bonds in connection with a redemption of such Bonds is due, the Trustee shall disburse to the Bondholders, from the segregated subaccount in the Redemption Account, Available Moneys in an amount sufficient to pay such premium. (c) Disbursements from the Redemption Account for Sinking Fund Payments (1) Application of Moneys. Provided that no notice of optional redemption has been sent to Bondholders on or prior to the 301h day preceding a Sinking Fund Payment Date, at the written instruction of the Borrower and with the prior written consent of the Credit Provider, the Trustee shall apply any Available Moneys in the Redemption Account on or prior to the 30`h day preceding such Sinking Fund Payment Date to the purchase of Bonds of the maturity for which such Sinking Fund Payment was established at prices (including any brokerage and other charges) not exceeding the redemption price for such Bonds plus accrued and unpaid interest to the date of purchase, such purchase to be made in such manner as the Trustee (after consultation with the Issuer, the Borrower and the Credit Provider) determines. The Borrower shall provide a copy of such direction to the Loan Servicer concurrently with delivery to the Trustee. (2) Credit Toward Sinking Fund Payment. Upon the purchase of any Bond pursuant to Section 5.5(c)(1), all such Bonds will be cancelled by the Trustee and an amount equal to the principal amount of the Bonds so purchased will be credited toward the Sinking Fund Payment next due with respect to the Bonds of such maturity. In the event the Trustee is able to purchase Bonds at a price less than the redemption price at which such Bonds were to be redeemed, then, presuming no notice of redemption has been sent to Bondholders, after payment by the Trustee of the purchase price of such Bonds and after payment of any other amounts due on the due date of such Sinking Fund Payment, the Trustee shall pay an amount not greater than the difference between the amount of such purchase price and the amount of such redemption price to, or at the direction of, the Borrower. (3) Redemption. As soon as practicable after the 301h day preceding the due date of any such Sinking Fund Payment, and otherwise as provided in Section 3.4, the Trustee shall give notice of redemption of Bonds in such amount as is necessary to complete the retirement of a principal amount of Bonds equal to the unsatisfied balance of such Sinking Fund Payment. The Trustee shall call such Bonds for redemption whether or not it then has moneys in the Redemption Account sufficient to pay the applicable redemption price of the Bonds to be redeemed on the Redemption Date. The Trustee shall pay the amount required for the redemption of the Bonds so called for redemption from the Funds specified in Article V of this Indenture, in the order of priority indicated, and such amount will be applied by the Trustee to such redemption. M SECTION 5.6 Revenue Fund - Credit Facilitv Account (a) Deposits into the Credit Facility Account. The Trustee shall deposit into the Credit Facility Account all Advances under the Credit Facility, except for Pledged Bond Advances. Any Pledged Bond Advance shall be deposited into the Bond Purchase Fund pursuant to Section 5.10(a)(2). No other moneys will be deposited into the Credit Facility Account and the Credit Facility Account shall be maintained as a segregated account and moneys therein shall not be co -mingled with any other moneys held under this Indenture. The Credit Facility Account shall be closed at such time as the Credit Provider has no continuing liability under the Credit Facility. (b) Transfers from the Credit Facility Account. The Trustee shall cause amounts deposited into the Credit Facility Account to be applied on the date payment is due to the payments for which the Advance was made pursuant to the Credit Facility. In no event shall amounts in the Credit Facility Account be applied to the payment of principal of and interest and any premium on any Pledged Bonds or on any Bonds known by the Trustee to be held by the Borrower or any Affiliate of the Borrower. Any amounts remaining in the Credit Facility Account after making the payment for which the Advance was made pursuant to the Credit Facility shall be immediately refunded to the Credit Provider. SECTION 5.7 Revenue Fund - Fees Account. (a) Deposits into the Fees Account. The Trustee shall deposit into the Fees Account the payments made by the Borrower under the Financing Agreement attributable to the Issuer's Fee, and the fees and expenses of the Trustee, the Tender Agent, the Remarketing Agent and the Rebate Analyst (collectively, "Third Party Fees"). (b) Disbursements from the Fees Account. On any date on which any amounts are required to pay any Third Party Fees, such amounts shall be withdrawn by the Trustee from the Fees Account for payment to the appropriate party. In the event the amount in the Fees Account is insufficient to pay such Third Party Fees, the Trustee shall make written demand on the Borrower for the amount of such insufficiency and, pursuant to the terms of the Financing Agreement, the Borrower shall be liable to promptly pay the amount of such insufficiency to the Trustee within five Business Days after the date of the Trustee's written demand. The Trustee will provide notice of the insufficiency to the Loan Servicer. (c) No Other Claims to Trust Estate. Neither the Tender Agent, the Remarketing Agent nor the Rebate Analyst shall have any right to any moneys in any Fund or Account or otherwise in the Trust Estate other than those moneys deposited pursuant to subsection (a) into the Fees Account specifically for such Person. Except as otherwise stated in Sections 5.17 and 9.2, the Issuer shall not have any right to any moneys in any Fund or Account or otherwise in the Trust Estate other than those moneys deposited pursuant to subsection (a) into the Fees Account specifically for the Issuer. Except as otherwise stated in Sections 5.17, 9.2 and 10. 10, the Trustee shall not have any right to any moneys in any Fund or Account or otherwise in the Trust Estate other than those moneys deposited pursuant to subsection (a) into the Fees Account specifically for the Trustee. 49 SECTION 5.8 Costs of Issuance Fund. (a) Deposits into the Costs of Issuance Fund. On or before the Closing Date the Borrower shall deliver the Costs of Issuance Deposit to the Trustee. On the Closing Date, the Trustee shall deposit or transfer, as applicable, the Costs of Issuance Deposit into the Costs of Issuance Fund. (b) Disbursements from the Costs of Issuance Fund. The Trustee shall disburse moneys on deposit in the Costs of Issuance Fund, pursuant to requisitions in the form of Exhibit C attached to this Indenture, signed by an Authorized Borrower Representative, to pay Costs of Issuance. The Trustee may conclusively rely on such requisitions for purposes of making such disbursements. Moneys on deposit in the Costs of Issuance Fund shall not be part of the Trust Estate and will be used solely to pay Costs of Issuance. (c) Disposition of Remaining Amounts. Any moneys remaining in the Costs of Issuance Fund one month after the Closing Date and not needed to pay still unpaid Costs of Issuance will be returned to the Borrower. Upon final disbursement, the Trustee shall close the Costs of Issuance Fund. SECTION 5.9 Rebate Fund. The Trustee shall hold and apply the Rebate Fund as provided in the Tax Certificate. Within 30 days after the end of every fifth Bond Year (as defined in the Tax Certificate), and within 55 days after the date on which no Bonds are Outstanding, the Borrower or the Trustee shall cause the Rebate Analyst to deliver to the Trustee and the Issuer a certificate stating whether any rebate payment is required to be made, as set forth in the Tax Certificate, and the Borrower shall deliver to the Trustee any amount so required to be paid. SECTION 5.10 Bond Purchase Fund. (a) Deposits into Bond Purchase Fund. The Trustee shall deposit each of the following into the Bond Purchase Fund: (1) remarketing proceeds received upon the remarketing of Tendered Bonds to any person; and (2) Pledged Bond Advances under the Credit Facility to enable the Trustee to pay the purchase price of Tendered Bonds to the extent that moneys obtained pursuant to paragraph (1) are insufficient on any date to pay the purchase price of Tendered Bonds, which amounts the Trustee shall transfer to the Tender Agent on or before 3:00 p.m. Eastern time on each Tender Date. Subject to Section 8.3 permitting reimbursement of amounts owed to the Credit Provider, moneys in the Bond Purchase Fund shall be held uninvested and exclusively for the payment of the purchase price of Tendered Bonds. Amounts held to pay the purchase price for more than two years will be applied in the same manner as provided under Section 5.16 with respect to unclaimed payments of principal and interest. (b) Disbursements from the Bond Purchase Fund. The Trustee shall transfer to the Tender Agent on or before 3:00 p.m. Eastern time on each Tender Date amounts on deposit in the Bond Purchase Fund to pay the purchase price of Tendered Bonds. The Tender Agent 50 shall apply such amounts to pay the purchase price of Bonds purchased under this Indenture to the former owners of such Bonds upon presentation of the Bonds to the Tender Agent pursuant to Sections 4.1 or 4.2. SECTION 5.11 Principal Reserve Fund (a) Deposits into the Principal Reserve Fund. The Trustee shall deposit each of the following amounts into the Principal Reserve Fund: (1) All of the monthly payments made by the Borrower in accordance with the Schedule of Deposits to Principal Reserve Fund attached to the Reimbursement Agreement, as such schedule may be amended in accordance with the Reimbursement Agreement; and (2) Investment Income earned on amounts on deposit in the Principal Reserve Fund. The Trustee may rely upon the Schedule of Deposits to Principal Reserve Fund attached to the Reimbursement Agreement provided to it as of the Closing Date until it is furnished an amended schedule by the Credit Provider or the Loan Servicer which has been approved by the Borrower. (b) Disbursements from the Principal Reserve Fund. The Trustee shall pay or transfer amounts on deposit in the Principal Reserve Fund as follows: (1) at the written direction of the Credit Provider, to the Credit Provider to reimburse the Credit Provider for any unreimbursed Advance under the Credit Facility and to pay any other amounts required to be paid by the Borrower under the Loan Documents, the Bond Documents or the Credit Facility Documents (including any amounts required to be paid to the Credit Provider); (2) at the written direction of the Credit Provider, with the written consent of the Borrower (so long as an Event of Default has not occurred and is not continuing under any of the Credit Facility Documents), to the Credit Provider or the Borrower, as the Credit Provider elects, to make improvements or repairs to the Mortgaged Property; (3) at the written direction of the Credit Provider, if a default has occurred under the Credit Facility Documents, any Loan Document or any Bond Document, to the Credit Provider for any use approved in writing by the General Counsel of the Credit Provider; (4) at the written direction of the Credit Provider, if a new mortgage and mortgage note have been substituted for the Security Instrument and the Note in accordance with the Loan Documents, or if the Borrower otherwise consents, for any purpose approved in writing by the General Counsel of the Credit Provider; (5) on each Adjustment Date, to the Redemption Account; (6) During a Weekly Variable Rate Period, on the tenth Business Day prior to each Interest Payment Date, all amounts on deposit in the Principal 51 Reserve Fund (rounded downward to the nearest multiple of $100,000) in excess of the Principal Reserve Amount, to the Redemption Account; and (7) Pay to the Borrower, Investment Income on moneys in the Principal Reserve Fund on the Interest Payment Date following receipt by the Trustee of such interest or profits; provided that there is no deficiency in the Interest Account, the Redemption Account, the Principal Reserve Fund, the Fees Account or the Rebate Fund, and that no default exists under the Credit Facility Documents, any Loan Document or any Bond Document. If a deficiency exists in the Interest Account, the Redemption Account, the Principal Reserve Fund, the Fees Account or the Rebate Fund, the Trustee shall transfer such Investment Income to the Interest Account, the Redemption Account, the Principal Reserve Fund, the Fees Account and/or the Rebate Fund, in that order of priority, prior to any payment to the Borrower. SECTION 5.12 Moneys to be Held in Trust. Except for (i) moneys deposited with or paid to the Trustee for the redemption of Bonds notice of the redemption of which has been duly given, and (ii) moneys on deposit in the Costs of Issuance Fund, the Rebate Fund and the Fees Account, all moneys required to be deposited with or paid to the Trustee for the account of any Fund or Account will be held by the Trustee in trust and, while held by the Trustee, shall constitute part of the Trust Estate and be subject to the security interest created by this Indenture. SECTION 5.13 Records. The Trustee shall keep and maintain accurate records with respect to the Funds and Accounts. The Trustee shall file at least an annual accounting of the Funds and Accounts and the payment history on the Bonds and the Loan with the Issuer, the Loan Servicer and the Borrower and, upon request, with the Credit Provider. Any notices, reports or other information delivered by the Trustee to the Loan Servicer with respect to any Fund or Account also will be delivered, upon request, to the Credit Provider. SECTION 5.14 Reports by the Trustee. The Trustee shall, on or before the 20th day of each month, file with the Loan Servicer and the Borrower a statement setting forth in respect of the preceding calendar month: (a) the amount withdrawn or transferred and the amount deposited within or on account of each Fund and Account under this Indenture, including the amount of Investment Income on each Fund and Account transferred to the Interest Account; (b) the amount on deposit at the end of such month to the credit of each Fund and Account; (c) a brief description of all obligations held as an investment of moneys in each Fund and Account; (d) the amount applied to the purchase or redemption of Bonds and a description of the Bonds or portions of Bonds so purchased or redeemed; and (e) any other information which the Borrower, the Credit Provider, the Loan Servicer or the Issuer may reasonably request. 52 No monthly statement for a Fund or Account need be rendered if no activity occurred in that Fund or Account during such month. Upon the written request of any Bondholder owning 25 percent or more in aggregate principal amount of Bonds then Outstanding, the Trustee, at the Borrower's expense, shall provide a copy of such statement to the Bondholder. All records and files pertaining to the Trust Estate will be open at all reasonable times during regular business hours of the Trustee to the inspection and audit of the Issuer, the Loan Servicer, the Borrower and the Credit Provider and their agents and representatives upon reasonable prior notice. SECTION 5.15 Moneys Held for Particular Bonds. The amounts held by the Trustee for payment of the interest, premium, if any, principal or redemption price due on any date with respect to particular Bonds, pending such payment, will be set aside and held in trust by the Trustee for the Bondholders entitled to such payment. For the purposes of this hidenture such interest, premium, principal or redemption price, after the due date of payment, will no longer be considered to be unpaid. SECTION 5.16 Nonaresentment of Bonds. In the event any Bond is not presented for payment when the principal of such Bond becomes due, either at maturity or at the date fixed for redemption of such Bond or otherwise, if amounts sufficient to pay such Bond have been deposited with the Trustee for the benefit of the owner of the Bond and have remained unclaimed for two years after such principal has become due and payable, such amounts, to the extent amounts are owed to the Credit Provider as set forth in a written statement of the Credit Provider addressed to the Trustee, will be paid to the Credit Provider, with any excess to be paid to the Borrower. Upon such payment, all liability of the Issuer and the Trustee to the holder of any Bond for the payment of such Bond will cease and be completely discharged. The obligation of the Trustee under this Section to pay any such amounts to the Credit Provider or the Borrower will be subject to any provisions of law applicable to the Trustee or to such amounts providing other requirements for disposition of unclaimed property. SECTION 5.17 Disposition of Remaining Moneys. Provided that the rebate requirements referenced in the Tax Certificate are first satisfied, any amounts remaining in the Revenue Fund or the Principal Reserve Fund after payment in full of the principal of and interest and any premium on the Bonds will be applied to pay (i) first, to the Credit Provider any unpaid amounts certified by the Credit Provider to be due and owing to the Credit Provider, (ii) second, to the person or persons entitled to be paid, all other unpaid amounts required to be paid under this Indenture or the Financing Agreement, and (iii) third, to the Borrower the balance upon the expiration or sooner cancellation or termination of the term of the Financing Agreement as provided in the Financing Agreement. ARTICLE VI INVESTMENTS SECTION 6.1 Permitted Investments: Investment Limitations. (a) Permitted Investments Generally. Moneys held as part of any Fund or Account shall be invested and reinvested in Permitted Investments. Permitted Investments shall have maturities corresponding to, or shall be available for withdrawal without penalty no later than, the dates upon which such moneys shall be needed for the purpose for which such moneys are held. 53 (b) Certain Limitations on Permitted Investments. Moneys on deposit in: (1) the Interest Account shall be invested only in investments described in paragraphs (a), (b), (c) and (h) of the definition of Permitted Investments; (2) the Redemption Account shall be invested only in investments described in paragraph (a) of the definition of Permitted Investments, with a term not exceeding the earlier of 30 days from the date of investment of such moneys or the date or dates that such moneys are anticipated to be required for redemption; (3) the Credit Facility Account and Bond Purchase Fund shall be held uninvested; and (4) the Costs of Issuance Fund, until disbursed or returned to the Borrower pursuant to Section 5.8, shall be invested only in investments described in paragraph (h) of the definition of Permitted Investments. (c) Selection of Permitted Investments. Subject to subsections (a) and (b), the Borrower may select all Permitted Investments by written direction to the Trustee; but if the Borrower fails to provide direction to the Trustee, the Trustee shall invest such moneys in investments described in paragraph (h) of the definition of Permitted Investments or, in the case of the Redemption Account, in investments described in paragraph (a) of the definition of Permitted Investments, or, in the case of the Credit Facility Account and the Bond Purchase Fund, shall hold the moneys uninvested. SECTION 6.2 Investment Income. Investment Income from moneys held in the Loan Fund, the Rebate Fund, the Costs of Issuance Fund and the Principal Reserve Fund shall remain in the respective Fund where earned. All other Investment Income from moneys held in all other Funds and Accounts, upon receipt, shall be deposited into the Interest Account. SECTION 6.3 Trustee's Authority and Responsibilities. All Permitted Investments shall be made by the Trustee in its name, as Trustee, and shall be held by or under the control of the Trustee. The Trustee shall take such actions as shall be necessary to assure that Permitted Investments purchased by it under this Indenture are held pursuant to the terms of this Indenture and are subject to the trusts and security interests created in this Indenture. The Trustee is authorized to sell and reduce to cash a sufficient amount of Permitted Investments whenever the cash balance is or will be insufficient to make a requested or required disbursement. The Trustee shall not be accountable for any depreciation in the value of any Permitted Investment or for any loss resulting from such sale. The Trustee may trade with itself and its Affiliates in the purchase and sale of securities for investments, and may transact purchases and sales through its investment department or through its Affiliates. The Trustee and its Affiliates may act as principal, agent, sponsor, advisor or depository with respect to any investments. In computing the amount in any Fund or Account, Permitted Investments if purchased at par shall be valued at principal cost plus accrued interest, or, if purchased at other than par, at principal cost plus amortized discount or less amortized premium (amortization to be on a straight-line basis to the date of stated maturity without regard to redemptions or repayments of principal which may occur prior to maturity) plus accrued interest. The Issuer (and the Borrower by its execution of 54 the Financing Agreement) acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Issuer or the Borrower the right to receive brokerage confirmations of security transactions as they occur, the Issuer and the Borrower specifically waive receipt of such confirmations to the extent permitted by law. ARTICLE VII REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER SECTION 7.1 Issuer's Representations and Warranties. The Issuer represents and warrants that: (a) The Issuer is duly authorized under the Constitution and laws of the State, including the Act, to (i) issue the Bonds, (ii) execute and deliver this Indenture, the Financing Agreement, the Assignment and the Regulatory Agreement and to endorse the Note, (iii) assign its interest in the Financing Agreement (except the Reserved Rights) and (iv) pledge and assign the Trust Estate as set forth in this Indenture for the benefit of (A) the Bondholders, to secure the payment of the principal of and interest and any premium on the Bonds in accordance with the terms and provisions of this Indenture and the Bonds and (B) the Credit Provider to secure the payment of all amounts owing to the Credit Provider under the Credit Facility Documents. (b) All actions on the part of the Issuer for the issuance, sale and delivery of the Bonds and for the execution and delivery of this Indenture, the Financing Agreement, the Assignment and the Regulatory Agreement and the endorsement of the Note have been or will be taken duly and effectively. (c) The Bonds, together with all other indebtedness of the Issuer, are within all applicable debt limits. (d) The Bonds will be valid and enforceable special obligations of the Issuer according to their terms, subject to bankruptcy and equitable principles. SECTION 7.2 Issuer's Covenants. In addition to all other covenants and agreements of the Issuer contained in this Indenture or the Financing Agreement, the Issuer further covenants and agrees with the Bondholders and the Trustee as follows: (a) Except as provided in Article XII, the Issuer shall not alter, modify or cancel, or agree to alter, modify or cancel, any agreement which relates to or affects the Security. (b) Except as otherwise provided in this Indenture, the Financing Agreement, the Assignment or the Credit Facility Documents, the Issuer shall not sell, convey, mortgage, encumber or otherwise dispose of any portion of the Security or create or authorize to be created any debt, lien or charge thereon. (c) At the expense of the Borrower, the Issuer shall cooperate with the Borrower in the Borrower's performing the Borrower's obligation to cause this Indenture, or any related instruments or documents relating to the assignment made by the Issuer under this Indenture to secure the Bonds, to be recorded and filed in the manner and in the places which may be required by law in order to preserve and protect fully the security of the holders of the Bonds and the rights of the Trustee hereunder. 55 SECTION 7.3 Limitations on Liability. Notwithstanding any other provision of this Indenture to the contrary: (a) The obligations of the Issuer with respect to the Bonds are not general obligations of the Issuer but are special, limited obligations of the Issuer payable by the Issuer solely from the Security. (b) Nothing contained in the Bonds or in this Indenture shall be considered as assigning or pledging any funds or assets of the Issuer other than the Trust Estate. (c) The Bonds are not and will not be a debt of the State, the Issuer or of any other political subdivision of the State, and neither the State, the Issuer nor any other political subdivision of the State is or will be liable for the payment of the Bonds. (d) Neither the faith and credit of the Issuer, the State nor of any other political subdivision of the State are pledged to the payment of the principal of and interest and any premium on the Bonds. (e) No failure of the Issuer to comply with any term, condition, covenant or agreement in this Indenture or in any document executed by the Issuer in connection with the Mortgaged Property or the issuance, sale and delivery of the Bonds shall subject the Issuer to liability for any claim for damages, costs or other charges except to the extent that the same can be paid or recovered from the Trust Estate. (f) The Issuer shall not be required to advance any moneys derived from any source other than the Trust Estate for any of the purposes of this Indenture, any of the other Bond Documents or any of the Loan Documents, whether for the payment of the principal or redemption price of, or interest on, the Bonds, the payment of Third Party Fees or administrative expenses or otherwise. SECTION 7.4 Further Assurances: Security Agreement. The Issuer, to the extent permitted by law, shall execute, acknowledge and deliver such supplemental indentures and other instruments and documents, and perform such further acts, as the Trustee or the Credit Provider may reasonably require to perfect, and maintain perfected, the security interest in the Trust Estate or to better assure, transfer, convey, pledge, assign and confirm to the Trustee or the Credit Provider all of its respective interest in the property described in this Indenture and the revenues, receipts and other amounts pledged by this Indenture. The Issuer shall cooperate to the extent necessary with the Borrower, the Trustee and the Credit Provider in their defenses of the Trust Estate and the Security against the claims and demands of all Persons. In addition to the assignment by the Issuer of its rights in the Trust Estate to the Trustee, the Issuer hereby acknowledges that in order to more fully protect, perfect and preserve the rights of the Trustee, the Borrower and the Credit Provider in the Trust Estate, the Issuer grants to the Trustee a security interest in the Trust Estate and the proceeds thereof. SECTION 7.5 Enforcement. The Issuer agrees that the Trustee and, so long as a Credit Facility provided by the Credit Provider continues in effect, the Credit Provider, in its name or in the name of the Issuer, may enforce against the Borrower or any other Person any rights of the Issuer under the Bond Documents (other than the Reserved Rights) whether or not the Issuer is in default under this Indenture or under the Financing Agreement, but neither the Trustee nor the 56 Credit Provider will be deemed to have assumed any of the obligations of the Issuer under the Bond Documents. The Issuer shall fully cooperate with the Trustee or the Credit Provider in the enforcement by the Trustee or the Credit Provider of any such rights. At the request of the Trustee or the Credit Provider, the Issuer, upon being indemnified to its reasonable satisfaction against all liability, costs and expenses which may be incurred in connection with such enforcement, shall in its name commence legal action or take such other actions as the Trustee or the Credit Provider reasonably requests to enforce the rights of the Issuer, the Trustee or the Credit Provider under or arising from the Bonds or the Bond Documents. SECTION 7.6 Tax Covenants. The Issuer agrees: (a) it shall neither make nor direct the Trustee to make any investment or other use of the proceeds of the Bonds that would cause the Bonds to be "arbitrage bonds" as that term is defined in Section 148(a) of the Code. (b) it (i) shall take, or use its best efforts to require to be taken, at the direction and expense of the Borrower, all actions that may be required of the Issuer for the interest on the Bonds to be and remain not included in gross income for federal income tax purposes and (ii) shall not take or authorize to be taken any actions within its control that would adversely affect that status under the provisions of the Code. (c) it shall enforce or cause to be enforced all obligations of the Borrower under the Regulatory Agreement in accordance with its terns necessary to preserve the tax exemption of interest on the Bonds and seek to cause the Borrower to correct any violation of the Regulatory Agreement within a reasonable period after any such violation is first discovered. In furtherance of the covenants in this Section, the Issuer and the Borrower shall execute, deliver and comply with the provisions of the Tax Certificate, which is by this reference incorporated into this Indenture and made a part of this Indenture, and by its acceptance of this Indenture the Trustee acknowledges receipt of the Tax Certificate and acknowledges its incorporation into this Indenture by this reference. The Trustee agrees that in those instances where it exercises discretion over the investment of funds, it shall not knowingly make any investment inconsistent with subsection (a). ARTICLE VIII CREDIT FACILITY; ALTERNATE CREDIT FACILITY SECTION 8.1 Acceptance of the Credit Facility. The Trustee shall hold the Credit Facility and shall enforce in its name all rights of the Trustee and all obligations of the Credit Provider under the Credit Facility for the benefit of the Bondholders. The Trustee shall not assign or transfer the Credit Facility except to a successor Trustee under this Indenture. The Issuer and the Trustee acknowledge that the obligations of Fannie Mae as the Credit Provider under the initial Credit Facility are not backed by the full faith and credit of the United States of America, but by the credit of Fannie Mae, a federally -chartered, stockholder owned corporation. SECTION 8.2 Requests for Advances Under Credit Facility. The Trustee shall request Advances under the Credit Facility in accordance with its terms and cause the proceeds of each Advance to be applied so that full and timely payments are made on each date on which 57 payment of principal, interest or purchase price is due on any Bond. The Trustee shall not request, and shall not apply the proceeds of, any Advance to pay (i) principal of, interest on or the purchase price of, any Pledged Bond or any Bond known by the Trustee to be held by the Borrower or any Affiliate of the Borrower, (ii) premium that may be payable upon the redemption of any of the Bonds or (iii) interest that may accrue on any of the Bonds on or after the maturity of such Bond. Prior to requesting an Advance to pay principal of or interest on the Bonds on an Interest Payment Date, the Trustee shall determine the amount necessary to make such payment of principal or interest. SECTION 8.3 Return of Payments Under the Credit Facility. In the event the Trustee receives an Advance from the Credit Provider on account of any Tendered Bond and thereafter the Trustee receives remarketing proceeds upon the remarketing of such Tendered Bond, then the Trustee shall promptly reimburse the Credit Provider with such funds to the extent of the amount so paid by the Credit Provider as a reimbursement on behalf of the Borrower. SECTION 8.4 Alternate Credit Facility. Subject to the terms of the Credit Facility Documents, the Trustee shall accept any Alternate Credit Facility delivered to the Trustee in substitution for the Credit Facility then in effect if- (a) £ (a) the Alternate Credit Facility meets the requirements of Section 2.9; (b) the Substitution Date for the Alternate Credit Facility is an Interest Payment Date during a Weekly Variable Rate Period or an Adjustment Date which immediately follows a Reset Period; (c) the Alternate Credit Facility is effective on and from the Substitution Date for such Alternate Credit Facility; and (d) the Trustee receives on or prior to the effective date of the Alternate Credit Facility (i) an Opinion of Counsel to the Credit Provider issuing the Alternate Credit Facility, in form and substance satisfactory to the Issuer and the Trustee, relating to the due authorization and issuance of the Alternate Credit Facility and its enforceability and (ii) an opinion of Bond Counsel to the effect that the substitution of such Alternate Credit Facility will not adversely affect the exclusion from gross income, for federal income tax purposes, of the interest payable on the Bonds. The Trustee shall give notice to the Bondholders by first class mail, postage prepaid, of the substitution by such Alternate Credit Facility for the Credit Facility then in effect as provided in Section 4.2. On the Substitution Date, the Trustee shall draw, if necessary, on the Credit Facility being replaced and shall not surrender such Credit Facility until all requests thereon have been honored. SECTION 8.5 Extension of Credit Facility. hi the event the term of any Credit Facility is extended, the Trustee must receive, not later than the Extension Date, (i) the commitment relating to such extension of the Credit Facility; and (ii) an Opinion of Counsel for the Credit Provider, in substantially the form of the Opinion of Counsel delivered to the Trustee upon the issuance of such Credit Facility. The Trustee shall provide a copy of the commitment to extend and the extension of the credit facility upon receipt thereof to the Rating Agency and, upon request, to any Bondholder. Upon the failure of the Borrower to furnish the Trustee with either a M satisfactory commitment to extend the Credit Facility or an Credit Facility pursuant to Section 8.4 and the accompanying Opinion of Counsel on or prior to each Extension Date, the Bonds shall be subject to mandatory tender pursuant to Section 4.2. SECTION 8.6 _Limitations on Rights of Credit Provider. Notwithstanding anything contained in this Indenture to the contrary, all provisions in this Indenture regarding consents, approvals, directions, waivers, appointments, requests or other actions by the Credit Provider shall be deemed not to require or permit such consents, approvals, directions, waivers, appointments, requests or other actions and shall be read as if the Credit Provider were not mentioned in such provisions (i) if a Wrongful Dishonor has occurred and is continuing, or (ii) after the Credit Facility ceases to be valid and binding on the Credit Provider for any reason, or is declared to be null and void by final judgment of a court of competent jurisdiction; provided, however, that the Credit Provider's right to notices and the payment of amounts due to the Credit Provider shall continue in full force and effect. The foregoing shall not affect any other rights of the Credit Provider. SECTION 8.7 References to Credit Provider When No Credit Facility Is In Effect. All provisions of this Indenture relating to the rights of the Credit Provider shall be of no force and effect if there is no Credit Facility in effect and there are no Pledged Bonds and all amounts owing to the Credit Provider under the Credit Facility Documents have been paid. In such event, all references to the Credit Provider shall have no force or effect. SECTION 8.8 Certain Notices to the Credit Provider and the Loan Servicer. The Trustee and Issuer shall promptly notify the Credit Provider and the Loan Servicer of any of the following as to which it has actual knowledge: (i) the occurrence of any Event of Default under this Indenture or under any of the other Transaction Documents, or any event which, with the passage of time or service of notice, or both, would constitute such an Event of Default, specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with respect to such event, (ii) an Act of Bankruptcy or a bankruptcy filing by or against the Borrower and (iii) the making of any claim in connection with seeking the avoidance as a preferential transfer ("Preference Claim") of any payment of principal of, or interest on, the Loan. SECTION 8.9 Credit Provider to Control Insolvency Proceedings. Each Bondholder, by its purchase of Bonds, the Trustee and the Issuer agree that the Credit Provider may at any time during the continuation of an insolvency proceeding of the Issuer or the Borrower ("Insolvency Proceeding") direct all matters relating to the Bonds in any such Insolvency Proceeding, including, without limitation, (i) all matters relating to any Preference Claim, (ii) the direction of any appeal of any order relating to any Preference Claim and (iii) the posting of any surety, supersedeas or performance bond pending any such appeal. hi addition, and without limitation of the foregoing, the Credit Provider shall be subrogated to the rights of the Issuer, the Trustee and the Bondholders in any Insolvency Proceeding to the extent it has performed its payment obligations under the Credit Facility, including any rights of any party to an adversary proceeding action with respect to any court order issued in connection with any such Insolvency Proceeding and rights pertaining to the filing of a proof of claim, voting on a reorganization plan and rights to payment thereunder. 59 ARTICLE IX DISCHARGE OF LIEN SECTION 9.1 Discharee of Lien and Security Interest. (a) Discharge. Upon satisfaction of the conditions set out in subsection (b), the Trustee shall (i) cancel and discharge this Indenture and the pledge and assignment of the Security, (ii) execute and deliver to the Issuer such instruments in writing prepared by the Issuer or its counsel and provided to the Trustee and the Credit Provider as may be required to cancel and discharge this Indenture and the pledge and assignment of the Trust Estate, (iii) reconvey, assign and deliver to the Issuer so much of the Trust Estate as may be in its possession or subject to its control (except for (A) moneys and Government Obligations held for the purpose of paying Bonds and (B) moneys and Investments held in the Rebate Fund for payment to the United States Government) who shall, in turn, convey, assign and deliver the remaining Trust Estate to the Borrower and (iv) return the Credit Facility to the Credit Provider. (b) Conditions to Discharge. The conditions precedent to the cancellation and discharge of this Indenture and the other acts described in subsection (a) are (i) payment in full of the Bonds, (ii) payment of the Trustee's Annual Fee and the Trustee's ordinary costs and expenses under this Indenture, (iii) receipt by the Trustee of a written statement from the Credit Provider stating that all obligations owed to the Credit Provider under the Credit Facility Documents have been fully paid, (iv) payment of all Extraordinary Items, (v) receipt by the Trustee of a written statement from the Issuer stating that all amounts owed to the Issuer in respect of Reserved Rights have been fully paid, (vi) return of the Credit Facility to the Credit Provider, and (vii) receipt by the Trustee of an Opinion of Counsel, at the expense of the Borrower, stating that all conditions precedent to the satisfaction and discharge of this Indenture have been satisfied. (c) Survival of Rights and Powers. The Reserved Rights of the Issuer and the rights and powers granted to the Trustee with respect to the payment, transfer and exchange of Bonds shall survive the cancellation and discharge of this Indenture. SECTION 9.2 Payment of Outstandine Amounts. If the Bonds are paid in full, but any one or more of the other conditions precedent set out in Section 9.1(b) are not satisfied because an amount has not been paid, the Trustee, prior to cancellation and discharge of this Indenture, shall pay to the persons listed below, in the strict order set out below, the amounts required to satisfy those conditions precedent: (a) Trustee's Annual Fee and Ordinary Costs and Expenses. If any portion of the Trustee's Annual Fee or ordinary costs and expenses of the Trustee remain unpaid, the Trustee shall pay to itself so much of the Trust Estate as will fully pay such unpaid amounts. No Extraordinary Items may be included under this subsection (a). (b) Credit Provider. If the Trustee receives a written statement from the Credit Provider stating that moneys are owed to the Credit Provider under the Credit Facility Documents or the Loan Documents, including obligations in respect of reimbursement of funds advanced by the Credit Provider to the Trustee for application to the payment of Remarketing Expenses, the Trustee shall pay to the Credit Provider so much of the remaining Trust Estate as will fully pay all amounts due and owing to the Credit Provider, as determined by the Credit Provider. The reimbursement from the Trust Estate of amounts advanced by the Credit Provider for application to the payment of Remarketing Expenses will be made with interest at a rate equal to the Prime Rate (as that term is defined in Section 4.2 of the Reimbursement Agreement) plus two percentage points, from the date or dates of such advances through the date of such reimbursement. The Trustee is authorized to rely on the written statement of the Credit Provider as to the amount of such advances and interest accrued on such advances. (c) Trustee. If any Extraordinary Items have not been paid to the Trustee, the Trustee shall pay to itself so much of the remaining Trust Estate as will fully pay all amounts owing to the Trustee for Extraordinary Items. (d) Issuer. If the Trustee receives a written statement from the Issuer stating that moneys are owed to the Issuer in respect of the Reserved Rights, the Trustee shall pay to the Issuer so much of the remaining Trust Estate as will fully pay all amounts owing to the Issuer in respect of the Reserved Rights. SECTION 9.3 Defeasance. (a) Provision for Payment of Bonds. So long as the Bonds are in a Reset Mode or the Fixed Rate Mode, any Bond will be deemed paid within the meaning of Section 9.1 if each of the conditions set out in this Section is satisfied. The Bonds may not be defeased within the meaning of this Section if the Bonds are in the Weekly Variable Rate Mode. The conditions are: (1) The Issuer or the Borrower deposits with the Trustee (A) Available Moneys or (B) Government Obligations which are not subject to early redemption and which are purchased with Available Moneys, of such maturities and interest payment dates and bearing such interest as will be sufficient, without further investment or reinvestment of either the principal amount of such Government Obligations or the interest earnings on Government Obligations (the earnings to be held in trust also), together with any Available Moneys, for the payment on their respective maturity dates, or redemption dates prior to maturity, of the principal of such Bonds and redemption premium, if any, and interest to accrue on such Bonds to such maturity or redemption dates. (2) The Trustee receives, at the expense of the Borrower, and may rely upon: (A) a verification report of an independent certified public accountant or other firm nationally recognized in the certification of cash flow analyses; and (B) an Opinion of Bond Counsel to the effect that such deposit with the Trustee and consequent defeasance of the Bonds does not adversely affect the excludability from gross income for federal income tax purposes of the interest payable on the Bonds. (3) All Third Party Fees due or to become due have been paid or sufficient additional moneys to make the required payments have been irrevocably deposited with the Trustee. (4) For any such Bonds to be redeemed on any date prior to their maturity, the j Trustee has received in form satisfactory to it irrevocable instructions to redeem such Bonds on a date on which the Bonds are subject to redemption, and either evidence 61 satisfactory to the Trustee that all redemption notices required by this Indenture have been given or irrevocable power authorizing the Trustee to give such redemption notices. (5) If the Bonds are in a Reset Mode, the Bonds will be redeemed on or before the last day of the current Reset Period. The Trustee shall redeem the Bonds specified by such irrevocable instructions on the date specified by such irrevocable instructions. (b) Defeased Bonds No Longer Outstanding. At such times as a Bond is deemed to be paid under this Indenture, it will no longer be secured by or entitled to the benefits of this Indenture, except for the purposes of payment in accordance with this Indenture. (c) Release of Certain Income. All income from all Government Obligations in the hands of the Trustee pursuant to this Section which is identified by an independent certified public accountant or other firm nationally recognized in the certification of cash flow analyses as not required for the payment of the Bonds and interest on such income with respect to which such moneys have been so deposited will be deposited with the Trustee as and when realized and collected for use and application as are other moneys deposited with the Trustee. (d) Particular Bonds. Notwithstanding any other provision of this Indenture to the contrary, all moneys or Government Obligations set aside and held in trust pursuant to the provisions of this Article IX for the payment of Bonds (including accrued interest on such Bonds) shall be applied to and used solely for the payment of the particular Bonds (including interest on such Bonds) with respect to which such moneys or Government Obligations have been so set aside in trust. ARTICLE X DEFAULT PROVISIONS AND REMEDIES SECTION 10.1 Events of Default; Preliminary Notice. (a) Events of Default. Each of the following constitutes an Event of Default under this Indenture: (1) default in the payment when due and payable of any interest due on any Bond (other than a Pledged Bond); (2) default in the payment when due and payable of (A) the principal of or any redemption premium on any Bond (other than a Pledged Bond) at maturity or upon any redemption, or (B) the purchase price of any Tendered Bond (other than a Pledged Bond); (3) written notice to the Trustee from the Credit Provider of a default by the Issuer in the observance or performance of any covenant, agreement, warranty or representation on the part of the Issuer included in this Indenture or in the Bonds (other than an Event of Default set forth in subsection (1) or (2) above) and the continuance of such default for a period of 30 days after the Trustee receives such notice; 62 (4) written notice to the Trustee from the Credit Provider of an Event of Default under the Reimbursement Agreement; (5) written notice to the Trustee from the Credit Provider an Act of Bankruptcy; or (6) a Wrongful Dishonor. (b) Preliminary Notice. The Trustee shall immediately notify the Issuer, the Loan Servicer, the Borrower and the Credit Provider after the Trustee obtains knowledge or receives notice of the occurrence of an Event of Default under this Indenture or an event which would become such an Event of Default with the passage of time, the giving of notice or both, identifying the paragraph in Section 10.1(a) under which the Event of Default has occurred or may occur. (c) Non -Default and Prohibition of Mandatory Redemption Upon Tax Event. The occurrence of any event ("Tax Event") which results in the interest payable on the Bonds being includable, for federal income tax purposes, in the gross income of the Bondholders, including any violation of any provision of the Regulatory Agreement or any of the other Bond Documents, shall not (i) directly or indirectly constitute an Event of Default under this Indenture or permit any party (other than the Credit Provider) to accelerate, or require acceleration of, the Loan or the Bonds, unless the Credit Provider provides written notice to the Trustee that such Tax Event constitutes a default under the Reimbursement Agreement, or (ii) give rise to a mandatory redemption of the Bonds, or (iii) give rise to the payment to the Bondholders of any amount, denoted as "supplemental interest," "additional interest," "penalty interest," "liquidated damages," "damages" or otherwise, in addition to the amounts payable to the owners of the Bonds prior to the occurrence of the Tax Event. Nothing contained in this subsection will be deemed to amend or supplement the terms of the Loan Documents. Promptly upon determining that a Tax Event has occurred, the Borrower (on behalf of the Issuer) or the Trustee, by notice in writing to the Credit Provider, the Loan Servicer, all Registered Owners of the Bonds and the Remarketing Agent, shall state that a Tax Event has occurred and whether the Tax Event is cured, curable within a reasonable period or incurable. Notwithstanding the availability of the remedy of specific performance to cure a Tax Event that is curable within a reasonable period, neither the Issuer nor the Trustee shall have, upon the occurrence of a Tax Event, any right or obligation to cause or direct acceleration of the Bonds or the Loan, to enforce the Note or to foreclose the Security Instrument, to accept a deed to the Mortgaged Property in lieu of foreclosure, or to effect any other comparable conversion of the Mortgaged Property. SECTION 10.2 Acceleration, Redemption and Mandatory Tender. The Bonds shall be subject to acceleration, redemption and mandatory tender as set out in this Section. (a) Acceleration. Upon: (1) the occurrence and during the continuance of a Wrongful Dishonor, the Trustee may, and upon the written request of Bondholders owning not less than 51 percent in aggregate principal amount of Bonds then Outstanding must, by written notice to the Issuer, the Borrower, the Credit Provider and the Loan Servicer, declare the principal of all Bonds and the interest accrued, and to accrue on the Bonds to the date of payment immediately due and payable; or 63 (2) the occurrence of any other Event of Default under this Indenture, the Trustee may, upon receiving the prior written consent of the Credit Provider, and must upon the written direction of the Credit Provider requiring that the Bonds be accelerated pursuant to this subsection, by written notice to the Issuer, the Borrower, the Credit Provider and the Loan Servicer, declare the principal of all Bonds and the interest accrued, and to accrue on the Bonds to the date of declaration immediately due and payable. (b) Redemption and Mandatory Tender. Upon the occurrence of an Event of Default under Section 10.1(a)(4) ofthis Indenture: (1) if the Credit Provider so directs pursuant to Section 3.3(b), the Bonds shall be redeemed in whole or in part in the amount specified by and at the direction of the Credit Provider. (2) if the Credit Provider so directs pursuant to Section 4.2(b), the Bonds shall be subject to mandatory tender. Notwithstanding anything to the contrary in this Indenture, if the Credit Provider directs that the Bonds be redeemed in part pursuant to Section 3.3(b), the Credit Provider may further direct on one or more other occasions under this subsection that the Bonds be redeemed in whole or in part or that the Bonds be subject to mandatory tender. (c) Notice. (1) Acceleration. Upon any decision to accelerate payment of the Bonds, the Trustee shall notify the Bondholders of the declaration of acceleration, that, in the event of acceleration pursuant to Section 10.2(a)(2), interest on the Bonds will cease to accrue upon such declaration, and payment of the Bonds will be made upon presentment of the Bonds at the Designated Office of the Trustee. Such notice shall be sent by registered mail or overnight delivery service, postage prepaid, or, at the Trustee's option, may be given by Electronic Means to each Registered Owner of Bonds at such Registered Owner's last address appearing in the Bond Register. Any defect in or failure to give notice of such declaration will not affect the validity of such declaration. (2) Redemption. Upon the direction of the Credit Provider to redeem the Bonds in whole or in part pursuant Section 3.3(b) and as provided in Section 3.4(a), immediate notice of redemption will be given. (3) Mandatory Tender. Upon any direction of the Credit Provider that the Bonds be subject to mandatory tender, the Trustee shall give notice to the Bondholders as provided in Section 4.2(b). (d) Draw on Credit Facility. Immediately upon acceleration, mandatory redemption or mandatory tender of the Bonds, the Trustee shall request an Advance under the Credit Facility in accordance with its terms. M SECTION 10.3 Other Remedies. Upon the occurrence and continuance of an Event of Default under this Indenture, the Trustee may, with or without taking action under Section 10.2, but only with the prior written consent of the Credit Provider, and must at the direction of the Credit Provider if the Event of Default occurs under Section 10.1(a)(3), (4) or (5), pursue any of the following remedies: (a) an action in mandamus or other suit, action or proceeding at law or in equity (A) to enforce the payment of the principal of and interest and any premium on the Bonds, (B) for the specific performance of any covenant or agreement contained in this Indenture, the Financing Agreement or the Regulatory Agreement or (C) to require the Issuer to carry out any other covenant or agreement with Bondholders and to perform its duties under the Act; (b) the liquidation of the Trust Estate; or (c) an action or suit in equity to enjoin any acts or things which may be unlawful or in violation of the rights of the Bondholders and to execute any other papers and documents and do and perform any and all such acts and things as may be necessary or advisable in the opinion of the Trustee in order to have the respective claims of the Bondholders against the Issuer allowed in any bankruptcy or other proceeding. Subject to the provisions of Section 10.7 and the requirement, if any, that the Credit Provider consent in writing to the exercise by the Trustee of any remedy, upon the occurrence and continuance of an Event of Default under this Indenture, the Trustee shall exercise such of the rights and powers conferred by this Section as the Trustee, being advised by counsel, deems most effective to enforce and protect the interests of the Bondholders and, unless a Wrongful Dishonor has occurred and is continuing, the Credit Provider. SECTION 10.4 Preservation of Security and Remedies if Payment Under Credit Facility is Not Made or is Insufficient; Rights of Bondholders. Upon the occurrence and during the continuance of a Wrongful Dishonor, the Trustee may proceed, and upon the written request of the holders of not less than 25 percent of the aggregate principal amount of the Bonds Outstanding and the receipt of indemnity reasonably satisfactory to the Trustee shall proceed, to protect and enforce its rights and the rights of the Bondholders under this Indenture by such suits, actions or special proceedings in equity or at law, whether for the specific performance of any covenant or agreement, or in aid of the execution of any power granted in this Indenture or by the Act, or for the enforcement of any legal or equitable right or remedy, as the Trustee, being advised by counsel, deems most effective to protect and enforce such rights or to perform any of its duties under this Indenture. SECTION 10.5 Remedies Not Exclusive; Delay or Omission. No right or remedy conferred upon or reserved to the Trustee (or to the Bondholders) is intended to be exclusive of any other right or remedy, but each and every such right and remedy will be cumulative and in addition to any other right or remedy given to the Trustee or to the Bondholders under this Indenture or under the Financing Agreement, the Regulatory Agreement or the Credit Facility or now or later existing at law or in equity. No delay or omission to exercise any right or remedy provided in this Indenture will impair any such right or remedy or be construed to be a waiver of any Event of Default or acquiescence in it. Every such right and remedy may be exercised from time to time as often as may be deemed expedient. rev SECTION 10.6 Waiver. Subject to the conditions precedent set out below, (i) the Trustee may waive, (ii) the Trustee shall waive if directed to do so by the Credit Provider in writing, and (iii) Bondholders owning not less than 51 percent in aggregate principal amount of Bonds then Outstanding may waive, by written notice to the Trustee, any Event of Default under this Indenture and its consequences and rescind any declaration of acceleration of maturity of principal. The conditions precedent to any waiver are: (a) unless waiver is directed by the Credit Provider, the Credit Provider consents to such waiver in writing; (b) the principal and interest on the Bonds in arrears, together with interest thereon (to the extent permitted by law) at the applicable rate or rates of interest borne by the Bonds has been paid or provided for by the Borrower in Available Moneys or by the Credit Provider and all fees and expenses of the Trustee have been paid or provided for by the Borrower or the Credit Provider; and (c) after the waiver, the Credit Facility remains in effect in an amount equal to the aggregate principal amount of the Bonds Outstanding (other than Pledged Bonds) plus the Interest Requirement, provided, however, that such waiver will be permitted without the Credit Facility remaining in effect if (i) the Issuer consents to the waiver, (ii) the Rating Agency then rating the Bonds is notified and the Trustee gives written notice to the Bondholders that the ratings on the Bonds may be reduced or withdrawn upon the occurrence of such waiver, and (iii) 100 percent of the Bondholders consent to the waiver. Upon any such waiver, the default or Event of Default shall be deemed cured and shall cease to exist for all purposes and the Issuer, the Borrower, the Trustee and the Bondholders will be restored to their former positions and rights under this Indenture. No waiver of any default or Event of Default shall extend to or affect any subsequent default or Event of Default or shall impair any right or remedy consequent thereto. SECTION 10.7 Rights of the Credit Provider and the Bondholders to Direct Proceedings: Riehts and Limitations Applicable to Bondholders Issuer and Trustee. (a) Rights to Direct Proceedings. Notwithstanding anything contained in this Indenture to the contrary, the Credit Provider itself or Bondholders owning not less than 51 percent in aggregate principal amount of Bonds then Outstanding, but only with the prior written consent of the Credit Provider, shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture or any other proceedings under this Indenture, provided, however, that such direction will not be otherwise than in accordance with the provisions of law and of this Indenture, and provided that the Trustee will be indemnified to its reasonable satisfaction (except for actions required under Section 10.2(b)). (b) Limitations on Bondholders' Rights. No Bondholder has or shall have the right to enforce the provisions of this Indenture or the Financing Agreement, or to institute any proceeding in equity or at law for the enforcement of this Indenture or the Financing Agreement, or to take any action with respect to an Event of Default under this Indenture or an Event of Default under the Financing Agreement, or to institute, appear in or defend any suit or other C:rl proceeding with respect to this Indenture or the Financing Agreement upon an Event of Default unless (i) such Event of Default is a Wrongful Dishonor, (ii) such Bondholder has given the Trustee, the Issuer, the Credit Provider, the Loan Servicer and the Borrower written notice of the Event of Default, (iii) the holders of not less than 51 percent in aggregate principal amount of Bonds then Outstanding have requested the Trustee in writing to institute such proceeding, (iv) the Trustee has been afforded a reasonable opportunity to exercise its powers or to institute such proceeding, (v) the Trustee has been offered reasonable indemnity, where required, and (vi) the Trustee has thereafter failed or refused to exercise such powers or to institute such proceeding within a reasonable period of time. No Bondholder has or shall have any right in any manner whatever to affect, disturb or prejudice the pledge of revenues or of any other moneys, Funds, Accounts or securities under this Indenture. Except as provided in this subsection, no Bondholder has or shall have the right, directly or indirectly, individually or as a group, to seek to enforce, collect amounts available under, or otherwise realize on, the Credit Facility. SECTION 10.8 Discontinuance of Proceedings. If the Trustee or any Bondholder has instituted any proceeding or remedy under this Indenture, and such proceedings have been discontinued or abandoned for any reason, or have been determined adversely, then and in every such case the Issuer, the Credit Provider and the Trustee will be restored to their former positions and rights under this Indenture, and all rights, remedies, powers, duties and obligations of the Issuer, the Trustee and the Credit Provider shall continue as if no such proceedings had been taken, subject to the limits of any adverse determination. SECTION 10.9 Possession of Bonds. All rights under this Indenture or upon any of the Bonds enforceable by the Trustee may be enforced by the Trustee without the possession of any of the Bonds, or the production of the Bonds at trial or other proceedings. Any suit, action or proceeding instituted by the Trustee may be brought in its name for itself or as representative of the Bondholders without the necessity of joining Bondholders as parties, and any recovery resulting from such proceedings shall, subject to Section 10.10, be for the ratable benefit of the Bondholders. SECTION 10.10 Application of Moneys. Amounts derived from payments under the Credit Facility shall be deposited into the Credit Facility Account and applied solely to pay the principal of and interest on the Bonds. Amounts on deposit in the Bond Purchase Fund shall be applied solely to pay the purchase price of the Bonds. All other moneys received by the Trustee pursuant to any action taken under this Article X shall be deposited into the Interest Account and the Redemption Account, as applicable, after payment of the ordinary costs and expenses of the Trustee. The balance of such moneys, less such amounts as the Trustee determines may be needed for possible use in paying future fees and expenses and for the preservation and management of the Mortgaged Property (as identified by the Credit Provider), shall be applied as set out in the following subsections. (a) Principal on Bonds Not Declared Due and Payable. Unless the principal on all Bonds has become or been declared due and payable, all such moneys will be applied: First - to the payment of all interest then due on the Bonds, in the order of the maturity of such interest and, if the amount available shall not be sufficient to pay in full said p amount, then to the payment ratably, of the amounts due, without any discrimination or privilege; 67 Second - to the payment of the unpaid principal of any of the Bonds which have become 1 due (other than Bonds matured or called for redemption for the payment of which moneys are held pursuant to this Indenture), in the order of due dates, with interest upon the principal amount of the Bonds from the respective dates upon which they become due at the rate or rates borne by the Bonds, to the extent permitted by law, and, if the amount available shall not be sufficient to pay in full the principal of such Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal due on such date, to the persons entitled to such payment without any discrimination or privilege; Third - to the payment of amounts owed to the Credit Provider under the Credit Facility Documents and the Loan Documents, and then to any amounts due to the Trustee for Extraordinary Items, for this purpose including the costs and expenses of any proceedings resulting in the collection of such moneys and of advances incurred or made by the Trustee. (b) Principal of Bonds Declared Due and Payable. If the principal of all the Bonds has become or been declared due and payable, all such moneys shall be applied first, to the payment of the principal and interest then due and unpaid upon the Bonds, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably according to the amounts due respectively for principal and interest to the persons entitled to payment, until all such principal and interest has been paid; second, to pay the Credit Provider amounts owed to it under the Credit Facility Documents and the Loan Documents; and third, to any other amounts due and payable under this Indenture. (c) General. Whenever moneys are to be applied pursuant to this Section, such moneys shall be applied at such times, and from time to time, as the Trustee determines, having due regard for the amount of such moneys available for application, the likelihood of additional moneys becoming available for such application in the future, and potential expenses relating to the exercise of any remedy or right conferred on the Trustee by this Indenture. Whenever the Trustee applies such moneys, it shall fix the date (which will be an Interest Payment Date unless it deems an earlier date more suitable) upon which such application is to be made, and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue, unless interest has already ceased to accrue in accordance with Section 10.2(a). The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the owner of any Bond until such Bond is presented to the Trustee for appropriate endorsement or for cancellation if fully paid. ARTICLE XI THE TRUSTEE AND TENDER AGENT SECTION 11.1 Auaointment of Trustee, Duties. The Trustee is appointed and agrees to act in such capacity and to perform the duties of the Trustee under this Indenture, the Financing Agreement, the Assignment and the Regulatory Agreement upon the express terms and conditions of this Indenture. ffM (a) Attorneys, Agents or Receivers. The Trustee may execute any of its trusts or powers under this Indenture and perform any of its duties by or through attorneys, agents or receivers. The Trustee shall be entitled to advice of counsel concerning all matters of trust under this Indenture and its duties under this Indenture. The Trustee may in all cases pay such reasonable compensation to such attorneys, agents and receivers and shall be entitled to reimbursement from the Borrower for all such compensation paid. The Trustee may act upon the opinion or advice of counsel, accountants, or such other professionals as the Trustee deems necessary and selected by it in the exercise of reasonable care. The Trustee shall not be responsible for any loss or damage resulting from any action or nonaction based on its good faith reliance upon such opinion or advice which is not contrary to the express terms of this Indenture, any of the other Bond Documents or the Loan Documents. (b) Limitation of Responsibility. The Trustee shall not be responsible for any recital in this Indenture (other than Recital N) or in the Bonds (other than in the certificates of authentication on the Bonds), or for insuring the Mortgaged Property, or for the sufficiency of any insurance, or for collecting any insurance moneys, or for the validity of this Indenture or of any supplements to this Indenture or instruments of further assurance, or for the sufficiency of the security for the Bonds issued under this Indenture or intended to be secured by this Indenture, or for the value or condition of or title to the Mortgaged Property or the Security. The Trustee may require (but shall be under no duty to require) of the Borrower full information and advice as to the performance of the covenants, conditions and agreements aforesaid as to the condition of the Mortgaged Property. The Trustee shall not be liable for any loss suffered in connection with any investment of amounts made by it in accordance with this Indenture. The Trustee is not accountable for the use (i) of any Bonds delivered in accordance with instructions of the Issuer, (ii) by the Borrower of the proceeds of the Loan, or (iii) for the use or application of any moneys paid out by the Trustee in accordance with this Indenture. (c) Reliance. The Trustee shall be protected in acting upon any Opinion of Counsel, notice, request, consent, direction, requisition, certificate, order, affidavit, letter, or other paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons and which is not contrary to the express terms of this Indenture, the other Bond Documents or the Loan Documents. Any action taken by the Trustee pursuant to this Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the owner of any Bond as shown on the Bond Register will be conclusive and binding upon all future owners or holders of the same Bonds and upon Bonds issued in exchange therefor or in place of such Bonds. (d) Right Not Duty Until Undertaken. The permissive right of the Trustee to do things enumerated in this Indenture or in the other Bond Documents to which the Trustee is a party shall not be construed as duties until specifically undertaken by the Trustee. Prior to an Event of Default under this Indenture, the Trustee shall only be responsible for the performance of the duties expressly set forth in this Indenture and in the other Bond Documents to which it is a party and shall not be answerable for other than its negligence or willful misconduct in the performance of those express duties. (e) No Personal Liability. The Trustee shall not be personally liable for any debts contracted or for damages to persons or to personal property injured or damaged, or for salaries or nonfulfillment of contracts, relating to the Mortgaged Property. M. (f) No Bond or Surety Required. The Trustee shall not be required to give any bond or surety in respect of the execution of its trusts and powers or otherwise in respect of the premises. (g) Security or Indemnity Bond. Before taking any action requested by Bondholders under Article X (except for acceleration of the Bonds, requesting draws under the Credit Facility or seeking payment pursuant to Section 10.3), the Trustee may require reasonably satisfactory security or an indemnity bond reasonably satisfactory to it from such Bondholders for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its own negligence or willful misconduct by reason of any such action so taken. (h) Not Bound to Inquire. The Trustee is not required to take notice or deemed to have notice of any default or Event of Default under this Indenture, except Events of Default under Section 10.1(a) (1), (2) or (6), unless the Trustee has actual knowledge thereof or has received notice in writing of such default or Event of Default from the Issuer, the Borrower, the Credit Provider, the Loan Servicer, or the holders of at least 25 percent in aggregate principal amount of the Outstanding Bonds, and in the absence of any such notice, the Trustee may conclusively assume that no such default or Event of Default exists. The Trustee may nevertheless require the Issuer and the Borrower to furnish information regarding performance of their respective obligations under the Financing Agreement, the Regulatory Agreement and this Indenture, but is not obligated to do so. (i) Standard of Care. The Trustee, during the existence and continuation of any Event of Default under this Indenture, shall exercise such of the rights vested in it by this Indenture, the Financing Agreement and the Regulatory Agreement, and use the same degree of care and skill in their exercise, as a reasonable person would exercise or use under the circumstances in the conduct of such person's own affairs. The foregoing will not limit the Trustee's obligations under Article VIII or Section 10.2(a). 0) Notice to Rating Agency. At any time that the Bonds are rated by a Rating Agency, the Trustee shall give notice by mail to that Rating Agency at its address (as specified in Section 13.4) promptly upon the occurrence of any of. (i) the appointment of any successor trustee or separate trustee or co -trustee, (ii) any amendment of or supplement to this Indenture, the Financing Agreement, the Credit Facility or any Loan Document, (iii) the termination of the Credit Facility, the extension or expiration of the Credit Facility or the substitution of any Alternate Credit Facility for the Credit Facility, (iv) an Event of Default under this Indenture, (v) a redemption, acceleration or defeasance of the Bonds in whole or in part (other than any mandatory sinking fund redemption or redemption caused by the deposit and accumulation of moneys in the Principal Reserve Fund), (vi) any mandatory tender of the Bonds, (vii) execution by the Trustee of an agreement for the investment of moneys at a guaranteed rate as an Investment, (viii) any change in the provider of an agreement in the Trust Estate for the investment of moneys at a guaranteed rate; (ix) any resignation, removal or replacement of the Remarketing Agent, (x) any change in Mode, and (xi) any other event of which notice reasonably is requested by the Rating Agency. Notwithstanding the foregoing, it is expressly understood and agreed that failure to provide any such notice to any Rating Agency or any defect in any such notice will not affect the validity of any action with respect to which notice is to be given or the effectiveness of any such action. 70 (k) Notice to Loan Servicer. The Trustee shall give prompt written notice to the Loan Servicer of the non-payment of any fee, cost or expense payable under the Financing Agreement. (1) Authority to Execute. The Trustee is authorized and directed by the Issuer to execute or accept and acknowledge and to perform its obligations under, as applicable, in its capacity as Trustee, the Financing Agreement, the Assignment, the Regulatory Agreement and any financing statements. (m) No Disclosure Responsibility. The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds, except for any information provided by the Trustee. (n) No Financial Obligation. No provision of this Indenture or any other Bond Document or any Loan Document shall require the Trustee to risk or advance its own funds or otherwise incur any financial liability in the performance of its duties or the exercise of its rights under this Indenture. (o) No Liability for Directions. The Trustee will not be liable for any action taken or not taken by it in accordance with the direction of the Credit Provider or Bondholders pursuant to this Indenture except for the Trustee's own negligent action, its own negligent failure to act, or its own willful misconduct. (p) No Liability for Loan Servicer. The Trustee shall not be responsible for the actions or omissions of the Loan Servicer and shall have no duty or responsibility to monitor the performance of the Loan Servicer. (q) Books, Records and Accounts. The Trustee, on behalf of the Issuer, shall keep and maintain, or cause to be kept and maintained, proper books, records and accounts in which complete and accurate entries shall be made of all of its transactions relating to the Bonds, this Indenture, the Financing Agreement, the Regulatory Agreement, the Loan, the Credit Facility, the Funds and Accounts, Permitted Investments and Investment Income, all of which, at all reasonable times, and upon reasonable prior notice, will be subject to the inspection and audit by the Issuer, the Credit Provider, the Borrower, the Loan Servicer and Bondholders owning not less than 25 percent in aggregate principal amount of Bonds then Outstanding or any of their accountants or agents duly authorized in writing, each of whom will have the right, at its expense, to make copies of any such books of record and accounts. (r) List of Bondholders. The Trustee shall keep the Bond Register available for inspection by any Bondholder or its attorney duly authorized in writing during normal business hours upon reasonable prior notice. SECTION 11.2 Oualification. The Trustee and any successor Trustee shall at all times be a bank or trust company organized under the laws of the United States of America or any state, authorized under such laws to exercise corporate trust powers, having a combined capital stock, surplus and undivided profits of at least $25,000,000 (or an affiliate of a corporation or banking association meeting that requirement which guarantees the obligations and liabilities of the Trustee) and subject to supervision or examination by federal or state banking authority. 71 SECTION 11.3 Fees, Expenses. Each of the Trustee and the Tender Agent is entitled to payment and reimbursement from the Borrower, or from the Trust Estate to the extent otherwise permitted in this Indenture, for reasonable fees for its ordinary services rendered under this Indenture and the other Bond Documents and its ordinary costs and expenses reasonably incurred in connection with its services under this Indenture and the other Bond Documents. In the event that it should become necessary that the Trustee perform extraordinary services, it shall be entitled to Extraordinary Items; provided however, that if such Extraordinary Items are incurred as a result of the negligence or willful misconduct of the Trustee or the Tender Agent, as applicable, it will not be entitled to compensation or reimbursement for such services or expenses. The Borrower's failure to pay amounts owed to the Trustee or the Tender Agent shall not excuse the performance of its obligations. The Trustee recognizes that all fees, charges and other compensation to which it may be entitled under this Indenture are required to be paid by the Borrower under the Financing Agreement, and, accordingly, the Trustee and the Tender Agent agree that except for moneys that the Issuer may derive from the Borrower for purposes of the foregoing, the Issuer shall not be liable for any such fees, charges and other compensation. SECTION 11.4 _Merger; Consolidation. Any corporation or association into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, merger or consolidation, provided such corporation or association otherwise qualifies under Section 11.2, shall be and become the successor Trustee under this Indenture with all the estates, properties, rights, powers and duties of the predecessor Trustee without the execution or filing of any instrument or any further act, deed or conveyance (other than the provision of notice to the Issuer, the Credit Provider and the Loan Servicer). SECTION 11.5 Resignation or Removal of Trustee. The Trustee may resign only upon giving 60 days prior written notice to the Issuer, the Credit Provider, the Loan Servicer, the Borrower and to each Registered Owner of Bonds then Outstanding as shown on the Bond Register. The Trustee may be removed at any time upon 30 days prior written notice to the Trustee, (i) by the Issuer, with the prior written consent of the Credit Provider, (ii) by the owners of not less than 51 percent in aggregate principal amount of Bonds then Outstanding, which written instrument shall designate a successor Trustee approved by the Credit Provider, or (iii) by the Credit Provider. Such resignation or removal shall not be effective until a successor Trustee satisfying the requirements of Section 11.2 is appointed and has accepted its appointment. SECTION 11.6 Appointment of Successor Trustee. Upon the resignation or removal of the Trustee, a successor Trustee, satisfying the requirements of Section 11.2, shall be appointed by the Borrower with the prior written consent of the Credit Provider (unless appointed by the Bondholders as provided in Section 11.5), provided, however, that if the Borrower is then in default under any Bond Document or any Loan Document or if an event has occurred and is continuing which, with notice or the passage of time or both, would constitute such a default, such appointment will be made by the Issuer with the prior written consent of the Credit Provider. If, in the case of resignation or removal of the Trustee, no successor is appointed within 30 days after the notice of resignation or within 30 days after removal, as the case may be, then, in the case of a resignation, the resigning Trustee shall appoint a successor with the prior 72 written consent of the Issuer and the Credit Provider or apply to a court of competent jurisdiction for the appointment of a successor Trustee and, in the case of a removal, the Credit Provider shall have the right to appoint a successor Trustee or to apply to a court of competent jurisdiction for the appointment of a successor Trustee. The successor Trustee must accept in writing its duties and responsibilities under this Indenture, the Financing Agreement, the Assignment and the Regulatory Agreement. The successor Trustee shall give notice of such succession by first- class mail, postage prepaid, to each Bondholder, the Issuer, the Credit Provider, the Loan Servicer and the Borrower. SECTION 11.7 _Transfer of Riuhts and MortsaEed Property to Successor Trustee. The successor Trustee, without any further act, deed or conveyance, shall become fully vested with all moneys, estates, properties, rights, powers, duties and obligations of the predecessor Trustee, but the former Trustee shall nevertheless, on the written request of the Issuer, the Credit Provider or the successor Trustee, execute, acknowledge and deliver such instruments of conveyance and further assurance and do such other things as may be reasonably required for more fully and certainly vesting and confirming in the successor Trustee all the right, title and interest of the predecessor Trustee in and to any properties held by it under this Indenture, and shall pay over, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions set forth in this Indenture. The former Trustee shall execute and deliver a certificate of transfer or such other certificate or document as may be required by the Credit Facility for its transfer to a successor Trustee and do such other things as may be reasonably required to transfer all of its right, title and interest in and to the Credit Facility to the successor Trustee. Should any deed, conveyance or instrument in writing from the Issuer be required by the successor Trustee for more fully and certainly vesting in and confirming to the successor Trustee any such moneys, estates, properties, rights, powers and duties, any and all such deeds, conveyances and instruments in writing, shall, on request, and as may be authorized by law, be executed, acknowledged and delivered by the Issuer. SECTION 11.8 Power To Appoint Co -Trustees and Separate Trustees. (a) Appointment of Co -Trustees. At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Mortgaged Property is located, the Issuer (at the request of the Borrower, unless the Borrower is then in default under any Bond Document or any Loan Document or if an event has occurred and is continuing which, with notice or the passage of time or both, would constitute such a default) shall have the power, subject to the approval of the Credit Provider, to appoint one or more persons approved by the Trustee either to act as co -trustee jointly with the Trustee or as separate trustee of all or any part of the Mortgaged Property, and to vest in such person, in such capacity, such title to the Mortgaged Property or any part of it, and/or such rights, powers, duties, trusts or obligations as the Issuer and the Trustee may consider necessary or desirable. If the Issuer is in default under this Indenture, the Trustee alone will have the power to make such appointment with the prior written consent of the Credit Provider. The Issuer shall execute, acknowledge and deliver all such instruments as may be required by any such co -trustee or separate trustee for more fully confirming such title, rights, powers, trusts, duties and obligations to such co -trustee or separate trustee. Any co -trustee shall give prompt written notice of such appointment to the Loan Servicer. f (b) Effect of Death, Incapacity, Resignation or Removal of Co -Trustee or Separate Trustee. In case any co -trustee or separate trustee dies, becomes incapable of acting, 73 resigns or is removed, the pledge and assignment of the Security and all rights, powers, trusts, duties and obligations of the co -trustee or separate trustee, so far as permitted by law, shall vest in and be exercised by the Trustee unless and until a successor co -trustee or separate trustee is appointed in the same manner as provided in subsection (a). (c) Approval of the Issuer. No co -trustee or separate trustee may assume its duties under this Indenture without the prior written approval of the Issuer, unless the Issuer is in default under this Indenture or has failed to respond timely as otherwise provided in this Article XI. SECTION 11.9 Filing of Financing Statements. At the direction of the Credit Provider or the Loan Servicer and at the expense of the Borrower, the Trustee shall file or record or cause to be filed or recorded all financing statements which are required to be filed or recorded in order fully to protect and preserve the security interests relating to and the priority of the Loan, the Trust Estate and the Security, and the rights and powers of the Issuer, the Trustee and the Credit Provider in connection with such security interests, including, but not limited to, all continuation statements for the purpose of continuing without lapse the effectiveness of (i) those financing statements which have been filed at or prior to the Closing Date in connection with the security for the Bonds pursuant to the authority of the UCC, and (ii) any previously filed continuation statements which have been filed as required by this Indenture; provided, however, that if the Credit Provider or the Loan Servicer gives written notice to the Trustee that it has filed or recorded all applicable financing statements, the Trustee shall be entitled to rely on such written notice. The Issuer shall sign, and the Trustee shall obtain from the Borrower, the Loan Servicer or the Credit Provider, all such financing statements as may be required for such purposes. Each financing statement delivered to the Trustee shall be accompanied by a notice from the Loan Servicer or the Credit Provider instructing the Trustee to file such financing statement in all appropriate places, which places shall be designated in such notice. Upon the filing of any such financing statement the Trustee shall immediately notify the Issuer, the Borrower, the Credit Provider and the Loan Servicer that the same has been done. If direction is given by the Loan Servicer or the Credit Provider, the Trustee shall file all financing statements in accordance with such directions. SECTION 11.10. Tender Agent. The initial Tender Agent is U.S. Bank National Association. The Tender Agent shall designate to the Trustee, the Issuer, the Remarketing Agent and the Credit Provider its Designated Office and signify its acceptance of the duties and obligations imposed upon it under this Indenture by a written instrument of acceptance delivered to the Trustee under which such Tender Agent will agree particularly to: (a) act as agent for the Trustee for the purpose of authenticating, accepting delivery of and delivering Bonds in accordance with Sections 2.11, 2.12, 2.13, 2.14, 2.16, 2.18, 4.1 or 4.2 or other provisions of this Indenture relating to authentication and delivery of Bonds; (b) forward to the Trustee immediately after completion of such authentication the names, addresses, taxpayer identification numbers or social security numbers of all persons in whose names the Bonds are to be registered; (c) deliver authenticated and registered Bonds to or to the order of the persons in whose names such Bonds are registered; 74 (d) as agent for the Trustee, hold all moneys delivered to it for the purchase of Bonds in trust in the Bond Purchase Fund for the account of the person who delivered such moneys until the Bonds purchased with such moneys have been registered, authenticated and delivered to or to the order of such person; and (e) hold all Bonds delivered to it for purchase in trust for the owner of such Bonds until such owner has received the purchase price for such Bonds. The Tender Agent shall be entitled to the same protections, immunities and limitations from liability afforded the Trustee under this Indenture. The Issuer shall cooperate with the Trustee, the Borrower and the Credit Provider to cause the necessary arrangements to be made and to be continued by which amounts from the sources specified in this Indenture and in the Financing Agreement shall be made available for the purchase of Bonds presented at the Designated Office of the Tender Agent, and by which Bonds, executed by the Issuer and to be authenticated by the Tender Agent, shall be made available to the Tender Agent to the extent necessary for delivery pursuant to Sections 4.1 or 4.2. SECTION 11.11. Resignation or Removal of Tender Agent. The Tender Agent may resign by giving no less than 30 days prior written notice to the Borrower, the Trustee, the Credit Provider, the Loan Servicer and the Issuer. The Tender Agent may be removed by the Borrower with the written approval of the Credit Provider, by an instrument signed by the Borrower stating the reason for such removal filed with the Tender Agent, the Trustee, the Credit Provider and the Issuer. The Trustee or the Credit Provider is authorized, with the prior written approval of the Borrower and the Credit Provider or the Trustee, as applicable, to remove the Tender Agent and appoint a successor. No removal of the Tender Agent shall be effective until a successor Tender Agent has been appointed and has accepted such appointment. Failing such appointment by the Borrower prior to the effective date of the Tender Agent's resignation, the Credit Provider shall have the right to appoint a successor Tender Agent acceptable to the Issuer. Any successor Tender Agent shall be a trust company or bank having trust powers and in good standing, within or without the State. The provisions of this Section shall apply if the resignation of the Tender Agent is due to the fact that the Tender Agent no longer exists. In no event shall the resignation or removal of the Tender Agent take effect prior to the date a successor Tender Agent has been appointed and is serving under this Indenture and the Tender Agent Agreement. The Trustee, when acting as Tender Agent, may transfer the Tender Agent duties to any related affiliate without further act or approval (other than the provision of notice to the Issuer, the Credit Provider, the Borrower and the Remarketing Agent). ARTICLE XII SUPPLEMENTAL INDENTURES; AMENDMENTS SECTION 12.1 Supplemental Indentures Not Reauiring Bondholder Consent. The Issuer and the Trustee, without the consent of or notice to any Bondholder, may enter into an indenture or indentures supplemental to this Indenture for one or more of the following purposes: (a) to cure any ambiguity or to correct or supplement any provision contained in this Indenture or in any supplemental indenture which may be defective or inconsistent with any other provision contained in this Indenture or in any supplemental indenture; W (b) to amend, modify or supplement this Indenture in any respect if, in the judgment of the Trustee, such amendment, modification or supplement is not materially adverse to the interests of the Bondholders; (c) to grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Bondholders or the Trustee, or to grant or pledge to the Trustee for the benefit of the Bondholders any additional security other than that granted or pledged under this Indenture; (d) to modify, amend or supplement this Indenture in such manner as to permit qualification under the Trust Indenture Act of 1939, as amended, or any similar federal statute then in effect, or to permit the qualification of the Bonds for sale under the securities laws of any of the States of the United States; (e) to appoint a successor trustee, separate trustee or co-trustee, or a separate Tender Agent, the Paying Agent, if any, or Bond Registrar; (f) to make any change requested by the Credit Provider which, in the judgment of the Trustee, is not materially adverse to the interests of the Bondholders, including, but not limited to, provision of a Credit Facility other than or in substitution for the initial Credit Facility, provided that the provision of such other Credit Facility does not adversely affect the rating then in effect for the Bonds; (g) to make any changes in this Indenture or in the terms of the Bonds necessary or desirable in order to maintain the rating of "AAA" or equivalent rating awarded to the Bonds by the Rating Agency or otherwise to comply with requirements of any Rating Agency then rating the Bonds; (h) to comply with the Code and the regulations and rulings issued with respect to the Code, to the extent determined as necessary in the Opinion of Bond Counsel; (i) to modify, alter, amend or supplement this Indenture in any other respect, including amendments which would otherwise be described in Section 12.2, (A) if such amendments will take effect on a Mandatory Tender Date following the purchase of Tendered Bonds or (B) if notice of the proposed supplemental indenture is given to Bondholders (in the same manner as notices of redemption are given) at least 30 days before the effective date of such amendment, modification, alteration or supplement and, on or before such effective date, the Bondholders have the right to demand purchase of their Bonds pursuant to Section 4.1; or 0) to change any of the time periods for provision of notice relating to the remarketing of Bonds or the determination of the interest rate on the Bonds. If the Trustee has received written confirmation from the Rating Agency to the effect that such supplemental indenture will not result in the suspension, withdrawal or reduction of the then current rating on the Bonds and all conditions precedent in this Section 12.1 and in Sections 12.5 and 12.6 have been satisfied, the Trustee shall join the Issuer in the execution of any such supplemental indenture. The Trustee promptly shall furnish a copy of any such supplemental indenture to the Credit Provider, the Remarketing Agent, the Tender Agent, the Loan Servicer and the Borrower. 76 SECTION 12.2 Supplemental Indentures Requirine Bondholder Consent. The Issuer and the Trustee may, with the consent of Bondholders owning not less than 51 percent in aggregate principal amount of Bonds then Outstanding, from time to time, execute indentures supplemental to this Indenture for the purpose of modifying or amending any of the provisions of this Indenture provided, however, that nothing in this Section 12.2 permits, or shall be construed as permitting: (a) an extension of the maturity of the principal of or interest on, or the mandatory redemption date of, any Bond, without the consent of the owner of such Bond; (b) a reduction in the principal amount of, or the rate of interest on, any Bond, without the consent of the owner of such Bond; (c) a preference or priority of any Bond or Bonds over any other Bond or Bonds, without the consent of the owners of all such Bonds; (d) the creation of a lien prior to or on panty with the lien of this Indenture, without the consent of the owners of all of the Bonds then Outstanding; (e) a change in the percentage of Bondholders necessary to waive an Event of Default under this Indenture or otherwise approve matters requiring Bondholder approval under this Indenture, including consent to any supplemental indenture, without the consent of the owners of all the Bonds then Outstanding; (f) a transfer, assignment or release of the Credit Facility (or modification of the provisions of this Indenture governing such transfer, assignment or release), other than as permitted by this Indenture or the Credit Facility, without the consent of the owners of all of the Bonds then Outstanding; (g) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indenture, without the consent of the holders of all of the Bonds then Outstanding; (h) the creation of any lien other than a lien ratably securing all of the Bonds at any time Outstanding under this Indenture, without the consent of the holders of all of the Bonds then Outstanding; or (i) the amendment of this Section 12.2, without the consent of the holders of all of the Bonds then Outstanding. The Trustee shall promptly furnish a copy of any such supplemental indenture to the Credit Provider, the Remarketing Agent, the Tender Agent, the Loan Servicer and the Borrower. Notice of any amendment pursuant to this Section shall be given to the Bondholders promptly following the execution thereof. SECTION 12.3 No Bondholder Consent Required for Amendment to Loan Documents. Unless a Wrongful Dishonor has occurred and is continuing, the Credit Provider alone may consent to any amendment to the Loan Documents and no consent of the Bondholders is required; provided, however, that any amendment or substitution of the Note shall occur only 77 following written confirmation of the Rating Agency that such amendment or substitution will not result in a reduction or withdrawal of the rating on the Bonds. SECTION 12.4 Amendments to the Credit Facility. The Credit Facility may only be amended, supplemented or otherwise changed in accordance with the following: (a) Replacement Credit Facility. At the request of the Credit Provider, the Trustee shall exchange the Credit Facility with the Credit Provider for a new Credit Facility (a "Replacement Credit Facility") issued by the Credit Provider, provided that there is delivered to the Trustee (i) a written confirmation from the Rating Agency to the effect that such exchange shall not adversely affect the rating then in effect for the Bonds and (ii) a written opinion of Bond Counsel to the effect that such exchange will not adversely affect the excludability of interest on the bonds from gross income for federal income tax purposes. No such exchange shall require the approval of the Issuer, the Trustee or any of the Bondholders or constitute or require a modification or supplement to this Indenture. (b) Amendment of the Credit Facility. The Trustee may consent, without the consent of the owners of the Bonds, to any amendment of the Credit Facility not addressed in subsection (a) which does not prejudice in any material respect the interests of the Bondholders. (c) Other Amendments of the Credit Facility. Except as provided in subsections (a) and (b), the Credit Facility may be amended only with the consent of the Trustee and the owners of a majority of all Outstanding Bonds. No amendment may be made to the Credit Facility which would reduce the amounts required to be paid under the Credit Facility or change the time for payment of such amounts; provided, however, that any such amounts may be reduced without such consent solely to the extent that such reduction represents a reduction in any fees payable from such amounts. SECTION 12.5 Notice to and Consent of Bondholders. If consent of the Bondholders is required for any supplement, amendment or modification to this Indenture or for any other similar purpose, the Trustee shall give notice of the proposed supplement, amendment or modification by first class mail, postage prepaid, to the Bondholders. Such notice will be conclusively presumed to have been duly given and received when given in such manner, whether or not any holder actually receives the notice. Such notice shall briefly set forth the nature of the proposed supplement, amendment or modification, and shall state that copies of any such supplement, amendment or modification are on file at the Designated Office of the Trustee for inspection by the Bondholders. The consent of the holder of any Bond will be binding on any transferee and successor transferees of such Bond. SECTION 12.6 Required Approvals. Subject to the provisions of Section 8.6, no amendment, supplement or modification may be made to any Transaction Document without the prior written consent of the Credit Provider. Anything in this Indenture to the contrary notwithstanding, a supplement or amendment or other document described under this Article XII which materially and adversely affects any rights or obligations of the Borrower will not become effective unless and until the Borrower (if the Borrower is not then in default under any Bond Document or any Loan Document and if no event which, with notice or the passage of time or both, would constitute such a default has occurred and is continuing) has consented in writing to the execution of such supplemental indenture, amendment or other document. The Trustee shall I�3 not be required to enter into any supplement or amendment which adversely effects the Trustee's rights and duties under this Indenture. SECTION 12.7 Opinions of Counsel. Subject to the provisions of Section 11.1, the Trustee may obtain and will be fully protected in relying upon an Opinion of Counsel as conclusive evidence that any supplement or amendment to this Indenture is authorized and permitted by this Indenture and, if applicable, is not materially adverse to the interests of the Bondholders. No supplement or amendment with respect to this Indenture will be effective until the Issuer and the Trustee have received an opinion of Bond Counsel to the effect that such supplement or amendment will not adversely affect the exclusion from gross income, for federal income tax purposes, of the interest payable on the Bonds. SECTION 12.8 Notation of Modification on Bonds, Preparation of New Bonds. Bonds authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation, in form approved by the Trustee and the Issuer as to any matter provided for in such supplemental indenture, and if such supplemental indenture so provides, new Bonds, so modified as to conform, in the opinion of the Trustee and the Issuer, to any modification of this Indenture contained in any such supplemental indenture, may be prepared by the Issuer, authenticated by the Trustee and delivered without cost to the Bondholders, upon surrender for cancellation of such Bonds in equal aggregate principal amounts. ARTICLE XIII MISCELLANEOUS SECTION 13.1 Consents, Etc., of Bondholders. Any consent, request, direction, or other instrument required to be signed by the Bondholders may be in any number of concurrent writings of similar tenor and may be signed by any Bondholder in person or by an authorized agent appointed in writing. The fact and date of the execution by any person of any such request, consent, direction, approval, objection or other instrument may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the person signing such writing acknowledged before such officer its execution, or by an affidavit of any witness to such execution. Such proof of execution or of the writing appointing any agent will be sufficient for any of the purposes of this Indenture and will be conclusive in favor of the Trustee with regard to any action taken by it under such consent, request, direction or other instrument. In the event that the Trustee receives conflicting directions from two groups of Bondholders, each with combined holdings of not less than 25 percent in aggregate principal amount of all Bonds then Outstanding, the directions given by the group of Bondholders which hold the largest percentage of Bonds Outstanding will be controlling and the Trustee shall follow such directions as elsewhere required in this Indenture. SECTION 13.2 Limitation of Rights. With the exception of rights expressly conferred in this Indenture, nothing expressed in or to be implied from this Indenture or the Bonds is intended or shall be construed to give to any Person other than the Issuer, the Trustee, the Bondholders, the Credit Provider, the Loan Servicer and the Borrower any legal or equitable right, remedy or j claim under or in respect of this Indenture. This Indenture and all of the covenants, conditions and provisions in this Indenture are intended to be for the sole and exclusive benefit of the parties to this Indenture, the Bondholders, the Credit Provider, the Loan Servicer and the 79 Borrower as provided in this Indenture. The Credit Provider is a third -party beneficiary of this Indenture with the right to enforce its provisions. SECTION 13.3 Severability. If any provision of this Indenture is held to be in conflict with any applicable constitution or statue or rule of law, or is otherwise held to be unenforceable for any reason, such circumstance shall not have the effect of rendering the provision in question inoperative or unenforceable in any other part or circumstance, or of rendering any other provision or provisions contained in this Indenture invalid, inoperative or unenforceable to any extent whatsoever. The invalidity of any one or more phrases, sentences, clauses or Sections of this Indenture will not affect the remaining portions of this Indenture. SECTION 13.4 Notices. Unless otherwise specified in this Indenture, it shall be sufficient service or giving of any notice, request, certificate, demand or other communication if the same is sent by (and all notices required to be given by mail will be given by) first-class registered or certified mail, postage prepaid, return receipt requested, or by private courier service which provides evidence of delivery, or sent by Electronic Means which produces evidence of transmission, confirmed by first-class mail, postage prepaid, and in each case will be deemed to have been given on the date evidenced by the postal or courier receipt or other written evidence of delivery or electronic transmission. Unless a different address is given by any party as provided in this Section, all such communications will be addressed as follows: To the Issuer: City of New Hope, Minnesota 4401 Xylon Avenue North New Hope, Minnesota 55428 Attn: City Manager To the Trustee: U.S. Bank National Association 60 Livingston Avenue St. Paul, Minnesota 55107-2292 Attn: Corporate Trust Services To the Remarketing Agent: U.S. Bancorp Piper Jaffray Inc. 800 Nicollet Mall, 13"' Floor Minneapolis, MN 55402-7020 To the Borrower: Broadway Lanel, a Limited Partnership 4601 Excelsior Blvd., Suite 601 Minneapolis, MN 55416 Attn: Paul Brewer with a copy to: Stephen J. Davis, Esq. 4601 Excelsior Blvd., Suite 500 St. Louis Park, MN 55416 To the Tender Agent: U.S. Bank National Association 60 Livingston Avenue St. Paul, MN 55107-2292 Attn: Corporate Trust Services EE To the Rating Agencies: Standard & Poor's Rating Services 55 Water Street 38th Floor New York, NY 10041 Attention: Public Finance Surveillance Group Telephone: (212) 438-2054 Facsimile: (212) 438-2157 Moody's Investor Services 99 Church Street New York, New York 10007 Attention: Fully Supported Group Telephone: (212) 553-4441 Facsimile: (212) 553-4090 To the Credit Provider: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Director, Multifamily Asset Management Telephone: (202) 752-2854 Facsimile: (202) 752-3542 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003/Glaser Financial Group, hic. with a copy to: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Vice President, Multifamily Services Telephone: (202)752-7869 Facsimile: (202) 752-8369 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003/Glaser Financial Group, Inc. A provided, however, that any notice required to be delivered to the Credit Provider pursuant to Section 4.1, 4.2 or 4.3 will be addressed as follows: with a copy to: Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, DC 20016-2899 Attention: Director, Fiscal Agency Relations and Treasury Backoffice Telephone: (202) 752-7916 Facsimile: (202) 752-6087 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003/Glaser Financial Group, Inc. Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, DC 20016-2899 Attention: Director, Multifamily Asset Management Telephone: (202) 752-3670 Facsimile: (202) 752-8369 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003/Glaser Financial Group, Inc. [For courier to all Fannie Mae addresses use 4000 Wisconsin Avenue, N.W. and delete any reference to Drawer AM] To the Loan Servicer: Glaser Financial Group, Inc. 2177 Youngman Avenue St. Paul, MN 55116 Telephone: (651) 644-7694 Facsimile: (651) 644-0923 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003/Glaser Financial Group, Inc. Copies of all notices given to the Credit Provider must be given concurrently to the Loan Servicer. By notice given under this Indenture, any entity whose address is listed in this Section may designate any different addresses to which subsequent notices, certificates, requests, demands or other communications shall be sent, but no notice directed to any one such entity (except for Credit Provider) will be required to be sent to more than two addresses. All approvals required under this Indenture will be given in writing. SECTION 13.5 Action Required to be taken on a Non -Business Day. If the date for making any payment or any date on which action is required to be taken is not a Business Day, then any action required to be taken or any payment required to be made may be taken or made on the following Business Day with the same force and effect as if made or taken on the date otherwise provided for in this Indenture and, in the case of any payment date, no interest will accrue for the period from and after such date. SECTION 13.6 Binding Effect. From and after the Closing Date, this Indenture shall be binding upon the Issuer and the Trustee and their respective successors and assigns, subject, however, to the limitations contained in this Indenture. SECTION 13.7 Governing Law. This Indenture shall be governed by and interpreted in accordance with internal laws of the State without regard to conflicts of laws principles. SECTION 13.8 No Personal Liability; No Recourse. No member, officer, agent, employee or attorney of the Issuer, including any person executing this Indenture or the Bonds, will be liable personally on the Bonds or for any reason relating to the issuance of the Bonds. No recourse will be had for the payment of the principal of or the interest on the Bonds, or for any claim based on such Bonds, or otherwise in respect of such Bonds, or based on or in respect of this Indenture or any indenture supplemental to this Indenture, against any member, officer, employee or agent, as such, of the Issuer or any successor, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance of this Indenture and as part of the consideration for the issue of the Bonds, expressly waived and released. SECTION 13.9 Counterparts. This Indenture may be simultaneously executed in several counterparts, each of which will be an original and all of which will constitute but one and the same instrument. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) RE } The Issuer has caused this Indenture to be executed in its name and on its behalf by its duly authorized officers, and the Trustee has caused this Indenture to be executed in its name by its duly authorized officer, all as of the date set forth above. CITY OF NEW HOPE, MINNESOTA By: Its: Mayor l By: z1'aA4 1K. City Manager U.S. BANK NATIONAL ASSOCIATION, as Trustee By:,t/c'�� Title: Y - -�e s � %z FV FINANCING AGREEMENT THIS FINANCING AGREEMENT dated as of August 1, 2003, is among the CITY OF NEW HOPE, MINNESOTA, a municipal corporation and political subdivision of the State of Minnesota ("Issuer"), BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership (`Borrower") and U.S. BANK NATIONAL ASSOCIATION, a national banking association ("Trustee"), not in its individual or corporate capacity, but solely as Trustee under the Indenture. ARTICLE I INCORPORATION OF RECITALS, DEFINITIONS AND RULES OF CONSTRUCTION SECTION 1.1 Incorporation of Recitals. The Recitals to the Indenture are incorporated into and made a part of this Agreement. SECTION 1.2 Definitions. All capitalized terms used in this Agreement have the meanings given to those terms in the Indenture or elsewhere in this Agreement unless the context or use clearly indicates a different meaning. SECTION 1.3 Rules of Construction. The rules of construction set forth in Section 1.2 of the Indenture shall apply to this Agreement in their entirety, except that in applying such rules, the term "Agreement' shall be substituted for the term "Indenture". ARTICLE II THE LOAN SECTION 2.1 Amount and Source of Loan. The Issuer has authorized the issuance of the Bonds in the aggregate principal amount of $2,655,000. The Issuer agrees to make the Loan in the amount of $2,655,000 to the Borrower with the Net Bond Proceeds. Upon the issuance and delivery of the Bonds, the Issuer will deliver the Net Bond Proceeds to the Trustee. The Loan shall be deemed made in full upon deposit of the Net Bond Proceeds into the Loan Fund. The Borrower accepts the Loan from the Issuer upon the terms and conditions set forth in this Agreement and the Loan Documents, subject to the Indenture, the Regulatory Agreement and the Assignment. Disbursements will be made from the Loan Fund as provided in the Indenture. The Borrower and the Trustee agree to have the proceeds of the principal of the outstanding Loan applied and disbursed directly or indirectly to provide for the current refunding of the Prior Bonds. Financing Agreement; Immediate Variable Rate Broadway LaNel SECTION 2.2 Note and Security Instrument. The Loan shall be evidenced by, payable in accordance with, and bear interest at the rates and on the terms provided in, the Note and secured by the Security Instrument. SECTION 2.3 Costs of Issuance Deposit. Prior to the issuance of the Bonds, the Borrower shall pay to the Trustee $0, representing the Costs of Issuance Deposit for deposit into the Costs of Issuance Fund. The Issuer shall have no obligation to issue the Bonds and to fund the Loan unless and until the Borrower delivers the Costs of Issuance Deposit. SECTION 2.4 Credit Facility. The Borrower agrees to cause credit enhancement for the Loan or the Bonds and liquidity support for the Bonds to be in effect in the amounts and during the periods as required by the Indenture. From time to time, the Borrower may arrange for the delivery to the Trustee of one or more Alternate Credit Facilities meeting the requirements of the Indenture in substitution for the Credit Facility then in effect. SECTION 2.5 Payment of Fees. Costs and Expenses. The Borrower shall pay when due, without duplication, the fees, expenses and other sums specified in this Section. (a) Issuer. The Issuer's Fee, which shall be paid on the Closing Date, and all costs and expenses incurred by the Issuer at any time in connection with the Bonds. (b) Trustee. The Trustee's acceptance fee, if any, which shall be paid on the Closing Date, the Trustee's Annual Fee, and all advances, out-of-pocket expenses, fees, costs and other charges reasonably and necessarily incurred by the Trustee under the Indenture and Extraordinary Items. (c) Tender Agent. The fees, costs and expenses of the Tender Agent, all advances, out-of-pocket expenses, fees, costs and other charges reasonably and necessarily incurred by the Tender Agent in performing its duties as Tender Agent under the Indenture and the Pledge Agreement. (d) Remarketing Agent. The fees, costs and expenses of the Remarketing Agent and the costs and expenses of the Remarketing Agent which the Borrower is obligated to pay under the Remarketing Agreement. (e) Rebate Analyst. The annual or other periodic fees of the Rebate Analyst. (f) Rating Agency. The annual rating maintenance fee of each Rating Agency. (g) Costs of Issuance. All Costs of Issuance. (h) Bond Costs. All costs of registering, printing, reprinting, preparing and delivering any replacement bonds required under the Indenture and in connection with the registration, printing, reprinting or transfer of Bonds. FA Financing Agreement; Immediate Variable Rate Broadway LaNel (i) Adjustment or Conversion of Interest Rate; Tender, Purchase, Remarketing or Reoffering of Bonds. All fees, costs and expenses of any change in Mode or of any tender, purchase, remarketing or reoffering of any Bonds. The fees, costs and expenses of any tender, purchase, remarketing or reoffering of Bonds must be paid by the Borrower in advance in accordance with the Remarketing Agreement or other agreement relating to the remarketing or reoffering of the Bonds. The Borrower agrees to timely honor any demand for payment by the Trustee pursuant to Section 5.7(b) of the Indenture on account of any insufficiency in the Fees Account. SECTION 2.6 Liability for Fees, Costs and Expenses. Neither the Issuer nor the Trustee shall have any obligation to pay any of the fees, costs or expenses referred to in Section 2.5. SECTION 2.7 Borrower's Obligations Upon Tender of Bonds. If any Tendered Bond is not remarketed on any Tender Date and a sufficient amount is not available in the Bond Purchase Fund for the purpose of paying the purchase price of such Bond, the Borrower will cause to be paid to the Trustee pursuant to the Credit Facility or otherwise pay by the applicable times provided in the Indenture, an amount equal to the principal amount of all Bonds tendered and not remarketed, together with interest accrued to the Tender Date. SECTION 2.8 Redemption Premium. The Borrower shall pay all redemption premiums, if any, payable with respect to each redemption of any of the Bonds. The Borrower shall make each such payment, or cause such payment to be made, in Available Moneys. SECTION 2.9 Obligation of the Borrower to Pay Deficiencies. The Borrower shall pay any deficiency resulting from any loss due to a default under any investment in any Fund or Account or a change in value of any investment. SECTION 2.10 Borrower's Approval of Transaction Documents. The Borrower acknowledges that it participated in the drafting and negotiation of the Transaction Documents and approves and agrees to each of the provisions of the Transaction Documents. The Borrower agrees that it is bound by, shall adhere to, and shall have the rights set forth by, the Indenture. ARTICLE III NATURE OF BORROWER'S OBLIGATIONS; SECURITY FOR OBLIGATIONS SECTION 3.1 Obligations of the Borrower Unconditional. To the fullest extent permitted by law, the obligations of the Borrower to make all payments and perform its other obligations under this Agreement shall be absolute, unconditional and irrevocable, shall be paid and performed strictly in accordance with this Agreement and the applicable Transaction Documents under all circumstances, including, without limitation, the following circumstances: (i) any invalidity or unenforceability of the Credit Facility or any of the other Transaction Documents; (ii) any amendment or waiver of, or any consent to departure from, the terms of the 3 Financing Agreement; Immediate Variable Rate Broadway LaNel Credit Facility or any of the other Transaction Documents, any extension of time or other modification of the terms and conditions for any act to be performed in connection with the Credit Facility or any of the other Transaction Documents; (iii) the existence of any claim, set- off, defense or other right which the Borrower may have at any time against the Issuer, the Trustee, the Tender Agent, the Credit Provider, the Loan Servicer, the Remarketing Agent or any other Person, whether in connection with any of the Transaction Documents, the Mortgaged Property, or any unrelated transaction; (iv) the surrender or impairment of any security for the performance or observance of any of the agreements or terms of any of the Transaction Documents; (v) defect in title to the Mortgaged Property, any act or circumstance that may constitute failure of consideration, destruction of, damage to or condemnation of the Mortgaged Property, commercial frustration of purpose, or any change in the tax or other laws of the United States of America or of the State or any political subdivision of either; (vi) the breach by the Issuer, the Trustee, the Tender Agent, the Remarketing Agent, the Credit Provider, the Loan Servicer or any other Person of any of its obligations under any Transaction Document; or (vii) any other circumstance, happening or omission whatsoever, whether or not similar to any of the foregoing. SECTION 3.2 Personal Liability of Borrower. Except as provided in the last sentence of this Section, the obligations of the Borrower under this Agreement and the obligations of the Borrower under the Regulatory Agreement to pay money, including the obligations of the Borrower with respect to the Reserved Rights, shall be (i) general obligations of the Borrower with recourse to the Borrower personally, but not to any of its partners and (ii) subordinate and junior in priority, right of payment and all other respects to any and all obligations of the Borrower under the Loan Documents and to the Credit Provider under or in respect of the Credit Facility Documents. Nothing in this Section shall apply to the obligations of the Borrower under any of the Loan Documents. SECTION 3.3 Obligations Unsecured. All obligations of the Borrower under this Agreement and under the Regulatory Agreement, including the obligations of the Borrower with respect to the Reserved Rights, shall not be secured by the Security Instrument and shall not constitute a lien on the Mortgaged Property in any manner. SECTION 3.4 Certain Obligations Personal to the Borrower. No subsequent owner of the Mortgaged Property (including the Credit Provider as a result of a foreclosure, a deed in lieu of foreclosure or comparable conversion of the Loan) shall be liable for any breach or default of any obligation of any prior owner under the Regulatory Agreement or this Agreement, including any payment or indemnification obligation. The owner of the Mortgaged Property at the time any default or breach occurs shall remain liable for any and all damages occasioned by such default or breach even after such Person ceases to be the owner. Upon seeking to collect such damages, neither the Issuer nor the Trustee shall have recourse against or the right to levy against or otherwise collect on any judgment from the Mortgaged Property. 0 Financing Agreement; Immediate Variable Rate Broadway LaNel ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.1 Representations and Warranties of the Issuer. The Issuer represents and warrants that: (a) The Issuer is a municipal corporation and political subdivision of the State, duly organized and validly existing under the Constitution and the laws of the State and is issuing the Bonds pursuant to the Act. (b) The issuance and sale of the Bonds and the execution and delivery of the Issuer Documents and the performance of all covenants and agreements of the Issuer contained in this Agreement and the Indenture have been duly authorized by a resolution of the governing body of the Issuer adopted at a meeting thereof duly called and held on July 28, 2003 and adopted by the affirmative vote of not less than a majority of its members. The Issuer intends to issue the Bonds on the terms set forth in the Indenture and to use the proceeds derived from the sale of the Bonds as specified in the Indenture and this Agreement. (c) Except as otherwise provided in the Indenture and the Assignment, the Issuer has not created any debt, lien or charge upon the Trust Estate, and has not made any pledge or assignment of or created any encumbrance on the Trust Estate. (d) There is not pending any suit, action or proceeding against the Issuer before or by any court, arbitrator, administrative agency or other governmental authority which materially and adversely affects the validity, as to the Issuer, of this Agreement or the Indenture, any of its obligations hereunder or thereunder or any of the transactions contemplated hereby or thereby. SECTION 4.2 Representations and Warranties of the Borrower. The representations and warranties of the Borrower set forth in the Issuer Documents and the Credit Facility Documents are incorporated into this Financing Agreement as if restated in this Financing Agreement in full, for the benefit of, and may be relied upon by, the Issuer and the other beneficiaries of this Financing Agreement. ARTICLE V COVENANTS OF THE BORROWER SECTION 5.1 Compliance With Laws. The Borrower will comply with all laws, ordinances, regulations and requirements of any of duly constituted public authorities which may be applicable to the Mortgaged Property and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, zoning and land use, and Leases (as such term is defined in the Security Instrument). The Borrower also will comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits. The Borrower will at all times maintain records sufficient to demonstrate compliance with the provisions of this Section. The 5 Financing Agreement; Immediate Variable Rate Broadway LaNel Borrower will take appropriate measures to prevent, and will not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the lien created by the Security Instrument. The Borrower represents and warrants that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity. Nothing contained in this Section is intended to modify or limit any provisions of the Regulatory Agreement or any Loan Document. SECTION 5.2 Maintenance of Legal Existence. The Borrower will maintain its existence, continue to be duly qualified to do business in the State and will not terminate or dissolve. With the prior written consent of the Issuer, the Borrower may consolidate with or merge into another entity or permit one or more other entities to consolidate with or merge into it, but subject to the satisfaction of the following conditions: (i) the entity resulting from or surviving such merger or consolidation (if other than the Borrower) ("Surviving Entity") is duly organized and existing in good standing and qualified to do business in the State, (ii) if the Borrower does not survive the consolidation or merger, the Surviving Entity expressly assumes in writing all of the Borrower's obligations under this Agreement and the other Borrower Documents and (iii) the Borrower delivers an opinion of Bond Counsel to the effect that such consolidation or merger will not cause interest on the Bonds to be included in gross income for federal income tax purposes. SECTION 5.3 Access to Mortgaged Property and Records. Subject to reasonable notice, the Issuer and the Trustee and the respective duly authorized agents of each have the right, during normal business hours, to enter the Mortgaged Property and any location containing records relating to any of the Borrower, the Mortgaged Property, the Loan and the Transaction Documents, to inspect, audit and make copies of the Borrower's records or accounts pertaining to the Borrower, the Mortgaged Property, the Loan, the Transaction Documents, and the Borrower's compliance with the Transaction Documents, and to require the Borrower, at the Borrower's sole expense, to furnish such documents to the Issuer and the Trustee, as the Issuer or the Trustee from time to time deems necessary in order to determine that the Borrower is in compliance with the Transaction Documents and to make copies of any records that the Issuer or the Trustee, or their respective duly authorized agents, may reasonably require. The Borrower will make available to the Issuer and the Trustee such other information concerning the Borrower, the Mortgaged Property, the Loan and the Transaction Documents as any of them may reasonably request. SECTION 5.4 Reports and Information. The Borrower will file such certificates and other reports with the Issuer and the Trustee as are required by the Transaction Documents. The Borrower will provide to the Issuer all information necessary to enable the Issuer to complete and file all forms and reports required by the laws of the State and the Code in connection with the Mortgaged Property and the Bonds. SECTION 5.5 Tax Covenants. The Borrower covenants that it will comply with the requirements and conditions of the Tax Certificate and the Regulatory Agreement. Without limiting the foregoing and notwithstanding anything to the contrary in this Agreement, the Borrower will not take, or permit to be taken on its behalf, any action which would cause interest 6 Financing Agreement; Immediate Variable Rate Broadway LaNel on the Bonds to be included in gross income for federal income tax purposes and will take such reasonable action as may be necessary to continue such exclusion from gross income, including: (a) the Borrower will not use the proceeds of the Bonds, or any other funds which may be deemed to be proceeds of the Bonds pursuant to Section 148 of the Code, which will cause the Bonds to be "arbitrage bonds" within the meaning of such Section, and will comply with the requirements of such Section throughout the term of the Bonds; (b) the Borrower will prepare and file any statements required to be filed by it in order to maintain such exclusion; and (c) the Borrower will pay to the United States any amount required to be paid by the Issuer or the Borrower pursuant to Section 148(f) of the Code, at the times, in the amounts and at the places required in order to maintain the exclusion of interest on the Bonds from gross income for federal income tax purposes. The Borrower irrevocably authorizes and directs the Issuer, the Trustee and any other agent designated by the Issuer to make payment of such amounts from funds of the Borrower, if any, held by the Issuer, the Trustee, or any agent of the Issuer or the Trustee. The Borrower further covenants and agrees that, pursuant to the requirements of Treasury Regulation Section 1.148- 1(b), it (or any related person contemplated by such regulations) will not purchase Bonds in an amount related to the amount of the Loan, other than Pledged Bonds. SECTION 5.6 Notice of Certain Events. The Borrower will advise the Issuer and the Trustee promptly in writing of the occurrence of any default by the Borrower in the performance or observance of any covenant, agreement, representation, warranty or obligation of the Borrower set forth in this Agreement or in any of the other Borrower Documents, or of any Event of Default or Potential Default under this Agreement known to it or of which it has received notice, specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with respect to such default. Such notice shall be given promptly, and in no event less than ten Business Days after the Borrower receives notice or has knowledge of the occurrence of any such event. The Borrower further agrees, that it will give prompt written notice to the Trustee if insurance proceeds or condemnation awards are received with respect to the Mortgaged Property. ARTICLE VI INDEMNIFICATION SECTION 6.1 Borrower's Obligations. The Borrower releases the Issuer, the Trustee, the Tender Agent and their respective officers, directors, agents, officials, employees (and, as to the Issuer, members of its governing body) and any person who controls the Issuer, the Trustee or the Tender Agent within the meaning of the Securities Act of 1933, from, and covenants and agrees to indemnify, hold harmless and defend the Issuer, the Trustee, the Tender Agent and their respective officers, directors, employees, agents, members of its governing body, officials and any person who controls such party within the meaning of the Securities Act of 1933 and Financing Agreement; Immediate Variable Rate Broadway LaNel employees and each of them (each an "Indemnified Party") from and against, any and all losses, claims, damages, liabilities and expenses (including attorneys' fees and expenses), taxes, causes of action, suits and judgments of any nature, joint or several, by or on behalf of any person arising out of: (a) the approval of refinancing for the Mortgaged Property or the making of the Loan; (b) the issuance and sale, resale or remarketing of any Bonds or any certifications or representations made by any person other than the party seeking indemnification in connection therewith, including, but not limited to, any (i) statement or information made by the Borrower with respect to the Borrower or the Mortgaged Property in any offering document or materials regarding the Bonds, the Mortgaged Property or the Borrower or in the Tax Certificate of the Borrower or in any other certificate executed by the Borrower which, at the time made, is misleading, untrue or incorrect in any material respect, (ii) untrue statement or alleged untrue statement of a material fact relating to the Borrower or the Mortgaged Property contained in any offering material relating to the sale of the Bonds, as from time to time amended or supplemented, or arising out of or based upon the omission or alleged omission to state in such offering material a material fact relating to the Borrower or the Mortgaged Property required to be stated in such offering material or necessary in order to make the statements in such offering material not misleading, (iii) failure to properly register or otherwise qualify the sale of the Bonds or failure to comply with any licensing or other law or regulation which would affect the manner in which or to whom the Bonds could be sold; (c) the interpretation, performance, enforcement, breach, default or amendment of the Bond Documents, the Loan Documents or any other documents relating to the Mortgaged Property or the Bonds or in connection with any federal or state tax audit, or any questions or other matters arising under such documents; (d) the Borrower's failure to comply with any requirement of this Financing Agreement or the Regulatory Agreement; (e) the condition of the Mortgaged Property (environmental or otherwise), including any violation of any law, ordinance, court order or regulation affecting the Mortgaged Property or any part of it; (f) any damage or injury, actual or claimed, of whatsoever kind, cause or character, to property (including loss of use of property) or persons, occurring or allegedly occurring in, on or about the Mortgaged Property or arising out of any action or inaction of the Borrower or any of its agents, servants, employees or licensees, whether or not related to the Mortgaged Property, or resulting from the acquisition, construction, design, rehabilitation, repair, operation, use or management of all or any part of the Mortgaged Property; (g) the Trustee's acceptance or administration of the trusts created by, and the exercise of its powers or duties under, the Indenture or under this Agreement, the Regulatory N Financing Agreement; Immediate Variable Rate Broadway LaNel Agreement, the Credit Facility or any other agreements in connection with such agreements to which it is a party; and (h) to the extent not mentioned in any of the preceding subsections, any cause whatsoever in connection with transactions provided for in this Agreement and the other Transaction Documents or otherwise in connection with the Mortgaged Property, the Bonds or the execution or amendment of any document relating to the Bonds or the Mortgaged Property. This indemnification shall extend to and include, without limitation, all reasonable costs, counsel fees, expenses and liabilities incurred in connection with any such claim, or proceeding brought with respect to such claim, except (i) in the case of the foregoing indemnification of the Trustee or any of the its Indemnified Parties, to the extent such damages are caused by the negligence or willful misconduct of such Person, and (ii) in the case of the foregoing indemnification of the Issuer or any of its Indemnified Parties, to the extent such damages are caused by the willful misconduct of such Person. SECTION 6.2 Defense of Claims. In the event that any action or proceeding is brought against any Indemnified Party with respect to which indemnity may be sought under Section 6. 1, the Borrower, upon written notice from the Indemnified Party, will assume the investigation and defense of the action or proceeding, including the engagement of counsel selected by the Borrower, subject to the approval of the Indemnified Party in such party's sole discretion, and shall assume the payment of all expenses related to the action or proceeding, with full power to litigate, compromise or settle the same in its sole discretion; provided, however, that the Indemnified Party shall have the right to review and approve or disapprove any such compromise or settlement. Each Indemnified Party shall have the right to engage separate counsel in any action or proceeding and participate in the investigation and defense of such action or proceeding, and the Borrower shall pay the reasonable fees and expenses of such separate counsel if (i) the Indemnified Party determines that a conflict exists between the interests of the Indemnified Party and the interests of the Borrower or (ii) such separate counsel is engaged with the approval of the Borrower, which approval shall not be unreasonably withheld, conditioned or delayed. SECTION 6.3 Borrower's Continuing Obligations. Notwithstanding any transfer of the Mortgaged Property to another owner in accordance with the Regulatory Agreement, the Borrower shall remain obligated to indemnify each Indemnified Party pursuant to this Article VI for all matters arising prior to such transfer, and, as a condition to the release of the transferor on and after the transfer date, the transferee must assume the obligations of the Borrower under this Agreement and the other Borrower Documents on and after the transfer date. Each Indemnified Parry's rights under this Article VI shall survive the termination of this Agreement, the payment of the Loan and the payment or defeasance of the Bonds. ARTICLE VII EVENTS OF DEFAULT AND REMEDIES 0 Financing Agreement; Immediate Variable Rate Broadway LaNel SECTION 7.1 Events of Default. The occurrence of any one or more of the following events shall constitute an Event of Default under this Agreement: (a) The Borrower fails to pay when due any amount payable by the Borrower under this Agreement. (b) The Borrower fails to observe or perform any covenant or obligation in this Agreement on its part to be observed or performed (other than covenants or obligations described under paragraph (a) hereunder) for a period of 30 days after receipt of written notice from the Trustee specifying such failure and requesting that it be remedied, provided, however, that if the failure cannot be corrected within such period, it shall not constitute an Event of Default if the failure is correctable without material adverse effect on the validity or enforceability of the Bonds or on the exclusion from gross income, for federal income tax purposes, of the interest on the Bonds, and if corrective action is instituted by the Borrower within such period and diligently pursued until the failure is corrected, and provided further that any such failure is cured within 90 days of receipt of notice of such failure. (c) The Credit Provider provides written notice to the Trustee of an Event of Default under this Agreement by reason of the occurrence of an Event of Default under the Reimbursement Agreement. No Event of Default under the Reimbursement Agreement shall constitute a default under this Agreement unless specifically declared to be so by the Credit Provider. The Credit Provider shall make such declaration by written notice to the Trustee. SECTION 7.2 Remedies upon an Event of Default. Subject to the Assignment, whenever any Event of Default occurs and is continuing under this Agreement, the Issuer may take one or any combination of the following remedial steps: (a) by written notice to the Borrower, declare all amounts then due and payable on the Note to be immediately due and payable; (b) exercise any of the rights and remedies provided in the Loan Documents; and (c) take whatever action at law or in equity may appear necessary or desirable to collect the amounts then due and afterward to become due, or to enforce performance and observance of any obligation, agreement or covenant of the Borrower under this Agreement. Notwithstanding the foregoing provisions, the Issuer may enforce its Reserved Rights as provided in the Assignment. SECTION 7.3 No Levy or Other Execution Against Mortgaged Property. Neither the Issuer nor the Trustee shall have any right to levy, execute or enforce any judgment in respect of the Borrower's obligations under this Agreement, including the Reserved Rights, against the Mortgaged Property or any other property of the Borrower which secures the obligations of the Borrower under the Loan or to the Credit Provider under any of the Credit Facility Documents. SECTION 7.4 Waiver and Annulment. Unless the Credit Provider otherwise consents in writing, neither the Issuer nor the Trustee may waive or annul any Event of Default under this 10 Financing Agreement; Immediate Variable Rate Broadway LaNel Agreement unless (i) all amounts which would then be payable under this Agreement by the Borrower if such Event of Default had not occurred and was not continuing are paid by or on behalf of the Borrower, and (ii) the Borrower also performs all other obligations in respect of which it is then in default under this Agreement and pays the reasonable charges and expenses of the Issuer and the Trustee, including reasonable attorneys' fees and expenses paid or incurred in connection with such default. No waiver or annulment shall extend to or affect any subsequent Event of Default or impair any right or remedy consequent on such Event of Default. SECTION 7.5 No Remedy Exclusive. All rights and remedies provided in this Agreement are cumulative, nonexclusive and in addition to any and all rights and remedies that the Issuer and the Trustee may have or may be given by reason of any law, statute, ordinance or otherwise. SECTION 7.6 No Waiver. No delay or omission to exercise any right or power accruing upon any Event of Default under this Agreement shall impair any such right or power or shall be construed to be a waiver of such Event of Default, but any such right or power may be exercised from time to time and as often as may be deemed expedient. SECTION 7.7 No Notices. In order to entitle the Issuer or the Trustee 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 expressly required in this Article or by any Bond Document. SECTION 7.8 Expenses. hi the event the Borrower should default under this Agreement and the Issuer employs attorneys or incurs other expenses for the collection of payments under, or the enforcement of performance or observance of any obligation or agreement on the part of the Borrower contained in, this Agreement, the Borrower agrees that it will pay, on demand, to the Issuer the reasonable fees of such attorneys and such other expenses so incurred by the Issuer. ARTICLE VIII MISCELLANEOUS SECTION 8.1 Notices. All notices, certificates or other communications provided in this Agreement shall be given in writing, and shall be sufficiently given and shall be deemed given if given in the manner provided in Section 13.4 of the hidenture. Copies of each notice, certificate or other communication given under this Agreement by any party shall be given to the other parties. By notice given under this Agreement, any party may designate further or different addresses to which subsequent notices, certificates or other communications are to be sent. A duplicate copy of each notice, certificate, request or other communication given under this Agreement to the Issuer, the Borrower or the Trustee shall also be given to the Credit Provider and the Loan Servicer. SECTION 8.2 Amendment. No amendment to this Agreement shall be binding upon the parties to this Agreement until such amendment is reduced to writing and executed by such parties; provided, however, that no amendment, supplement or other modification to this 11 Financing Agreement; Immediate Variable Rate Broadway LaNel Agreement or any other Bond Document shall be effective without the prior written consent of the Credit Provider, subject to the provisions of Section 8.12. SECTION 8.3 Entire Agreement. This Agreement is one agreement in a set of agreements, documents and instruments representing an integrated transaction. The agreements, documents and instruments are the Transaction Documents. The Transaction Documents contain all agreements between the parties to the integrated transaction, and there are no other representations, warranties, promises, agreements or understandings, oral, written or implied, among them, unless reference is made in a Transaction Document. Nothing in this Agreement shall relieve the Borrower of its obligations under the Loan Documents and the Credit Facility Documents. SECTION 8.4 Binding Effect. This Agreement is a continuing obligation and shall (i) be binding upon each of the parties to this Agreement and their successors and assigns and (ii) inure to the benefit of and be enforceable by such parties and their respective successors, transferees and assigns; provided, however, that the Borrower may not assign all or any part of this Agreement without the prior written consent of the Issuer. SECTION 8.5 Further Assurances and Corrective Instruments. The parties agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such amendments to this Agreement and to the other Transaction Documents contemplated by this Agreement as reasonably may be required to cavy out the intention of, or to facilitate the performance of this Agreement, or to perfect or give further assurances of any of the rights granted or provided for in this Agreement. SECTION 8.6 Severability. Should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any jurisdiction, such provision shall be severable from the remainder as to such jurisdiction and the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired in any jurisdiction. SECTION 8.7 Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 8.8 Governing Law. This Agreement shall be construed, and the obligations, rights and remedies of the parties under this Agreement shall be determined, in accordance with the laws of the State without regard to conflicts of laws principles, except to the extent that the laws of the United States of America may prevail. SECTION 8.9 WAIVER OF JURY TRIAL. THE BORROWER, ISSUER AND THE TRUSTEE (A) COVENANT AND AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER THIS AGREEMENT TRIABLE BY A JURY AND (B) WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT NOW EXISTS OR SHALL LATER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL BY THE BORROWER, AND THIS 12 Financing Agreement; Immediate Variable Rate Broadway LaNel WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. FURTHER, THE BORROWER CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE ISSUER (INCLUDING, BUT NOT LIMITED TO, THE ISSUER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO THE BORROWER THAT THE ISSUER WILL NOT SEEK TO ENFORCE THE PROVISIONS OF THIS SECTION. SECTION 8.10 Limited Liability of the Issuer. All obligations of the Issuer under this Agreement, the Regulatory Agreement and the Indenture shall be special, limited obligations of the Issuer, payable solely and only from the Trust Estate. No owner or owners of any of the Bonds shall ever have the right to compel any exercise of the taxing power of the State or the Issuer or any political subdivision or other public body for the payment of the Bonds, nor to enforce the payment of the Bonds against any property of the State or the Issuer or any such political subdivision or other public body, except, in respect of the Issuer, as provided in the Indenture. No member, officer, agent, employee or attorney of the Issuer, including any person executing this Agreement on behalf of the Issuer, shall be liable personally under this Agreement. No recourse shall be had for the payment of the principal of or the interest on the Bonds, for any claim based on or in respect of the Bonds or based on or in respect of this Agreement, against any member, officer, employee or agent, as such, of the Issuer or any successor whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance of this Agreement and as part of the consideration for the issuance of the Bonds, expressly waived and released. SECTION 8.11 Term of this Agreement. This Agreement shall be in full force and effect from its date to and including such date as all of the Bonds are fully paid or retired (or provision for such payment shall have been made as provided in the Indenture); provided, however, that Sections 2.5 and 5.5 and Articles III and VI shall survive the termination of this Agreement. SECTION 8.12 References to the Credit Provider. All provisions in this Agreement regarding consents, approvals, directions, waivers, appointments, requests or other actions by the Credit Provider shall be deemed not to require or permit such consents, approvals, directions, waivers, appointments, requests or other actions and shall be read as if the Credit Provider were not mentioned (i) if a Wrongful Dishonor has occurred and is continuing, or (ii) from and after the date on which the Credit Facility is declared to be null and void by final judgment of a court of competent jurisdiction;rop vided, however, that the payment of any amounts due to the Credit Provider pursuant to this Agreement shall continue in full force and effect. The foregoing shall not affect any other rights of the Credit Provider. All provisions in this Agreement relating to the rights of the Credit Provider shall be of no force and effect if the Credit Facility has terminated or expired in accordance with its terms and there are no Pledged Bonds or Bonds in which the Credit Provider has a security interest and all amounts owing to the Credit Provider under the Reimbursement Agreement have been paid. [The remainder of this page is intentionally blank.] 13 Financing Agreement; Immediate Variable Rate Broadway LaNel j The parties to this Agreement have caused this Agreement to be executed by their duly authorized representatives as of the date set forth above. Financing Agreement; Immediate Variable Rate Broadway LaNel CITY OF NEW HOPE, MINNESOTA By: Its Mayor 14 LANEL, A LIMITED L U.S. BANK NATIONAL ASSOCIATION, as Trustee By: G Name: Title: i r 2 s , c✓ 15 Financing Agreement; Immediate Variable Rate Broadway LaNel f DEEDA AND COVENANTS RUNNING WITH THE LAND THIS INDENTURE, between the Housing and Redevelopment Authority in and for City of New Hope, Minnesota, a body politic and corporate of the State of Minnesota, Grantor, and Broadway LaNel, a Limited Partnership, a Minnesota limited partnership, Grantee, WITNESSETH, that the Grantor, in consideration of the sum of One Dollar (;1.00) and other good and valuable consideration, the receipt whereof is hereby acknowledged, does hereby grant, bargain, quitclaim and convey to the Grantee, its successors and assigns, forever, all the tract or parcel of land lying and being in the County of Hennepin and State of Minnesota (the Land) described as follows, to -wit: Parcel 1: (Abstract) That part of the North 1/2 of Section 5, Township 118, Range 21, described as follows: Beginning at a point on the North line of said Section 5 where said North line is intersected by the Osseo Road, also known as Old Jefferson Highway; thence East along North line of said Section 5 a distance of 1953.5 feet; thence Southerly making an angle of 104 degrees 40 minutes to the right from said last described course a distance of 289.8 feet; thence West in a straight line a distance of 1378.84 feet along a line which, if extended, would intersect the center line of said Osseo Road at a point a distance of 275.61 feet Southerly measured along said center line of said Osseo Road from its intersection with the North line of said Section 5; thence South at right angles 95 feet to actual point of beginning of tract of land hereby to be described; thence East at right angles 31.4 feet; thence south at right angles 95 feet; thence West 442.9 feet, more or less, to a point in center line of said Osseo Road distant 475.61 feet Southerly, as measured along said center line from its intersection with North line of said Section 5; thence Northwesterly along said center line of said Osseo Road, 100 feet; thence East 474.3 feet, more or- less, to the point of beginning. Parcel 2: (Torrens) Tract B, Registered Land Survey No. 840, Files of Registrar of Titles, County of Hennepin. Parcel 3: (Abstract) That part of the North 1/2 of Section 5, Township 118, Range 21, described as follows: Beginning at a point on the North line of said Section 5 where said North line is intersected by the Osseo Road, also known as Old Jefferson Highway; thence East along the North line of said Section 5 a distance of 1953.5 feet; thence Southerly making an angle of 104 degrees 40 minutes to the right from said last described course a distance of 289.8 feet; thence West in a straight line a distance of 1374.84 feet along a line which, if extended, would intersect the center line of said Osseo road at a point distant 275.61 feet Southerly measured along said center line of said Osseo Road from its intersection with the North line of said Section 5, to the actual point of beginning of the tract of land hereby to be described; thence South at right angles a distance of 95 feet; thence West a distance of 442.9 feet, more or less, to the center line of said Osseo Road to a point distant 375.6 feet Southerly as measured along said center line from its intersection with the North line of said Section 5; thence Northwesterly along said center line 100 feet; thence East a distance of 474.3 feet more or less, to the point of beginning; subject to the rights of the public over the West 33 feet thereof for road purposes, according to the United States Government Survey thereof. State Deed Tax Due Hereon: None. To'have and to hold the same, together with all the hereditaments and appurtenances thereunto belonging or in anywise appertaining, to the Grantee, its successors and assigns, forever Provided: Section I. Definitions. Unless otherwise expressly provided herein or unless the context clearly requires otherwise, the following terms shall have the respective meanings set forth below for the purposes hereof: Act: Minnesota Statutes, Chapter 4620, as amended. Bon counsel experien edein mattersrm of relatingltoathe tax-exempt bond financing of multifamily residential housing projects, selected by the Grantor and acceptable to the Trustee. Bonds: the Multifamily Housing Revenue Bonds (Broadway LaNel Project), dated as of December 30, 1985, issued by the City in the aggregate principal amount of $3,350,000. -2- City: The City of New Hope, Minnesota. Code: the Internal Revenue Code of 1954, and the regulations promulgated or proposed thereunder, as amended. Grantee: Broadway LaNel, a Limited Partnership, a Minnesota limited partnership, whose general partners are presently Francis W. Lang and Eugene M. Nelson, or any successor or assign which is the owner of the Rental Project from time to time. Grantor: the Housing and Redevelopment Authority in and for the City of New Hope, Minnesota, or any successor or assign. Loan Agreement: the Loan Agreement, dated as of ember 1, 1985, between the Grantee and the City, pursuant to ch the City has agreed to loan to the Grantee the proceeds the Bonds to finance the acquisition, construction and ipment of the Rental Project. Lower -Income Tenants: individuals who on the date of heir initial occupancy of dwelling units in the Rental Project re individuals of low or moderate income within the meaning of ection 103(b)(4)(A) of the Code. uaiLie� Pr Pst day4onlwhich atoleast Pten o(10%)hpercentdof the units beginning ninhe .e Rental Project are first occupied (which date shall be stablished by a Certificate and Declaration to be executed by he Grantor and Grantee in the form attached to this Deed as xhibit A, and until so established shall be deemed to be not arlies than December 30, 1985), and ending on the later of i) the date which is ten (10) years after the date on which at east fifty (50%) percent of the units in the Rental Project re first occupied (which would also be established by said rhibit A, and until so established the date of 50 percent :cupancy shall be deemed to be not earlier than January 1', 487), (ii) the date which is fifty (50%) percent of the total unber of days which comprise the term of the Bonds with the ingest maturity after the date on which any of the units in .e Rental Project is first occupied (which shall also be tablished by said Exhibit A, and until so established shall deemed to be not earlier than March 1, 1997), or (iii) the to on which any assistance provided with respect to the ntal Project under Section 8 of the United States Housing Act 1937 terminates. it is not presently contemplated that such ction 8 assistance will be provided to the Rental Project. the event that Section 8 assistance is so provided, the rmination date shall be established by an amendment to -3- Exhibit A, upon the execution of a Housing Assistance Pa Contract with the United States Department of Housing Development. In the event of Payments Contract, said date shall be a subsequent terminationof said established b the date of Y an additional amendment to termination as Exhibit A. Rental Proiecr: residential yenta The facilities constituting Pursuant to the Loan Agreement be constructed by the Grantee Grantee from the Grantor hereunder, Land purchased b seventy-two (72) multifamil consisting of approximately Y the other functional) Y residential units withparking and contemplated in Section related and subordinate facilities, as and including any facilities additional )tofthe eresidentialnrental property so described, which may be constructed upon the Land, Tree: First Trust Company, corporation whose principal Inc., a Minnesota corporate trust office is located in St. Paul, Minnesota, or any successor trustee under the Indenture of Trust, dated as of December 1, 1985, between the Grantor and the Trustee, and any successor trustee thereunder. All the terms and provisions hereof shall be construed to effectuate thepurposes set forth herein and to sustain the validity hereof. The titles and headings of the sections hereof have been inserted for convenience of reference only are not to be considered a part hereof and shall not in any way modify or restrict an of and shall never be considered ore terms or provisions hereof and this instrument or an given any effect in construing intent, if any question pofvintentsion hshouldereof oariseascertaining Seen 2. Residential Rental Pro ert . itselfanitsosuccessorsaandhassiantee hereby H Y the provisions of Sections 3 and 10 itsheri tentethat, subject to Is to be owned, operated and managed as residentialthe trentalJect Property within the meaning of Section 103(b)(4)(A) of the Code. To that end, but without limitation b) the the foregoing, the Grantee further represents, agrees as follows: generality of covenants and (1) The Rental Project is being ac constructed for the purpose of Providing Property. The Grantee shall acquired and Project as residential rentashall own, managandloperate thedential Rentaldwelling units and facilities property comprised of residential subordinate thereto, in accordance twithlSectiont103(b)(4)(A) of the Code. -4- I (2) once available for occupancy, each unit included in the Rental Project will be held available for rental on a continuous basis during the longer of the remaining term of the Bonds or the Qualified Project Period. (3) Each unit in the Rental Project shall contain complete facilities for living, sleeping, eating, cooking and sanitation for a single person or family, but may be served by centrally located equipment including but not limited to heating and air conditioning. (4) Neither the Rental Project nor any portion thereof shall ever be used on a transient basis as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, hospital, sanitarium or rest home or similar facility. (5) The units in the Rental Project shall be leased and rented to members of the general public without regard to race, religion, creed or national origin. The Grantee will not give preference in renting dwelling units in the Rental Project to any particular class or group of persons, other than Lower -Income Tenants. Section 3. Lower Income Tenants. For the purpose of satisfying the requirements of Section 103(b)(4)(A) of the Code, the Grantee represents, covenants and agrees as follows, but without limitation of the generality of the foregoing, and subject to the limitations in Section 10 hereof: (1) At all times during the Qualified Project Period the Grantee will allocate (without designation) at least twenty percent (20%) of the units in the Rental Project (fifteen percent of the units in the Rental Project if the Rental Project is, or subsequently becomes, a "targeted area project" as defined in 26 CFR §1.103-8(b)(8)(iii)) for occupancy by Lower -Income Tenants. The Grantee will advise the Grantor in writing of such allocation and of any revision thereof. The units so allocated shall have substantially the same equipment and amenities as the other units in the Rental Project. (2) If at any time the Grantee is unable to rent or lease the units so allocated to Lower -Income Tenants, the Grantee agrees to hold the unrented dwelling runts so allocated vacant and to offer the unrented dwelling units so allocated for occupancy by Lower -Income Tenants. A unit shall be treated as occupied by a Lower -Income Tenant until reoccupied, other than for a temporary period not exceeding 31 days, at which time the character of the unit will be redetermined. a (3) The Grantee will obtain and maintain on file an initial income certification from each Lower -Income Tenant residing in the Rental Project and such other certification as may be requested by the Grantor or as may be required by applicable rules, rulings, procedures, official statements, regulations or policies now or hereafter promulgated or proposed by the Department of the Treasury or the Internal Revenue Service with respect to obligations exempt from federal income taxation under Section 103(b)(4)(A) of the Code. (4) The Grantee will permit, upon not less than 24 hours' notice and during regular business hours, any duly authorized representative of the Grantor, the Trustee, the Department of the Treasury or the Internal Revenue Service to inspect the books and records of the Grantee pertaining to the incomes of Lower -Income Tenants residing in the Rental Project. (5) The Grantee will prepare and submit to the Grantor and the Trustee on April 1 of each year during the Qualified Project Period, a certificate executed by the Grantee stating the percentage of the dwelling units of the Rental Project which were occupied by Lower -Income Tenants (or held vacant and available for occupancy by Lower -Income Tenants as provided in subparagraph (2) above) at all times during the year preceding the date of such certificate. Section 4. Negative Covenants. In addition to those affirmative covenants and agreements set forth in Sections 2 and 3 above, the Grantee does hereby agree that the property hereby conveyed and the Rental Project to be constructed thereon shall at all times during the Qualified Project Period, subject to the provisions of Section to below, be restricted as to the use and occupancy thereof by the Grantee and any other person or entity having an interest therein so that on a continuous basis, during the Qualified Project Period, (a) the Rental Project, and each of the units therein, will be available for no other purpose than rental and (b) at least twenty percent (20%) (fifteen percent if the Rental Project is, or subsequently becomes, a "targeted area project") of the units in the Rental Project will be occupied by or available for occupancy by Lower -Income Tenants in full accordance with Section 103(b)(4)(A) of the Code so that no more than eighty percent (8o%) (85 percent if the Rental Project is, or subsequently becomes, a "targeted area project") of the units in the Rental Project as originally constructed shall be used or occupied for all other purposes. Section 5. Covenants Running with the Land. The Grantor and the Grantee hereby agree that it is their express intent that each of the affirmative and negative covenants and -6- restrictions set forth in Sections 2, 3 and 4 above shall be construed to be, deemed, and is hereby declared to be a covenant running with the property herein conveyed and that the benefit and burden of such covenants and restrictions shall pass to, and be binding upon the Grantee's successors in title, unless terminated or deleted as hereinafter provided. Except as provided in Section 10 hereof, each and every contract, lease, conveyance, agreement or other instrument hereafter executed covering or conveying the property or the Rental Project or any part or portion thereof shall conclusively be held to have acquired such interest in the property or the Rental Project or any portion thereof subject to the obligations of such covenants, regardless of whether or not such covenants and restrictions are set forth or referred to, or specifically agreed to be performed by any such transferee, in any such contract, lease, conveyance, agreement or other such instrument. Section 6. Common Plan. The covenants and restrictions in Sections 2, 3 and 4 above are intended to establish a uniform and common plan for the use, development and improvement of the property and the Rental Project for the common burden and benefit of the Grantee and all subsequent owners and occupants thereof. Section 7. Covenants Touch and Concern. The Grantor and the Grantee hereby agree that the covenants and restrictions in Sections 2, 3 and 4 above in fact touch and concern the property and the Rental Project in the following respects: (i) The Grantee's legal title to the property and Rental Project has been burdened with a use limitation as well as affirmative covenants running with the property providing for the management of the Rental Project consistent with Section 103(b)(4)(A) of the Code, to the end that the interest payable on the Bonds may be and remain exempt from federal income taxation thereunder. (ii) The Grantor, through the Grantor, residents of the State of Minnesota and, particularly, the Lower -Income Tenants, will be assured that the property and Rental Project will afford them safe, sanitary and adequate housing during the effective term of the covenants and restrictions. Both the Grantor and the Grantee recognize that the covenants and restrictions in Sections 2, 3 and 4 above are necessary to ` enable the financing of the Rental Project to be accomplished without which the Rental Project could not be constructed and utilized, and although the existence of such covenants and -7- restrictions may in fact burden and render less valuable the Grantee's fee title to the property and Rental'Project when completed, nevertheless the construction of the Rental Project upon the property and the utilization of the same in accordance with such covenants and restrictions will constitute a significant financial benefit to the Grantee far surpassing to the Grantee the benefit of leaving the property vacant and unimproved, and the Grantee specifically states that the burden upon the Grantee's fee title to the property is reasonable, acceptable and certainly not unconscionable or against public policy in any way, given the other benefits of the transaction to the Grantee and -the citizens on behalf of whom the Grantor exercises the powers given it by law. Section 8. Grantor as Representative of Benefited Parties. The Grantor, and its successors and assigns, althoug itself a benefited entity of the covenants and restrictions in Sections 2, 3 and 4 above, is hereby designated the sole and exclusive representative of any and all other persons or entities also benefited by such covenants and restrictions, insofar as the enforcement, the construction, the interpretation, the amendment, the release and/or the termination of such covenants and restrictions are concerned. This designation and appointment shall also run with the property and is hereby made and agreed to by the Grantee, its successors and assigns, and any subsequent transferee of any interest in the property and the Rental Project, or any part thereof, from the Grantee. Section 9. Remedies, Enforceability. In the event of a violation, or attempted violation of any of the covenants or restrictions in Sections 2, 3 and 4 above, the Grantor and its successors or assigns (but only the Grantor and its successors and assigns), may institute and prosecute any proceeding at law or in equity to abate, prevent or enjoin any such violation or to specifically enforce the covenants therein set forth. Notwithstanding any other provision hereof, enforcement of these covenants and restrictions shall not result in any claim against the Rental Project, the proceeds of the Bonds or against the rents or other income from the property. In the event of a violation of the covenant of the Grantor with respect to execution of the Certificate of Amendment or Termination or Deletion of Covenants in accordance with Section 10 hereof, the Grantee and its successors and assigns may institute and prosecute any proceedings at law or in equity to abate, prevent or enjoin any such violation or to specifically enforce the covenants therein set forth; provided, however, the Grantee waives any and all rights it has to bring an action for damages against the Grantor with respect to any violation of the covenants of the Grantor set forth in Section 10 hereof. -8- Until terminated or deleted as hereinafter provided, the provisions hereof are imposed upon and made applicable to the property and the Rental Project and shall be enforceable against the Grantee, each purchaser, grantee, owner or lessee of the Rental Project and the respective heirs, legal representatives, successors and assigns of each. No delay in enforcing the provisions of said covenants and restrictions as to any breach or violation shall impair, damage or waive the right to enforce the same or to obtain relief against or recover for the continuation or repetition of such breach or violation or any similar breach or violation thereof at any later time or times. Section 10. Amendment, Termination or Deletion of Covenants. (1) The provisions of Sections 2 through 10 of this Deed shall not be amended, terminated or deleted prior to the stated term set forth in Section 2, 3 and 4 hereof and in this Section 10, except (i) by an instrument in writing duly executed by the Grantor, the Grantee and the Trustee or their respective successors or assigns or (ii) in accordance with paragraph (4) of this Section 10. Unless sooner terminated or amended or deleted from this Declaration as in this Section 10 provided, each of the covenants and restrictions set forth in Section 2 hereof shall continue in full force and effect during the longer of the remaining term of the Bonds or the Qualified Project Period, and each of the covenants and restrictions set forth in Sections 3 and 4 hereof shall continue in full force and effect throughout the Qualified Project Period, and shall thereupon terminate and be of no further force and effect, it being expressly agreed and understood that the provisions of such Sections 2 through 10 hereof are intended to survive the expiration and satisfaction of any security instruments placed of record contemporaneously with this Deed and the issuance of the Bonds, if such expiration and satisfaction occurs prior to the expiration of the Qualified Project Period. (2) At any defined), the Grantee, Aorrits lsuccessors ate Time" (or assias gns, shall execute and deliver to the Grantor a Certificate of Amendment or Termination or Deletion of Covenants in the form attached to this Declaration as Exhibit B. If the Grantee's request is made at an "Appropriate Time," the Grantor will execute and deliver to the Grantee the Certificate of Amendment or Termination or Deletion of Covenants. Any such certification entered into by the Grantee and the Grantor shall be (and it shall be so provided in the certification itself) a conclusive determination of the amendment or the satisfaction and termination or deletion of the covenants and restrictions in MM Sections 2, 3 and 4 hereof with respect to the obligations of the Grantee and its successors and assigns under Sections 2 through 10 hereof, including particularly Sections 2, 3 and 4 hereof, it being the intention of the parties that upon the execution and filing of any amendment, such covenants and restrictions shall thereafter and for all purposes be modified and amended and that upon the granting and filing of any termination or deletion such covenants and restrictions shall thereafter for all purposes be forever terminated or deleted from this Declaration. (3) It shall be an "Appropriate Time" for the Grantor's execution and delivery of the Certificate of Amendment or Termination or Deletion of Covenants with respect to termination or deletion at the expiration of the stated term of such covenants and restrictions as set forth in this Section 10. Prior to such expiration of the stated term, it shall be an "Appropriate Time" for the execution and delivery of the Certificate of Amendment or Termination or Deletion of Covenants only if the Grantee delivers to the Grantor with the Grantee's request a written opinion of Bond Counsel addressed to the Grantor and the Grantee and the Trustee to the effect that the amendment or earlier termination or deletion from this Declaration of such covenants and restrictions will not adversely affect the exemption from federal income taxation of interest already received or to be received on the Bond. Such opinion of Bond Counsel shall clearly state whether it addresses amendment, termination or deletion of the covenants and restrictions of Sections 2, 3 and 4 hereof and shall specify the applicable paragraph of Exhibit B to be included in the Certificate of Amendment or Termination or Deletion of Covenants. Upon receipt of such Declarant request and accompanying opinion, the Grantor shall deliver the Certificate, of Amendment or Termination or Deletion of Covenants to the Grantee. (4) The provisions of Section 2 through 10 hereof shall be deemed to be no longer in effect, without the necessity of any act or document whatsoever, in the event of noncompliance with the provisions of Section 103(b)(4)(A) of the Code and Treasury Regulations promulgated or proposed thereunder if such noncompliance is caused by involuntary loss caused by fire, seizure, requisition, foreclosure, transfer of title by deed in lieu of foreclosure, change in federal law or an action of a federal agency after the date of issue of the Bonds (which change in law or action prevents the Grantor from enforcing the requirements of Sections 2 through 10 hereof), or condemnation or similar events but only if within a reasonable period, the Bonds are paid and retired. To evidence the facts stated in this paragraph (4) and not as a condition to the -10- termination of such covenants, the Grantor, upon request of the Grantee, accompanied by a certificate evidencing the factual basis for the request, shall execute and deliver a Certificate of Termination of Covenants in substantially the form of Exhibit B hereto, which for this purpose need not be executed by the Grantee and may be amended accordingly. If the Bonds are not paid and retired, any amounts received as a consequence of such event shall be used to provide a project which meets the requirements of Section 103(b)(4)(A) of the Code and Treasury Regulations promulgated or proposed thereunder. The provisions of this paragraph (4) shall be deemed to be inoperable, and the -requirements of Sections 2 through 10 hereof shall continue in effect, if the operation of this paragraph (4) would subject the interest payable on the Bonds to federal income taxation. ion 11. ty of Amendments. The Certifecateaand1Declarationfasatosthed Qualified Project Period, Exhibit A, and any amendment thereof, the Certificate of Amendment, Termination or Deletion of Covenants, Exhibit B, and any amendment of covenants and restrictions provided for herein shall all be in such form as will enable them to be recorded with the County Recorder, Hennepin County, Minnesota, or in case of registered land, with the Registrar of Titles, Hennepin County, Minnesota. on 12: as covenants Sand 1restrictions nset sfort hoin1Sections 2, The 3eand 4 above constitute a part of the consideration given and agreed to be the Grantee for the execution and delivery of this Deed by the Grantor, and the making available by the Grantor of the proceeds of the Bonds. Section 13. Governing Law. This instrument shall be governed by the laws of the State of Minnesota. Section 14. Notices. Any notice required to be given to either party hereunder shall be given in writing by first-class or certified mail at the address of such party specified below, or at such other address as may be specified by that party by notice given to the other party: Grantor: Housing and Redevelopment Authority in and for the City of New Hope New Hope City Hall 4401 Xylon Avenue North New Hope, Minnesota 55428 Attn: Executive Director -11- Grantee: Broadway LaNel, a, Limited Partnership c/o Lang—Nelson Associates, Incorporated 4601 Excelsior Boulevard, Suite 650 Minneapolis, Minnesota 55416 with a copy to: Stephen J. Davis Attorney at Law 4114 IDS Center 80 South Eighth Street - Minneapolis, Minnesota 55402 Section 15. Severability. If any provision hereof shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions shall not in any way be affected or impaired. Section 16. Other Applicable Laws. This Deed is also given subject to the provisions of the ordinances, building and zoning laws of the Grantor, state and federal laws and regulations insofar as they affect this real estate. IN WITNESS WHEREOF, the Grantor has caused this Deed to be duly executed in its behalf by its Chairman, Secretary—Treasurer and Executive Director and the Grantee, to indicate its acceptance of the terms and provisions hereof and the covenants contained herein, and to express its understanding of and agreement with the intent hereof, has caused this instrument to be duly executed in its behalf by its general partner, all as of December 1, 1985. (SEAL) HOUSING AND REDEVELOPMET AUTHORITY IN AND FOR THE CITY OF NEW HOPE, MINNESOTA BfFYChairman U74 By -12- THIS CONVEYANCE AND AL INCLUDING THE E LIONOTHER TERMS RESTRICTIONS IN S THAT THE BURDENSPROVISIONS HEREOF, SECTIONS OF THE COVENANTS AND L ARE HEREBY ACCEPTED. 3 AND 4 HEREIN SHALL RUN WITH THE A LIMITED This instrument is exem Gen€ral Partner pt from state deed tax and filing This instrument drafted by: Dorsey g Whitney 2200 First Bank Place East Minneapolis, Minnesota 55402 Tax Statements for the Real Property described in this instrument should be sent to: Broadway LaNel, a Limited Partnership c/o Lang -Nelson Assoc, ates, Incorporated 4601 Excelsior Bo'Iles, Minneapolis, Mi nnesard, Suite 6ota 55416 -13- STATE OF MINNESOTA) COUNTY OF q i1 ss. this ��l The fore oin instrument was acknowled ed before ri}e day of �; and �i7iE/ 7hc!4 . 198b, by Ward�r�c�sd.i 1. rile,-f=aUIV ct Secretary -Treasurer and the Executive Director, respectively, of the Housing and Redevelopment Authority in and for the City of New Hope, Minnesota, body politic and corporate of the State Of Minnesota, on behalf of the corporation. �r °d> N'11EU N81A. SOMPlORNAEP SL 1 NENERIN fMI CommAUNTyzon WA ° EyDi2s Seo. 23. 1387 -14- Notary Public STATE OF AJES0r,4 COUNTY OF JV pf j j ss . The fore oin instrument was acknowledged before me this � day of 198 partner of Broadw byQ^� a general limited p L n b a Limited Partnership a Minnesota partnership, on behalf of such limited partnership. -15- Not y Public EXHIBIT A CERTIFICATE AND DECLARATION AS TO QUALIFIED PROJECT PERIOD WHEREAS, the Housing and Redevelopment Authority in and for the City of New Hope, Minnesota, a body politic and corporate of the State of Minnesota, Grantor, by a deed (recorded] (filed] on , 198 , in the office of the j (County Recorder] [Registrar of Titles] in and for the County of Hennepin, and State of Minnesota, as Document No. (the "Deed"), has conveyed to Broadway LaNel, a Limited Partnership, a Minnesota limited partnership, Grantee, the following described land in the County of Hennepin and State of Minnesota, to -wit: [INSERT LEGAL DESCRIPTION] WHEREAS, the Deed contained certain covenants and restrictions in Section 2, 3 and 4 thereof which were intended to run with the land and be binding upon the Grantee, its successors and assigns at all times during a Qualified Project Period, as therein defined, unless and until such covenants and restrictions are amended, terminated or deleted as provided in s the Deed; and WHEREAS, under the terms and provisions of Section 1 of the Deed the date of certain occurrences are to be established by an instrument to be executed by the Grantor and Grantee in substantially the form of this Certificate and Declaration; NOW THEREFORE, the Grantor and Grantee do hereby certify and declare that: 1. The day on which at least ten (10%) percent of the units in the Rental Project (as defined in the Deed) were first occupied was , 19 , which was the date of commencement of the Qualified Project Period. 2. The date on which at least fifty (50%) percent of the units in the Rental Project were first occupied was 19_, and the date which is ten (10) years thereafter is 19 A-1 3. The date on which the first unit in the Rental Project was occupied was , 19 Dated: , 198 HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE MINNESOTA - By Chairman And Secretary -Treasurer "rr.I Executive Director BROADWAY LANEL, A LIMITED PARTNERSHIP By General Partner A-2 STATE OF MINNESOTA) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 198_, by and the Chairman, the Secretary -Treasurer and the Executive Director respectively, of the Housing and Redevelopment Authority in and for City of New Hope, Minnesota, a Minnesota body politic and corporate, on behalf of the corporation. Notary Public STATE OF ) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 198 , by , a general partner of Broadway LaNel, a Limited Partnership, a Minnesota limited partnership, on behalf of such limited partnershp. i Notary Public Tax Statements for the Real Property described in this instrument should be sent to: Broadway LaNel, a Limited Partnership C/o Lang -Nelson Associates, Incorporated, 4601 Excelsior Boulevard, Suite 650 Minneapolis, Minnesota 55416 A-3 EXHIBIT B CERTIFICATION OF AMENDMENT OR TERMINATION OR DELETION OF COVENANTS WHEREAS, the Housing and Redevelopment Authority in and for the City of New Hope, Minnesota, a body politic and corporate of the State of Minnesota, Grantor, by a deed [recorded] (filed] on 1 198 , in the office of the [County Recorder] [Registrar of Titles] in and for the County of Hennepin and State of Minnesota, as Document No. (the "Deed"), has conveyed to Broadway LaNel, a Limited Partnership, a Minnesota limited partnership, Grantee, the following described land in the County of Hennepin and State of Minnesota, to -wit: (Insert Legal Description] WHEREAS, the Deed contained certain covenants and restrictions in Sections 2, 3 and 4 thereof which were intended to run with the land and be binding upon the Grantee, its successors and assigns; WHEREAS, the Grantor, and its successors and assigns, was given in said Deed the full and absolute right and obligation to amend or terminate or delete such restrictions and to execute and deliver this Certificate for and on behalf of all persons and entities who might have been benefited by such covenants and restrictions; and WHEREAS, under the terms and provisions of Section 10 of said Deed it is now an Appropriate Time (as such term is defined in the Deed) to deliver this Certificate and to amend or terminate or delete such covenants and restrictions; NOW, THEREFORE, this is to certify that (DELETE (a) OR (b) OR (c) IF INAPPLICABLE]: (a) the covenants and restrictions set forth in Sections 2, 3 and 4 of the Deed are null and void and of no further force or effect; the [County Recorder] [Registrar of Titles] in and for the County of Hennepin and State of Minnesota is hereby authorized to accept this instrument for recording or filing as a conclusive determination of the termination and release of all covenants and restrictions set forth in Section 2, 3 and 4 of the Deed, as specified and as a complete termination of all rights and other remedial provisions of Sections 2 through 10, or (b) the covenants and restrictions set forth in Sections 2, 3 and 4 (or B-1 any of them, as specified: ), of the Deed are hereby deleted from the Deed; the (County Recorder] (Registrar of Titles] in and for the County of Hennepin and State of Minnesota is hereby authorized to accept this instrument for recording or filing as a conclusive determination of the deletion from the Deed of all covenants and restrictions set forth in Sections 2, 3 and 4 (or any of them, as specified: ), of the Deed and as a complete deletion of the provisions of Sections 2 through 10 of the Deed (or certain provisions, as specified: ) or (c) the covenants and restrictions set forth in Sections 27 3 and 4 (or any o8 them, as specified) of the Deed are hereby amended to read as follows: (insert text of amendment]; the (County Recorder] (Registrar of Titles] in and for the County of and State of Minnesota is hereby authorized to accept this instrument for recording or filing as a conclusive determination of the amendment of the covenants and restrictions set forth in Sections 2, 3 and 4 of the Deed, as specified. Dated this day of B-2 19_ HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF NEW HOPE, MINNESOTA By Chairman By Secretary -Treasurer By Executive Director BROADWAY LANEL, A LIMITED PARTNERSHIP By - Its General Partner FIRST TRUST COMPANY, INC., as Trustee By Its STATE OF MINNESOTA) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 19 , by and , the Chairman, the—Secretary-Treasure—r, and the Executive Director, respectively, of the Housing and Redevelopment Authority in and for the City of New Hope, Minnesota, a municipal corporation, on behalf of the corporation. Notary Public STATE OF MINNESOTA) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 19_, by general partner of Broadway LaNel, a Limited Partnership, a Minnesota limited partnership, on behalf of such limited partnership. Notary Public STATE OF MINNESOTA) i ss. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 19 , by , the , of First Trust Company, Inc., a Minnesota corporation, on behalf of the trust company. Notary Public Tax Statements for the Real Property described in this instrument should be sent to: Broadway LaNel, a Limited Partnership c/o Lang -Nelson Associates, Incorporated 4601 Excelsior Boulevard, Suite 650 Minneapolis, Minnesota 55416 B-3 STATE OF MINNESOTA ) ) SS COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this 2/`qday of 4— 1993, by r 5KQ, i _EP , the Assistant Vice PresiYiant and . M. 0L R 1 KSEr4 , the p,F cutant Secretary of First Trust National Association, a national banking association, on behalf of said association. --------------- a,. peen:•':, DONNA M. HULL NOTARY PUBUC-MINNESOTA i,' `.f; ', ^.AMSEY COUNTY ,__" ._-'.-.xien Exp?re, N. J. 12, 1535 STATE OF MINNESOTA ) ) SS COUNTY OF HENNEPIN ) 7 / / vl'u-j-t Notary Public The fpregoing instrument was acknowledged before me this 3/�day of ll� v .993, by Francis W. Lang, a general partner of Broadway LaNel, a Limited Partnership, a Minnesota limited partnership. DONNA M. HULL NOTARY PUBUC- MINNESOTA RAMSEY COUNTY Ply Coni, -i n EXPI MS N -v. 12,1595 me Notary Public FIRST AMENDMENT TO DEED AND COVENANTS RUNNING WITH THE LAND THIS AGREEMENT, made and entered into as of September 1, 1993, by and between BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited Partnership (the "Owner"), the NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY, a public body corporate and politic (the "EDA") and FIRST TRUST NATIONAL ASSOCIATION (formerly known as First Trust Company, Inc. ("First Trust'); WITNESSETH, THAT: WHEREAS, by that certain Deed and Covenants Running with the Land ("Deed") from the Housing and Redevelopment Authority in and for the City of New Hope, Minnesota (the "HRA") to Owner dated as of December 1, 1985 and filed in the office of the Hennepin County Recorder on August 17, 1986 as Document No. 5099932 and in the office of the Hennepin County Registrar of Titles on April 17, 1986 as Document No. 1717489, the HRA conveyed to Owner the premises lying and being in Hennepin County, Minnesota ("Premises") which are now described as follows: Lot 1, Block 1, Broadway LaNel Addition WHEREAS, the HRA has assigned to the EDA all of its interests in and to Redevelopment Plan 85-1 within which the Premises is located, and such assignment has the HRA to the EDA included all of the rights of the EDA under the Deed; and WHEREAS, the Deed imposed certain covenants and restrictions upon said Premises in connection with the issuance by the City of New Hope, Minnesota (the "City") of its Multifamily Housing Revenue Bonds (Broadway LaNel Project), Series 1985, in the total aggregate principal amount of $3,350,000 (the "1985 Bonds"); and WHEREAS, the City has agreed to issue its Multifamily Housing Refunding Revenue Bonds (Broadway LaNel Project), Series 1993, in the total principal amount of $3,300,000 (the "1993 Bonds") for the purpose of refunding the outstanding 1985 Bonds; and WHEREAS, the Owner, EDA and First Trust desire to amend the covenants and restrictions contained in the Deed to reflect such refunding. WHEREAS, First Trust is the Trustee as defined in the Deed; and NOW, THEREFORE, in consideration of the issuance by the City of the 1993 Bonds and the loan of the proceeds thereof by the City to the Owner, the adequacy of which is hereby acknowledged by Owner, the EDA and First Trust do hereby agree that the Deed shall be and hereby is amended as follows, but otherwise shall remain in full force and effect: (1) The definition of the term 'Bonds" in Section 1 is deleted in its entirety and the following is substituted in lieu thereof: Bonds: The Multifamily Housing Refunding Revenue Bonds (Broadway LaNel Project), Series 1993, issued by the City of New Hope, Minnesota in the total principal amount of $3,300,000. (2) Trustee: First Trust National Association, a national banking association, whose principal corporate trust office is at St. Paul, Minnesota, as Trustee under an Indenture of Trust, dated as of September 1, 1993, between t ustee and the City of New Hope, Minnesota, and any sucssor stee there nder. IN WITNESS WHEREOF, O er, the EDA, and First Trust ha\e caused this Agreement to be duly executed as qf the date first ove itten. P LZ FIRST TRUST`Al.ATFONAI ASSOCIATION, as Trustee And Its Assistant Secreta WS NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY is ¢l t And Its i�li� s� :roc -3- STATE OF MINNESOTA ) ) SS COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me thi 3z' da of > 1993, by and 7.>icI >�76 the vp o%> t and respectively, of the New Hope Economic Development Authority, a public body corporate and public, on behalf of such agency. DRAFTED BY: Dorsey & Whitney (JPG) Pillsbury Center South 220 South Sixth Street Minneapolis, Minnesota 55402 Notary Public y' STEVEN A. SONDRALL f NOTARY PUBLIC—MINNESOTA �- HENNEPIN COUNTY My Commission Expires Nov. 9, 1993 -5- SECOND AMENDMENT TO DEED AND COVENANTS RUNNING WITH THE LAND THIS AGREEMENT, made and entered into as of August 1, 2003, by and between BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited Partnership (the "Owner'), the NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY, a public body corporate and politic (the "EDA") and U.S. BANK NATIONAL ASSOCIATION (formerly known as First Trust Company, Inc. and First Trust National Association, "Trustee'); WITNESSETH, THAT: WHEREAS, by that certain Deed and Covenants Running with the Land ("Original Deed") from the Housing and Redevelopment Authority in and for the City of New Hope, Minnesota (the "HRA") to Owner dated as of December 1, 1985 and filed in the office of the Hennepin County Recorder, as Document No. 5099932 and in the office of the Hennepin County Registrar of Titles, as Document No. 1717489, the HRA conveyed to Owner the premises lying and being in Hennepin County, Minnesota ("Property") which are now described as follows: Lot 1, Block 1, Broadway LaNel Addition WHEREAS, the Original Deed was amended by that certain First Amendment to Deed and Covenants Running with the Land, dated as of September 1, 1993, between the Owner, EDA and Trustee filed in the office of the Hennepin County Recorder as Document No. 6147858 and in the office of the Hennepin County Registrar of Titles as Document No. 2513476, and by that certain Corrective First Amendment to Deed and Covenants Running with the Land, dated as of September 1, 1993, between the Owner, the EDA and the Trustee filed in the office of the Hennepin County Recorder as Document No. 6285009 (together, the "First Amendment"); and WHEREAS, the Original Deed as amended by the First Amendment is herein referred to as the "Deed"; and WHEREAS, the HRA has assigned to the EDA all of its interests in and to Redevelopment Plan 85-1 within which the Property is located, and such assignment has the HRA to the EDA included all of the rights of the EDA under the Deed; and WHEREAS, the Deed imposed certain covenants and restrictions upon said Property in connection with the issuance by the City of New Hope, Minnesota (the "City") of its Multifamily Housing Refunding Revenue Bonds (Broadway LaNel Project), Series 1993, in the total aggregate principal amount of $3,300,000 (the "1993 Bonds"); and WHEREAS, the City has agreed to issue its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003, in the total principal amount of $2,655,000 (the "2003 Bonds") for the purpose of refunding the outstanding 1993 Bonds; and WHEREAS, the Owner, EDA and Trustee desire to amend the covenants and restrictions contained in the Deed to reflect such refunding; and WHEREAS, the Trustee is the Trustee as defined in the Deed; and NOW, THEREFORE, in consideration of the issuance by the City of the 2003 Bonds and the loan of the proceeds thereof by the City to the Owner, the adequacy of which is hereby acknowledged by Owner, the EDA and Trustee do hereby agree that the Deed shall be and hereby is amended as follows, but otherwise shall remain in full force and effect: (1) The definition of the term "Bonds" in Section 1 is deleted in its entirety and the following is substituted in lieu thereof: Bonds: The Variable Rate Demand Multifamily Housing Revenue Refirnding Bonds (Broadway LaNel Project), Series 2003, issued by the City of New Hope, Minnesota in the total principal amount of $2,655,000. Trustee: U.S. Bank National Association, a national banking association, whose principal corporate trust office is at St. Paul, Minnesota, as Trustee under a Trust Indenture, dated as of August 1, 2003, between the Trustee and the City of New Hope, Minnesota, and any successor trustee thereunder. (2) The Deed is hereby amended to incorporate in full the Fannie Mae Rider attached hereto as Exhibit A. IN WITNESS WHEREOF, Owner, the EDA, and Trustee have caused this Agreement to be duly executed as of the date first above written. BROADWAY LANEL, A LIMITED PARTNERSHIP U.S. BANK NATIONAL Trustee By Ifs F�, NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY By he President And 4 S txecutive Director STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this /s' `day of 2003, by . s.CP9C1,0, Cthe and of U.S. Bank National Association, a national banking association, on behalf of said association. ■ CATHERINE M. NUTZMANN 'i NOTARY PUBLIC•MINNESOTA „�', My Commission Expires Dart 312005 �x Notary Public STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this � day of 2003, by Francis W. Lang, as general partner of Broadway LaNel, a Limited Partnership, a Minnesota limited partnership. ` CATHERINE M.NUTZMANN■ NOTARY PUBLIC -MINNESOTA My Commission Expires Jan. 31, 2005 Y Notary Public i ywMPShN� STATE OF MINNESOTA ) SS. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this 8th day of August 2003,byW. Peter Enck ,and Daniel J. Donahue the President and Executive Director , respectively, of the New Hope Economic Development Authority, a public body corporate and public, on behalf of such agency. n VALERIEJ. LEONE azQ� 2L I P , NDTABYPUBLIC-MINNESOTA �� My Commission Expires Jan. 3" z 5 Notary Public DRAFTED BY: Dorsey & Whitney LLP (JPG) Suite 1500 50 South Sixth Street Minneapolis, Minnesota 55402 0 EXHIBIT A FANNIE MAE RIDER TO DEED AND COVENANTS RUNNING WITH THE LAND THIS FANNIE MAE RIDER TO DEED AND COVENANTS RUNNING WITH THE LAND ("Rider") is attached to and forms a part of the DEED AND COVENANTS RUNNING WITH THE LAND dated as of December 1, 1985, as amended by First Amendment to Deed and Covenants Running with the Land dated as of September 1, 1993, Corrective First Amendment to Deed and Covenants Running with the Land dated as of 1993, and Second Amendment to Deed and Covenants Running with the Land dated as of August 1, 2003 (together, the "Regulatory Agreement"), by and among BROADWAY LANEL, A LIMITED PARTNERSHIP ("Company"), its successors and assigns, the CITY OF NEW HOPE, MINNESOTA ("City") and the U.S. BANK NATIONAL ASSOCIATION ("Trustee'), as Trustee. 1. Definitions. All capitalized terms used in this Rider have the meanings given to those terms in the Regulatory Agreement or the Indenture, as applicable. 2. Applicability. This Rider shall amend and supplement the Regulatory Agreement. In the event any provision of this Rider conflicts with the Regulatory Agreement, this Rider shall supersede the conflicting provision of the Regulatory Agreement. This Rider shall apply in spite of the fact that the covenants, reservations and restrictions of the Regulatory Agreement run with the land and may be deemed applicable to any successor in interest to the Company. 3. Oblfaations not Secured by the Property. The Regulatory Agreement shall not constitute a mortgage, equitable mortgage, deed of trust, deed to secure debt or other lien or security interest in the Property. None of the obligations of the Company or any subsequent owner of the Property under the Regulatory Agreement shall be secured by a lien on, or security interest in, the Property. All such obligations are expressly intended to be and shall remain unsecured obligations. The occurrence of an event of default under the Regulatory Agreement shall not impair, defeat or render invalid the lien of the Security Instrument. 4. Subordination. The terms, covenants and restrictions of the Regulatory Agreement, other than those set forth in Sections 2, 3, 4 and 10, are and shall at all times remain subject and subordinate, in all respects, to the liens, rights and interests created under the Loan Documents. Upon a conveyance or other transfer of title to the Property by foreclosure, deed in lieu of foreclosure or comparable conversion of the Loan, the Person who acquires title to the Property pursuant to such foreclosure, deed in lieu of foreclosure or comparable conversion of the Loan (unless such Person is the Company or a Person related to the Company within the meaning of Section 1.103-10(e) of the U.S. Treasury Regulations, in which event the Regulatory Agreement shall remain in full force and effect in its entirety) shall acquire such title free and clear of the terms, covenants and restrictions of the Regulatory Agreement, other than those set forth in Sections 2, 3, 4 and 10 and, from and after the date on which such Person acquires title A-1 to the Property, the terms, covenants and restrictions of the Regulatory Agreement, other than those set forth in Sections 2, 3, 4 and 10 shall automatically terminate and be of no force and effect; provided that Sections 2, 3, 4 and 10 shall also terminate and be of no force or effect under the circumstances set forth in Section 10 of the Regulatory Agreement. 5. Obligations Personal. The City agrees that no owner of the Property (including Fannie Mae) subsequent to the Company will be liable for, assume or take title to the Property subject to: (a) any failure of any prior owner of the Property to perform or observe any representation or warranty, affirmative or negative covenant or other agreement or undertaking under the Regulatory Agreement; and (b) the payment of any compensation or any accrued unpaid fees, costs, expenses or penalties otherwise owed by any prior owner of the Property under the Regulatory Agreement. The Company and each subsequent owner of the Property shall be responsible under the Regulatory Agreement for its own acts and omissions occurring during the period of its ownership of the Property. All such liability and obligations shall be and remain personal to such person even after such person ceases to be the owner of the Property. 6. Sale or Transfer. (a) Restrictions Not Applicable to Certain Transfers. All provisions of the Regulatory Agreement regarding the sale or transfer of the Property or of any interest in the Company, including any requirement, limitation or condition precedent for any of (i) the consent of the City or the Trustee to such transfer, (ii) an agreement by any transferee to abide by the requirements and restrictions of the Regulatory Agreement, (iii) transferee criteria or other similar requirements, (iv) an opinion of legal counsel and (v) the payment of any assumption fee, transfer fee, penalty or other charges, shall not apply to any of the following: (1) any transfer of title to the Property to Fannie Mae or to a third party by foreclosure, deed in lieu of foreclosure or comparable conversion of any lien on the Property or to any subsequent transfer by Fannie Mae (or a third party) following such foreclosure, deed in lieu of foreclosure or comparable conversion; (2) any execution and delivery of a mortgage, deed of trust, deed to secure debt or other lien by the Company to secure any additional indebtedness of the Company which is originated by a lender for sale to Fannie Mae or guaranteed or otherwise credit enhanced by Fannie Mae; and (3) provided that no Bonds are then Outstanding or all Bonds are to be simultaneously fully paid, redeemed or defeased, any execution and delivery of a mortgage, deed of trust, deed to secure debt or other lien by the Company to secure any indebtedness incurred by the Company which effectively refinances the Loan. A-2 (b) Fannie Mae Rights to Consent Not Impaired. Nothing contained in the Regulatory Agreement shall affect any provision of the Security Instrument or any of the other Credit Enhancement Documents or Loan Documents which requires the Company to obtain the consent of Fannie Mae as a precondition to sale, transfer or other disposition of, or any direct or indirect interest in, the Property or of any direct or indirect interest in the Company, excluding transfers permitted by the Security Instrument. (c) Conclusive Evidence. Any written consent to a sale or transfer obtained from the City shall constitute conclusive evidence that the sale or transfer is not a violation of the transfer provisions of the Regulatory Agreement. 7. Damaee, Destruction or Condemnation of the Property. In the event that the Property is damaged or destroyed or title to the property, or any part thereof, is taken through the exercise or the threat of the exercise of the power of eminent domain, the Company shall comply with all applicable requirements of the Security Instrument and the other Loan Documents. 8. Regulatory Aereement Default. Notwithstanding anything contained in the Regulatory Agreement to the contrary: (a) The occurrence of an event of default under the Regulatory Agreement shall not impair, defeat or render invalid the lien of the Security Instrument. (b) The occurrence of an event of default under the Regulatory Agreement shall not be or be deemed to be a default under the Loan Documents, except as may be otherwise specified in the Loan Documents. (c) Upon any default by the Company under the Regulatory Agreement, the Assignment shall govern the remedies and other actions which the City may take on account of such default. 9. Amendments. Unless the Assigned Rights (as that term is defined in the Assignment) are transferred to the Trustee pursuant to Section 5.1 of the Assignment, the City shall not consent to any amendment, supplement to, or restatement of the Regulatory Agreement without the prior written consent of Fannie Mae. 10. Termination. The Regulatory Agreement may be terminated upon agreement by the City, the Trustee, the Credit Provider and the Company upon receipt of an opinion of a nationally recognized bond counsel acceptable to the Trustee that such termination will not adversely affect the exclusion of the interest on the Bonds from gross income for federal income purposes. So long as the Bonds have been redeemed or are redeemed within a reasonable period thereafter, the Regulatory Agreement shall terminate and be of no further force or effect from and after the date of any transfer of title to the Property by foreclosure, deed in lieu of foreclosure or comparable conversion of any lien on the Property; provided, however, that the preceding provisions of this sentence shall cease to apply and the restrictions contained in the Regulatory Agreement shall be reinstated if, at any time subsequent to the termination of such provisions as the result of the foreclosure or the delivery of a deed in lieu of foreclosure or a A-3 similar event, the Company or any related person (within the meaning of Section 1.103-10(e) of the Regulations) obtains an ownership interest in the Property for federal income tax purposes. 11. Third -Party Beneficiary. The parties to the Regulatory Agreement recognize and agree that the terms of the Regulatory Agreement and the enforcement of those terms are essential to the security of Fannie Mae and are entered into for the benefit of various parties, including Fannie Mae. Fannie Mae shall accordingly have contractual rights in the Regulatory Agreement and shall be entitled (but not obligated) to enforce, separately or jointly with the City and/or the Trustee, or to cause the City or the Trustee to enforce, the terms of the Regulatory Agreement. In addition, the Company and the City intend that Fannie Mae be a third -party beneficiary of the Regulatory Agreement. 12. Copies of Notices under the Regulatory Agreement. Copies of all notices under the Regulatory Agreement shall be sent to the Loan Servicer at the address set forth below or to such other address as the Loan Servicer may from time to time designate: Glaser Financial Group, Inc. 2550 University Avenue West Suite 31ON St. Paul, MN 55112 13. Notices. Any notice to be given to Fannie Mae shall be sent to Fannie Mae at the address set forth below or to such other address as Fannie Mae may from time to time designate: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Director, Multifamily Asset Management Telephone: (202)752-2854 Facsimile: (202) 752-3542 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003/Glaser Financial Group, Inc. [For courier use 4000 Wisconsin Avenue, N.W. and delete Drawer AM] with a copy to: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Vice President, Multifamily Services Telephone: (202) 752-7869 Facsimile: (202) 752-8369 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003/Glaser Financial Group, Inc. [For courier use 4000 Wisconsin Avenue, N.W. and delete Drawer AM] CITY'S INITIALS: COMPANY'S INITIALS: OR UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF HENNEPIN CITY OF NEW HOPE VARIABLE RATE DEMAND'S MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT) SERIES 2003 i, Dated: August 14, 2003 Maturity Date: July 15, 203311 Interest Rate: Variable REGISTERED OWNER: CEDE & CO. $2,655,000 CUSIP: 645464 FK 9 Payment Dates: 15"' Day of each Month, commencing September 15, 2003 PRINCIPAL AMOUNT: TWO MILLION SIX HUNDRED FIFTY FIVE THOUSAND DOLLARS ($2,655,000) Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation (`DTC'), to the Trustee for registration, transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or in the name of such other entity as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE OF THIS BOND FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the Registered Owner of this Bond, Cede & Co., has an interest in this Bond. Capitalized terms used in this Bond but not defined in this Bond shall have the meanings given to those terms in the Indenture (as defined below). FOR VALUE RECEIVED, the City of New Hope, Minnesota (the "Issuer"), a municipal corporation and political subdivision of the State of Minnesota (the "State"), promises to pay to the Registered Owner identified above or registered assigns (subject to prior redemption as provided in the Indenture ), on the Maturity Date set forth above, the Principal Amount set forth above, and to pay interest on the Principal Amount on each Bond Payment Date. The term "Bond Payment Date" means any (a) Interest Payment Date, (b) other date on which interest is payable, including any Redemption Date, the Maturity Date and the date of acceleration of the Bonds and (c) date on which principal of the Bonds is payable, including each date on which Bonds are purchased upon tender in accordance with the Indenture. During the Weekly Variable Rate Period, the Interest Payment Dates are the 15th day of each calendar month, beginning September15, 2003. Payment of interest on this Bond on each Interest Payment Date will be made to the Registered Owner of this Bond (as determined at the close of business on the Record Date (being the Business Day preceding the applicable Interest Payment Date) by check drawn upon the Trustee and mailed by first class mail, postage prepaid, -.on the Interest Payment Date to the address of the Registered Owner as it appears on the. Bond Register or to such other address as may be famished in writing by the Registered Owner ,to the Trustee prior to the applicable Record Date. Payment of the principal of this Bond and premium, if any, together with interest payable on any Bond Payment Date (other than interest payable on a regularly scheduled Interest Payment Date) will be made by check to the Registered Owner of this Bond only upon presentation and surrender of this Bond on or after its maturity date or date fixed for purchase, redemption or other payment at the office of the Trustee designated by the Trustee for that purpose. Notwithstanding the foregoing; payment of principal of, premium, if any, and interest on, this Bond will be made by wire transfer to any account within the United States of America designated by the Registered -Owner if the Registered Owner owns $1,000,000 or more in aggregate principal amount of the Bonds and otherwise complies with the procedures set forth in the Indenture. Notwithstanding the foregoing, payments of the principal of, premium, if any, and interest on any Bonds that are subject to the Book -Entry System will be made as provided in the Indenture. If interest on this Bond is in default, the Trustee, prior to the payment of interest, will establish a special record date (the "Special Record Date") for such payment. A Special Record Date will be not more than 15 nor less than ten days prior to the date of the proposed payment. Payment of defaulted interest will then be made by check or wire transfer as permitted by the Indenture, mailed or remitted to the Registered Owner in whose name this Bond is registered on the Special Record Date at the address or account of such Registered Owner as shown on the Bond Register. The principal of, premium, if any, and interest on this Bond are payable in lawful money of the United States of America. During the Weekly Variable Rate Period, interest on the Bonds is payable at the Weekly Variable Rate, and will remain payable at the Weekly Variable Rate unless and until the interest rate on the Bonds is adjusted to a different interest rate Mode in accordance with the Indenture. So long as the Bonds bear interest at the Weekly Variable Rate, interest will be computed on the basis of a 365 or 366 day year, as applicable, for the actual number of days elapsed. The Weekly Variable Rate will be determined by the Remarketing Agent not later than 4:00 p.m., Eastern Time, on the applicable Rate Determination Date and will be the minimum rate of interest necessary, in the best professional judgment of the Remarketing Agent, taking 2 into consideration prevailing market conditions, to enable the Remarketing Agent to remarket all of the Bonds on the applicable Rate Determination Date at par plus accrued interest. The Weekly Variable Rate so determined will, within each Weekly Variable Rate Period, be effective for the seven-day period beginning on Thursday of each calendar week and ending on and including the next succeeding Wednesday, except that (a) the first such period will begin on the Closing Date and end on and include the following Wednesday and (b) the final period will begin on a Thursday and end on the earlier of the day preceding an Adjustment Date or the Maturity Date. The first and last period may consist of more (but not more than 13) or less than 7 days. The Remarketing Agent will provide notice of the Weekly Variable Rate before 5:00 p.m., Eastern Time, on the Rate Determination Date by_telephone to any Beneficial Owner upon request. r: f If the Remarketing Agent fails or refuses to determine the Weekly Variable Rate for any period during the Weekly Variable Rate Period, the interest rate to be borne by the Bonds during such period beginning on and including Thursday of each week to and including the following Wednesday shall be the latest BMA Index Rate published on or before the Rate Determination Date, or, in the event the BMA Index Rate is no longer published, the last determined Weekly Variable Rate. THE BONDS ARE�SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY OUT OF THE REVENUES, RECEIPTS AND OTHER MONEYS PLEDGED THEREFOR UNDER THE INDENTURE. THE BONDS ARE NOT A DEBT OF THE STATE, THE ISSUER OR OF ANY OTHER POLITICAL SUBDIVISION OF THE STATE, AND NEITHER THE STATE, THE ISSUER NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE IS LIABLE FOR THE PAYMENT OF THE BONDS. NEITHER THE FAITH AND CREDIT OF THE STATE, THE ISSUER NOR OF ANY OTHER POLITICAL SUBDIVISION OF THE STATE ARE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OR OF INTEREST ON THE BONDS. This Bond is one of a duly authorized issue of bonds of the Issuer designated as its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 (the "Bonds"). The Bonds are issued pursuant to and in compliance with the Act and a resolution of the Issuer. The Bond Proceeds will be used to fund the Loan to Broadway LaNel, a Limited Partnership (the "Borrower"), a Minnesota limited partnership. The proceeds of the Loan will be used, directly or indirectly, to prepay the prior loan and to refund the City of St. New Hope, Minnesota Multifamily Housing Refunding Revenue Bonds (Broadway LaNel Project), Series 1993 in order to refinance a multifamily housing facility (the "Project") located in New Hope, Minnesota owned by the Borrower. The Loan will be in the amount of $2,655,000 and, will be made pursuant to a Financing Agreement (the "Financing Agreement'), dated as of August 1, 2003, between the Issuer, the Trustee and the Borrower. The Bonds are issued under and are equally and ratably secured as to principal, premium, if any, interest and purchase price by a Trust Indenture (the "Indenture"), dated as of August 1, 2003 between the Issuer and the Trustee, to which Indenture and all indentures supplemental to 3 such Indenture (copies of which are on file at the Principal Office of the Trustee) reference is made for a description of the Trust Estate under the Indenture, the nature and extent of the Security for the Bonds, the terms and conditions upon which the Bonds are issued and secured, and the rights of the owners of the Bonds. The Security includes a Credit Enhancement Instrument (Direct Pay) (the "Credit Facility"), dated August 14, 2003 issued by Fannie Mae to the Trustee. The Credit Facility provides credit enhancement for the Loan and liquidity support for the Bonds. FANNIE MAE'S OBLIGATIONS WITH RESPECT -"TO THE LOAN AND THE BONDS ARE SOLELY AS PROVIDED IN THE CREDIT FACILITY. THE OBLIGATIONS OF FANNIE MAE UNDER THE CREDIT FACILITY WILL; BE OBLIGATIONS SOLELY OF FANNIE MAE, A FEDERALLY, CHARTERED STOCKHOLDER -OWNED CORPORATION. FANNIE MAE'S OBLIGATIONS' ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, OR ANY AGENCY OF THE UNITED STATES OF AMERICA, OR OF FANNIE MAE, AND ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA, ANY AGENCY OF THE UNITED STATES OF -AMERICA OR FANNIE MAE. FANNIE MAE HAS NO OBLIGATION TO PURCHASE, DIRECTLY OR INDIRECTLY, ANY OF THE BONDS. The Bonds are subject to redemption prior to maturity only as set forth below and in the Indenture. All redemptions will be in Authorized Denominations. The Authorized Denomination during the Weekly Variable Rate Period is $100,000 or any integral multiple of $5,000 in excess of $100,000, without regard to how DTC or any successor securities depository records interests in the Bonds. The Bonds are subject to optional redemption upon optional prepayment of the Loan in accordance with the terms of the Loan Documents. Redemption will be in (a) whole, upon optional prepayment by the Borrower of the Loan in whole or (b) corresponding part, upon optional prepayment by the Borrower of the Loan in part. Optional redemption may be made on any Interest Payment Date at a redemption price equal to 100% of the principal amount redeemed plus accrued interest to the Redemption Date. The Bonds are subject to special mandatory redemption as provided in the following three paragraphs. Unless otherwise specified in any paragraph below, each special mandatory redemption will be (a) effected on the earliest practicable Redemption Date for which timely notice of redemption can be given following the occurrence of the event requiring such redemption and (b) at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest on such Bonds to the Redemption Date. Bonds subject to special mandatory redemption in part will be redeemed in Authorized Denominations; if the Trustee receives an amount for the special mandatory redemption of the Bonds which is not equivalent to an Authorized Denomination, Bonds will be redeemed in an amount equal to the next lowest whole integral of the Authorized Denomination to the amount received by the Trustee, with any excess to be held in the Redemption Account. 4 The Bonds will be redeemed in whole or in part, at the direction of the Credit Provider in the event and to the extent that proceeds of insurance from any casualty to, or proceeds of any award from any condemnation, or any award as part of a settlement in lieu of condemnation, of the Mortgaged Property (in any such events, "Proceeds") are applied in accordance with the Security Instrument to the prepayment of the Loan. The Bonds will be redeemed in whole or in part at the written direction, or with the prior written consent, of the Credit Provider given to the Trustee, and in the amount specified by the Credit Provider if the redemption is in part, upon the occurrence of an Event of Default under the Reimbursement Agreement. The Bonds will be redeemed in whole or in part: (i), on each Adjustment Date if and to the extent that amounts are transferred on the Adjustment Date from the Principal- Reserve Fund to the Redemption Account in accordance with the Indenture; or (ii). on any Interest Payment`'Date during any Weekly Variable Rate Period if and to the extent amounts are transferred from the Principal Reserve Fund to the Redemption Account on the tenth Business Day of the month prior to such Interest Payment Date as provided in the Indenture. y, The Trustee will give notice of the call for redemption of any Bonds in the name and on behalf of the Issuer by mail not less than 10 days prior to the specified Redemption Date, to the Registered Owner of each Bond to be redeemed at the address of such Registered Owner as shown on the Bond Register. The Trustee may give a notice of redemption prior to the receipt of all funds necessary to effect the redemption, provided that a redemption will not occur unless and until the Trustee has on deposit and available or, if applicable, has received, all of the funds necessary to effect the redemption; otherwise, the redemption will be cancelled. The Trustee will cause a second notice of redemption to be sent by mail on or within 10 days after the 30th day after the Redemption Date to any Bondholder who has not submitted its Bond to the Trustee for payment on or before the 30th day following the Redemption Date. If less than all the Outstanding Bonds are called for redemption, the Trustee will select by lot, in such manner as it shall in its discretion determine, the Bonds, or portions of the Bonds in Authorized Denominations, to be redeemed. In the selection process any Purchased Bonds Outstanding will be called for redemption before any other Bonds are selected for redemption. During any Weekly Variable Rate Period, the Trustee will purchase any Bond on behalf of and as agent for the Borrower, but solely from the sources provided in the Indenture, upon receipt from the Beneficial Owner of such Bond of a Bondholder Tender Notice. The purchase price of such Bond will be equal to 100% of the principal amount of such Bond plus accrued interest, if any, to the date of purchase. The Bondholder Tender Notice must be accompanied by a guaranty of signature acceptable to the Tender Agent and must be delivered to and received prior to 3:30 p.m., Eastern time, on a Business Day not later than the seventh day preceding the E Business Day designated in such Bondholder Tender Notice as the date of purchase. The Bondholder Tender Notice must state the following: (i). the number and principal amount (or portion of a Bond in integral multiples of the Authorized Denomination, provided that the portion of the Bond retained is also an integral multiple of an Authorized Denomination) of such Bond; (ii). the name, address and tax identification number or social security number of the Beneficial Owner of the Bond demanding such payment; and (iii). the date on which the Bond is to be purchased, which date must be a Business Day not prior to the seventh day next succeeding the`date4 the delivery of the Bondholder Tender Notice to the Tender Agent. The Trustee will, initially, serve as Tender Agent for the Bonds. By delivering the Bondholder Tender ditice, the Beneficial Owner irrevocably agrees to deliver the Tendered Bond (with an appropriate transfer of registration form executed in blank and accompanied by a guaranty of signature satisfactory to the Tender Agent) to the Principal Office of the Tender Agent, or any other address designated by the Tender Agent at or prior to 10:00 a.m., Eastern time4on the date of purchase specified in the Bondholder Tender Notice. Any election by a Beneficial Owner to tender a Bond or Bonds (or portion of a Bond or Bonds) for purchase on a Business Day will also be binding on any transferee of the Beneficial Owner making such election. A Bond will be purchased only if the Bond so delivered to the Tender Agent conforms in all respects to the description of the Bond in the Bondholder Tender Notice. The Tender Agent will determine in its sole discretion whether a Bondholder Tender Notice complies with the requirements of the Indenture and whether any Bond delivered conforms in all respects to the description of the Bond in the Bondholder Tender Notice. If after delivery to the Tender Agent of a Bondholder Tender Notice in accordance with the Indenture, the Beneficial Owner making the election fails to deliver the Bond or Bonds described in the Bondholder Tender Notice to the Tender Agent on the applicable purchase date, the untendered Bond or Bonds or portion of the untendered Bond or Bonds described in the Bondholder Tender Notice will be deemed to have been properly tendered for purchase to the Tender Agent and, to the extent that there will be on deposit in the Bond Purchase Fund or the Credit Facility Account on the applicable purchase date an amount sufficient to pay the purchase price of the Bond, the untendered Bond or Bonds will on and after such purchase date cease to bear interest and no longer will be considered to be Outstanding under the Indenture. The Holder of any Bond is required to tender its Bond to the Tender Agent, for purchase by the Trustee acting on behalf of and as agent for the Borrower, but solely from the sources provided in the Indenture, for a purchase price equal to 100% of the principal amount of the Bond plus accrued interest to the applicable Mandatory Tender Date, on each Mandatory Tender Date; and in any such event, the Holder of the Bond may not elect to retain its Bond. Mandatory Tender Dates include each proposed Adjustment Date, each Adjustment Date, each Substitution Date and each Extension Date. The Trustee will give notice of Mandatory Tender Dates as follows: (i). Not less than 30 days before any proposed Adjustment Date, the Trustee will give notice by mail to the Owners of the Bonds stating (a) the proposed Adjustment Date, (b) that the Bonds are required to be tendered for purchase or redeemed on such date, (c) that the Owners of the Bonds will not have the right to elect to retain their Bonds, and (d) if applicable, any additional information required to be set forth in notices pursuant to the Indenture. (ii). Not less than 30 days before any Substitutipn-Date, the Trustee will give notice by mail to the Owners of the Bonds stating (a) the Substitution Date, (b) that the Bonds are required to be tendered on the Substitution Date and (c)4thatithe Owne'rsi of the Bonds will not have the Ij right to elect to retain their Bonds. � �{ (iii). Not less than 10 days before any Extension"Date, if the Trustee has not received a binding commitment to extend the applicable Alternate Credit Facility then in effect and the Opinion of Counsel required by the FinancingA—greement, the Trustee will give notice by mail to the owners of the Bonds stating (a) the -Extension Date and that the conditions to extend the Alternate Credit Facility set forth in. the Indenture have not been satisfied, (b) that the Bonds are required to be tendered on the Extension Date (unless the conditions set forth in the Indenture are satisfied prior to the Extension Date, in which event the notice will be cancelled), and (c) that the Owners of the Bonds will not have the right to elect to retain their Bonds. The Bonds will also be subject to mandatory tender upon receipt by the Trustee of written notice from the Credit Provider stating that an Event of Default has occurred and directing that the Bonds be subject to mandatory tender. Immediately upon receipt by the Trustee of written notice or actual knowledge of any of the foregoing events, the Trustee will give notice by mail to the owners of the Bonds stating that (a) such event has occurred, (b) that such Bonds are required to be tendered on the Mandatory Tender Date specified in such notice, and (c) the Owners of the Bonds will not have the right to elect to retain their Bonds. Any Bond which is not tendered on a Mandatory Tender Date will be deemed to have been tendered to the Tender Agent on the Mandatory Tender Date, and, beginning on the Mandatory Tender Date, will cease to bear interest and no longer will be considered to be Outstanding under the Indenture. The registered owner of this Bond will have no right to enforce the provisions of the Indenture or the Financing Agreement or to institute any proceeding in equity or at law for the enforcement of the Indenture or the Financing Agreement or to take any action with respect to an Event of Default under the Indenture or the Financing Agreement or to institute, appear in or defend any suit or other proceedings with respect to the Indenture or the Financing Agreement, except as provided in the Indenture. If an Event of Default occurs, the principal of all Bonds may be declared due and payable upon the conditions, in the manner and with the effect provided in the Indenture. The Trustee is the Bond Registrar for the Bonds and will keep the Bond Register for the registration of the Bonds and for the registration of transfer of Bonds. Subject to the express limitations contained in the Indenture, any Bondholder or its attorney duly authorized in writing may transfer title to a Bond on the Bond Register upon surrender of the Bond at the office of the Trustee designated by the Trustee for that purpose, together with a written instrument of transfer (in substantially the form of assignment, including signature guarantee, attached to the Bond) satisfactory to the Trustee executed by the Bondholder or its attorney duly authorized in writing, and upon surrender for registration of transfer of any Bond, the Issuer will execute and the Trustee will authenticate, and deliver in the name of the transferee or transferees a new Bond or Bonds of the same aggregate principal amount, rate of interest, maturity, series and tenor as the Bond surrendered and 'of any Authorized Denomination. Subject to the express limitations contained in the-lridenture, Bonds may be exchanged upon surrender of such Bonds at the office of the Trustee designated by the Trustee for that purpose together with a written instrument of transfer (in substantially the form of assignment, including signature guarantee, allached to the Bond) satisfactory to the Trustee, executed by the Bondholder or its attorney duly authorized in writing, for an equal aggregate principal amount of Bonds of the same aggregate principal amount, rate of interest, maturity, series and tenor as the Bonds being exchanged and of any Authorized Denomination. The Issuer will execute and the Trustee will authenticate -and deliver Bonds which the Bondholder making the exchange is entitled to receive, bearing numbers not contemporaneously then outstanding. Registrations of transfers or exchanges of Bonds will be without charge to the Bondholders, but any taxes or other governmental charges required to be paid with respect to a transfer or exchange must be paid by any Bondholder requesting the registration of transfer or exchange as a condition precedent to the exercise of such privilege. Any service charge made by the Trustee for any such registration, transfer or exchange will be paid by the Borrower. The Trustee is not required to register any transfer or exchange of any Bond (or portion of any Bond) called for redemption. The person in whose name this Bond is registered on the Bond Register will be deemed and regarded as the absolute owner of this Bond for all purposes, and payment of or on account of either principal or interest will be made only to or upon the order of such person or its attorney duly authorized in writing, but such registration may be changed as provided in the Indenture. In any case in which the date required for payment of principal of or interest on the Bonds or the date fixed for redemption or mandatory purchase of any Bonds or any date on which action is required to be taken is a day other than a Business Day, then any action required to be taken or any payment required to be made on such date need not be taken or made on such date, but may be taken or made on the next succeeding Business Day with the same force and effect as if made or taken on the date otherwise provided for in the Indenture and, in the case of any payment date, no interest shall accrue for the period on and after such date. The Indenture contains provisions permitting the Issuer and the Trustee to enter into supplemental indentures without notice to or the consent of the Bondholders for certain limited purposes enumerated in the Indenture. In addition the Issuer and the Trustee may, with the written consent of Fannie Mae and Bondholders owning 51% or more in aggregate principal amount of the Bonds Outstanding, enter into supplemental indentures to modify the provisions of the Indenture, provided that no supplemental indenture may permit: (i). an extension of the maturity of the principal of or interest on, or the mandatory redemption date of, any Bond, without the consent of the Owners of all of the Bonds then Outstanding; ` (ii). a reduction in the principal amount of, or the rate of interest on, any Bond, without the consent of the Owner of such Bond; l' (iii). a preference or priority of any Bond or Bonds over any other Bond or Bonds, without the consent of the Owners of all such Bonds; (iv). the creation of a lien prior.to or on panty with the lien of the Indenture, without the consent of the Owners of all of the Bonds then Outstanding; (v). a change in the percentage of Bondholders necessary to waive an Event of Default or otherwise approve matters requiring Bondholder approval under the Indenture, including consent to any supplemental indenture, without the consent of the Owners of all the Bonds then Outstanding; (vi). a transfer, assignment or release of the Credit Facility (or modification of the provisions of the Indenture governing such transfer, assignment or release), other than as permitted by the Indenture, the Assignment or the Credit Facility, without the consent of the Owners of all of the Bonds then Outstanding; (vii). a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indenture, without the consent of the Owners of all of the Bonds then Outstanding; (viii). the creation of any lien other than a lien ratably securing all of the Bonds at any time Outstanding under the Indenture, without the consent of the Owners of all of the Bonds then Outstanding; or (ix). the amendment of the provisions of the Indenture relating to Bondholder consents to supplemental indentures, without the consent of the Owners of all of the Bonds then Outstanding. Neither the members of the governing body of the Issuer nor any officer, agent, representative or employee of the Issuer nor any person executing this Bond shall be subject to any personal liability or accountability by reason of the issuance of this Bond, whether by virtue Z of any Constitution, statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability being expressly waived as a condition of and in consideration for the execution of the Indenture and the issuance of the Bonds. This Bond shall not be entitled to any benefit under the Indenture, or become valid or obligatory for any purpose, until the certificate of authentication on this Bond has been manually endorsed by the Trustee. It is certified and recited by the Issuer that all conditions; acts and things required by the Indenture or by the laws of the State, including the Act,: to`exiit, to have happened or to have been performed precedent to or in the issuance of this Bond do. exist, have happened and have been performed in due time, form and manner as required by law, and that the issuance of this Bond and the issue of which it forms a part is within every. debt and other limit prescribed by said Constitution or statutes. r $ 10 The Issuer has caused this bond to be duly executed in its name by the manual or facsimile signatures of its Mayor and its City Manager all as of August 14, 2003. CITY OF NEW HOPE, MINNESOTA Its: Mayor it And: r Its: City Manager CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds of the issue described in the within -mentioned Indenture. Authentication Date: U.S. BANK NATIONAL ASSOCIATION, as Trustee Un 11 Authorized Signatory FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto the within Bond and all rights thereunder and hereby irrevocably constitutes and appoints to transfer the within -mentioned Bond on the books kept for registration thereof with full power of substitution in the Premises. Please insert social security or other identifying number of assignee: Dated: NOTICE: The signature to this Assignment must correspond with the name as it appears upon the face of the within bond -in -every particular, without alteration or enlargement or any change whatever. e p Signature Guaranteed: ,� kr Signature(s) must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Trustee, which requirements include member- ship or participation in the medallion program or such other "signature guaranty program" as may be determined by the Trustee in addition to or in substitution for the medallion program, all in accordance with the Securities Exchange Act of 1934, as amended. 12 DIRECT PAY IRREVOCABLE TRANSFERABLE CREDIT ENHANCEMENT INSTRUMENT (Broadway LaNel Project) August 14, 2003 U.S. $2,684,678 Relating to Loan U.S. Bank National Association, as Trustee Mail Code: EP -MN WS3C 60 Livingston Avenue St. Paul, MN 55107-2292 At the request of Broadway LaNel, a Limited Partnership ("Borrower"), Fannie Mae ("Fannie Mae") issues this direct pay irrevocable, transferable Credit Enhancement Instrument to U.S. Bank National Association ("Trustee"), not in its individual or corporate capacity but solely as Trustee for the owners of $2,655,000 aggregate principal amount of the City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 ("Bonds") issued pursuant to the Trust Indenture ("Indenture") dated as of August 1, 2003 between the City of New Hope, Minnesota ("Issuer") and the Trustee. 1. Definitions. Capitalized terms used in this Credit Enhancement Instrument have the meanings given to those terms in this Section 1 or elsewhere in this Credit Enhancement Instrument. "Advance" means a Principal Advance, Interest Advance or Pledged Bonds Advance, as such terms are defined in Section 3. "Affiliate" as applied to any person, means any other person directly or indirectly controlling, controlled by, or under common control with, that person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that person, whether through the ownership of voting securities, partnership interests or by contract or otherwise. "Amount Available" has the meaning given that term in Section 2. "Business Day" means any day other than (i) a Saturday or a Sunday, (ii) any day on which banking institutions located in the City of New York, New York are required or authorized by law Direct Pay Credit Enhancement Instrument (Broadway LaNel Project) or executive order to close, (iii) any day on which banking institutions located in the city or cities in which the Designated Office (as that term is defined in the Indenture) of the Trustee, the Remarketing Agent or the Loan Servicer is located are required or authorized by law or executive order to close, (iv) prior to the date upon which the interest rate on the Bonds adjusts to a fixed rate mode, a day on which the New York Stock Exchange is closed or (v) any day on which Fannie Mae is closed. "Certificate" means any certificate in the form attached to this Credit Enhancement Instrument as an Exhibit or such other form as provided in Section 3. If the certificate is submitted to Fannie Mae by personal delivery or by telecopy, the certificate must be signed by one who purports to be an authorized officer of the Trustee. If the certificate is submitted to Fannie Mae in any other medium (such as e-mail or a web based medium), the certificate must be authenticated as provided in the related Presentation Protocol. "Credit Enhancement Instrument" means this Direct Pay Irrevocable Transferable Credit Enhancement Instrument as the same may be amended, supplemented or restated from time to time. "Excluded Bond" means any Bond which is not Outstanding (as that term is defined in the Indenture), any Bond registered in the name of or otherwise owned, directly or indirectly, by the Borrower or any Affiliate of the Borrower or any Pledged Bond. "Expiration Date" means the Expiration Date stated in Section 7. "Interest Portion" has the meaning given that term in Section 2. "Loan" means the mortgage loan made by the Issuer to the Borrower pursuant to the Financing Agreement for the purpose of providing funds to the Borrower to repay the Prior Loan and cause the refunding of the Prior Bonds. "Loan Servicer" means initially Glaser Financial Group, Inc. or any other entity approved by Fannie Mae in its discretion as the servicer of the Loan, and any permitted successors or assigns. "Note" means the Multifamily Note (together with all addenda thereto) dated as of August 1, 2003, executed by the Borrower in favor of the Issuer, as the same may be amended, supplemented or restated from time to time or any mortgage note executed in substitution therefor in accordance with the terms of the Bond Documents, as such substitute note may be amended, supplemented or restated from time to time. "Pledged Bond" means any Bond during the period from and including the date of its purchase by the Trustee on behalf of and as agent for the Borrower with the proceeds of an Advance under this Credit Enhancement Instrument, to, but excluding, the date on which the Pledged Bonds Advance made by the Credit Provider on account of such Pledged Bond is reinstated under this Credit Enhancement Instrument. Direct Pay Credit Enhancement Instrument (Broadway LaNel Project) "Presentation Protocol" means an agreement between Fannie Mae and the Trustee regarding one or more media through which the Trustee may present Certificates to Fannie Mae under this Credit Enhancement Instrument, as such agreement may be amended, supplemented or restated from time to time. "Principal Portion" has the meaning given that term in Section 2. "Reimbursement Agreement" means the Reimbursement Agreement, dated as of August 1, 2003, between Fannie Mae and the Borrower, as such agreement may be amended, supplemented or restated from time to time. "Remarketing Agent" means the remarketing agent under the Indenture. "Reset Rate" means the rate of interest borne by the Bonds for a period of ten or more years (or such shorter period as consented to by Fannie Mae) as determined in accordance with the Indenture. "Tender Agent" means the tender agent under the Indenture. "Termination Date" means, subject to Section 7(d), the date on which this Credit Enhancement Instrument terminates in accordance with Section 7(b). "Trustee" means U.S. Bank National Association, a national banking association having a designated corporate trust office in St. Paul, Minnesota, not in its individual or corporate capacity, but solely as trustee under the Indenture, or any permitted successor trustee under the Indenture. 2. Amount Available. Subject to the terms and conditions of this Credit Enhancement Instrument, Fannie Mae irrevocably authorizes the Trustee to draw on Fannie Mae, from time to time, from and after the date of this Credit Enhancement Instrument to, and including, the earlier of the Expiration Date or the Termination Date, a maximum aggregate amount not exceeding $2,684,678 (as such amount may be reduced or reinstated from time to time in accordance with Section 8, "Amount Available"), of which: (a) up to $2,655,000 ("Principal Portion") may be drawn with respect to the unpaid principal of the Bonds or, as the case may be, the principal portion of the purchase price of the Bonds; and (b) up to $29,678 ("Interest Portion"), or 34 days interest on the Bonds (calculated at an assumed rate on the Bonds of 12% per annum on the basis of a year of 365 days), may be drawn with respect to interest actually accrued on the Bonds or, as the case may be, the interest portion of the purchase price of the Bonds. 3. Advances. Each demand for an Advance shall be made by the Trustee's presentation to Fannie Mae of a Certificate: Direct Pay Credit Enhancement Instrument 3 (Broadway LaNel Project) (a) in the form of Exhibit A to pay principal of the Bonds (other than Excluded Bonds) due as a result of the acceleration, defeasance, redemption or stated maturity thereof ("Principal Advance"); (b) in the form of Exhibit B to pay interest on the Bonds (other than Excluded Bonds) on or prior to their stated maturity date ("Interest Advance"); and (c) in the form of Exhibit C to pay principal of, plus accrued interest on, Bonds tendered for purchase pursuant to the Indenture ("Pledged Bonds Advance"). Any Certificate submitted to Fannie Mae by the Trustee shall have all blanks appropriately completed and shall be signed by one who states therein that he or she is an authorized officer of the Trustee. Fannie Mae's obligation to honor any demand for an Advance is a direct pay obligation, without regard to whether the Borrower has made any such payment. Neither demands for, nor Advances, may be made under this Credit Enhancement Instrument to pay (i) principal of, interest on or the purchase price of, any Excluded Bond, (ii) premium that may be payable upon the redemption of any of the Bonds or (iii) interest that may accrue on any of the Bonds on or after the maturity of such Bond. Fannie Mae may amend the form of any Certificate or delete any of the information, statements and certifications set out in the form of any Certificate to accommodate the sending of such Certificate by a medium pursuant to a Presentment Protocol. No such amendment may require any additional information, statement or certification than that required by such form of certificate attached to this Credit Enhancement Instrument on the date of issuance. 4. Presentation of Certificates. Each Certificate must be given to Fannie Mae by (a) personal delivery at 3900 Wisconsin Avenue, Washington, D.C. 20016, Attention: Vice President, Multifamily Services; or (b) telecopy to phone number 202-752-8374, immediately followed by telephonic notice to the Vice President, Multifamily Services at telephone number 202-752-7869; or (c) such other medium as Fannie Mae and the Trustee may agree in a Presentation Protocol from time to time. A Presentation Protocol may provide that the Trustee may not submit a Certificate by telecopy after a stated date or may only submit Certificates by telecopy after a certain date with the prior written permission of Fannie Mae, in which case subsection (b) shall be automatically deemed amended to that effect. Fannie Mae will notify the Trustee in writing of any change in address or telecopy number to which all Certificates must be delivered or of any change relating to the person to be called for telephonic notices confirming telecopy communications. Any such written notice shall be effective upon receipt by the Trustee. Direct Pay Credit Enhancement Instrument 4 (Broadway LaNel Project) 5. Fannie Mae's Engagement. Upon due receipt by Fannie Mae of a Certificate conforming to the terms and conditions of this Credit Enhancement Instrument, Fannie Mae will honor payment of the amount specified in such Certificate if presented as specified below on or before the earlier of the Expiration Date or the Termination Date: (a) If a presentation in respect of a Principal Advance, Interest Advance or Pledged Bonds Advance relating to a mandatory tender pursuant to Section 4.2(b) of the Indenture is made: (1) at or prior to 12:00 noon Eastern time on a Business Day, payment shall be made to the Trustee of the amount specified no later than 1:00 p.m. Eastern time on the next following Business Day. (2) after 12:00 noon Eastern time on a Business Day, payment shall be made to the Trustee of the amount specified no later than 1:00 p.m. Eastern time on the second following Business Day. (b) If a presentation in respect of a Pledged Bonds Advance (other than a Pledged Bonds Advance relating to a mandatory tender pursuant to Section 4.2(b) of the Indenture) is made: (1) at or prior to 10:30 a.m. Eastern time on a Business Day, payment shall be made to the Trustee of the amount specified no later than 1:30 p.m. Eastern time on the same Business Day. (2) after 10:30 a.m. Eastern time on a Business Day, payment shall be made to the Trustee of the amount specified no later than 1:30 p.m. Eastern time on the next following Business Day. All Advances made under this Credit Enhancement Instrument will be made with Fannie Mae's own funds in immediately available funds. 6. Nonconforming Tender. If a demand for payment under this Credit Enhancement Instrument made by the Trustee does not conform to the terms and conditions of this Credit Enhancement Instrument, Fannie Mae will notify the Trustee of such lack of conformity within a reasonable time after delivery of such demand for payment, such notice to be promptly confirmed in writing to the Trustee, and Fannie Mae shall hold all documents at the Trustee's disposal or, at the Trustee's option, return the same to the Trustee. 7. Expiration and Termination. (a) Expiration. This Credit Enhancement Instrument shall expire at 4:00 p.m. Eastern time on July 20, 2033 ("Expiration Date"). Direct Pay Credit Enhancement Instrument (Broadway LaNel Project) (b) Termination Before Expiration Date. This Credit Enhancement Instrument shall automatically terminate prior to the Expiration Date on the first to occur of: (i) the honoring by Fannie Mae of an Advance which automatically and permanently reduces the Principal Portion to zero, (ii) 4:00 p.m. Eastern time on the day following the last day of any period during which the Bonds bear interest at a Reset Rate unless Fannie Mae has notified the Trustee prior to such date that it elects to waive such termination, and (iii) Fannie Mae's receipt of a Certificate in the form of Exhibit G (which shall be conclusive evidence of the matters set forth therein). The date determined in the preceding sentence is the "Termination Date." (c) Delivery. Upon the Expiration Date or the Termination Date, whichever first occurs, the Trustee shall deliver this Credit Enhancement Instrument to Fannie Mae for cancellation. (d) Business Day Convention. In the event that any date on which this Credit Enhancement Instrument would otherwise expire or terminate is not a Business Day, this Credit Enhancement Instrument shall continue in effect and shall not expire or terminate until 4:00 p.m. Eastern time on the next Business Day. 8. Reduction and Reinstatement of Amount Available, The Amount Available shall be reduced or reinstated from time to time in accordance with this Section. (a) Automatic Reduction on Making any Advance. The Amount Available shall be reduced automatically by the amount of each Advance paid by Fannie Mae, notwithstanding any act or omission, whether authorized or unauthorized, of the Trustee or any officer, director, employee or agent of the Trustee in connection with any Advance or the proceeds of such Advance or otherwise in connection with this Credit Enhancement Instrument. Each reduction shall be permanent or subject to reinstatement as provided in this Section. Such reduction shall be applied to the Principal Portion and the Interest Portion as appropriate for the Advance to which the reduction relates. (b) Permanent Reduction for each Principal Advance. The Principal Portion and Interest Portion shall be reduced automatically and permanently upon the making of any Principal Advance as follows: (1) the Principal Portion will be reduced by the amount of the Principal Advance; and (2) the Interest Portion will be reduced by an amount equal to 34 days of interest (calculated at the rate of 12% per annum on the basis of a year of 365 days) on the amount of the related permanent reduction of the Principal Portion. (c) Permanent Reduction on Notice from the Trustee. The Amount Available shall be reduced automatically by the amounts specified in any Certificate in the form of Exhibit E which is delivered to Fannie Mae. Such reduction shall be applied to the Principal Portion and the Interest Portion as set out in the Certificate. Direct Pay Credit Enhancement Instrument 6 (Broadway LsNel Project) (d) Reinstatement of Interest Portion for Interest Advance. Except for a permanent reduction of the Interest Portion under subsection (b)(2), the amount of the Interest Portion reduced by an Interest Advance shall be reinstated immediately and automatically. (e) Reinstatement of Pledged Bonds Advance. The Principal Portion and the Interest Portion shall be reinstated after each Pledged Bonds Advance upon receipt by Fannie Mae of money equal to the amount by which the Trustee requests Fannie Mae to increase the Principal Portion and the Interest Portion in a Certificate of Reinstatement in the form of Exhibit F. Upon any permanent reduction of the Amount Available, Fannie Mae may deliver to the Trustee a substitute Credit Enhancement Instrument in exchange for this Credit Enhancement Instrument, in an amount available equal to the then current Amount Available, but otherwise having terms identical to this Credit Enhancement Instrument. 9. Discharge of Obligations. Only the Trustee may demand an Advance under this Credit Enhancement Instrument. Upon payment to the Trustee of the amount specified in any Certificate presented under this Credit Enhancement Instrument, Fannie Mae shall be fully discharged of its obligation under this Credit Enhancement Instrument with respect to such Certificate and Fannie Mae shall not thereafter be obligated to make any further payment to the Trustee or any other person in respect of such Certificate for payment of principal of, purchase price of, or interest on any Bond. 10. Nature of Fannie Mae's Obligations. Fannie Mae's obligation to make Advances to the Trustee upon the proper presentation of documents which conform to the terms and conditions of this Credit Enhancement Instrument is absolute, unconditional and irrevocable, shall be fulfilled strictly in accordance with this Credit Enhancement Instrument, and shall not be affected by any right of set-off, recoupment or counterclaim Fannie Mae might otherwise have against the Issuer, the Trustee, the Tender Agent, the Remarketing Agent, the Borrower, the Loan Servicer or any other person. Fannie Mae's obligations under this Credit Enhancement Instrument are primary obligations and shall not be affected by the performance or non-performance by the Issuer under the Indenture or the Bonds or by the Borrower under the Note or the Reimbursement Agreement or by the performance or non-performance of any party under any other agreement between or among any of the Issuer, the Trustee, the Borrower or Fannie Mae. 11. Transfer. This Credit Enhancement Instrument may be successively transferred in whole only, to each successor Trustee under the Indenture. Any such transfer shall be effective upon receipt by Fannie Mae of a signed copy of the instrument effecting such transfer signed by the transferor and by the transferee in the form attached as Exhibit H (which shall be conclusive evidence of such transfer). In each such case, the transferee instead of the transferor shall, without the necessity of further action, be entitled to all the benefits of and rights under this Credit Enhancement Instrument in the transferor's place. Direct Pay Credit Enhancement Instrument % (Broadway LaNel Project) 12. Notices and Deliveries. All documents, notices and other communications, other than Certificates, shall be in writing and personally delivered to Fannie Mae at the address (and to the attention of the party) set out in Section 4(a) or may be sent to Fannie Mae by telecopy immediately followed by telephonic notice as set out in Section 4(b), as such address, telephone numbers and parties to whom such notices are sent are changed by Fannie Mae pursuant to Section 4. 13. Governing Law. This Credit Enhancement Instrument shall be governed by the laws of the District of Columbia, including the Uniform Commercial Code as in effect in the District of Columbia. (Balance of page intentionally left blank.) Direct Pay Credit Enhancement Instrument 8 (Broadway LaNel Project) 14. Entire Credit Enhancement Instrument. This Credit Enhancement Instrument sets forth in full the terms of Fannie Mae's undertaking and shall not in any way be amended, amplified or limited by reference to any document, instrument or agreement referred to in this Credit Enhancement Instrument (including, without limitation, the Bonds) or in which this Credit Enhancement Instrument is referred to or to which this Credit Enhancement Instrument relates, except for (i) the Exhibits referred to in this Credit Enhancement Instrument and (ii) any Presentation Protocol, all of which shall be deemed fully incorporated into this Credit Enhancement Instrument as if fully set forth herein. FANNIE Un Direct Pay Credit Enhancement instrument S-1 (Broadway LaNel Project) Exhibit A CERTIFICATE FOR "PRINCIPAL ADVANCE" DIRECT PAY Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument") $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the direct pay Credit Enhancement Instrument, that: (1) Demand for Advance. The Trustee demands an Advance in the amount of $ under the Principal Portion of the Available Amount to be used to pay principal of the Bonds due as a result of the acceleration, defeasance, redemption or stated maturity of the Bonds pursuant to the Indenture. (2) When the Advance Must be Made. If this demand for Advance is made: (a) at or prior to 12:00 noon Eastern time on a Business Day, you must pay the Advance no later than 1:00 p.m. Eastern time on the next following Business Day. (b) after 12:00 noon Eastern time on a Business Day, you must pay the Advance no later than 1:00 p.m. Eastern time on the second following Business Day. (3) Where the Advance Must be Made. Please pay the Advance demanded by this Certificate to the Trustee at [specify account]. (4) Amount Available. Upon the payment of the Advance: (a) Reduction of Amount Available. The Amount Available shall be reduced automatically and permanently by $[insert amount of reduction] of which: (1) $ is attributable to the Principal Portion; and (2) $ is attributable to the Interest Portion. Direct Pay Credit Enhancement instrument A-1 (Broadway LaNel Project) (b) New Amount Available. The Amount Available will be $ of which: (1) $ will be the Principal Portion; and (2) $ will be the Interest Portion. (5) Other Matters. (a) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (b) The principal of the Bonds (other than Excluded Bonds) that is due on [Trustee: complete this blank using the first Business Day after the date of this Certificate] is $ . The amount of the Advance demanded in Paragraph 1 does not exceed such amount of principal. (c) The amount of the Advance (i) does not exceed the Principal Portion of the Amount Available on the date of this Certificate and (ii) was computed in accordance with the Bonds and the Indenture. (d) Upon the payment referred to in Paragraph 1, the aggregate principal amount of all Bonds outstanding will be $ (e) Upon receipt by the Trustee of the Advance, (i) the Trustee will apply the same directly for the purpose specified in Paragraph 1, and (ii) no portion of said amount shall be applied by the Trustee for any purpose other than as set forth in Paragraph 1. (f) The proceeds of the Advance demanded by this Certificate will not be applied to any payment on any Excluded Bonds. (g) The aggregate principal amount of all Excluded Bonds outstanding is (h) The amount of interest (computed at the Maximum Interest Rate (as that term is defined in the Indenture), which currently is . percent per annum) on the basis of the actual number of days elapsed over a year of 365 or 366 days, as applicable), accruing on the Bonds referred to in subparagraph (d) above in any period of _** days is $ Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument. Trustee: Fill in current Maximum Interest Rate. Portion. Trustee: Fill in number of days of interest coverage required to be supplied by the Interest Direct Pay Credit Enhancement instrument (Broadway LaNel Project) A-2 IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the day of — U.S. BANK NATIONAL ASSOCIATION, as Trustee M Authorized Officer Direct Pay Credit Enhancement Instrument (Broadway LaNel Project) A-3 Exhibit B CERTIFICATE FOR "INTEREST ADVANCE" DIRECT PAY Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument') $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the Credit Enhancement Instrument, that: (1) Demand for Advance. The Trustee demands an Advance in the amount of $ under the Interest Portion of the Available Amount to be used to pay interest on the Bonds (other than Excluded Bonds) on or prior to their stated maturity date. (2) When the Advance Must be Made. If this demand for Advance is made: (a) at or prior to 12:00 noon Eastern time on a Business Day, you must pay the Advance no later than 1:00 p.m. Eastern time on the next following Business Day. (b) after 12:00 noon Eastern time on a Business Day, you must pay the Advance no later than 1:00 p.m. Eastern time on the second following Business Day. (3) Where the Advance Must be Made. Please pay the Advance demanded by this Certificate to the Trustee at [specify account]. (4) Other Matters. (a) The Trustee is the Trustee under the Indenture for the holders of the Bonds (b) The amount of the Advance referred to in Paragraph 1 was computed in accordance with the Bonds and the Indenture and does not exceed the amount of interest that is (i) due on the Business Day following the date of this Certificate on the Bonds and (ii) the Interest Portion of the Amount Available on the date of this Certificate. (c) Upon receipt by the Trustee of the amount demanded by this Certificate, (i) the Trustee will apply the same directly for the purpose specified in Paragraph 1 and (ii) no portion Direct Pay Credit Enhancement Instrument (Broadway LaNel Project) B-1 of said amount shall be applied by the Trustee for any purpose other than as set forth in Paragraph 1. (d) The proceeds of the Advance demanded by this Certificate will not be applied to any payment on any Excluded Bonds. Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument. IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the day of — U.S. BANK NATIONAL ASSOCIATION, as Trustee Authorized Officer Direct Pay Credit Enhancement Instrument B-2 (Broadway LaNci Project) Exhibit C CERTIFICATE FOR "PLEDGED BONDS ADVANCE" DIRECT PAY Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument') $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the Credit Enhancement Instrument, that: (1) Demand for Advance. The Trustee demands an Advance in the amount of $ consisting of (i) $ under the Principal Portion of the Amount Available to be used to pay the principal portion of the purchase price of Bonds and (ii) $ under the Interest Portion of the Amount Available to be used to pay the interest portion of the purchase price of Bonds purchased pursuant to Section 4.1(a), 4.2(a) or 4.2(b) of the Indenture ("Tendered Bonds"). (2) When the Advance Must be Made. (Trustee: check applicable box) ❑ The Advance relates to a mandatory tender of Bonds pursuant to Section 4.2(b) of the Indenture. Accordingly, if this demand for Advance is made: (w) at or prior to 12:00 noon Eastern time on a Business Day, you must pay the Advance no later than 1:00 p.m. Eastern time on the next following Business Day. (x) after 12:00 noon Eastern time on a Business Day, you must pay the Advance no later than 1:00 p.m. Eastern time on the second following Business Day. ❑ The Advance does not relate to a mandatory tender of Bonds pursuant to Section 4.2(b) of the Indenture. Accordingly, if this demand for Advance is made: (y) at or prior to 10:30 a.m. Eastern time on a Business Day, you must pay the Advance no later than 1:30 p.m. Eastern time on the same Business Day. (z) after 10:30 a.m. Eastern time on a Business Day, you must pay the Advance no later than 1:30 p.m. Eastern time on the next following Business Day. Direct Pay Credit Enhancement Instrument (Broadway LaNel Project) C-1 (3) Wbere the Advance Must be Made. Please pay the Advance demanded by this Certificate to the Trustee at [specify account]. (4) Other Matters. (a) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (b) The amount demanded pursuant to Paragraph 1 does not exceed the amount necessary, at the time of the presentation of this Certificate to Fannie Mae, to pay the purchase price of the Tendered Bonds which the Remarketing Agent has not remarketed or for which the Remarketing Agent has not received sufficient remarketing proceeds to pay the purchase price of the Tendered Bonds. (c) The principal component of the aggregate purchase price of the Tendered Bonds that is due on the date of this Certificate is $. and the amount of the Advance relating to the Principal Portion referred to in Paragraph 1 does not exceed such amount of principal. The aggregate accrued interest component of the purchase price of the Tendered Bonds that is due on the date of this Certificate is $ and the amount of the Advance relating to the Interest Portion referred to in Paragraph 1 does not exceed such amount. (d) On the date of this Certificate, (i) the principal portion of the Advance does not exceed the Principal Portion of the Amount Available and (ii) the interest portion of the Advance does not exceed the Interest Portion of the Amount Available. The amount of the Advance was computed in accordance with the Bonds and the Indenture. (e) Upon receipt by the Trustee of the Advance demanded by this Certificate, (i) the Trustee will apply the same directly for the purpose specified in Paragraph 1 and (ii) no portion of said amount shall be applied by the Trustee for any purpose other than as set forth in Paragraph 1. (f) The proceeds of the Advance demanded by this Certificate will not be applied to defease, redeem or pay (whether at stated maturity or by acceleration) any Excluded Bond. (g) Bonds in a principal amount equal to the Principal Portion of the Advance made under this Certificate will be delivered to U.S. Bank National Association or if, and only if, delivery of the Bonds is not possible, a written entitlement order will be delivered to the applicable financial intermediaries on whose records ownership of the Pledged Bonds is reflected directing the intermediaries to credit the security entitlement to the Pledged Bonds to the account of U.S. Bank National Association for the benefit of Fannie Mae and a written confirmation of such credit will be delivered to U.S. Bank National Association. Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument. Direct Pay Credit Enhancement Instrument C,_2 (Broadway LaNel Project) IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the day of — U.S. BANK NATIONAL ASSOCIATION, as Trustee M Authorized Officer Direct Pay Credit Enhancement Instrument C-3 (Broadway LaNel Project) Exhibit D [RESERVED] Direct Pay Credit Enhancement Instrument D-] (Broadway LaNel Project) Exhibit E CERTIFICATE OF REDUCTION Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument') $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the Credit Enhancement Instrument, as follows: (1) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (2) The aggregate principal amount of Bonds outstanding has been reduced to $ (3) Effective on [insert date]: (a) the Amount Available shall be reduced by $ , of which (i) $ is a reduction of the Principal Portion and (ii) $ is a reduction of the Interest Portion; (b) after such reduction, the Amount Available will be $ of which (i) $ will be the Principal Portion and (ii) $ will be the Interest Portion; and (c) after such reduction, the Amount Available will be not less than the aggregate unpaid principal amount of the Bonds Outstanding (as that term is defined in the Indenture). By its execution hereof, Broadway LaNel, a Limited Partnership ("Borrower") certifies to Fannie Mae that the Trustee is authorized to deliver this Certificate to Fannie Mae. The Borrower and the Trustee further certify that the amounts specified in Paragraph 3 have been determined in accordance with the terms and conditions of the Indenture and the Reimbursement Agreement. Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument. Direct Pay Credit Enhancement Instrument E-1 (Broadway LaNel Project) IN WITNESS WHEREOF, the Trustee and the Borrower have executed and delivered this Certificate as of the day of U.S. BANK NATIONAL ASSOCIATION, as Trustee Authorized Officer BROADWAY LaNEL, A LIMITED PARTNERSHIP Authorized Officer Direct Pay Credit Enhancement Instrument E-2 (Broadway LaNel Project) Exhibit F CERTIFICATE OF REINSTATEMENT Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument") $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned, a duly authorized officer of the Trustee named below ("Trustee'), certifies to Fannie Mae, with reference to the Credit Enhancement Instrument, as follows: (1) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (2) The Trustee has received notification from the Tender Agent that Bonds pledged to Fannie Mae by the Borrower which were acquired with the proceeds of a Pledged Bonds Advance under the Credit Enhancement Instrument are to be remarketed or sold. The Trustee has received and is transferring to Fannie Mae the amount set forth in Paragraph 3. (3) Upon receipt by Fannie Mae of this certificate and $ , the Available Amount will be increased as follows: (a) the Principal Portion of the Amount Available will be increased by $ , but such increase shall not cause the Principal Portion to exceed the original Principal Portion less the sum of (i) all Principal Advances paid by Fannie Mae in accordance with the Credit Enhancement Instrument and (ii) the aggregate of all reductions of the Principal Portion pursuant to any Certificate of the Trustee in the form of Exhibit E; and (b) the Interest Portion of the Amount Available will be increased by $ but such increase shall not cause the Interest Portion to exceed the original Interest Portion less the aggregate of (i) all Interest Advances for interest which have not been reinstated in accordance with the Credit Enhancement Instrument, subject to the reinstatement of such amounts as set forth in the Credit Enhancement Instrument, (ii) all reductions of the Interest Portion due to any permanent reduction of the Principal Portion of the Amount Available and (iii) to the extent not addressed in (ii), all reductions of the Interest Portion pursuant to any Certificate of the Trustee in the form of Exhibit E. (4) Fannie Mae shall promptly release or direct Fannie Mae's custodian in writing to release the Pledged Bonds to the Tender Agent in a principal amount corresponding to the Principal Portion identified in Paragraph 3 or, if such release is not possible, Fannie Mae shall be deemed Direct Pay Credit Enhancement Instrument F-1 (Broadway LaNel Project) to consent to the delivery of a written entitlement order to the applicable financial intermediary on whose records ownership of such Pledged Bonds is reflected to credit the ownership entitlement to such Bonds to the account as directed by the Trustee. Such release or deemed consent shall be conclusive evidence of the reinstatement of the Principal Portion and Interest Portion as described in Paragraph 3. Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument. IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the day of U.S. BANK NATIONAL ASSOCIATION, as Trustee L-3 Authorized Officer Direct Pay Credit Enhancement Instrument F-2 (Broadway LaNel Project) Exhibit G NOTICE OF TERMINATION Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument') $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned, a duly authorized officer of the undersigned Trustee ("Trustee"), certifies to Fannie Mae, with respect to the Credit Enhancement Instrument, that the Trustee is authorized to file this notice pursuant to the Indenture. Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument. The undersigned certifies to Fannie Mae: * (a) None of the Bonds are Outstanding under the Indenture. (b) The Trustee has received an Alternate Credit Facility (as such term is defined in the Indenture) as permitted by the Indenture and the Reimbursement Agreement. * Trustee: Check applicable paragraph Pursuant to the Indenture we enclose the Credit Enhancement Instrument for cancellation. Very truly yours, U.S. BANK NATIONAL ASSOCIATION, as Trustee Lo Authorized Officer Dated: Direct Pay Credit Enhancement Instrument (,J-1 (Broadway LaNel Project) By its execution hereof, Broadway LaNel, a limited partnership ("Borrower") hereby certifies to Fannie Mae that all conditions precedent to the cancellation of the Credit Enhancement Instrument and substitution of an Alternate Credit Facility set forth in the Indenture and the Reimbursement Agreement have been satisfied and hereby joins in the Trustee's instructions to Fannie Mae may cancel the same. BROADWAY LaNEL, A LIMITED PARTNERSHIP Un Authorized Officer Direct Pay Credit Enhancement Instrument G-2 (Broadway LaNel Project) Exhibit H CERTIFICATE FOR SUCCESSOR TRUSTEE Fannie Mae 3900 Wisconsin Avenue Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument') $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned is a duly authorized officer of the Trustee under the Indenture for the holders of the Bonds The Trustee transfers all rights in the Credit Enhancement Instrument to , subject to the terms and conditions of the Credit Enhancement Instrument. The Trustee certifies that the transferee is the successor Trustee under the Indenture referred to in the Credit Enhancement Instrument and such successor Trustee has been approved in writing by Fannie Mae. The transferee acknowledges below that it is the successor Trustee. Such successor Trustee has entered into a written agreement to be bound by the Assignment and Intercreditor Agreement dated as of August I, 2003 by and among Fannie Mae, the Trustee and the Issuer. By this transfer, all rights of the undersigned Trustee in the Credit Enhancement Instrument are transferred to the transferee and the transferee shall have the sole rights as the beneficiary, including sole rights relating to any amendments, whether increases or extensions or other amendments and whether now existing or hereafter made. All amendments are to be advised direct to the transferee without necessity of any consent of or notice to the undersigned. Dated: U.S. BANK NATIONAL ASSOCIATION, as Trustee 57 Authorized Officer Direct Pay Credit Enhancement Instrument H-1 (Broadway LaNel Project) The above signature of an officer or other authorized representative conforms to that on file with us. Said officer or representative is authorized to sign for said party. U.S. BANK NATIONAL ASSOCIATION Authorized Officer Indenture. LIM acknowledges that it is the successor to as Trustee under the Authorized Officer Direct Pay Credit Enhancement Instrument H-2 (Broadway LaNel Project) BOND PURCHASE AGREEMENT August 14, 2003 City of New Hope, Minnesota 4401 Xylon Avenue North New Hope, MN 55428-4898 Attention: City Manager Broadway LaNel, a Limited Partnership 4601 Excelsior Boulevard, Suite 601 St. Louis Park, MN 55416 Attention: Francis W. Lang $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003 (the "Bonds") Ladies and Gentlemen: The undersigned, U.S. Bancorp Piper Jaffray Inc. (the "Underwriter"), hereby proposes to enter into the following Agreement concerning the above -captioned bonds (the "Bonds"), subject to the acceptance of this Agreement by the City of New Hope, Minnesota (the "Issuer") and Broadway LaNel, a Limited Partnership, a Minnesota limited partnership (the `Borrower"), on or before 12:00 noon, local time then prevailing in Minneapolis, Minnesota on August 12, 2003. The Bonds are described in the Offering Circular dated August 6, 2003 prepared in connection with the issuance of the Bonds (including the appendices thereto, the "Offering Circular"). The Bonds are issued pursuant to a Trust Indenture dated as of August 1, 2003 (the "Indenture"), between the Issuer and U.S. Bank National Association, as trustee (the "Trustee"). If and when accepted by you, this document shall constitute our Bond Purchase Agreement. Undefined terms used herein shall have the meaning assigned to such terms in the Indenture. Section 1. Background. The Bonds are to be issued by the Issuer pursuant to, and will be secured as provided in, the Indenture. The net proceeds of the Bonds will be used to refund the Prior Bonds and thereby to refinance a multifamily housing project (the "Project') owned by the Borrower. The proceeds of the Bonds will be loaned by the Issuer to the Borrower pursuant to a Financing Agreement (the "Financing Agreement') dated as of August 1, 2003, among the Issuer, the Borrower, and the Trustee. Payment of the principal of and interest and premium, if any, on the Bonds is secured as described in the Offering Circular. 1 Pursuant to the Regulatory Agreement as defined in the Indenture (the "Regulatory Agreement'), the Borrower will agree to hold 20% of the units in the Project available for occupancy by persons whose incomes do not exceed eighty percent (801/o) of the area median income of the Minneapolis -St. Paul Standard Metropolitan Statistical Area. The Bonds are to be sold by us pursuant to the Offering Circular. Section 2. Representations of Issuer. The Issuer represents to the Underwriter and the Borrower that: (a) The refinancing of the Project, the issuance and sale of the Bonds, the execution and delivery of the Financing Agreement, this Agreement and the Indenture and the performance of all covenants and agreements of the Issuer contained in the Financing Agreement, this Agreement and the Indenture have been duly authorized by resolution of the governing body of the Issuer adopted at a meeting thereof duly called and held on July 28, 2003, by the affirmative vote of not less than a majority of its members; and (b) To refinance the Project, the Issuer has duly authorized the Bonds to be issued upon the terms set forth in the Indenture, under the provisions of which the Issuer has agreed to pledge and grant to the Trustee a security interest in certain of its interests in the Financing Agreement as security for the payment of the principal of and interest and premium, if any, on the Bonds. Section 3. Representations of Borrower. The Borrower represents and warrants to the Underwriter and the Issuer that: (a) the Borrower is a duly formed and validly existing Minnesota limited partnership, in good standing under the laws of the State; (b) the execution, delivery and performance by the Borrower of the Financing Agreement, the Credit Facility Documents, the Remarketing Agreement, the Mortgage Loan Documents, the Hedge Documents, this Agreement and the Regulatory Agreement (all such documents referred to collectively herein as the "Borrower Documents"), have been duly authorized by the Borrower, and compliance with the provisions hereof and thereof, under the circumstances contemplated herein and therein, will not in any material respect conflict with or constitute on the part of the Borrower a breach of or default (with due notice or the passage of time or both) under the Limited Partnership Agreement of the Borrower or any indenture, mortgage, deed of trust, loan agreement, contract or other agreement or other instrument to which the Borrower is a party, or any existing law, administrative regulation, court order or decree to which the Borrower is subject or by which it or any of its properties are otherwise subject or bound; (c) there is no action, suit, litigation, proceeding, inquiry or investigation at law or in equity or by or before any judicial or administrative court, agency, body or other entity, served or, to the best knowledge of the Borrower, threatened against the Borrower E or any of its properties, wherein an unfavorable decision, ruling or finding (1) would adversely affect the issuance, delivery, validity or enforceability of any of the Borrower Documents, (2) would result in any materially adverse change in the existence or powers of the Borrower, the business, properties, assets, liabilities or condition (financial or other) of the Borrower, or (3) would otherwise materially adversely affect the ability of the Borrower to comply with its obligations under the Borrower Documents, or adversely affect the transactions contemplated by the Indenture; (d) no event or event which, with notice or lapse of time or both, would constitute an event of default or default under the Borrower Documents or any other material agreement or instrument to which the Borrower is a party or by which the Borrower or its properties is or may be bound has occurred and is continuing; (e) to the best of its knowledge, the Borrower has all necessary licenses, permits and approvals required to carry on and operate all of its properties; (f) to the best of its knowledge, neither the Borrower nor the Project is in violation of, nor has the Borrower received any notice of any actual or alleged violation of, any environmental, zoning, land use or other similar laws or regulations applicable to the Borrower or the Project; (g) all of the representations and warranties of the Borrower contained in the Borrower Documents are true and correct as of this date, as if made on this date; and (h) the information in the Offering Circular related to the Borrower and the Project, and to the best of its knowledge the documents to which the Borrower is a party, does not contain any untrue statement of a material fact and does not omit to state a material fact necessary in order to make the statements contained therein not misleading. Section 4. Purchase, Sale and Delivery of the Bonds. On the basis of the representations and warranties and subject to the terms and conditions set forth herein, we agree to purchase, and the Issuer agrees to sell to us, the total principal amount of the Bonds at a purchase price equal to 100% of the stated principal amount of the Bonds, plus accrued interest from the date of the Bonds to the Closing Date. On the Closing Date, the Borrower shall pay to the Underwriter its fee of $26,550, plus certain expenses of the Underwriter. Payment for the Bonds shall be made to the Issuer or its order in federal funds or other immediately available funds no later than 12:00 noon prevailing time on August 14, 2003, at the offices of Bond Counsel or at such other time and place as shall be mutually agreeable to the parties hereto, against delivery of the Bonds as directed by us. The date and time of such payment and delivery are herein called the "Closing Date." The Bonds are to be delivered to The Depository Trust Company ("DTC") for the respective accounts of the original purchasers thereof at DTC's offices in New York, New York, and the Bonds shall be made available for inspection by us prior to the Closing Date. 9 Section 5. The Borrower's Covenants. The Borrower shall: (a) if at any time for a period of six months after the date of the Offering Circular an event of which the Borrower has knowledge shall have occurred as a result of which it is necessary to amend or supplement the Offering Circular in order to make the statements therein not untrue or misleading, notify us promptly thereof and fiunish to us an appropriate amendment or a supplement that will correct the statements in the Offering Circular in order to make the statements therein not untrue or misleading; (b) refrain from taking any action, or permitting any action to be taken with regard to which the Borrower may exercise control, that results in the loss of the tax- exempt status of the interest on the Bonds or a violation of the Regulatory Agreement; and (c) furnish to us so long as any Bonds remain outstanding the financial information set forth in Section 9 of the Remarketing Agreement. Section 6. Conditions of Purchase Obligation of Underwriter. Our obligation to purchase and pay for the Bonds is subject to the following conditions: (a) The representations and warranties of the Borrower shall be true and correct as of the date hereof and the Closing Date. (b) At the Closing Date the Borrower shall have performed all of its obligations hereunder theretofore to have been performed. (c) At the Closing Date, there shall be delivered to us and dated as of the Closing Date: (i) one or more opinions of Dorsey & Whitney LLP, as bond counsel, in form and substance satisfactory to us, covering the validity of the Bonds and the tax-exempt status of interest on the Bonds and related matters; (ii) an opinion of counsel to the Borrower, addressed to us and to the Issuer, in foam and substance satisfactory to us; (iii) one or more opinions of counsel to Fannie Mae, addressed to us, in form and substance satisfactory to us; and (iv) an opinion of Gray, Plant, Mooty, Mooty & Bennett, P.A., counsel to the Underwriter, addressed solely to us, in form and substance satisfactory to us. In rendering the above opinions, counsel may rely upon customary certificates. (d) The Issuer Documents and the Borrower Documents in substantially the forms existing on the date hereof, with such changes therein as may be mutually agreed F1 upon by the parties thereto and us, and all instruments contemplated thereby, shall have been duly authorized, executed and delivered by the respective parties thereto and shall be in full force and effect on the Closing Date. (e) All proceedings and related matters in connection with the authorization, issue, sale and delivery of the Bonds shall have been satisfactory to bond counsel, and such counsel shall have been furnished with such papers and information as they may have reasonably requested to enable them to pass upon the matters referred to in this Section 6. (f) Each of the Borrower and the Issuer shall have famished or caused to be furnished to us on the Closing Date a certificate satisfactory to us as to the accuracy of all their respective representations and warranties contained herein as of the date hereof and as of the Closing Date and as to the performance by them of all of their respective obligations hereunder to be performed at or prior to the Closing Date. (g) The offer and sale of the Bonds and underlying securities shall be exempt from registration under the Securities Act of 1933, as amended; and the Indenture shall be exempt from qualification under the Trust Indenture Act of 1939, as amended. (h) We shall have been provided with such quantities of the Offering Circular at such time or times as shall be necessary for us to comply with any applicable provision of law or regulation, including Regulation 15c2-12 promulgated by the Securities and Exchange Commission. (i) The Bonds shall have been assigned a rating of "AAANMIGI" by Moody's Investors Service, Inc. 0) Fannie Mae shall have delivered the Credit Facility in form and substance satisfactory to us. All such opinions, certificates, letters and documents will be in compliance with the provisions hereof only if they are in all material respects satisfactory to us, as to which we shall act reasonably. If any condition of our obligation hereunder to be satisfied prior to the Closing Date is not so satisfied, this Agreement may be terminated by us by notice in writing or by telegram to the Borrower and the Issuer. We may waive in writing compliance by the Borrower or the Issuer with any one or more of the foregoing conditions or extend the time for their performance. Section 7. Termination by Underwriter. This Agreement may be terminated in writing by the Underwriter if any of the following shall occur: (i) this Agreement shall not have been accepted by the Issuer or the Borrower within the time herein provided; (ii) the Bonds and all of the Closing Documents shall not have been delivered as provided herein as of 11:00 a.m., Minneapolis, Minnesota time on the date of Closing; (iii) legislation shall be enacted, or actively considered for enactment, or a court decision announced, or a ruling, regulation or decision by or on behalf of a governmental agency having jurisdiction of the subject matter shall be made to the effect that interest on obligations of the general character of the Bonds shall not be exempt from federal income taxes, or that securities of the general character of the Bonds shall not be exempt from registration under the Securities Act of 1933, as amended, or that the Indenture shall not be exempt from qualification under the Trust Indenture Act of 1939, as amended; (iv) there shall exist any event or circumstance which, in the reasonable opinion of the Underwriter, makes untrue, incorrect or misleading in any material respect any statement or information contained herein or in the Offering Circular, as it may be amended or supplemented; (v) there shall have occurred any outbreak of hostilities or material escalation thereof, or other national or international calamity or crisis, the effect of which outbreak, escalation calamity or crisis on the financial markets of the United States of America being such as, in the reasonable opinion of the Underwriter, would make it impracticable for the Underwriter to place the Bonds; (vi) there shall be in force a general suspension of trading on the New York Stock Exchange, or minimum or maximum prices for trading on the New York Stock Exchange shall have been fixed and be in force; (vii) in the reasonable judgment of the Underwriter the market price of the Bonds, or the market price generally of obligations of the general character of the Bonds, might be adversely affected because: (a) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange, or (b) the New York Stock Exchange or other national securities exchange, or any governmental authority, shall impose, as to the Bonds or similar obligations, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, underwriters; or (viii) a general banking moratorium shall have been declared by either federal, Minnesota or New York authorities having jurisdiction, and shall be in force. Section 8. Termination by Issuer or Borrower. This Agreement may be terminated in writing by the Issuer or the Borrower in the event that the Underwriter shall fail to accept delivery of the Bonds on the Closing Date upon tender thereof to DTC by the Issuer and delivery to the Underwriter of all of the Closing Documents. Section 9. Expenses. Except as hereinafter specifically provided, all expenses and costs of the Borrower and the Issuer incident to the performance of their obligations in connection with the authorization, issuance and sale of the Bonds, including fees and expenses of the Trustee, Borrower's Counsel, Bond Counsel, Counsel to the Underwriter, Fannie Mae, Counsel to Fannie Mae, the Loan Servicer, Counsel to the Loan Servicer, the fee of the Underwriter referred to in Section 4 hereof plus reimbursement of expenses, all costs and expenses with respect to the examination of, and registration of the Bonds under, the securities or "Blue Sky" laws of the various jurisdictions in which the Bonds are to be offered or sold, all costs of procuring a satisfactory survey and title insurance policy, and the costs and expenses of preparing, printing and distributing the Offering Circular, the Bonds, this Agreement, the Indenture, the Financing Agreement, the Mortgage Loan Documents and all related documents shall be payable by the Borrower or, if available, from Bond proceeds. Notwithstanding anything else contained in this Section 9 to the contrary, issuance costs (including Underwriter's compensation) financed by the Bonds shall not exceed 2.00% of the proceeds of the Bonds. The terms and provisions of this Section 9 shall survive and be binding upon the Borrower notwithstanding the termination of this 0 Agreement pursuant to Section 7 or Section 8 hereof, except that the fee and expenses of the Underwriter referred to in Section 4 hereof and this section shall not be payable upon any such termination. Section 10. Offering by Underwriter. We shall offer the Bonds for sale in transactions exempt from registration under the applicable securities laws in the states in which the Bonds will be reoffered, or in compliance with such registration requirements, as set forth in the Offering Circular. Concessions from the offering price may be allowed to selected dealers and special purchasers. The initial offering price and concessions set forth in the Offering Circular may vary after the initial offering. The Borrower hereby confirms and the Issuer hereby consents to the authority and use by the Underwriter of the Offering Circular. Section 11. Notices. Any notice or other communication to be given to the Borrower and the Issuer under this Agreement may be given by delivering the same in writing to their respective addresses set forth above; and any such notice or other communication to be given to the Underwriter may be given by delivering the same in writing to the Underwriter at U.S. Bancorp Piper Jaffray Inc., 800 Nicollet Mall, Suite 1300, Minneapolis, Minnesota 55402, Attention: Public Finance Department. Any notice to the Borrower shall be copied to: Stephen Davis, Esq., 4601 Excelsior Boulevard, Suite 500, St. Louis Park, MN 55416. Section 12. Indemnification by the Borrower. The Borrower agrees to indemnify and hold harmless the Issuer and the Underwriter, and any person who controls the Underwriter within the meaning of the Securities Act of 1933, as amended, against any and all losses, claims, damages and liabilities arising out of any untrue statement or alleged untrue statement of a material fact in the Offering Circular (except under the headings "THE ISSUER," ..FANNIE MAE," "THE LOAN SERVICER," "TAX EXEMPTION AND RELATED CONSIDERATIONS," "RATING," "UNDERWRITING" and "CONTINUING DISCLOSURE" and in Exhibits A, B and G thereto), or omission or alleged omission of a material fact necessary in order to make the Offering Circular (except under the headings "THE ISSUER," ..FANNIE MAE," "THE LOAN SERVICER," "TAX EXEMPTION AND RELATED CONSIDERATIONS," "RATINGS," "UNDERWRITING" and "CONTINUING DISCLOSURE" and in Exhibits A, B and G thereto) not misleading, and to the extent of the aggregate amount paid in settlement of any litigation commenced or threatened arising from a claim based upon any such statement or omission if such settlement is effected with the written consent of the Borrower. In case any claim shall be made or action brought against the Issuer or the Underwriter, or any controlling person (as aforesaid) based upon such statement or omission, in respect of which indemnity may be sought against the Borrower, then the Issuer or the Underwriter, or any controlling person, as the case may be, shall promptly notify the Borrower in writing setting forth the particulars of such claim or action and the Borrower shall assume the defense thereof including the retaining of counsel (who shall be satisfactory to the Issuer and the Underwriter) and the payment of all expenses, provided that if the Borrower shall have failed to assume the defense of such action or to retain counsel satisfactory to the Issuer or the Underwriter, as the case may be, within a reasonable time after notice of the commencement of such action, the fees and expenses of counsel retained by the Issuer or the Underwriter, as the case may be, shall be paid by the Borrower. If the Issuer or the Underwriter is advised in an opinion of counsel that there may be legal defenses available to the Issuer or the Underwriter that 7 are adverse to or in conflict with those available to the Borrower, or that the defense of the Issuer, the Underwriter or the Borrower should be handled by separate counsel, the Borrower shall not have any right to assume such defense of the Issuer or the Underwriter, as the case may be, but shall be responsible for the reasonable fees and expenses of counsel retained by the Issuer or the Underwriter, as the case may be, in assuming its or their own defense. Notwithstanding, and in addition to, any of the foregoing, the Issuer and the Underwriter or any such controlling person shall have the right to retain separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the party retaining such counsel unless the retaining of such counsel has been specifically authorized by the Borrower in writing. The Borrower shall not be liable to indemnify any person for the settlement of any such action effected without its written consent. This indemnity shall be in addition to any similar or other obligations which the Borrower may have under the Indenture, the Financing Agreement, the Reimbursement Agreement or the Mortgage Loan Documents. To the same extent as the foregoing indemnity contained in this Section from the Borrower to the Underwriter and the Issuer and each person, if any, who controls the Underwriter and the Issuer, the Underwriter agrees to indemnify and hold harmless the Borrower and the Issuer and each person, if any, who controls the Borrower and the Issuer within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (hereinafter in this paragraph separately and collectively referred to as the "defendants'), with reference to any untrue statement, error, misstatement or omission or allegation thereof in the Offering Circular under the heading "UNDERWRITING" only. In case any such claim shall be presented in writing or any action shall be brought against any of the defendants in respect of which indemnity may be sought from the Underwriter on account of its agreement contained in this Section, the Underwriter shall have the rights and duties given to the Borrower in the above paragraph and the defendants shall have the rights and duties given by the above paragraph to the persons therein referred to as "defendants." In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in the preceding part of this Section 12 is for any reason held to be unavailable to the Underwriter, the Borrower or the Issuer, then the Borrower shall contribute to the damages paid by the Underwriter or the Issuer, and the Underwriter shall contribute to the damages paid by the Borrower or the Issuer in such proportion that the Underwriter is responsible for the portion represented by the percentage that the underwriting fee set forth herein bears to the aggregate face amount of the Bonds and the Borrower is responsible for the balance; provided, however, that (i) in no case shall the Underwriter be responsible for any amount in excess of the underwriting fee applicable to the Bonds purchased by it pursuant to this Bond Purchase Agreement, and (ii) no person guilty of fraudulent misrepresentation of a material fact or failing to state a material fact shall be entitled to contribution as to any liability arising from such fraudulent misrepresentation or omission, from any person who was not guilty of such fraudulent misrepresentation or omission. In determining the amount of contribution to which the respective parties are entitled, there shall be considered the relative benefits received by each party from the offering of the Bonds (taking into account the portion of the proceeds of the offering realized by each), the parties' relative knowledge and access to information concerning the matter with respect to which the claim was asserted the opportunity to correct and prevent any statement or omission, and any other equitable consideration appropriate in the 3 circumstances. The Borrower and the Underwriter agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation. For purposes of this Section, each person, if any, who controls the Underwriter within the meaning of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, shall have the same rights to contribution as the Underwriter or the Borrower, respectively. Section 13. Parties and Interests; Borrower's Undertakings; Survival of Representations. This Agreement is made solely for the benefit of the Issuer, the Borrower and the Underwriter, and no other person, partnership, association or corporation shall acquire or have any rights hereunder or by virtue hereof. All representations and agreements by the Issuer, the Underwriter and the Borrower in this Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Underwriter, and shall survive the delivery of and payment for the Bonds. Section 14. Governing Law. This Agreement shall be governed by the laws of the State of Minnesota. Section 15. Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. U.S. BANCORP PIPER JAFFRAY INC. By'!/��� Its Managing Director 10 Accepted by: CITY OF NEW HOPE, MINNESOTA By Mayor c By ity 4Manager 2" 11 GP:1469350 Q 12 Accepted by: BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership 1� ED W. Lang; $2,655,000 CITY OF NEW HOPE, MINNESOTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT), SERIES 2003 CLOSING CERTIFICATE OF THE ISSUER The undersigned, being the Mayor and City Manager, respectively, of the City of New Hope, Minnesota (the "Issuer") hereby certifies with respect to the $2,655,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003, of the Issuer (the "Bonds") as follows: 1. The Issuer is a political subdivision of the State of Minnesota validly existing under the Constitution and laws of the State of Minnesota. 2. On June 23, 2003, the Issuer held a public hearing on the proposed issuance of the Bonds after published notice duly given in accordance with Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code") and applicable Regulations. Attached as Exhibit A is a true and correct copy of the affidavit of publication of said notice (published on June 5, 2003) from New Hone -Golden Vallev Sun Post, and attached as Exhibit B is a true and correct copy of the minutes of said hearing. On June 23, 2003, the City Council, at a meeting duly called and held in accordance with law and at which a quorum was present and voting, adopted Resolution No. 2003-104, a true and correct copy of which is attached as Exhibit C, giving preliminary approval to the issuance of the Bonds. On July 28, 2003, the City Council, at a meeting duly called and held in accordance with law and at which a quorum was present and voting, adopted Resolution No. 2003-118, a true and correct copy of which is attached as Exhibit D, authorizing the issuance of the Bonds and approving the execution and delivery of the Transaction Documents. Said resolutions are in full force and effect on the date hereof in the form in which they were adopted. 3. No litigation is pending and with respect to which the Issuer has been served with process, or, to the best of our knowledge, threatened (i) to restrain or enjoin the issuance of any of the Bonds; (ii) in any way contesting or affecting the Issuer for the issuance or validity of the Bonds, or the validity of the Transaction Documents or the Bond Purchase Agreement, dated August 14, 2003, between the Issuer, U.S. Bancorp Piper Jaffray Inc. and Broadway Lanel, A Limited Partnership (the 'Bond Purchase Agreement"); or (iii) in any way contesting the existence or powers of the Issuer or the title of any officers of the Issuer. 4. No event affecting the Issuer has occurred since the date of the Offering Circular that should be disclosed in the Offering Circular for the purposes for which it is to be used or which is necessary to be disclosed therein to make the statements and information therein not misleading in any material respect. 5. The representations and warranties made by the Issuer in the Bond Purchase Agreement are true and correct in all material respects as of the date hereof with the same effect as if made on the date hereof. 6. Neither the execution and delivery of, nor the fulfillment of or compliance with the terms or conditions of, the Transaction Documents violates the constitution or laws of the State or any judgment, order, writ, injunction or decree to which the Issuer is subject, or conflicts in any material respect with, or results in a material breach of, or material default under, any agreement or instrument to which the Issuer is now a party or by which it is bound. 7. The Issuer has full right, power and authority to enter into and perform its obligations under the Transaction Documents to which it is a party and such documents have been duly authorized, executed and delivered by the Issuer. 8. The Issuer has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Bond Purchase Agreement at or prior to the date hereto. 9. The undersigned further certifies that the Mayor and the City Manager have been duly authorized by the Issuer to execute the Bonds on behalf of the Issuer and that, pursuant to such authority, the Bonds have been duly executed by the facsimile signature of the Mayor and the signature of the City Manager. Capitalized terms not defined herein shall have the same meaning as set forth in the Bond Purchase Agreement. Dated: August 14, 2003. CITY OF NEW HOPE, MINNESOTA Mayor 2 STATE OF MINNESOTA) SS. Exhibit A 4COMME newspapers AFFIDAVIT OF PUBLICATION COUNTY OF HENNEPIN) Richard Hendrickson, being duly sworn on an oath states or affirms, that he is the Chief Financial Officer of the newspaper known as Sun -Post and has full knowledge of the facts stated below: (A) The newspaper has complied with all of the requirements constituting qualification as a qualified newspaper, as provided by Minn. Stat. §331A.02, §331A.07, and other applicable laws, as amended. (B) The printed public notice that is attached was published in the newspaper once each week, for one successive weeks; it was first published on Thursday, the 5 day of June , 2003, and was thereafter printed and published on every Thursday to and including Thursday, the _ day of 2003; and printed below is a copy of the lower case alphabet from A to Z, both inclusive, which is hereby acknowledged as being the size and kind of type used in the composition a ublication of the otice: abcdefghijklmnopgrat BY: CFO Subscribed and swdl /on this yT day of or affirmed before me MERIDEL M. HEDBLQM NOTARY PUBLIGMINNEMTA MYCOMMISSICN EXPIRES RATE INFORMATION (1) Lowest classified rate paid by commercial users for comparable space (2) Maximum rate allowed by law $ 2.85 per line (3) Rate actually charged $ 1.40 l2er line City of New Hope (Official Publimtion) NOTICE OF PUBLIC rtEARING NOTICE IS HEREBY Gr City of New Hope, Minns: 23, 2003, at 7:00 p.m., at t North, in the City of Nev public hearing on the prc fandingrevenue bonds un 462C, as amended (the A, reeding $2,810,000 (the R fund prior to maturity rev the City under the Act to under the Act w finance tb Anthony James Apartme. cammining 73 apartment facilities, which is owned Partnership, a Minnesots that the City Council of th, the City) will meet on Jer- ryHall, 4401 Xylon Avenw e. Minnesota, to conduct: that the City issue its or massacre Statutes, Chapin a principal amount not ex ling Hoods). N order to re a The Refunding Bonds will be limited obligations of ds City, payable solely from revenues of the developmem specifically pledged to the payment of the Bonds and wil not constitute a debt of the City. No holder of the Refund ing Bonds shall ever have the right to compel the exercux of the taxing power ofthe City to Pay the Refunding goad[ or the interest thereon, or to enforce payment thereon against any property of the City. All persons may appear and be heard at the time and place set forth above, or may file written comments with the City Clerk prior to the data of the hearing ast forth above. /x/ Valerie Leone City Clerk (June 5 2003)P2/Antho9v James Ards Exhibit B e( CERTIFICATE CITY OF NEW HOPE STATE OF MINNESOTA) COUNTY OF HENNEPIN) ss CITY OF NEW HOPE ) I, the undersigned being the duly qualified City Clerk of the City of New Hope, Minnesota, hereby attest and certify that: 1. As such officer, I have the legal custody of the original record from which the attached minutes were transcribed. 2. 1 have carefully compared said extract with said original record. 3. 1 find the attached extract of minutes to be a true, correct and complete transcript from the original minutes of: New Hope City Council — June 23, 2003 4. Said meeting was duly held, pursuant to call and notice thereof, as required by law, and a quorum was present. WITNESS my hand officially as such Clerk and the seal of said City, this 7th day of August, 2003. (SEAL) Valerie Leone, City Clerk CITY OF NEW HOPE 4401 Xylon Avenue North • New Hope, Minnesota 55428-4898 • www. ci.new-hope.mn.us City Hall: 763-531-5100 • Police (non -emergency): 763-531-5170 • Public Works: 763-592-6777 • TDD: 763-531-5109 City Hall Fax: 763-531-5136 • Police Fax: 763-531-5174 • Public Works Fax: 763-592-6776 CONSENT AGENDA Mayor Enck introduced the consent items as listed for consideration and stated that all items will be enacted by one motion unless requested that an item be removed for discussion. Item 6.15 was removed for discussion later in the meeting. MOTION Motion was made by Councilmember Collier, seconded by Councilmember Gwin- Consent Items Lenth, to approve all remaining items on the Consent Agenda. All present voted in favor. Motion carried. BUSINESS LICENSES Approval of 2003 Business Licenses. Item 6.1 FINANCIAL CLAIMS Approval of Financial Claims Through June 23, 2003. Item 6.2 RESOLUTION 03-100 Resolution Approving City Manager's Revocation of Election to be Excluded Item 6.4 from Membership in Public Employees Retirement Association (PERA). MOTION/WAIVE Motion to Approve Waiving the Fees for Sign and Tent Permits for Lions Club FEES CORN FEED Annual Com Feed to be held on August 13, 2003. Item 6.5 MOTION/WAIVE Motion to Waive Fees for Eight Special Event Signs for 2003 Duk Duk Daze FEES DUK DUK DAZE Festival. Item 6.6 RESOLUTION 03-101 Resolution Authorizing Release of Financial Guarantee for Olson General Item 6.7 Contractors Development at 920152" Avenue North (Planning Case 02-04). RESOLUTION 03-102 Resolution Imposing a Fee for Issuance of Revenue Bonds. Item 6.8 RESOLUTION 03-103 Resolution Authorizing Application for the Livable Communities Demonstration Item 6.9 Account (LCDA) Development Grant Program for the Hope Village Livable Communities Redevelopment Area. IMP. PROJECT 685 Motion Approving Final Payment to BCB Construction, Inc. for Completion of Item 6.10 City Contract for the Construction of the City -Owned Twinhome Located at 7105 62"d and 6151 Louisiana Avenue North (Improvement Project No. 685). IMP. PROJECT 748 Motion Authorizing Staff to Obtain Appraisal of 5512 Winnetka Avenue North Item 6.11 (Improvement Project No. 748). 2002 AUDIT Acceptance of 2002 Comprehensive Annual Financial Report. Item 6.12 ORDINANCE 03-13 Ordinance No. 03-13, An Ordinance Establishing a Park Dedication Requirement Item 6.13 and/or Cash Payment in Lieu of Land Dedication. ORDINANCE 03-14 Ordinance No. 03-14, An Ordinance Amending Chapter 2 of the New Hope City Item 6.14 Code Regulating the Various Commissions Established to Advise the City Council. BID/GENERATOR Approval of Quote from Zeigler Power Systems for One (1) Portable Generator in Item 6.16 ._ _ the Amount of $21,622. PUBLIC HEARING Mayor Enck introduced for discussion Item 7.1, Public Hearing: Resolution Q71 - Giving Preliminary Approval to Issuance of Multifamily Housing Refunding Revenue Bonds. New Hope City Council Page 2 June 23, 2003 Mr. Dan Donahue, City Manager, stated the public hearing is to consider approval of the issuance of refunding revenue bonds. He stated LaNel Financial Group owns Anthony James Apartments located at 6100 West Broadway. He reported that the city is attaching its name to the bonds but is in no way obligated to repay the bonds if the petitioner were to default. He commented on the excellent management of the apartment complex and recommend approval of the revenue bonds. Mr. Greg Bronk, LaNel Financial Group, was recognized. He commented of their intent to take advantage of lower interest rates by refinancing. Mayor Enck opened the floor for comments. There was no one present to address the council on the item. MOTION Motion was made by Councilmember Gwin-Lenth, seconded by Councilmember CLOSE HEARING Sommer, to close the Public Hearing. All present voted in favor. Motion Item 7.1 carried. RESOLUTION 03-104 Councilmember Cassen introduced the following resolution and moved its Item 7.1 adoption: "RESOLUTION GIVING PRELIMINARY APPROVAL TO ISSUANCE OF MULTIFAMILY HOUSING REFUNDING REVENUE BONDS". The motion for the adoption of the foregoing resolution was seconded by Councilmember Gwin-Lenth, and upon vote being taken thereon, the following voted in favor thereof. Enck, Cassen, Collier; Gwin-Lenth, Sommer; and the following voted against the same: None; Abstained: None; Absent: None; whereupon the resolution was declared duly passed and adopted, signed by the mayor which was attested to by the city clerk. PUBLIC HEARING Mayor Enck introduced for discussion Item 7.2, Public Hearing: Resolution Item 7.2 Vacating an Easement for a Public Alley and Authorizing the Preparation, Execution and Recording of Documents Relating to the Same (Improvement Project No. 665). Mr. Ken Doresky, Community Development Specialist, explained that the alley easement located north of the parcels of 7500-7528 42"d Avenue North is no longer needed and vacation of the easement will aid in the redevelopment of the site. Councilmember Sommer questioned the size of the vacated property easement and whether it was included in the appraisal. Mr. Doresky indicated the property is 20' x 320' and expressed uncertainly as to whether it was included in the appraisal or not. The Council expressed the need to maintain access to the area for fire protection purposes. MOTION Motion was made by Councilmember Collier, seconded by Councilmember Gwin- CLOSE HEARING Lenth, to close the Public Hearing. All present voted in favor. Motion carried. Item 7.2 RESOLUTION 03-105 Councilmember Gwin-Lenth introduced the following resolution and moved its Item 7.2 adoption: "RESOLUTION VACATING AN EASEMENT FOR A PUBLIC ALLEY AND AUTHORIZING THE PREPARATION, EXECUTION AND RECORDING OF DOCUMENTS RELATING TO THE SAME (IMPROVEMENT PROJECT NO. 665)". The motion for the adoption of the foregoing resolution was seconded by Councilmember Cassen, and upon vote being taken thereon, the following voted in favor thereof: Enck, Cassen, Collier, Gwin-Lenth, Sommer; and the following voted against the same: None; Abstained: New Hope City Council Page 3 June 23, 2003 Exhibit C eRa STATE OF MINNESOTA) COUNTY OF HENNEPIN) ss CITY OF NEW HOPE ) I, the undersigned, being the duly qualified City Clerk of the City of New Hope, Minnesota, hereby attest and certify that: 1. As such officer, I have the legal custody of the original record from which the attached resolution was transcribed. 2. 1 have carefully compared the attached resolution with the original record of the meeting at which the resolution was acted upon. 3. 1 find the attached resolution to be a true, correct and complete copy of the original: RESOLUTION NO. 2003-104 RESOLUTION GIVING PRELIMINARY APPROVAL TO ISSUANCE OF MULTIFAMILY HOUSING REFUNDING REVENUE BONDS 4. 1 further certify that the affirmative vote on said resolution was 5 ayes, 0 nayes, and 0 absent/abstention. 5. Said meeting was duly held, pursuant to call and notice thereof, as required by law, and a quorum was present. WITNESS my hand officially as such Clerk and the seal of said City, this 12th day of August, 2003. -l2 et [C L ( LLC{ 67 Lc (Seal) Valerie Leone, City Clerk CITY OF NEW HOPE 4401 Xylon Avenue North • New Hope, Minnesota 55428-4898 • wwFv. ci.new-hope.mn.us City Hall: 763-531-5100 • Police (non -emergency): 763-531-5170 • Public Works: 763-592-6777 • TDD: 763-531-5109 City Hall Fax: 763-531-5136 • Police Fax: 763-531-5174 • Public Works Fax: 763-592-6776 RESOLUTION NO. 2003-104 RESOLUTION GIVING PRELIMINARY APPROVAL TO ISSUANCE OF MULTIFAMILY HOUSING REFUNDING REVENUE BONDS BE IT RESOLVED by the City Council of the City of New Hope, Minnesota (the "City"), as follows: SECTION I Recitals 1.1. The City has received a request from representatives of Broadway LaNel, a Limited Partnership, a Minnesota limited partnership (the "Partnership"), that the City issue refunding bonds (the "Refunding Bonds") under Minnesota Statutes, Chapter 462C, as amended (the "Act'), to refund the Multifamily Housing Refunding Revenue Bonds (Broadway LaNel Project), Series 1993 of the City (the "Series 1993 Bonds"), which were used to refund bonds issued to finance the acquisition and construction of Anthony James Apartments, a 73 unit rental housing development owned by the Partnership and located at 6100 West Broadway in the City (the "Development'). On June 23, 2003, the City Council held a public hearing on the issuance of the Refunding Bonds at which hearing all persons who appeared were given an opportunity to be heard with respect to the proposed issuance of the Refunding Bonds. SECTION 2 Preliminary Approval of Refunding Bonds 2.1. On the basis of the information given the City to date, preliminary approval is hereby given to the issuance of the Refunding Bonds, in an amount not to exceed $2,810,000, to provide tax-exempt financing to refund the Series 1993 Bonds. The adoption of this resolution shall not be deemed, however, to establish a legal obligation on the part of the City or its Council to issue or to cause the issuance of the Bonds. All details of the Bonds and the provisions for payment thereof shall be subject to final approval of this Council prior to their issuance. The Bonds, if issued, shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the City, except the revenues to be received from the operation of the Development and owner thereof specifically pledged to the payment thereof, and each Bond, when, as and if issued, shall recite in substance that the Bond, including interest thereon, is payable solely from said revenues and funds specifically pledged to the payment thereof, and shall not constitute a debt or pecuniary liability of the City within the meaning of any constitutional or statutory limitation. Adopted by the City Council of the City of New Hope on this 23`d day of June, 2003. Attest: //(_/_Dla/, L22i City Clerk -2- Mayor Exhibit D eRa STATE OF MINNESOTA) COUNTY OF HENNEPIN) ss CITY OF NEW HOPE ) I, the undersigned, being the duly qualified City Clerk of the City of New Hope, Minnesota, hereby attest and certify that: 1. As such officer, I have the legal custody of the original record from which the attached resolution was transcribed. 2. 1 have carefully compared the attached resolution with the original record of the meeting at which the resolution was acted upon. 3. 1 find the attached resolution to be a true, correct and complete copy of the original: RESOLUTION NO. 2003-118 RESOLUTION AUTHORIZING THE ISSUANCE OF VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT), SERIES 2003; ESTABLISHING THE SECURITY THEREFORE AND AUTHORIZING THE EXECUTION OF DOCUMENTS 4. 1 further certify that the affirmative vote on said resolution was 5 ayes, 0 nayes, and 0 absent/abstention. 5. Said meeting was duly held, pursuant to call and notice thereof, as required by law, and a quorum was present. WITNESS my hand officially as such Clerk and the seal of said City, this 7th day of August, 2003. (Seal) Valerie Leone, City Clerk CITY OF NEW HOPE 4401 Xylon Avenue North • New Hope, Minnesota 55428-4898 • www. ci.new-hope.mn.us Citv Hall: 763-531-5100 • Police (non -emergency): 763-531-5170 • Public Works: 763-592-6777 • TDD: 763-531-5109 City Hall Fax: 763-531-5136 • Police Fax: 763-531-5174 • Public Works Fax: 763-592-6776 RESOLUTION NO. 03-118 RESOLUTION AUTHORIZING THE ISSUANCE OF VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT), SERIES 2003; ESTABLISHING THE SECURITY THEREFOR AND AUTHORIZING THE EXECUTION OF DOCUMENTS BE IT RESOLVED by the City Council of the City of New Hope, Minnesota (the "City"), as follows: Section 1. Recitals. 1.01. It has been proposed that the City refinance its Multifamily Housing Refunding Revenue Bonds (Broadway LaNel Project), Series 1993, issued in the original principal amount of $3,300,000 and outstanding in the principal amount of $2,810,000 (the "Refunded Bonds"), through the issuance by the City, pursuant to Minnesota Statutes, Chapters 462A and 462C (collectively, the "Act"), of its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Apartments Project), Series 2003, in a principal amount not to exceed $2,810,000 (the "Bonds") and loan the proceeds to Broadway LaNel, a Limited Partnership , a Minnesota limited partnership (the "Borrower"). 1.02 The Refunded Bonds were issued in connection with the refinancing of the City's $3,350,000 Multifamily Housing Revenue Bonds (Broadway LaNel Project), Series 1985 (the "Series 1985 Bonds"), which Series 1985 Bonds were issued by the City and the proceeds were loaned to the Borrower to finance the acquisition, construction and equipping of a multifamily rental housing facility located in the City (the "Property"). . 1.03. Fannie Mae, a corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. § 1716 et seq. ("Fannie Mae"), has agreed, subject to the satisfaction of certain conditions, to facilitate the refinancing of the Property and the issuance of the Bonds by providing credit enhancement and liquidity support for the Bonds pursuant to a credit facility. 1.04. Draft forms of the following documents relating to the Bonds have been prepared and submitted to this Council and are hereby directed to be filed with the City Clerk: (a) a Financing Agreement (the "Financing Agreement"), proposed to be entered into by the City, U.S. Bank National Association, as trustee (the "Trustee") and the Borrower; (b) a Trust Indenture (the "Indenture"), proposed to be entered into by the City and the Trustee, relating to the Bonds; (c) a Bond Purchase Agreement (the `Bond Purchase Agreement'), proposed to be entered into by the City, the Borrower and U.S. Bancorp Piper Jaffray Inc. (the "Underwriter"), relating to the Bonds; (d) an Assignment and Intercreditor Agreement (the "Assignment'), proposed to be entered into by the City, the Trustee and Fannie Mae, and acknowledged and agreed to by the Borrower; (e) an Offering Circular (the "Offering Circular"), to be used in connection with the offer and sale of the Bonds by the Underwriter. Section 2. Findings. It is hereby found, determined and declared that: (a) It is desirable that the Bonds be issued by the City upon the terms set forth in this resolution and the Indenture, under the provisions of which the City grants to the Trustee under the Indenture a security interest in certain revenues and payments to be received by the City under the Financing Agreement as security for the payment of the principal of, premium, if any, and interest on the Bonds. (b) The payments required to be made to the Trustee pursuant to the Financing Agreement are fixed, and are required to be revised from time to time as necessary, so as to produce income and revenue sufficient to provide for prompt payment of principal of and interest on all Bonds issued under the Indenture when due; and the Financing Agreement also provides that the Borrower is required to continue to pay all expenses of the operation and maintenance of the Property, including but without limitation, adequate insurance thereon and insurance against all liability for injury to persons or property arising from the operation thereof, and all taxes and special assessments levied upon or with respect to the site of the Property and payable during the term of the Financing Agreement. (c) The execution and delivery of the Financing Agreement, the Indenture, the Assignment and the Bond Purchase Agreement (the "Bond Documents") and all other acts and things required under the Constitution and laws of the State of Minnesota to make the Bond Documents and the Bonds valid and binding special, limited obligations in accordance with their terms, are authorized by the Act. Section 3. Authorization and Aunroval of Bond Documents. The Bond Documents referred to in Section 1.04 are approved, and the Mayor and City Manager are authorized to execute the Bond Documents on behalf of the City, with such modifications as are deemed appropriate and are approved by the Mayor and City Manager, within the limitations provided in this resolution, which approval shall be conclusively evidenced by execution of the Bond Documents. The Mayor, the City Manager and the City Clerk, or any of them, are also ficates on behalf of the authorized to execute such other documents, instruments and closing certi City as maybe required to give effect to the transactions contemplated in the Bond Documents. -2- Section 4. Offering Circular. The City hereby consents to the use of the Offering Circular by the Underwriter in connection with the offer and sale of the Bonds to potential investors; provided that the City has not participated and will not participate in the preparation thereof and assumes no responsibility for the sufficiency, completeness or accuracy of the same. Section 5. The Bonds. 5.01. In anticipation of the receipt of the loan repayments from the Borrower, the City shall proceed forthwith to issue its Bonds in the form and upon the terms set forth in the Indenture or established pursuant to this resolution. The Bonds shall be sold to the Underwriter at a price of par plus accrued interest, if any, as provided in the Bond Purchase Agreement. The Bonds shall be issued bearing interest initially at the Weekly Variable Rate established as provided in the Indenture, subject to the Maximum Rate specified therein. The Mayor and the City Manager are hereby authorized to approve: (1) the principal amount of the Bonds; provided that the aggregate principal amount of the Bonds is not in excess of $2,810,000; (2) the maturity schedule of the Bonds; provided that the final maturity date of the Bonds shall not be later than July 15, 2033; and (3) the provisions for redemption of the Bonds. The approval of such officers of the terms of the Bonds shall be conclusively presumed by the execution of the Bond Purchase Agreement and the Indenture by said officers. 5.02. The Mayor and the City Manager are authorized and directed to prepare and execute the Bonds as prescribed herein and in the Indenture and to deliver them to the Trustee, together with a certified copy of this resolution, the other documents required in the Indenture, and such other certificates, documents and instruments as may be appropriate to effect the transactions herein contemplated. The Trustee is hereby appointed authenticating agent for the Bonds pursuant to Minnesota Statutes, Section 475.55, Subdivision 1. Section 6. Absence of Officers. In the absence or disability of the Mayor, any of the documents authorized by this resolution to be approved and executed by the Mayor may be so approved and executed by the acting Mayor. In the absence or disability of the City Manager, any of the documents authorized by this resolution to be approved and executed by the City Manager may be so approved and executed by the person designated as acting City Manager or by such other officer of the City who, in the opinion of the City Attorney, may execute such documents. Section 7. Authentication OfProceedings. The Mayor, the City Manager, the City Clerk and other officers of the City are authorized and directed to furnish to the Underwriter and bond counsel certified copies of all proceedings and records of the City relating to the Bonds, and such other affidavits and certificates as may be required to show the facts relating to the legality and marketability of the Bonds as such facts appear from the books and records in the officers, custody and control or as otherwise known to them; and all such certified copies, certificates and affidavits, including any heretofore furnished, shall constitute representations of the City as to the truth of all statements of fact contained therein -3- Section 8. Limitations of the City's Obligations. Notwithstanding anything contained in the Bonds or the Bond Documents, the Bonds shall not constitute a debt of the City within the meaning of any constitutional or statutory limitation, and shall not be payable from nor shall constitute a charge, lien or encumbrance, legal or equitable, upon any funds or any property of the City other than the revenues specifically pledged to the payment thereof pursuant to the Bond Documents, and no holder of the Bonds shall ever have the right to compel any exercise of the taxing power of the City to pay the Bonds or the premium, if any, or interest thereon, or to enforce payment thereof against any property of the City other than those rights and interests of the City which have been pledged to the payment thereof pursuant to the Bond Documents. The agreement of the City to perform the covenants and other provisions contained in this resolution or the Bonds or the Bond Documents shall be subject at all times to the availability of the revenues furnished by the Borrower sufficient to pay all costs of such performance or the enforcement thereof, and the City shall not be subject to any personal or pecuniary liability thereon. Passed this 28th day of July, 2003. Attest: / QCi'jz-�i� Valerie Leone, City Clerk -4- _ 2 e W. Peter Enck, Mayor $2,655,000 CITY OF NEW HOPE, MINNESOTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT), SERIES 2003 ARBITRAGE CERTIFICATE THIS ARBITRAGE CERTIFICATE, dated August 14, 2003, is made by the City of New Hope Minnesota, a municipal corporation and political subdivision of the State of Minnesota (the "Issuer"), and is being delivered in connection with the execution and delivery of (i) the Trust Indenture, dated as of August 1, 2003 (the "Indenture"), by and between the Issuer and U.S. Bank National Association (the "Trustee"), (ii) the Financing Agreement, dated as of August 1, 2003, between the Issuer, Broadway LaNel, A Limited Partnership, a Minnesota limited partnership (the "Borrower") and the Trustee (the "Financing Agreement") and (iii) the Deed and Covenants Running with the Land relating to the Mortgaged Property, dated as of December 1, 1985, among the Borrower and the Housing and Redevelopment Authority in and for the City of New Hope, Minnesota, as amended and supplemented by a First Amendment to Deed and Covenants Running with the Land, dated as of September 1, 1993, between the Borrower, the New Hope Economic Development Authority (the "EDA") and U.S. Bank National Association (formerly known as First Trust National Association), as trustee, as amended and supplemented by a Second Amendment to Deed and Covenants Running with the Land, dated as of August 1, 2003 between the Borrower, the Trustee and the EDA (as so amended, the "Deed"), between the Issuer and the Borrower, for the purpose of refunding the Issuer's Multifamily Housing Refunding Revenue Bonds, Series 1993, outstanding in the aggregate principal amount of $2,810,000 (the "Prior Bonds") through the issuance of the Issuer's Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 (the "Bonds"). WHEREAS, the Internal Revenue Code of 1954 (the "1954 Code"), Title XIII of the Tax Reform Act of 1986 (the "Act"), the Internal Revenue Code of 1986, as amended (the "1986 Code," and, together with the 1954 Code, the "Code"), and the regulations promulgated with respect thereto (the "Regulations"), impose certain limitations on the uses and investment of the proceeds of the Bonds and of certain other moneys relating to the Bonds; WHEREAS, such provisions of the Code, the Act and the Regulations, relate to the conditions under which interest on the Bonds will be excluded from gross income for federal income tax purposes; and WHEREAS, the Issuer has determined to deliver this Arbitrage Certificate (the "Certificate") and the Borrower has determined to deliver a Borrower Tax Certificate (the "Borrower Tax Certificate") in order to set forth certain representations and warranties, and establish certain expectations, relating to (i) the use of the proceeds of the Prior Bonds (and bonds refunded thereby), (ii) the operation of the multifamily rental housing facility previously financed by the Prior Bonds (and bonds refunded thereby), and refinanced by the Bonds, and (iii) the use and investment of the proceeds of the Bonds and of certain other moneys relating thereto, all in order to assure that interest on the Bonds will be excluded from gross income for federal income tax purposes; NOW, THEREFORE, in part pursuant to Section 1.148-2(b)(2) of the Regulations, the Issuer hereby represents, certifies, covenants and agrees as follows: I. IN GENERAL 1.1 Purpose of Certificate. The Issuer is delivering this Certificate to Dorsey & Whitney LLP, Bond Counsel, with the understanding that Dorsey & Whitney LLP will rely upon this Certificate in rendering its opinion that interest on the Bonds is excluded from gross income under Section 103 of the Code. 1.2 Date of Issuance. The Bonds are being issued on the date of this Certificate. Such date is referred to herein as the "Closing Date." 1.3 Purpose of Financing. The Bonds are being issued to refund the Prior Bonds on September 15, 2003 (the "Redemption Date"). The Prior Bonds were issued in the original principal amount of $3,300,000 pursuant to an Indenture of Trust, dated as of September 1, 1993 (the "Prior Indenture"), to refund the City's Multifamily Housing Revenue Bonds (Broadway LaNcl Project), Series 1985, issued on December 30, 1985 (the "Original Bonds"), which Original Bonds were issued to provide funds to pay the costs of acquisition, construction and equipping of the multifamily rental housing facility (the "Project") more fully described in the Borrower Tax Certificate to be delivered by the Borrower. The Bonds are being issued to refinance the Project by refunding the Prior Bonds. Payment of debt service on the Bonds will be secured by a credit enhancement instrument (the "Credit Facility") issued by Fannie Mae on the Closing Date. 1.4 Issuer Reliance on Other Parties. The expectations of the Issuer concerning certain uses of the proceeds of the Bonds and certain other moneys described herein and other matters are based in whole or in part upon representations of the Borrower and other parties set forth in the Borrower Tax Certificate or other documents referenced herein. The Issuer is not aware of any facts or circumstances that would cause it to question the accuracy or reasonableness of any representation made in this Certificate. 1.5 Definitions. Capitalized terms used herein which are not otherwise defined herein shall have the respective meanings set forth in the Indenture. Additionally, unless the context otherwise requires, the following capitalized terms have the following meanings for purposes of this Certificate: Bond Year shall mean the period beginning on the Closing Date and ending on July 15, 2004 (or a shorter period selected by the Issuer or the Borrower pursuant to Treasury Regulations Section 1.148-1(b)), and each successive one-year period thereafter. The last Bond Year will end on the last day any Bonds are outstanding. Gross Proceeds shall have the meaning used in Regulations Section 1.148-1(b), and generally means all proceeds derived from or relating to the Bonds, including Sale Proceeds, Investment Proceeds and Replacement Proceeds. Investment Proceeds shall mean the earnings from investing and reinvesting the Sale Proceeds and from investing and reinvesting such earnings. Investment Property shall mean any security or obligation (other than a Tax -Exempt Bond), any annuity contract or any other investment -type property. Nonpurpose Investment shall mean any Investment Property in which Gross Proceeds are invested other than the Loan. Opinion of Counsel shall mean a written opinion of Bond Counsel, as defined in the Indenture. Rebate Requirement shall mean the amount of rebatable arbitrage computed as of the last day of any Bond Year pursuant to Regulations Section 1.148-3. Replacement Proceeds shall have the meaning given in Regulations Section 1.148-1(c), including amounts reasonably expected to be used, directly or indirectly, to pay principal or interest on the Bonds, or directly or indirectly pledged to pay principal or interest on the Bonds, or held pursuant to an agreement for the direct or indirect benefit of the Bondholders or a guarantor of the Bonds. Sale Proceeds shall mean the proceeds received by the Issuer upon issuance of the Bonds, being $2,655,000. Tax -Exempt Bond shall mean any obligation the interest on which is excluded from gross income pursuant to the provisions of Section 103 of the Code. It shall also include an interest in a regulated investment company to the extent that at least 95% of the income to the holder of the interest is interest that is excludable from gross income under Section 103 of the 1986 Code. Yield Reduction Requirement shall mean the amount of any yield reduction payment computed as of the last day of any Bond Year pursuant to Regulations Section 1.148-5(c). II. REPRESENTATIONS, CERTIFICATIONS, EXPECTATIONS AND WARRANTIES OF THE ISSUER 2.1 Public Hearing and Approval. On June 5, 2003, the Issuer caused to be published in the New Hone -Golden Valley Sun Post, being the official newspaper of the Issuer published in New Hope, Minnesota, a notice of public hearing to be held by the Issuer regarding the issuance of the Bonds. On June 23, 2003, the Issuer held the aforementioned hearing. At this hearing all interested persons were invited and given the opportunity to comment upon the issuance of the Bonds and the refinancing of the Project. The City Council of the Issuer adopted a Resolution giving preliminary approval to the issuance of the Bonds on June 23, 2003, and adopted a Resolution approving the issuance of the Bonds on July 28, 2003. 2.2 Volume Can. The issue price of the Prior Bonds was par plus accrued interest. The issue price of the Bonds is par and does not exceed the outstanding amount of the Prior Bonds. The Bonds are being issued exclusively to refund the Prior Bonds. Consequently, no allocation of volume cap is required pursuant to the provisions of Section 146 of the 1986 Code. ARBITRAGE REPRESENTATIONS. CERTIFICATIONS EXPECTATIONS AND WARRANTIES 3.1 No Replacement Proceeds. Neither the Issuer nor any related person will use any Gross Proceeds directly or indirectly to replace funds of the Issuer, the Borrower or any related person if such funds are or will be used directly or indirectly to acquire Investment Property reasonably expected to produce a yield materially higher than the yield on the Bonds. 3.2 No Abusive Arbitrage Device. The Bonds are not and will not be part of a transaction or series of transactions that (i) enables the Issuer, the Borrower or any related person to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage and (ii) overburdens the market for tax-exempt obligations in any manner, including without limitation, by selling bonds that would not otherwise be sold or selling more bonds, or issuing them sooner, or allowing them to remain outstanding longer, than would otherwise be necessary. 3.3 Reftinding Bonds. The Sale Proceeds of the Bonds are to be used exclusively for the current refunding of the Prior Bonds. No debt service on any governmental obligation, other than the Prior Bonds, will be paid directly or indirectly from proceeds of the Bonds. Sale Proceeds of the Bonds do not exceed the amount necessary to pay the outstanding principal amount of the Prior Bonds on the Redemption Date. 3.4 Transferred Proceeds. All Gross Proceeds of the Prior Bonds and investment earnings thereon have been spent or will be spent in connection with the refunding of the Prior Bonds on the Redemption Date. 3.5 Program Obligations. The Issuer is acquiring the Loan as part of a governmental program (the 'Program") involving the acquisition of loans to provide housing and related facilities. At least 95% of the payments received by the Issuer pursuant to the Loan and related Note will be used to pay debt service on the Bonds or to reimburse the Issuer or to pay directly the administrative costs of the Bonds and the Program. The Borrower will not purchase, pursuant to a formal or informal arrangement, the Bonds or other obligations of the Issuer under the Program in amount related to the amount of the Loan. 3.6 Administrative Costs and Issuer Fees. On the date of issuance of the Bonds the Borrower will pay the Issuer a bond issuance fee of $13,275. The Issuer and the Borrower have agreed pursuant to the Financing Agreement that the Borrower will pay for the administrative costs incurred by or for the benefit of the Issuer in connection with the issuance of the Bonds, but excluding general expenses or administrative overhead of the Issuer. In addition, Section 2.5 of the Financing Agreement requires the Borrower to pay certain expenses arising out of or in connection with the Financing Agreement and other associated costs. The payment of the fee, costs and expenses described above is not expected to cause the yield on the Loan and related Note to exceed the yield on the Bonds by more than one-eighth percentage points (.125%). 3.7 Funds and Accounts. Pursuant to the Indenture, the Issuer will establish the following Funds and Accounts: Loan Fund Revenue Fund Interest Account Redemption Account Credit Facility Account Fees Account Costs of Issuance Fund Rebate Fund Bond Purchase Fund Principal Reserve Fund Additionally, the Borrower has established with or for the benefit of Fannie Mae (i) a Hedge Reserve Escrow Account pursuant to the provisions of Hedge Reserve Escrow Account Security Agreement, dated as of August 1, 2003, between the Borrower, Glaser Financial Group, Inc., a Minnesota corporation ("Glaser"), and Fannie Mae, and (ii) a Hedge Account pursuant to the provisions of a Hedge Assignment and Security Agreement, dated as of August 1, 2003, between the Borrower, Glaser and Fannie Mae. Amounts from time to time held in said Accounts shall be considered to be Gross Proceeds of the Bonds and subject to the calculation of yield reduction payments as described in Regulations Section 1.148-5(c) unless the Borrower obtains and files with the Trustee an opinion of bond or tax counsel reasonably acceptable to the Trustee that such funds need not be considered Gross Proceeds under applicable provisions of the 1986 Code and Regulations. No funds or accounts other than those set forth in this Section 3.7 have been established or are expected to be established by the Issuer or the Borrower in connection with the Bonds. 3.8 Loan Fund. Sale proceeds of the Bonds held in the Loan Fund or other account pending payment and redemption of the Prior Bonds may be invested without regard to yield pursuant to the temporary period provided pursuant to Regulations Section 1.148-9(d)(2)(ii)(A). 3.9 Revenues. The Bonds are special, limited obligations of the Issuer payable from revenues of the Issuer ("Revenues") consisting principally of amounts received by the Issuer or the Trustee from or with respect to the Financing Agreement and related Note and any other amounts held in funds and accounts established pursuant to the Indenture (other than amounts held in the Fees Account, the Rebate Fund and the Costs of Issuance Fund). The Borrower expects to make payments under the Financing Agreement and related Note using current revenues of the Borrower and will not set aside moneys for future payments owing under the Financing Agreement and Note. Revenues are expected to equal or exceed debt service on the Bonds during each payment period. 3.10 Revenue Fund. Under the Indenture, all Revenues and any other amounts (other than remarketing proceeds) which are subject to the lien and pledge of the Indenture are to be deposited by the Trustee in the Revenue Fund. No Sale Proceeds of the Bonds will be deposited into the Revenue Fund. The Revenue Fund (except for the Fees Account) will be used primarily to achieve a proper matching of Revenues and debt service on the Bonds within each Bond Year. The Revenue Fund (except for the Fees Account) is expected to be depleted at least once a year except for a carryover amount not to exceed the greater of the earnings on such fund for the immediately preceding Bond Year or 1/12th of principal and interest payments on the Bonds for the immediately preceding Bond Year. Amounts deposited to the Revenue Fund (except for the Fees Account) are expected to be spent within thirteen months after the date of such deposit, and any amounts received from the investment or reinvestment of moneys held in such fund are expected to be expended within one year after the date of accumulation thereof in the Revenue Fund. Amounts in the Fees Account are to be used to pay Third -Party Fees (as defined in the Indenture) and are not security for or available to make payment of principal or interest on the Bonds. The Revenue Fund is expected to qualify as a "bona fide debt service fund" as defined in Regulations Section 1.148-1(b) and amounts in the Revenue Fund may be invested without regard to yield. 3.11 Bond Purchase Fund. Under the Indenture, all moneys received by the Trustee under certain conditions, including the tender of Bonds and the remarketing of Bonds, will be held in the Bond Purchase Fund. To the extent the Bond Purchase Fund is not used to redeem Bonds but only used to facilitate remarketing of Bonds, amounts in the Bond Purchase Fund may be invested without regard to yield. G9 3.12 Principal Reserve Fund. Under the Indenture, the Trustee shall deposit into the Principal Reserve Fund monthly payments made by the Borrower in accordance with the Reimbursement Agreement for such purpose. Amounts in the Principal Reserve Fund may be used for the purposes set forth in Section 5.11 of the Indenture. Amounts in the Principal Reserve Fund shall be considered to be Gross Proceeds of the Bonds and subject to the calculation of yield reduction payments as described in Regulations Section 1.148-5(c) unless the Borrower obtains and files with the Trustee an opinion of bond or tax counsel reasonably acceptable to the Trustee that such funds need not be considered Gross Proceeds under applicable provisions of the 1986 Code and Regulations. 3.13 Yield. For purposes of this Certificate, yield is calculated as set forth in Section 148(b) of the 1986 Code and Regulations Sections 1.148-4 and 1.148-5. 3.13.1 Yield on the Bonds. The Bonds will bear a variable rate of interest pursuant to the terms of the Indenture. Accordingly, pursuant to Regulations Section 1.148-4(c), yield on the Bonds is computed separately for each computation period, as defined in Regulations Section 1.148-1(b). The yield for each computation period is the discount rate which, when used in computing the present value as of the first day of the computation period of all payments of principal and interest and qualified guarantee and qualified hedge fees that are attributable to the computation period, produces an amount equal to the present value, using the same discount rate, of the aggregate issue price (or, pursuant to Regulations Section 1.148-4(c)(2)(iv), the deemed issue price for any computation period other than the computation period beginning on the Closing Date) of the Bonds as of the first day of the computation period. The payments attributable to a computation period generally include (i) any amounts actually paid during the computation period for principal on the Bonds, (ii) any amounts actually paid during the computation period for interest accruing during the computation period, (iii) any amounts actually paid during the computation period for interest during the prior computation period that was included in the deemed issue price of the Bonds as accrued but unpaid interest as of the first day of the computation period, (iv) any amounts properly allocable to fees for a qualified guarantee fee for the computation period and (v) any amounts properly allocable to a qualified hedge for the computation period. For purposes of computing yield with respect to the computation period beginning on the Closing Date, the aggregate issue price of the Bonds will be $2,655,000. For purposes hereof, yield shall be calculated on a 360 -day year basis with interest compounded semiannually. 3.13.2 Yield on Investment Property. Yield on Investment Property generally means that discount rate which, when used in computing the present value of all unconditionally payable payments representing principal and interest, produces an amount equal to the purchase price of the Investment Property. 3.14 Oualified Guarantee. In computing the yield on the Bonds as described above, premiums paid or to be paid to Fannie Mae (to the extent not properly allocable to a cost other than the cost of credit enhancement) are treated as qualified guarantee payments with respect to the Bonds, as provided in Regulations Section 1.148-4(f). This is based upon (i) representations of the Fannie Mae and the Underwriter that the fees paid or to be paid for such credit enhancement were negotiated at arms' length and are within the normal range of charges charged by Fannie Mae for the transfer of credit risk with respect to similar tax-exempt obligations, that the present value of interest saved as a consequence of such credit enhancement exceeds the present value of the fees for such credit enhancement, and that the fees for such credit enhancement do not include any direct or indirect payment for a service other than the transfer of credit risk and (ii) representations of the Issuer and the Borrower made hereby that the premiums paid and to be paid for such credit enhancement are reasonable. 3.15 Filing Requirements. The Issuer will file or cause to be filed at the expense of the Borrower such reports or other documents with the Internal Revenue Service as are required by the Code. IV OTHER MATTERS 4.1 Expectations. The undersigned are authorized representatives of the Issuer and are acting for and on behalf of the Issuer in executing this Certificate. To the best of the knowledge and belief of the undersigned, there are no other facts, estimates or circumstances that would materially change the expectations as set forth herein, and said expectations are reasonable. 4.2 Amendments. Notwithstanding any provision of this Certificate, the Issuer may amend this Certificate and thereby alter any actions allowed or required by this Certificate if such amendment is based on an opinion of bond or tax counsel reasonably acceptable to the Trustee. Dated as of this 14th day of August, 2003. CITY OF NEW HOPE, MINNESOTA By Mayor ./,, City manager [Signature Page to Arbitrage Certificate] $2,655,000 CITY OF NEW HOPE, MINNESOTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT), SERIES 2003 INSTRUCTIONS TO TRUSTEE The undersigned official hereby states and certifies to U.S. Bank National Association, as trustee (the "Trustee") under the Trust Indenture dated as of August 1, 2003 between the City of New Hope, Minnesota (the "Issuer") and the Trustee (the "Indenture"), on behalf of the Issuer, that: (i) He is the duly appointed, qualified and acting City Manager and an Authorized Officer as such term is defined in the Indenture and, as such, is familiar with the facts herein certified and is authorized and qualified to certify the same. (ii) Terms capitalized but not defined herein shall have the meanings given in the Indenture. (iii) Pursuant to the Indenture, the Trustee is hereby authorized and directed to authenticate and, on the date set forth below, to deliver to U.S. Bancorp Piper Jaffray Inc. (the "Underwriter") the Issuer's Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003, in the aggregate principal amount of $2,655,000, dated, as originally issued, as of the date hereof, upon (i) receipt of payment by the Trustee for the account of the Issuer of $2,655,000 in immediately available funds from the Underwriter, and (ii) satisfaction of the conditions set forth in Section 2.18 of the Indenture. (vi) The Trustee is instructed to deposit the proceeds from the sale of the Bonds in the Loan Fund as provided in Section 5.2 of the Indenture. Dated: August 14, 2003. CITY OF NEW HOPE, MINNESOTA B Zwl-c City Manager Form 8038 Information Return for Tax -Exempt (Rev. January 2002) Private Activity Bond Issues OMB No. 1545-0720 Department of rhe Treasury (Under Internal Revenue Code section 149(e)) Imemal Revenue Service ► See separate instructions. Reporting Authority Check if Amended Return ► ❑ 1 Issuer's name 2 Issuer's employer identification number Citv of New Hone. Minnesota Al : 91111112711 3 Number and street (or P.O. box if mail is not delivered to street atltlress) 4401 Xylon Avenue North Room/suite 4 Report number 1 301 5 City, town, or post office, state, and ZIP code New Hope, Minnesota 55428 6 Date of issue April 9, 2003 7 Name of issue Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 a CUSIP number 645464 FK 9 9 Name and title of officer or legal representative whom the IRS may call for more information Daryl Sulander, City Finance Director/Treasurer 10 Telephone number of officer or legal representative (763 ) 531-5100 Type of Issue (check the applicable box(es) and enter the issue price for each) Issue Price 11 Exempt facility bond: a ❑ Airport (sections 142(a)(1) and 142(c)) . . . . . . . . . . . . b ❑ Docks and wharves (sections 142(a)(2) and 142(c)) . . . . . . . c ❑ Water furnishing facilities (sections 142(a)(4) and 142(e)) . . . . d ❑ Sewage facilities (section 142(a)(5)) . . . . . . . . . . e ❑ Solid waste disposal facilities (section 142(a)(6)) . . . . . . f ❑ Qualified residential rental projects (sections 142(a)(7) and 142(d)), as follows:. 11a 11b 11c 11d 11e 11f . . . . . 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))? ❑ Yes ❑ No g ❑ Facilities for the local furnishing of electric energy or gas (sections 142(a)(8) and 142(f)) In 5a Facilities allowed under a transitional rule of the Tax Reform Act of 1986 (see instructions) Facility typeMultifamily_Rental,Housinq•------- 1986 Act section 1313(x) 11 11h $2,655,000 j i ❑ Qualified enterprise zone facility bonds (section 1394) (see instructions) . . j ❑ Qualified empowerment zone facility bonds (section 1394(f)) (see instructions) k ❑ District of Columbia Enterprise Zone facility bonds (section 1400A) (see instructions) I ❑ Qualified public educational facility bonds (sections 142(a)(13) and 142(k)) m ❑ Other. Describe (see instructions)►.--_------------------------•-------•----__•----__-__ _-_--_---_ 12 ❑ Qualified mortgage bond (section 143(a)) . I3 ❑ Qualified veterans' mortgage bond (section 143(b)) . . . . . . . . . . . . . . ► Check the box if you elect to rebate arbitrage profits to the United States . ❑ 4 ❑ Qualified small issue bond (section 144(a)) (see instructions). . . . . . . . . . . ► Check the box for $10 million small issue exemption . . . . . . . . . . . ❑ 5 ❑ Qualified student loan bond (section 144(b)) . 6 ❑ Qualified redevelopment bond (section 144(c)) 7 ❑ Qualified hospital bond (section 145(c)) (attach schedule—see instructions) . . . . . . 8 ❑ Qualified 501(c)(3) nonhospital bond (section 145(b)) (attach schedule—see instructions) . Check box if 95% or more of net proceeds will be used only for capital expenditures ► ❑ 9 ❑ Nongovernmental output property bond (treated as private activity bond) (section 141(d)) . 0 IJ Other. Describe see instructions) 1i20 11i 11' 11k 111 11m 12 13 WE 14 097/7/2WER/ 15 16 17 18 WE 19 I ORM Description of Bonds (Complete for the entire issue for which this form is hainn Filart l For Paperwork Reduction Act Notice, see page 4 of the separate instructions. Cat. No. 49973K Form 8038 (Rev. 1-2002) (a) Final maturity date (b) Issue price (c) Stated redemption (d) Weighted 9 price at maturity average maturity (e) Yield 21 Jul 15 2033 $ 2,655,000 $ 2 655 000 29.919 ears1 VR For Paperwork Reduction Act Notice, see page 4 of the separate instructions. Cat. No. 49973K Form 8038 (Rev. 1-2002) DORSEY & WHITNEY LLP MINNEAPOLIS SUITE 1500 COSTA MESA NEW YORK 50 SOUTH SIXTH STREET BILLINGS SEATTLE MINNEAPOLIS, MINNESOTA 55402-1498 FARGO DENVER TELEPHONE: (612) 340-2600 HONG KONG WASHINGTON, D.C. GREAT FALLS FAX: (612) 340-2868 NORTHERN VIRGINIA ROCHESTER DES MOINES www.doIseylaw.com TOKYO LONDON MISSOULA ANCHORAGE CATHERINE M. NUTZMANN SALT LAKE CITY Paralegal VANCOUVER (612)340-2963 TORONTO BRUSSELS FAX (612) 340-2643 SHANGHAI nutzma=.cathy@dorsey.com September 11, 2003 CERTIFIED MAIL/RETURN RECEIPT REQUESTED Director Internal Revenue Service Center Ogden, Utah 84201 Re: $2,655,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 City of New Hope, Minnesota Dear Sir or Madam: Enclosed please find two copies of Form 8038 for the above Bonds filed by the City of Wheaton, Minnesota pursuant to Section 149(e) of the Internal Revenue Code of 1986, as amended, referred to above. Please file one (1) copy of the enclosed Form 8038 and acknowledge receipt on the second copy, and return it to the undersigned. I have provided a self- addressed envelope for your convenience. Thank you for your cooperation. Enclosures Yours truly, Catherine . Nutzmali Paralegal m —13 M p Postage 5 S Q' Gertilletl Fee a Return Receipt Fee C3 IEndorsement nc Return Piece Re ee p Restricted delivery Fee p IEnaorsement Reouiretl) Postmark Here q_ ((-63 C3 d� rI Total Postage E Fees $ V1 C, Ftre,OA.tp, __..__.....__....._..__.I irector ---- fL No.,p knternal Revenue Service Center ZIP.4--------------------------------- Ogden, Utah 84201 :rr rr ...ter,. •Complete items 1 addict 2 for additional services. rn F �r Q ? •Complete items 3, 4a, and 4b. I also Wish to receive the • Print t your name end address on the reverse cam to you. of this f form so that we can return this following services (for an extra fee): •Atlach this forth to the horn of the mailpiece, permit. or on the back if space does not 1, ❑Addressee's Address o •Wdte'Retum Receipt Fequesred'on the mailpiece below the article number. •The Return Receipt will show to whom the article was delivered end the date p. ❑ Restricted Delivery 2 0 delivered. Consult postmaster for fee. I Article Addressed to: Aa Arfirlw rdumner m 0i,tec-ftir 7002 D510 0001 9403 6365 7:1711-�er if Q i Qe I%60-te- Se✓6!l Le- 4b. Service Type ❑ Registered 2-15ertified /� C / 6,e n U t a h �J '� Q I uu r ❑ Express Mail ❑ Insured E t D Realm Receipt for Merchandise ❑COD p 7. Date of Delivery 0 0 A i. Received By: (Print Name) 8. Addressee's Address (Only if requested and fee is paid) s i. Signature: (Addressee or Agent) t' X PS Forth December 1994 102595-97-6-0179 rn UCC FINANCING STATEMENT FILER US CORPORATE SERVICES 380 JACKSON STREET#418 ST. PAUL, MN 55101 L I City of New Hope OR ........e ...r U-1161tu 1 THE ABOVE Ile w Ibl -.. Iml abbreviate o, mmnne -- Filing NO: 20038466218 Filing Date: 2003/08/19 Filing Time: 5:00 PM State of Minnesota Processing Office: Secretary of State Filed by: patjeOl 4401 Xylon Avenue North I New Hope I MN 155428 1 USA 41-6008870 IDE6TOR — I Political Subdivision IMinnesota u� brrvale m cumbne mores OR 3. SECURED PARTY:S NAME.—NALAc,..n..., All of the Debtor's right, title and interest in and to the following: (1) all right, title and interest of the Issuer in and to the Loan, including the Note, the Security Instrument and the other Loan Documents and in and to the Financing Agreement, reserving, however, the Reserved Rights; (2) all rights to receive payments on the Note and under the other Loan Documents, including all proceeds of insurance or condemnation awards; (3) all right, title and interest of the Issuer in and to the Revenues, the Net Bond Proceeds and the accrued interest, if any, derived from the sale of the Bonds, and all Funds and Accounts under this Indenture (including, without limitation, moneys, documents, securities, investments, Investment Income, instruments and general intangibles on deposit or otherwise held by the Trustee) but excluding all moneys in the Fees Account, the Rebate Fund and the Costs of Issuance Fund unless and to the extent funded with Net Bond Proceeds (including within such exclusion Investment Income retained in the Costs of Issuance Fund and the Rebate Fund); (CONTINUED IN BOX NO. 16) TERNAnVE DESIGNATION RI mnL.inisP iceccm.eeme M ........... .----------- r I— - __.. __ _ FILING OFFICE COPY— NATIONAL UCC FINANCING STATEMENT (FORM UCC11(REV. 07/29/88) NATUCCI. 51"1 CT Syuem OSIFN 3.. DRGANIIATION'S NAME OR U.S. Bank National Association, as trustee and Fannie Mae, as their interests may appear ab.INDIVIDUAL UT NAME FIRST NAME MIDDLE NAME SUFFIX k. MAILINGADORES$ c/o Glaser Financial Group, 2550 University Avenue W. CITY St. Paul STATE MN POSTALCODE 55114 COUNTRY USA All of the Debtor's right, title and interest in and to the following: (1) all right, title and interest of the Issuer in and to the Loan, including the Note, the Security Instrument and the other Loan Documents and in and to the Financing Agreement, reserving, however, the Reserved Rights; (2) all rights to receive payments on the Note and under the other Loan Documents, including all proceeds of insurance or condemnation awards; (3) all right, title and interest of the Issuer in and to the Revenues, the Net Bond Proceeds and the accrued interest, if any, derived from the sale of the Bonds, and all Funds and Accounts under this Indenture (including, without limitation, moneys, documents, securities, investments, Investment Income, instruments and general intangibles on deposit or otherwise held by the Trustee) but excluding all moneys in the Fees Account, the Rebate Fund and the Costs of Issuance Fund unless and to the extent funded with Net Bond Proceeds (including within such exclusion Investment Income retained in the Costs of Issuance Fund and the Rebate Fund); (CONTINUED IN BOX NO. 16) TERNAnVE DESIGNATION RI mnL.inisP iceccm.eeme M ........... .----------- r I— - __.. __ _ FILING OFFICE COPY— NATIONAL UCC FINANCING STATEMENT (FORM UCC11(REV. 07/29/88) NATUCCI. 51"1 CT Syuem OSIFN Filing NO: 20038466218 vn lTlb. INDIVIDUAL'S LAST NAME FIRSTNAME MIDDLE NAME ISUFFTS I 11c. MAILING ADDRESS CITY STATE POSTAL CODE iCDUNBv I1E. Tp%IOP: SSN OR EIN ADD'L INFO RE 11o. TYGEOFORGANIUTION 111. JURISDICTION OF ORGANIZATION It — B ORGANIZATIONAL ID R Aanv ORGNAIATpN DEETOR NONI 12. 1 ADDITIONAL SECURED PARTY'S Rc ASSIGNOR S/P'S NAME I in>en p Iy pppnpme 112. p,12b; 12a. ORGANIZATIONS NAM[ -- ---- - — OR 12b. INDIVIDUAL'S LAST NAME FIRST NAME IMILIlaF wVtE - ... 12c. MAILING ADDRESS CITYiaTl.:,.-i,rt'j'- 13. TMs FINANCING STATEMENT a em Ynlbar lO be eW or D as.extractW 16 Aeai3OM collawal ,lospipliun: Clea .> a ❑ mwre woo. 19Descripti Description o11 reel . mbm: (4) all funds, moneys and securities and any and all other rights and interests in property, whether tangible or intangible, from time to Lime conveyed, mortgaged, pledged, assigned or transferred by delivery or by writing of any kind to the Trustee as additional security under this Indenture for the benefit of the Bondholders and the Credit Provider: and (5) all of the proceeds of the foregoing, including, without limitation, Investments and Investment Income (except as excluded above): as further provided in. (and as the foregoing terns with initial capital letters are defined in) the Trust Indenture, dated as of August 1, 2003, between the Debtor and U.S. Bank National Association, as trustee, and the Assignment and Intercreditor Agreement, dated as of August I, 3003 between the Debtor and the Secured Parties. 15. Nemo ane address d e RECORD OWNER N abwmd>dlbed reY esute n DeeN. nose nol neve a,em,d wpre>n: 17. Cnedt uuy rc eppl;Wle aw cnelYt pyy oiw boa. Dab1w n a T,Y61 a Tmslae adinS x+m mspoc110 prOvenv nom m oust 0 Deceaenrs Esm10 18. CINGM pry it eppkaEb uu1 CHCM qdy pia OOa. OeElOria aTMNSMITTIN6 VTILIR' F"til In wn.dbn WA aManuladurelLHame T.ansatllul—abeniva .HI Years PHW in mn. MIh a publkiinana Trenead. — Mocllve So years FILING OFFICE COPY— NATIONAL UCC FINANCING STATEMENT ADDENDUM (FORM UCC1Ad) IREV.0729/98) NATUCCI -5/4NI CTSyMem Onlinr Y�u�4BYf+• C vC Uniform Commercial Code 180 State Office Building �� .- �i Mary Kiffineyer 100 Rev. Dr. Martin Luther King Jr. Blvd. -� ti Y Secretar of State Saint Paul, MN 55155` a Minnesota Central Filing System UCC Filing Acknowledgement August 20, 2003 Page 1 of 1 DA US CORPORATE SERVICES 380 JACKSON STR #418 SAINT PAUL MN 55101 The Minnesota Central Filing System has received and filed your document. The information below reflects the data that was indexed in our system. Please review the information for accuracy. If you find a potential error, please notify the appropriate filing office. Client Account Number: 32186 Batch Number: 602986 Filing Type: Public Finance/Mfd Home Original Filing Number: 20038466218 Filed Date: 08/19/2003 Filed Time: 5:00 p.m. Lapse Date: 8/19/2033 Party Tvoe Party Name and Address Debtor CITY OF NEW HOPE New Hope MN Secured Party US BANK NATIONAL ASSOCIATION AS TRUSTEE AND FANNIE MAE AS THEIR INTERESTS MAY APPEAR SAINT PAUL MN Filing by the Minnesota Central Filing System is not conclusive proof that all conditions for securing priority have been met. Ensuring that accurate information is on the document to be filed is the responsibility of the filing party. If the filing is challenged, the filing office does not guarantee that the filing is legally sufficient to secure priority under UCC Article 9 and expressly disclaims any liability for failure of the filing party to secure priority resulting from the information contained in the filed document, or the lack of information on the filed document. User ID: patje01 Come visit us on the internet at http://ww .Sos.state.mn.usl County ID: 88 (651) 296-2803 FAX (651) 215-1009 TTY (800) 627-3529 STATE OF MINNESOTA) COUNTY OF HENNEPIN) ss CITY OF NEW HOPE ) I, the undersigned, being the duly qualified City Clerk of the City of New Hope, Minnesota, hereby attest and certify that: 1. As such officer, I have the legal custody of the original record from which the attached resolution was transcribed. 2. 1 have carefully compared the attached resolution with the original record of the meeting at which the resolution was acted upon. 3. 1 find the attached resolution to be a true, correct and complete copy of the original: EDA RESOLUTION NO. 2003-06 RESOLUTION RELATING TO A REDEVELOPMENT AGREEMENT WITH BROADWAY LANEL, A LIMITED PARTNERSHIP; APPROVING TERMINATION OF THE REDEVELOPMENT AGREEMENT AND AUTHORIZING EXECUTION OF VARIOUS DOCUMENTS 4. 1 further certify that the affirmative vote on said resolution was 5 ayes, 0 nayes, and 0 absent/abstention. 5. Said meeting was duly held, pursuant to call and notice thereof, as required by law, and a quorum was present. WITNESS my hand officially as such Clerk and the seal of said City, this 12th day of August, 2003. (Seal) Valerie Leone, City Clerk CITY OF NEW HOPE 4401 Xylon Avenue North • New Hope, Minnesota 55428-4898 • www. ci.new-hope.mn.us City Hall: 763-531-5100 • Police (non -emergency): 763-531-5170 • Public Works: 763-592-6777 • TDD: 763-531-5109 City Hall Fax: 763-531-5136 • Police Fax: 763-531-5174 • Public Works Fax: 763-592-6776 EDA RESOLUTION NO. 03-06 RESOLUTION RELATING TO A REDEVELOPMENT AGREEMENT WITH BROADWAY LANEL, A LIMITED PARTNERSHIP; APPROVING TERMINATION OF THE REDEVELOPMENT AGREEMENT AND AUTHORIZING EXECUTION OF VARIOUS DOCUMENTS BE IT RESOLVED, by the Board of Commissioners of the New Hope Economic Development Authority (the "EDA"), as follows: 1. Recitals. The Housing and Redevelopment Authority in and for the City of New Hope, Minnesota (the "HRA") has approved a redevelopment plan, as defined in Minnesota Statutes, Section 469.002, subdivision 16, designated as Redevelopment Plan 85-1 ("Redevelopment Plan 85-1"), and a redevelopment project to be undertaken pursuant thereto, as defined in Minnesota Statutes, Section 469.002, subdivision 14, designated as Redevelopment Project 85-1 ("Redevelopment Project 85-l'). In connection with Redevelopment Plan 85-1 and Redevelopment Project 85-1, the HRA and the City of New Hope (the "City") entered into a Redevelopment Agreement dated December 9, 1985 (the "Redevelopment Agreement'), with Broadway LaNel, a Limited Partnership, a Minnesota limited partnership (the "Developer") whereby the HRA sold certain premises described therein (the "Land") to the Developer. The Developer has constructed a 73 -unit apartment building on the Land (the "Project"). Pursuant to the Redevelopment Agreement, the HRA has executed and delivered to the Developer a Deed and Covenants Running with the Land, dated as of December 1, 1985, as amended by a First Amendment to Deed and Covenants Running With the Land, dated as of September 1, 1993 (as so amended, the "Deed"). To secure performance of the Developer's obligations under the Redevelopment Agreement, the HRA has imposed certain covenants, restrictions and limitations on the Land, all as more fully set forth in the Redevelopment Agreement and the Deed, including a lien on the Land to secure amounts payable to the HRA upon sale or transfer of the Land (the "Lien"). Pursuant to Minnesota Statutes, Section 469.094, subdivision 2, the City transferred control of Redevelopment Plan 85-1 and Redevelopment Project 85-1 from the HRA to the EDA. The Developer has proposed that the City issue its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 (the "Refunding Bonds"), in a principal amount not in excess of $2,810,000 under a Trust Indenture between the City and U.S. Bank National Association, as trustee (the "Trustee"). The proceeds of the Refunding Bonds will be loaned to the Developer and applied to refund the City's Multifamily Housing Development Refunding Revenue Bonds (Broadway LaNel Project), Series 1993 (the "Prior Bonds"), issued by the City to refund bonds issued by the City in 1985 to finance the acquisition and construction of the Project by the Developer. Fannie Mae, a corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. § 1716 et seq. ("Fannie Mae"), has agreed, subject to the satisfaction of certain conditions, to facilitate the issuance of the Bonds by providing credit enhancement and liquidity support for the Bonds pursuant to a credit facility. In addition, the Developer will obtain a mortgage loan in a principal amount of up to $1,155,000 (the "Taxable Loan") from Fannie Mae. In connection with the issuance of the Refunding Bonds, the Deed will be amended to reflect the issuance of the Refunding Bonds. Under the Redevelopment Agreement, the issuance of the Refunding Bonds require the Developer to pay to the HRA to pay the amounts secured by the Lien. The Developer has requested that the EDA (i) execute any amendments to the Deed required to be executed by the EDA to reflect the issuance of the Refunding Bonds (the "Deed Amendments"), and (ii) terminate the Redevelopment Agreement and satisfy the Lien upon payment to the EDA of $50,000 by the Developer. 2. Approval of Deed Amendments and Termination of Redevelopment Agreement. The EDA approves the execution and delivery by the EDA of the Deed Amendments, and the appropriate officers of the EDA are authorized and directed to execute the Deed Amendments in the form approved by the officer or officers executing the Deed Amendments and the attorney for the EDA. The EDA approves the termination of the Redevelopment Agreement and satisfaction of the Lien upon payment to the EDA of $50,000 by the Developer, and upon payment of such amount to the EDA. The appropriate officers of the EDA are authorized and requested by the Developer, the appropriate officers of the EDA are authorized and directed to execute such agreements as may be necessary and appropriate in the opinion of the officer or officers executing any such agreement and in the opinion of the attorney for the EDA, to evidence the termination of the Redevelopment Agreement and satisfaction of the Lien. Passed the 28th day of July, 2003. President r Atte GC- Exe ve irector -2- TERMINATION OF REDEVELOPMENT AGREEMENT The Housing and Redevelopment Authority in and for the City of New Hope, Minnesota (the "HRA"), has entered into a Redevelopment Agreement, Project 85-1, dated December 9, 1985 (the "Redevelopment Agreement"), with Broadway LaNel, a Limited Partnership, a Minnesota limited partnership (the "Company"), with respect to the property described in Exhibit A attached hereto and made a part hereof. The HRA has assigned all of its interests in and to the Redevelopment Agreement to the New Hope Economic Development Authority (the "EDA"). The EDA hereby agrees and acknowledges that all rights and interests of the EDA under the Redevelopment Agreement with respect to the indebtedness thereby secured, including but not limited to the HRA Lien described in Section 4.07 of the Redevelopment Agreement, are fully paid and satisfied. Dated: 6W --,V I y , 2003. NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY By Z6:�:L/ Its President And Its Executive 11irector STATE OF MINNESOTA ) ss. Thf� foregoing instrument was acknowledged before me this %i day of August, 2003, by USL-YZf�t ( -k and J /1te/�,T�TYlYw12tLe the President and Executive Director, respectively, of the New Hope Economic Development. Authority, a public body corporate and public, on behalf of such agency. ? ��� VALERIE J. LEONE My CommflssPonBExpiresNan.3�T2005 Ll� v Notary Public $2,655,000 CITY OF NEW HOPE, MINNESOTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT), SERIES 2003 CLOSING CERTIFICATE OF THE BORROWER Francis W. Lang, a general partner of Broadway LaNel, A Limited Partnership, a Minnesota limited partnership (the "Borrower"), hereby certifies as follows: 1. The Borrower is a limited partnership, duly organized and existing under and by virtue of the laws of the State of Minnesota, and is duly registered as a limited partnership pursuant to the provisions of Minnesota Statutes, Chapter 322A. Attached hereto as Exhibit A is a true and correct copy of the Borrower's partnership agreement, and all amendments thereto, which is in full force and effect as of the date hereof. The Borrower has complied with all certifications and requirements to qualify as a limited partnership transacting business in Minnesota. 2. Each of the representations and warranties of the Borrower set forth in the Borrower Documents and in the Bond Purchase Agreement dated August 14, 2003 (the "Purchase Contract"), between the City of New Hope, Minnesota ("Issuer"), U.S. Bancorp Piper Jaffray hic., as the Underwriter, and the Borrower, is true and correct in all material respects on the date hereof with the same effect as if made on the date hereof. 3. No event has occurred since the date of the Offering Circular which should be disclosed in the Offering Circular for the purpose for which it is to be used or which is necessary to be disclosed therein in order to make the statements and information therein not misleading in any material respect. 4. The Borrower has complied with all agreements and satisfied all the conditions on its part to be performed or satisfied under the Borrower Documents and the Purchase Contract at or prior to the date hereof, including authorizing the distribution of the Offering Circular. The Borrower has deemed final the Offering Circular prior to its use and distribution by the Underwriter. 5. The Borrower has duly executed and delivered the Purchase Contract and the Borrower Documents and the execution and delivery of the Purchase Contract and the Borrower Documents and the performance by the Borrower of its obligations under each such document will not constitute a breach of or default under its partnership agreement or the terms and provisions of any agreement or commitment to which the Borrower is presently a party or by which the Borrower is presently bound. Attached hereto as Exhibit B is a true and correct copy of the resolution or written action of the partners of the Borrower authorizing the transaction described herein. Capitalized terms not defined herein shall have the meanings set forth in the Purchase Contract or in the Trust Indenture, dated as of August 1, 2003, between the Issuer and U.S. Bank National Association, as Trustee, pursuant to which the Bonds are being issued. Dated: August 14, 2003. AY LANEL, W. Lang, a [Signature Page to the Borrower Certificate] 737 MINNESOTA SECRETARY OF STATE AMENDMENT TO .............. FOREIGN TYPE OR PRINT IN BLACK INK. CERTIFICATE OF LIMITED PARTNERSHIP OR LIMITED PARTNERSHIP REGISTRATION CHAPTER 322A Limited Partnership Name Broadway LaNel, A Limited Partnership Name in State of formation (if different from above) Minnesota The Certificate of Limited Partnership or Foreign Limited Partnership Registration is to be amended as follows: Term. The latest date on which the Limited Partnership shall dissolve is December 31, 2033. Exhibit A I certify that I am authorized to sign this amendment and I further certifythat I un d that 'bX signing this amendment, i am subject to the penalties of perjury as set forth in sectio` 09.48 as if d sig d this m nd me nt 6r oath. August 5, 2003 / Dated igned Francis W. Lang 521-920-0400 Name and telephone numberof contact person: Please print legibly NOTE: An amendmentto a Certificate of Limited Partnership or Foreign Limited Partnership must be signed by at least one general partner. Make check payable to "Secretary of State". Your cancelled Check is your Receipt. STATE OF MINNESOTt,DEPARTMENT of STATE FILED Submit this form and the filing fee of $50.00 to: AU b — 8 2003 9 Secretary of State 9 Business Services Section 180 State Office Bldg., 100 Rev. Dr. Martin Luther King Jr. Blvd Z(j r— St. Paul, MN 55155-1299.(651)296-2803 Secretary of o• - All of the information on this form is public and required in order to process this filing. Failure to provide the requested information will prevent the Office from approving or further processing this filing. This document can be made available in alternative formats, such as large print, Braille or audio tape, by calling (651)296-2803/ Voice. ForTTY communication, contact Minnesota Relay Service at 1-800-627-3529 and ask them to place a call to (651)296-2803. The Secretary of State's Office does not discriminate on the -basis of race, creed, color, sex, sexual orientation, national origin, ige, marital status, disability, religion, reliance on public assistance, or political opinions or affiliations in employment or the provision of services. bus56 Rev. 3-03 DOMESTIC LIMITED PARTNERSHIP Certificate of Formation TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING: WHEREAS, a Certificate of Limited Partnership, duly executed, has been filed for record in the office of the Secretary of State, on the 6th day of December —_ A. D. 19-&5—for the formation of Broadwa Lairel A Limited Partncrshi under and in accordance with the provisions of the Minnesota Uniform Limited Partnership Act, Chapter 322A, Minnesota Statutes; NOW, THEREFORE, by virtue of the powers and duties vested in me by law, as Secre- tary of State of the State of Minnesota, I do hereby certify that the said Broadwa LaHel A Limited Yartn shi is a legally organized Limited Partnership under the laws of this State. Witness my official signature hereunto sub- scribed and the Great Seal of the State of Minnesota hereunto affixed this sixth day of December in the year of our Lord one thousand nine Jhunundred and eighty-five 4r1 i'�lill"t Awrr 111 Secretary of State. v 7:3"7 LIMITED PARTNERSHIP AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP OF BROADWAY LANEL, A LIMITED PARTNERSHIP This Limited Partnership Agreement and Certificate of Limited Partnership is entered into this 5th day of December, 1985, byand between Francis W. Lang ("Lang") and Eugene M. Nelson (" Nelson ) (collectively the "General Partners") and Lang and Nelson (collectively the "Initial Limited Partners"). I. Formation of Partnership. The parties hereto do hereby form Broadway LaNel, A Limited Partnership, a Minnesota limited partnership (the "Partnership"), to be organized and operated in compliance with the provisions of the 1976 Uniform Limited Partnership Act, as codified in Chapter 322A of the Minnesota Statutes. The parties agree that they shall promptly record in the appropriate office in the State of Minnesota this Limited Partnership Agreement and Certificate of Limited Partnership and any additional or supplemental certificates of limited partnership that may be required. 1.1 Name. The business of the Partnership shall be conducted under the firm name and style of "Broadway LaNel, A Limited Partnership". 1.2 Principal Place of Business. The location of the principal office of the Partnership will be 4601 Excelsior Blvd., Suite 650, Minneapolis, MN 55416. 1.3 Agent for Service of Process. The name and address of the agent for service of process is Francis W. Lang, 4601 Excelsior Blvd., Suite 650, Minneapolis, 1. MN 55416. 1.4 Names and Addressesof Partners are: Partners. The names and addresses of the General Partners and the Initial Limited Lang 4601 Excelsior Blvd., Suite 650 Minneapolis, MN 55416 Nelson 4601 Excelsior Blvd., Suite 650 Minneapolis, MN 55416 1.5 Term. The Partnership shall continue until December 31, 2025, unless earlier terminated pursuant to the provisions of the Limited Partnership Agreement, as amended, or by operation of law. II. Purpose and Character of the Business. The business of the Partnership is to invest in existing income-producing real estate projects. III. Capital. The Partners have made and hereby agree to make the following contributions to the capital of the Partnership: 3.1 General Partner. The General Partners have made cash contributions as follows: Lang $6.00 Nelson $4.00 3.2 Limited Partners. The Limited Partners have made cash contributions as follows: Lang $54.00 Nelson $36.00 3.3 Admission of Additional Limited Partners. The General Partners in their discretion may admit additional limited partners to the Partnership without the consent of the Initial Limited Partners. IV. Assignment of Limited Partners' Interest. The Partnership interest of the Initial Limited Partners may not be assigned, pledged, mortgaged, sold or otherwise disposed of, and the Initial Limited Partners shall not have the right to substitute assignees in their place, without the written consent of the General Partner, which consent may not be unreasonably withheld. V. Withdrawal of General Partner. The General Partners shall not be permitted to sell, tz_nsfer or assign their interest in the Partnership without the conent of the Initial Limited Partners. VI. Distributions. The General Partners are entitled to 108 of the net income, profits, losses and cash distributions of the Partnership as follows: Lang 603 Nelson 408 -2- [1 The Initial Limited Partners are entitled to the Of the net income, profits, losses and cash distributions of the Partnership,remaining f the to be divided as follows: Lang Nelson 608 408 IN WITNESS WHEREOF, Agreement and Certificate the parties hereto have executed this this 5th day of -3- AMENDMENT TO AMENDED LIMITED PARTNERSHIP AGREEMENT OF BROADWAY LANEL, A LIMITED PARTNERSHIP The First Amended Limited Partnership Agreement dated as of December 1, 1986 (the "Partnership Agreement') of Broadway LaNel, A Limited Partnership (the "Partnership") is hereby amended as follows: The term of the Partnership set forth in Article 1.4 shall continue until December 31, 2033, unless dissolved, terminated and liquidated prior thereto under the provisions of Article XIII. The undersigned General Partners of the Partnership hereby represent that this Amendment to the Limited Partnership Agreement of Broadway LaNel, A Limited Partnership is duly authorized by the Partners of the Partnership in accordance with the terms of Article 8.5 of the Partnership Agreement. IN WITNESS WHEREOF, the undersigned General Partners have executed this Amendment as of this 5`" day of August, 2003. GENERAL Lang Nelson FIRST AMENDED LIMITED PARTNERSHIP AGREEMENT OF BROADWAY LANEL, A LIMITED PARTNERSHIP Date ^6ciaber _, 1986 THE LIMITED PARTNERSHIP INTERESTS (THE "UNITS") EVIDENCED BY THIS FIRST AMENDED LIMITED PARTNERSHIP AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAW. THE UNITS MAY NOT BE OFFERED OR SOLD (WITHIN THE MEANING OF THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW) UNLESS SUCH OFFER AND SALE WILL NOT VIOLATE THE REGISTRATION PROVISIONS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS (EITHER IN CONNECTION WITH SUCH OFFER AND SALE OR THE INITIAL OFFER AND SALE OF THE UNITS) BY VIRTUE OF EXEMPTIONS CONTAINED IN SUCH LAWS. ANY SALE, ASSIGNMENT, TRANSFER, MORTGAGE, PLEDGE, ENCUMBRANCE, HYPOTHECATION OR OTHER DISPOSITION OF A UNIT BY A LIMITED PARTNER SHALL BE PERMITTED ONLY IF, AT THE REQUEST OF THE GENERAL PARTNERS OF THE PARTNERSHIP, SUCH LIMITED PARTNER OBTAINS, AT HIS SOLE EXPENSE, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THE PARTNERSHIP, TO THE EFFECT THAT SUCH SALE, ASSIGNMENT, TRANSFER, MORTGAGE, PLEDGE, ENCUMBRANCE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS. IN ADDITION, THE SALE, ASSIGNMENT, TRANSFER, MORTGAGE, PLEDGE, ENCUMBRANCE, HYPOTHECATION OR OTHER DISPOSITION OF THE UNITS IS RESTRICTED BY ARTICLE X AND CERTAIN OTHER PROVISIONS OF THIS LIMITED PARTNERSHIP AGREEMENT, REFERENCE TO ALL OF WHICH HEREBY IS MADE. LIMITED PARTNERSHIP AGREEMENT OF BROADWAY LANEL, A LIMITED PARTNERSHIP DtA,7 FIRST AMENDED LIMITED PARTNERSHIP AGREEMENT is entered into as of oe4eber L, 1986, by and among Francis W. Lang and Eugene M. Nelson (the "General Partners"), whose place of business is 4601 Excelsior Boulevard., Suite 650, Minneapolis, Minnesota 55416, and all other parties comprising the Limited Partners, who shall execute this agreement and whose names and addresses appear on Schedule A to this Agreement. I. Formation of the Partnership The parties hereto do hereby confirm the formation of a limited partnership (the "Partnership") pursuant to the provisions of the 1976 Uniform Limited Partnership Act, as codified in Chapter 322A of the Minnesota Statutes (the "Limited Partnership Act"). The original Limited Partnership Agreement and Certificate of Limited Partnership dated as of December 5, 1985 were filed with the Secretary of State of Minnesota on December 6, 1985. The parties hereby agree that they shall promptly file any additional or supplemental amended certificates of limited partnership that may be required in the appropriate office in the State of Minnesota and in such other offices as may be required, and that the parties shall comply with the other provisions and requirements of the Limited Partnership Act as in effect in Minnesota, which Act shall govern the rights and liabilities of the Partners, except as herein or otherwise expressly stated. 1.1 Name. The business of the Partnership is to be conducted under the name of: BROADWAY LANEL, A LIMITED PARTNERSHIP. 1.2 Principal Place of Business. The location of the principal place of business and the principal office of the Partnership shall be 4601 Excelsior Boulevard, Suite 650, Minneapolis, Minnesota 55416. The Partnership may also maintain offices at the Project and such other place of business as the General Partners may from time to time determine. 1.3 Names and Addresses. The names of the General Partners are Francis W. Lang and Eugene M. Nelson and the address of the General Partners is 4601 Excelsior Boulevard, Suite 650, Minneapolis, Minnesota 55416. The names and addresses of the Limited Partners are set forth on Schedule A attached hereto. 1.4 Term. The Partnership shall continue until December 31, 2025, unless dissolved, terminated and liquidated prior thereto under the provisions of Article XIII. 1.5 Agent for Service of Process. The name and address of the agent for service of process is Francis W. Lang, 4601 Excelsior Boulevard, Suite 650, Minneapolis, Minnesota 55416. -2- II. Definitions As used in this agreement, the following terms shall have the following meanings: 2.1 "Adjusted Capital Contributions" means the aggregate original capital contributions reduced, from time to time, by the total cash distributed from Net Proceeds of Sale or Refinancing with respect to the Units. Adjusted Capital Contributions shall not be reduced by distributions of Net Cash Flow. 2.2 "Affiliate" means (i) any person directly or indirectly controlling, controlled by or under common control with another person, (ii) any person owning or controlling 10% or more of the outstanding voting securities of another person, (iii) any officer, director, partner or employee of another person and (iv) if such other person is an officer, director, partner or employee, any such company for which such person acts in such capacity. 2.3 "General Partners" means Francis W. Lang and Eugene M. Nelson and any substitute General Partner as provided in Article XI. 2.4 "Limited Partners" means all parties who shall execute, either personally or by an authorized attorney—in—fact, this agreement as Limited Partners and comply with the conditions in Section 4.2, and any and all assignees of the Limited Partners, whether or not such assignees are admitted to the Partnership as substitute Limited Partners; provided, however, that an assignee of the interest of any Limited Partner shall not be considered a "Limited Partner" for purposes of Articles XI and XII hereof unless such assignee is admitted as a substitute Limited Partner as provided in Article X. 2.5 "Limited Partnership Unit" or "Unit" means the Partnership interest and appurtenant rights, powers and privileges of a Limited Partner and represents the stated capital contributions with respect thereto, all as set forth elsewhere in this agreement. 2.6 "Net Cash Flow" means Partnership cash funds provided from operations, without deduction for depreciation, but after deducting cash funds used to pay all other expenses, debt payments including payments of principal and interest on loans by the General Partners to the Partnership, capital improvements and replacements and less the amount set aside for restoration or creation of reserves. 2.7 "Net Proceeds of Sale or Refinancing" means the excess of gross proceeds from any new mortgaging of the Project or from the sale of the Partnership's interest in the Project over all costs and expenses of such new mortgaging or sale, including fees payable in connection therewith, and over the payments made or required to be made on any prior encumbrances against the Project in connection with such new mortgaging or sale. —3— 2.8 "Partners" means the General Partners and the Limited Partners. 2.9 "Partnership" means Broadway LaNel, A Limited Partnership, the limited partnership governed by this agreement. 2.10 "Project" means a 73 unit, three—story apartment building for residents who have reached the age of 55 years located at 6100 West Broadway, New Hope, Minnesota. III. Purpose and Character of the Business The purpose and character of the business of the Partnership shall be to acquire an interest in the Project upon such terms and conditions as the General Partners, in their absolute discretion, shall determine, including, without limitation, taking title to such properties subject to, or by assuming, any mortgage or other encumbrance against the Project; to own, lease, operate and manage the Project for income—producing purposes; to furnish services and goods in connection with the operation and management of the Project; to enter into agreements pertaining to the operation and management of the Project; to borrow funds for such purposes and to mortgage or otherwise encumber any or all of the Partnership's assets or properties to secure such borrowings; to sell or otherwise dispose of the Project and the assets of the Partnership; and to undertake and carry on all activities necessary or advisable in connection with the acquisition, ownership, leasing, operation, management and sale of the Project. IV. Capital 4.1 General Partners. The General Partners shall not be obligated to make any cash contributions to the capital of the Partnership except that, in the event that any General Partner has a negative balance in his capital account after dissolution and winding up of the Partnership, such General Partner will contribute to the Partnership an amount equal to the lesser of (a) the deficit balance in his capital account or (b) 1.01% of the total capital contributions of the Limited Partners. 4.2(a) Limited Partners --Capital Contribution. There shall be available for subscription by prospective Limited Partners an aggregrate of 100 Limited Partnership Units at a purchase price of $14,067.53 per unit. There is no minimum purchase and no limit on the sale of fractional units. The purchase price of $14,067.53 per Unit is payable as follows: —4— M $900 upon subscription. (ii) $2,500 on or before February 1, 1987; (iii) $2,850 on or before February 1, 1988; (iv) $2,700 on or before February 1, 1989; (v) $2,750 on or before February 1, 1990; and (vi) $2,367.53 on or before February 1, 1991. Each Limited Partner shall contribute to the capital of the Partnership the amounts set forth opposite the name of the Limited Partner on Schedule A, at the times specified therein. (b) Additional Contributions by Limited Partners. The Limited Partners shall not be obligated to make any additional contributions to the capital of the Partnership except as provided in Section 4.2(a); provided, however, that a Limited Partner's relative ownership interest in the Partnership may be diluted if the General Partners raise working capital for the Partnership by offering additional Limited Partnership interests, as provided for in Section 4.9, and such Limited Partner chooses not to subscribe for his pro rata portion of such additional interests. 4.3 Purchase of Partnership Units of Limited Partner in Default. The failure of a Limited Partner to make an installment of capital when due could jeopardize the Partnership's ability to meet its obligations. If a Limited Partner defaults, the remaining Limited Partners could lose their entire investment in the Partnership unless additional financing could be arranged or the defaulting Limited Partner's Units could be sold. For these reasons, if any Limited Partner shall fail to pay any portion of his required contributions to the capital of the Partnership within 15 days after the due date thereof, as provided in Section 4.2(a) (an event of default), the Partners shall have the opportunity to purchase from such Limited Partner (the "Defaulting Partner") those Units on which the Defaulting Partner is in default (the "Defaulted Units") in accordance with the terms of this Section 4.3. (a) If an event of default occurs, the General Partners shall have a right of first refusal to purchase the Defaulted Units for 15 days following the event of default. If the General Partners do not exercise their right of first refusal, the General Partners shall promptly give notice to all of the Limited Partners, stating the number of Limited Partnership Units that are available for purchase. Within 45 days after such notice is given, any or all of the Limited Partners may elect, by notifying the Partnership of such election, to purchase such Defaulted Units. If more than one Limited Partner elects to purchase such Defaulted Units, such Defaulted Units and the purchase price therefor —5— shall be allocated among them pro rata on the basis of their respective interests in Partnership income, profits, gains and losses under Section 5.1 hereof. The General Partners shall promptly notify each Limited Partner of the number of Defaulted Units to be purchased by him and the purchase price therefor. Upon notification of a right to purchase, a Limited Partner must make his purchase on a timely basis, or his right to purchase is waived, with time being of the essence. (b) The purchase price for any Defaulted Units shall be an amount equal to 25% of the capital contributions actually made by the Defaulting Partner hereunder and attributable to the Defaulted Units and shall be payable to the Defaulting Partner on or prior to the thirtieth (30th) day following the date on which one or more of the Partners exercises this option to purchase the Defaulted Units. Any Partner purchasing any Defaulted Units pursuant to this Section 4.3 shall become the owner thereof and shall assume in writing all of the obligations of the Defaulting Partner with respect thereto, effective as of the date upon which such Units become subject to purchase, and shall pay to the Partnership, at the time or times and subject to terms and conditions provided for in Section 4.2(a) hereof, the additional capital contributions required to be made with respect to the Defaulted Units so purchased and any capital contributions in default. The assignment of any Defaulted Units pursuant to this Section 4.3 shall be effected, as of the date upon which such Defaulted Units became subject to purchase, automatically upon payment of the purchase price therefor, without the necessity of any action on the part of the Defaulting Partner. (c) Each Limited Partner agrees that if all or any portion of his Defaulted Units are purchased pursuant to this Section 4.3 he will surrender any certificate evidencing his limited partnership interest and execute all instruments requested by the Partnership or the purchasing Partner for the purpose of confirming or evidencing the assignment of such Defaulted Units. Notwithstanding that all or a portion of the Limited Partnership Units of a Defaulting Partner are purchased pursuant to this Section 4.3, the Defaulting Partner shall be and remain liable for the full amount of any capital contributions payable with respect to any of his Limited Partnership Units, and the Partnership may collect from the Defaulting Partner by legal process the entire amount of the unpaid capital contribution or contributions attributable to such Defaulted Units, together with all court costs and reasonable attorneys' fees; provided, however, that in the event such Defaulted Units of a Defaulting Partner are resold hereunder, the continuing liability of the Defaulting Partner to make capital contributions to the Partnership shall be reduced to the extent that the purchaser of such Units makes such contributions to the Partnership, and further provided that the Defaulting Partner shall become the owner of the Defaulted Unit to the extent of his additional capital contribution. (d) Any Defaulted Units remaining unsold may be sold by the General Partners to persons other than Partners, subject always to applicable securities, tax and partnership laws. 4.4 Capital Accounts. A separate capital account shall be maintained by the Partnership for each Partner. The capital account of each Partner shall be credited with the amount of his contribution to the capital of the Partnership and with the amount of net income of the Partnership and gain on the sale of the Project allocated to such Partner. The capital account of each Partner shall be debited with the amount of any distributions made by the Partnership to such Partner and with the amount of net loss of the Partnership and loss on the sale of the Project allocated to such Partner. Except as provided in Section 4.1, in the event that any Partner has a negative capital account balance after dissolution and winding up of the Partnership, such Partner will not be obligated to contribute capital in the amount of such deficit. 4.5 No Right to Return of Contribution. The Limited Partners shall have no right to withdraw or to receive a return of their contributions to the capital of the Partnership, as reflected in their respective capital accounts from time to time, except upon the dissolution and liquidation of the Partnership pursuant to Article XIII. Pending investment, the Partnership will maintain the Limited Partners' capital contributions (including the capital reserve fund) in short—term liquid investments. 4.6 Loans to Partnership; No Interest on Capital. The General Partners may make loans or advances to the Partnership to defray cash deficits or for other Partnership business purposes, but are not obligated to do so. Limited Partners may make loans to the Partnership from time to time, as authorized by the General Partners, in excess of their contributions to the capital of the Partnership. No loan by a Partner to the Partnership shall be treated as a contribution to the capital of the Partnership for any purpose hereunder, nor shall any loan entitle a Partner to any increase in his share of the profits and losses and cash distributions of the Partnership, nor shall any loan constitute a lien against the Project. The amount of any loans and the interest thereon shall be determined by the General Partners, but the interest shall not exceed 1.5% over the base rate of Norwest Bank Minneapolis, National Association, as adjusted from time to time. Any loan by a Partner to the Partnership shall be an obligation of the Partnership to such Partners. No interest shall be paid by the Partnership on the contributions to the capital of the Partnership by the Partners. 4.7 Purchase of Limited Partnership Units by the General Partner. The General Partners and their Affiliates may subscribe for and acquire Limited Partnership Units for their own accounts. With respect to such Units, the General Partners and their Affiliates shall have all their rights afforded to Limited Partners under this agreement, except as expressly provided in this agreement. 4.8 Nonrecourse Loans. A creditor who makes a nonrecourse loan to the Partnership cannot have or acquire, at any time as a result of —7— making the loan, any direct or indirect interest in the profits, capital or property of the Partnership other than as a secured creditor. 4.9 Additional Voluntary Capital Contributions. If the General Partners decide in their sole discretion that the Partnership requires additional working capital and, after making a reasonably diligent inquiry, determine that the Partnership will be unable to borrow necessary funds or that it is undesirable for the Partnership to do so, the General Partners may seek to raise funds necessary to meet immediate and reasonable working capital needs of the Partnership, and for no other purposes, by offering for sale additional Partnership interests in the following manner: (a) Such additional Partnership interests shall be offered to all existing Partners of the Partnership, including the General Partners, pro rata based on the allocation of income and losses provided in Section 5.1. (b) No Partner shall be obligated to make any such additional contribution to the Partnership's capital; provided, however, that the General Partners may re -offer any additional Partnership interests that are not purchased by existing Partners first to other Partners and then to third parties. (c) The General Partners may, in their absolute discretion (without participation by the Limited Partners), determine the proportion of Partnership ownership interests that shall be allocated to any such additional Partnership interests (i.e., the amount of dilution) and may do so by taking into account all relevant factors and without any obligation to allocate such additional Partnership interests on a dollar for dollar basis proportionate to the allocation made in connection with the initial offering of Units hereunder, provided that such allocation shall be consistent with the General Partners' fiduciary obligations. (d) In connection with any such offering, the General Partners shall comply with applicable securities, tax and partnership laws, including the filing of amended certificates of limited partnership in the appropriate office of the State of Minnesota. (e) The Power of Attorney provided in Section 8.5 shall allow the General Partners to execute on behalf of all Partners whatever amendment or amendments to this Limited Partnership Agreement and Certificate of Limited Partnership as may be necessary to reflect the offer and sale of additional Partnership interests under this Section 4.9. Except for the limited purposes described above, the General Partners shall have no right to call for or accept additional capital contributions from any Limited Partner. am V. Allocations of Profits, Gains and Losses• Distributions to Partners The Partners agree that the income, profits, gains and losses of the Partnership shall be allocated, and that cash distributions of the Partnership shall be made, as follows: 5.1 Allocation of Income, Profits, Gains and Losses. (a) For income tax purposes, all income, profits, gains and losses of the Partnership for each fiscal year, other than any gain or loss realized upon the sale, exchange or other disposition or refinancing of all or substantially all of the Project, computed in accordance with generally accepted accounting principles consistently applied, using such methods of accounting for depreciation and other items as the General Partners determine to use for federal income tax purposes, shall be allocated as of the end of each fiscal year to each Partner based on his varying interest in the Partnership during such fiscal year. The Partnership shall determine, in the discretion of the General Partners and as recommended by the Partnership auditors, whether to prorate items of income and deduction according to the portion of the year for which a Partner was a member of the Partnership or whether to close the books on an interim basis and divide such fiscal year into two or more segments. Subject to Sections 5.1(b) and (c), for income tax purposes, income, profits, gains and losses, other than any gain or loss realized upon the sale, exchange or other disposition or refinancing of all or substantially all of the Project, shall be allocated 98% to the Limited Partners pro rata and 2% to the General Partners. (b) Notwithstanding anything in this Section 5.1 to the contrary, an amount of Partnership net losses for federal income tax purposes equal to the amount of any loans made to the Partnership by a Partner in that year shall be allocated to such Partner in the amount of such loans; but all other Partnership net losses from operations for federal income tax purposes for that year shall be allocated in accordance with Section 5.1. (c) Notwithstanding anything in this Section 5.1 to the contrary, an amount of Partnership gross income from operations for federal income tax purposes equal to the amount of any loans that are repaid by the Partnership in that year shall be allocated to the Partners receiving such repayment; provided that such gross income shall only be allocated to the extent losses had previously been allocated pursuant to Section 5.1(b) with respect to such loans and no corresponding allocation of income or gains had previously been made pursuant to this Section 5.1(c) or Section'5.1(a); and provided further that all other Partnership gross income and net income from operations for federal income tax purposes for that year shall be allocated in accordance with Section 5.1. 5.2 Allocation of Gain or Loss Upon Sale, Exchange or Other (a) The gain realized upon the sale, exchange or other disposition of all or substantially all of the Project shall be allocated first to the Partners in an amount equal to the negative balances in their respective capital accounts (pro rata based on the relative negative balances), then to the Limited Partners until the aggregate balance in their capital accounts equals their aggregate Adjusted Capital Contributions, then to the General Partners until the aggregate balance in their capital accounts equals 1/49th times the aggregate balance in the Limited Partners' capital account, and the balance of any remaining gain shall then be allocated 70% to the Limited Partners pro rata and 30% to the General Partners divided as follows: 18% to Francis W. Lang and 12% to Eugene M. Nelson. (b) Any loss realized upon the sale, exchange or other disposition of all or substantially all of a Project shall be allocated 98% to the Limited Partners pro rata and 2% to the General Partners. 5.3 Distributions of Net Cash Flow. The Partnership shall distribute to the Partners, within 60 days after the first year of operation and thereafter on a semiannual basis, any Net Cash Flow of the Partnership after payment of fees to the General Partners and Affiliates, as determined by the General Partners, in the following manner: 98% to the Limited Partners pro rata and 2% to the General Partners; provided, however, that the General Partners may determine, in their absolute discretion, to make more frequent distributions of Net Cash Flow; provided further, however, that the General Partners, in their sole discretion, may first apply such amounts as they deem necessary and appropriate to the working capital of the Partnership, for contingent or future liabilities of the Partnership and/or for repair, replacement or improvement of the Project, provided that no capital improvements will be made that will change the nature of the Project. 5.4 Distribution of Net Assets Upon Refinancing Sale or Disposition of the Project. Net Proceeds of Sale or Refinancing of the Project shall not be reinvested in additional properties. The Partnership shall distribute such Net Proceeds remaining after the repayment of loans secured by the Project and other Partnership debts and liabilities relating to the Project, including loans by the General Partners and unpaid fees due LaNel Financial Group, Inc. and Lang—Nelson Associates, Inc. under Sections 6.2(b) and 6.2(c), in the following manner: 98% to the Limited Partners pro rata and 2% to the General Partners until the Limited Partners have received an amount equal to their Adjusted Capital Contributions; then 70% to the Limited Partners pro rata, 18% to Francis W. Lang and 12% to Eugene M. Nelson. —10— 5.5 Limitation on Loss Allocation. Notwithstanding Sections 5.1 and 5.2, no allocation of loss may cause the sum of the deficit capital account balances of the Partners to exceed the "minimum gain" (determined at the end of the Partnership taxable year to which the allocation relates), which is defined as the excess of the outstanding principal balance of nonrecourse indebtedness of the Partnership over the adjusted taxable basis of the Project; and provided further that the Partners with deficit capital account balances resulting in whole or in part from allocations of loss or deduction attributable to nonrecourse indebtedness shall be allocated income or gain in an amount no less than the "minimum gain" and at a time no later than the time at which the "minimum gain" is reduced below the sum of such deficit capital account balances or as soon thereafter as possible. 5.6 Negative Capital Accounts. In the event that any Limited Partner has a negative capital account after dissolution and winding up of the Partnership, such Limited Partner shall not be obligated to contribute capital in the amount of such deficit. In the event that any General Partner has a negative balance in his capital account after dissolution and winding up of the Partnership, such General Partner will contribute to the Partnership an amount equal to the lesser of (a) the deficit balance in its capital account or (b) 1.01% of the total capital contributions of the Limited Partners. 5.7 Allocation Among General Partners. Except as specifically provided in Sections 5.2 and 5.4, any allocations of taxable income or loss among the General Partners and any distributions of cash to the General Partners shall be made in the following ratios: 1.2% to Francis W. Lang and 0.8% to Eugene M. Nelson. VI. the Gene Without limiting the generality of the powers conferred upon the General Partners in Article VII, the Partners agree that the business of the Partnership shall be conducted as follows: 6.1 Offering of Limited Partnership Units and Acquisition and Management of Proiects. The actions of the General Partners on behalf of the Partnership in causing Limited Partnership Units to be offered, causing the interest in the Project to be acquired and causing the management of the Project to be undertaken are hereby in all respects authorized, approved, ratified and confirmed. 6.2 Fees and Compensation to the General Partner and Affiliates. The following forms and amounts of fees and compensation to the General Partners and their Affiliates are hereby in all respects authorized, approved, ratified and confirmed: —11— (a) Subject to Section 7.2, the General Partners will be reimbursed the amount of any advances made to the Partnership and any direct expenses incurred on behalf of the Partnership, including interest on any such advances as provided in Section 4.6. Although the General Partners do not contemplate rendering any services or providing goods other than as specifically provided below, they may receive compensation for general services rendered or goods sold to the Partnership at rates comparable to those obtainable from unaffiliated parties. (b) The Partnership will pay LaNel Financial Group, Inc. or its Affiliates the following fees and compensation: (i) An organization fee in the amount of $150,200. (ii) A rent -up fee in the amount of $14,100. (iii) A syndication fee in the amount of $5,000. (iv) A financial projection and consulting fee in the amount of $75,000. The above fees and compensation to be paid to LaNel Financial Group, Inc. by the Partnership shall be paid at such time or times that Limited Partner Capital Contributions received by the Partnership provide the Partnership with sufficient funds to pay such fees and compensation. (c) The Partnership will pay Lang -Nelson Associates, Inc. or its Affiliates the following fees and compensation: (i) A monthly property management fee of 5% of the Gross Receipts of the project for the preceding month, which fee is to be passed on to the tenants. After December 31, 1987, the property management fee may be increased, but only to match fees competitive with others in the property management industry. (The term "Gross Receipts" means (a) tenant rentals collected for each month during the term of the property management agreement, excluding any tenant security deposits; (b) cleaning, security and damage deposits forfeited by tenants in such period; (c) any and all receipts from the operation of the Project received and relating to such period; (d) proceeds from rental interruption insurance; and (e) any other sums and charges collected in connection with termination of the tenant leases.) (ii) A partnership management fee of 1% of the Gross Receipts of the Project for the fiscal year ending on December 31, 1986 and each December 31 thereafter, payable on February 1, 1987 and each February 1 -12- thereafter, through and including the year in which the Project is sold, for administrative services performed during each year. (iii) Reconstruction or renovation fees equal to 10% of any reconstruction or renovation costs incurred by the Partnership. (iv) A Project resale fee with respect to the Project, which fee may not exceed 3% of the gross sales price of the Partnership's interest in the Project and which will be payable in the event of a sale of the Partnership's interest in the Project, provided that the Project resale fee with respect to the Project shall be reduced to the extent and by the amount of any real estate commissions or other brokerage commissions paid (either by the Partnership or by the ultimate purchasers of the Project) to all persons with respect to the Project. (v) A Project refinancing fee with respect to the refinancing of any mortgage, which fee may not exceed 1% of the gross refinanced amount and which will be payable in the event the Project is refinanced. The Project refinancing fee with respect to a Project mortgage shall be in addition to any refinancing fees or any other type of commissions for finding substitute financing paid (either by the Partnership or by the ultimate refinancing entity) to any persons with respect to each Project mortgage. VII. Rights, Powers and Duties of General Partners The Partners agree that the General Partners shall have the following rights, powers and, where provided, duties in connection with the conduct of the business of the Partnership. The General Partners shall manage the affairs of the Partnership in a prudent and businesslike fashion and shall use their best efforts to carry out the purposes and character of the business of the Partnership. The General Partners shall devote such of their time as they deem necessary to the management of the business of the Partnership. 7.1 Appointment of General Partners. The Limited Partners delegate to the General Partners the sole and exclusive authority for all aspects of the conduct, operation and management of the business of the Partnership, including making any decision regarding the sale, exchange, lease, mortgaging, financing or other disposition of the Partnership's assets, amendment of this agreement or dissolution and liquidation of the Partnership, subject to the requirement of obtaining the prior consent of —13— a majority of the Limited Partners, by interest, to the sale of all or substantially all of each Project. With the exceptions stated above, the General Partners shall have the exclusive authority to make all decisions affecting the Partnership and to exercise all rights and powers granted to the General Partners. 7.3 Reimbursement of Expenses. The Partnership shall reimburse the General Partners for any actual and necessary direct expenditures of their own funds in connection with the organization of the Partnership and the offer and sale of the Units. The General Partners also shall be reimbursed, without interest, for any actual and necessary direct expenditures of their own funds in connection with legal and auditing fees and expenses directly related to the Partnership; provided, that the General Partners will not be reimbursed or paid for any of their general or administrative expenses. The General Partners will not be reimbursed for rent or depreciation, utilities, capital equipment and other administrative items. 7.4 Other Activities of General Partners. The General Partners during the term of this Partnership may engage in and possess an interest for their own accounts in other business ventures of every nature and description, independently or with others, including, but not limited to, the ownership, financing, leasing, operation, management, syndication, brokerage, investment in and development of real estate; and neither the Partnership nor any Partner, by virtue of this agreement, shall have any right in and to said independent ventures or any income or profits derived therefrom. 7.5 Indemnification and Liability of General Partners. The Partnership shall indemnify any General Partner against any claim or liability incurred by or imposed upon him in the good faith exercise of his judgment relative to the Partnership, provided he was not guilty of misconduct or negligence. Neither the Partnership nor any Partner shall have any claim against any General Partner by reason of any act or omission (including acts or omissions of the General Partner acting as the "tax matters partner" pursuant to Section 6231 of the Internal Revenue Code) of any General Partner in the exercise of his judgment relative to the Partnership, provided he was not guilty of misconduct or negligence. In the event that a claim for indemnification for liabilities arising under the Securities Act of 1933 (other than the payment by the Partnership of expenses incurred or paid by any General Partner in the successful defense of any such action, suit or proceeding) is asserted by any General Partner in connection with the securities being registered, the Partnership, unless in the opinion of its counsel the matter has been settled by controlling precedent, will submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue; furthermore, any settlement in connection with such a claim will not be effective unless approved by a court of appropriate -14- jurisdiction after such court has been advised of the current position of the Securities and Exchange Commission on such issue. VIII. Provisions Applicable to Limited Partners The following provisions shall apply to the Limited Partners, and the Limited Partners hereby agree thereto. 8.1 Liability. Except as otherwise provided by Minn. Stat. §322A.26 or any amended or successor section, the Limited Partners shall be liable with respect to the Partnership only to the extent of the amount of the contribution to capital required to be made by such Limited Partners as provided in Section 4.2. 8.2 No Participation in Management. No Limited Partner shall take any part or participate in the conduct of, or have any control over, the business of the Partnership, and no Limited Partner shall have any right or authority to act for or to bind the Partnership. 8.3 No Withdrawal or Dissolution. No Limited Partner shall at any time withdraw from the Partnership except as provided in this agreement. No Limited Partner shall have the right to have the Partnership dissolved or to have his contribution to the capital of the Partnership returned except as provided in this agreement. The death or bankruptcy of a Limited Partner shall not dissolve or terminate the Partnership. 8.4 Consent. To the fullest extent permitted by law, each of the Limited Partners hereby consents to the exercise by the General Partners of all the rights and powers conferred on the General Partners by this agreement. 8.5 Power of Attorney. Each of the Limited Partners hereby irrevocably constitutes and appoints the General Partners, and each of them individually, his or its true and lawful attorney, in his or its name, place and stead to make, swear to, execute, acknowledge and file: (a) any and all certificates of limited partnership of the Partnership and any amendments thereto that may be required by the Limited Partnership Act, including this agreement and amendments required for the substitution of a Limited Partner, for the reflection of return of capital to any Partner or the contribution of any additional capital, and the continuation of the business of the partnership by a substitute General Partner; (b) any certificate or other instrument and any amendments thereto that may be required to be filed by the Partnership in order to accomplish the business and the purposes of the Partnership, including any business certificate, fictitious name certificate or assumed name certificate; -15- (c) any cancellation of such certificates of limited partnership and any and all other documents and instruments that may be required upon the dissolution and liquidation of the Partnership; (d) new certificates of limited partnership and any and all documents and instruments that may be required to effect a continuation of the business of the Partnership as provided in this agreement; and (e) any amended limited partnership agreement or certificate of limited partnership that has been duly adopted hereunder or authorized hereby. It is expressly intended that the foregoing power of attorney is (1) coupled with an interest and shall survive the bankruptcy, death, incompetence or dissolution of any person hereby giving such power and (2) does not affect the Limited Partners' rights to approve or disapprove any amendments to this agreement or other matters as provided elsewhere herein. If a Limited Partner assigns his interest in the Partnership, as provided in Article X, the foregoing power of attorney shall survive the delivery of the instruments effecting such assignment for the purpose of enabling the General Partners, and each of them individually, to sign, swear to, execute and acknowledge and file any and all amendments to the certificates of limited partnership of the Partnership and other instruments and documents necessary to effectuate the substitution of the assignee as a Limited Partner. IX. Books of Account; Reports and Fiscal Matters 9.1 Books; Place; Access. The General Partners shall maintain accurate books of account and each and every transaction shall be entered therein. The books of account and the records described in Minn. Stat. §322A.05 or any amended or successor section shall be kept at the office of the Partnership in Minneapolis, Minnesota, and any Partner or his legal counsel may inspect and copy the Partnership books and records (including the information specified in Minn. Stat. §32ZA.28 or any amended or successor section) at any time during ordinary business hours. The General Partners shall have no obligation to deliver or mail to Limited Partners copies of certificates of limited partnership or amendments thereto. 9.2 Method. The books of account shall be kept in accordance with generally accepted accounting principles consistently applied using the accrual method of accounting. -16- 9.3 Fiscal Year. The fiscal year of the Partnership shall end on December 31 of each year. 9.4 Reports to Limited Partners. The General Partners shall cause the following reports to be prepared and distributed to the Limited Partners and to assignees of Limited Partnership Units: (a) Tax Information: Within 90 days after the end of each calendar year, all information necessary for the preparation of federal income tax returns by Limited Partners and assignees of Limited Partnership Units. (b) Annual Report: Within 120 days after the end of each calendar year, an annual report containing a statement of income and expense, schedule of expenses and a cash flow statement. (c) Final Statements: Upon dissolution, a statement listing the assets and liabilities of the Partnership and the intent of the General Partners as to the conduct of the winding up process and, upon completion of the winding up process, a statement describing the disposition of Partnership assets, the provisions made for payment of contingent liabilities and the application of the winding up proceeds. - 9.5 Tax Matters Partner. Francis W. Lang shall act as "tax matters partner" for the Partnership pursuant to Section 6231 of the Internal Revenue Code. 9.6 Bank Accounts. Except as otherwise described in the Memorandum, the General Partners shall select a bank account or accounts for the funds of the Partnership, and all funds of every kind and nature received by the Partnership shall be deposited in such account or accounts. The General Partner shall designate from time to time the persons authorized to withdraw funds from such accounts. The funds of the Partnership will not be commingled with funds of any other person or entity. 9.1 Tax Elections. In the event of a transfer of all or part of the Partnership interest of any Partners, the Partnership, in the sole discretion of the General Partners, may elect pursuant to Section 754 of the Internal Revenue Code of 1954 (or any successor provisions) to adjust the basis of the assets of the Partnership. X. Assignment of Limited Partner's Interest The Partnership interest of a Limited Partner may not be assigned, pledged, mortgaged, sold or otherwise disposed of, and no Limited Partner shall have the right to substitute an assignee in his place, except as provided in this Article X. -17- 10.1 Limited Partners. (a) Each Limited Partner may transfer or assign all or part of his interest in the Partnership as provided in the Limited Partnership Act; provided, however, that no transfer or assignment shall be effective until written notice thereof is received by the General Partners. (b) No assignee or transferee of a Limited Partner will be entitled to become a substitute Limited Partner unless the General Partners have consented to such transfer or assignment. The General Partners have complete discretion in determining whether to admit an assignee or transferee to the Partnership as a substitute Limited Partner, and no substitute Limited Partner may be admitted to the Partnership if such change in Partners would result in a termination of the Partnership for federal income tax purposes. Moreover, while the General Partners have discretion in determining whether to admit an assignee or transferee as a substitute Limited Partner, they are required to take three factors into account in making their determination: (i) whether the proposed transfer or assignment will comply with applicable state and federal securities laws, (ii) whether the proposed transferee or assignee satisfied applicable suitability standards imposed by state or federal agencies and (iii) whether the proposed transfer or assignment will result in adverse tax consequences to the Partnership. The General Partners may condition their consent upon the receipt of favorable opinions of counsel regarding these factors. If the General Partners consent to the assignment or transfer of a Limited Partner's interest in the Partnership, the assignee or transferee shall become a Limited Partner of record on the first day of the month following the month in which the transfer or assignment occurs. (c) No purported sale, assignment or transfer by a Limited Partner of less than one Unit will be permitted or recognized, except by gift, inheritance, family dissolutions, transfers to Affiliates or by operation of law. (d) If a Limited Partner dies, his executor, administrator or trustee, or if he is adjudged incompetent or insane, his committee guardian or conservator, or if he becomes bankrupt, the receiver or trustee of his estate, shall have the rights of a Limited Partner for the purpose of settling or managing his estate and such power as the decedent or incompetent possessed to assign all or any part of his Units and to join with the assignee thereof in satisfying conditions precedent to such assignee becoming a substitute Limited Partner. The death, dissolution or adjudication of incompetency or bankruptcy of a Limited Partner shall not dissolve the Partnership. (e)' By executing and adopting this agreement, each Limited Partner hereby consents to the admission of additional or substitute Limited Partners by the General Partners and to any assignee of his Units becoming a substitute Limited Partner. -18- 10.2 Documents and Expenses. As a condition to admission as a substitute Limited Partner, an assignee of all or part of the Partnership interest of any Limited Partner or the legatee or distributee of all or any part of the Partnership interest of any Limited Partner shall execute and acknowledge such instruments, in form and substance satisfactory to the General Partners, as the General Partners shall deem necessary or advisable to effectuate such admission and to confirm the agreement of the person being admitted as such substitute Limited Partner to be bound by all of the terms and provisions of this agreement. Such assignee, legatee or distributee shall pay all reasonable expenses in connection with such admission as a substitute Limited Partner, including, but not limited to, legal fees and costs of the preparation, filing and publishing of any amendment to the certificates of limited partnership of the Partnership if necessary or desirable in connection therewith. 10.3 Acquit Partnership. In the absence of written notice to the Partnership of any assignment of a Partnership interest, any payment to the assigning Partner or his executors, administrators or representatives shall acquit the Partnership of liability to the extent of such payment to any other person who may have an interest in such payment by reason of an assignment by the Partner or by reason of such Partner's death or otherwise. 10.4 Restriction on Transfer. Notwithstanding the foregoing provisions of this Article X, no sale or exchange of a Partnership interest may be made if the interest sought to be sold or exchanged, when added to the total of all other Partnership interests sold or exchanged within the period of 12 consecutive months prior thereto, would result in the termination of the Partnership under section 708 of the Internal Revenue Code of 1954 (or any successor section). 10.5 Endorsement on Certificate. The foregoing provisions governing the assignment of the Partnership interest of a Limited Partner shall be indicated by an endorsement on the certificate evidencing such Limited Partner's interest in the Partnership, in the form as determined from time to time by the General Partners. XI. Withdrawal, Expulsion and Replacement of the General Partners 11.1 Withdrawal. A General Partner may not withdraw from the Partnership without first providing 90 days written notice prior to the date of withdrawal to all Partners and without the approval of a majority of the Limited Partners, by interest (excluding any Limited Partnership Units held by the General Partner for its own account). The Limited Partners shall vote to accept or reject the proposed substitute General Partner, if any, in person or by proxy at a special meeting called by the General Partners for such purpose following at least 30 days written notice to all Partners. —19— 11.2 Removal. A General Partner may be removed from the Partnership as a General Partner with or without cause by a vote (rendered in person or by proxy) of a majority of Limited Partners, by interest (excluding any Limited Partnership Units held by the General Partner for its own account). 11.3 Expulsion. A General Partner shall be expelled without further action for "cause," which means (1) final judicial determination or admission of his bankruptcy or insolvency, or (2) final judicial determination that such General Partner (i) was grossly negligent in his failure to perform his obligations under this agreement, (ii) committed a fraud upon the Partners or upon the Partnership, (iii) committed a felony in connection with the management of the Partnership or its business, or (iv) was in material breach of his obligations under this agreement. In the event of expulsion of a General Partner, such General Partner shall be deemed to have surrendered to the Partnership his entire interest in the Partnership and shall be entitled to no compensation therefor. 11.4 Replacement of General Partner. In the event of (i) the withdrawal, removal or expulsion of a General Partner or all of the General Partners under circumstances that the Partnership lacks a General Partner or (ii) the written proposal of Limited Partners holding 10% or more of the issued and outstanding Limited Partnership Units, and upon providing at least 30 days written notice to all Partners, the Limited Partners may call a special meeting of the Partnership for the purpose of replacing a General Partner. At such meetings, a General Partner may be replaced without cause by a vote (rendered in person or by proxy) of a majority of the Limited Partners, by interest (excluding any Limited Partnership Units held by the General Partner for its own account). The General Partners shall cause an amendment to the Partnership's certificate of limited partnership to be filed within 30 days of the withdrawal of a General Partner, the admission of a new or substitute General Partner or as otherwise required by Minnesota Statutes, Section 322.Al2 (or any successor provision). 11.5 Liability of Withdrawing General Partner. If a General Partner effectively ceases to be a General Partner, either voluntarily or involuntarily, he shall be and remain liable for all obligations and liabilities incurred by him as General Partner prior to the time that such withdrawal, sale, transfer or assignment shall become effective, but he shall be free of any obligation or liability incurred because of Partnership activities from and after the time that such withdrawal, sale, transfer or assignment shall become effective. —20— 11.6 Payment for Replaced General Partner's Interest. A substitute General Partner, immediately upon its or his admission as General Partner, shall become the owner of the Partnership interest of the replaced General Partner. Except where a General Partner has been replaced because of its expulsion for cause under Section 11.2, the substitute General Partner shall pay to the replaced General Partner, as the purchase price for his Partnership interest, the fair market value of such Partnership interest as agreed to by the replaced General Partner and the substitute General Partner, or if no such agreement can be reached within 90 days thereafter, as determined by an independent appraiser to be selected by the replaced General Partner and the substitute General Partner, or if they cannot mutually agree to such an appraiser, by the President of the American Institute of Real Estate Appraisers. At the election of the substitute General Partner, such amount may be paid over a three—year period commencing 30 days after the price has been determined, together with 9% interest, in quarterly installments. 11.7 Failure to Admit Substitute General Partner. In the event that a substitute General Partner is not appointed and admitted within a reasonable time after the withdrawal or termination of all of the General Partners with the result that there is no General Partner acting, the Partnership shall then be dissolved, terminated and liquidated. XII. Amendment of Agreement and Meetings 12.1 General. The General Partners, upon at least 30 days written notice, may call a special meeting of all Partners for consideration of an amendment to this agreement, and such amendment shall become effective in accordance with its terms upon the affirmative vote of a majority, by interest, of the Limited Partners. At any time, Limited Partners holding not less than 10% of the issued and outstanding Units may propose an amendment to this agreement or a meeting of Limited Partners to consider any other proposal for which the Limited Partners may vote hereunder and in such event the General Partners, within 15 days of the receipt by the General Partners of notice of such proposal, shall call a special meeting of all Partners for the purpose of considering such proposal (which meeting shall be held within 15 to 60 days after giving written notice thereof to the Partners), and the affirmative vote of a majority, by interest, of the Limited Partners shall decide the matter. In any event, however, no such amendment shall affect the allocation of economic interests to the Partners without the approval of the General Partners and a majority, by interest, of the Limited Partners, except as otherwise provided in Article XI. 12.2 Alternative to Special Meetings. As an alternative to voting at special meetings of the Partnership pursuant to this and other Articles of this agreement, the Limited Partners may consent to and approve by written action any matter that the Limited Partners may consent to and approve by vote at a special meeting. In order to consent —21— to and approve the matter, the same percentage of Limited Partners, by interest, must sign the written action as is required by vote at a special meeting. XIII. Dissolution and Liquidation 13.1 Events Causing Dissolution. The Partnership shall be dissolved only upon the occurrence of one or more of the following events: (a) the expiration of the term set forth in Section 1.4; (b) the occurrence of any event that, under the laws of the jurisdictions governing the Partnership shall dissolve the Partnership; (c) the bankruptcy of the Partnership or all of the General Partners; (d) the withdrawal or the expulsion of all of the General Partners if a substitute General Partner has not been timely admitted as provided in Article XI, with the result that there is no General Partner acting; (e) the decree of court that other circumstances render a dissolution of the Partnership equitable or required by law; (f) the sale or other disposition of all or substantially all of the assets of the Partnership; provided, however, that upon the Sale or Refinancing of the Project, the Net Proceeds of such Sale or Refinancing shall be distributed pursuant to the provisions of Section 5.4 and not pursuant to the provisions of Section 13.3. (g) the express will of the General Partners, following the giving of at least 90 days written notice to the Partners of the intention to dissolve the Partnership; and (h) the affirmative vote of a majority, by interest, of the Limited Partners. 13.2 Continuation of Business. Except as provided in Section 13.3, upon the dissolution of the Partnership for any reason, the business of the Partnership and title to the property of the Partnership shall be vested in the Partnership continuing the business. Upon any such dissolution no Partner, nor his legal representatives, shall have the right to an account of his interest as against the Partnership continuing the business, and no Partner, nor his legal representatives, as against the Partnership continuing the business, shall have the right to have the value of his interest as of the date of dissolution ascertained nor have any right as a creditor or otherwise with respect to the value of his interest. _22_ 13.3 Liquidation and Winding Up. If dissolution of the Partnership should be caused by reason of (a) an event that makes it unlawful for the business of the Partnership to be carried on or for the Partners to carry it on in the Partnership, (b) the bankruptcy of the Partnership, (c) the withdrawal or expulsion of all of the General Partners and no substitute General Partner has been timely admitted as provided in Article XI, with the result that there is no General Partner acting, (d) a decree of court that other circumstances render a dissolution and winding up of the affairs of the Partnership equitable or required by law, (e) the sale of all or substantially all of the assets of the Partnership, (f) the express will of the General Partners, and the General Partners, in their absolute discretion, deem the liquidation and winding up of the Partnership necessary or advisable or (g) the express will of Limited Partners as provided in Section 13.1(h) above, the Partnership shall be liquidated and the General Partners (or the person or persons selected by a decree of court to carry out the winding up of the affairs of the Partnership) shall wind up the affairs of the Partnership. The General Partners or the person winding up the affairs of the Partnership shall promptly proceed to liquidate the Partnership. In settling the accounts of the Partnership, the assets and the property of the Partnership shall be distributed in the following order of priority: (a) To the payment of all debts and liabilities of the Partnership, including loans by Partners that are secured by mortgages, but excluding any other loans or advances that may have been made by the Partners to the Partnership, in the order of priority as provided by law; (b) To the establishment of any reserves deemed necessary by the General Partners or the person winding up the affairs of the Partnership for any contingent liabilities or obligations of the Partnership; (c) To the repayment of any unsecured loans or advances, including unpaid principal and interest on any loans that may have been made by any Partners to the Partnership in the order of priority as provided by law; (d) The balance shall be distributed to the Partners in accordance with their capital account balances. XIV. Miscellaneous Provisions 14.1 Interpretation. The terms and provisions of this agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. All references herein to Articles and Sections refer to Articles and Sections of this agreement. All Article and Section headings are for reference purposes only and shall not affect -23- the interpretation of this agreement. The use of the masculine gender, for all purposes of this agreement, shall be deemed to refer to both male and female Partners. 14.2 Notice. Any notice given pursuant to this agreement or in connection with the business of the Partnership shall be deemed to have been given if mailed, by certified or registered mail, postage prepaid: if to the Partnership, to the principal office of the Partnership set forth in Section 1.2 or to such other address as the Partnership may hereafter designate by notice to the Partners; if to the General Partners, to the address set forth in Section 1.3 or such other address as the General Partners may hereafter designate by notice to the Partnership; if to the Limited Partners, to the addresses set forth in the subscription agreement executed by each Limited Partner or to such other address as such Limited Partners may hereafter designate by notice to the Partnership. 14.3 Successors and Assigns. Except as herein otherwise provided to the contrary, this agreement shall be binding upon and inure to the benefit of the parties hereto and their personal representatives, assigns and successors. 14.4 Counterparts. This agreement may be executed in several counterparts, and all so executed shall constitute one agreement, binding on all parties hereto, notwithstanding that all of the parties are not. signatory to the original or the same counterpart. 14.5 Severability. In the event agreement shall be held to be invalid, the validity of the remainder of this agreemen formation of the Partnership as a limited Partnership Act. IN WITNESS WH date set forth in the that any provision of this same shall not affect the t or the validity or the partnership under the Limited _Y4_ Broadway Lanel Anthony James Comstock Investments, Inc. Mark Tansey Elizabeth Thomson Tolbert Bruce Thomson Mary W. Doty Leo J. Hopf Colleen M. Haik Revocable Trust Haik Family Limited Partnership Francis W. Lang Eugene M. Nelson Percent Ownership 3.125% 3.125% 14.0630% 14.0630% 6.2500% 6.2500% 5.0000% 20.0000% 16.8740% 11.2500% 100.0000% ,,gate of Minnesota SECRETARY OF STATE Certificate of Good Standing I, Mary Kiffineyer, Secretary of State of Minnesota, do certify that: The limited partnership listed below is a limited partnership formed under the laws of Minnesota; that: the limited partnership was formed pursuant to Minnesota Statutes 322A by the filing of a Certificate of Limited Partnership with the Office of the Secretary of State on the date listed below; and that this limited partnership is authorized to do business as a limited partnership at the time this certificate is issued. Name: Broadway LaNel, A Limited Partnership Date Formed: 12/06/1985 This certificate has been issued on 07/21/03. WIPPEN, M�iw r fc r Exhibit B CONSENT OF THE PARTNERS OF BROADWAY LANEL, A LIMITED PARTNERSHIP The undersigned, a Limited Partner of Broadway LaNel, a Limited Partnership, a Minnesota Limited Partnership (the 'Partnership") hereby consents to the following actions: That the Partnership remarket the existing tax exempt Housing Development Revenue Bonds (The Bonds) in the amount of $2,655,000 and borrow the amount of $1,155,000 from Glaser Financial Group, Inc., an approved seller/servicer for Fannie Mae ("Lender") for a total mortgage debt of $3,810,000. This is pursuant to the terms and conditions of that certain loan application dated May 12, 2003, and secure said loan by granting to the Lender (i) a first mortgage lien on property consisting of Anthony James, 6100 W. Broadway, New Hope, Minnesota (the "Project), (ii) a security interest in all personal property constituting a part of the Project, (iii) an assignment to the Lender of all leases and rents there from arising out of the Project, and (iv) the execution of all documents necessary and to remarket the bonds. That Francis W. Lang, as Managing General Partner, the partnerships general partner, is hereby authorized, empowered and directed to execute and deliver to the Lender a Loan Agreement, Promissory Note for the Bonds, Bond Purchase Agreement, and other required Bond Documents, Multifamily Note, a Multifamily Mortgage, Assignment of Rents and Security Agreement, UCC - 1 Financing Statements, a Repair Escrow Agreement, a Replacement Reserve Agreement and such other documents as may be necessary to effectuate the aforementioned financing; all such documents to be in such form and contain such terms as said General Partner may approve, such approval to be conclusively evidenced by the execution of the General Partner thereon which shall bind the Partnership. 3. That said General Partner be, and hereby is, authorized, empowered and directed to take such other action as it may deem necessary and appropriate to consummate the funding of the loan as herein above set forth. 4. That the terms and conditions of the Application, which was accepted by the General Partner on behalf of the Partnership, are, and they hereby are ratified, adopted, and confirmed. Dated: -711? -:1,2003 gifte y-�cBy: rtner Broadway LaNel, a Limited Partnership CONSENT OF THE PARTNERS OF BROADWAY LANEL, A LIMITED PARTNERSHIP The undersigned, a Limited Partner of Broadway LaNel, a Limited Partnership, a Minnesota Limited Partnership (the "Partnership") hereby consents to the following actions: That the Partnership remarket the existing tax exempt Housing Development Revenue Bonds (The Bonds) in the amount of $2,655,000 and borrow the amount of $1,155,000 from Glaser Financial Group, Inc., an approved seller/servicer for Fannie Mae ("Lender") for a total mortgage debt of $3,810,000. This is pursuant to the terms and conditions of that certain loan application dated May 12, 2003, and secure said loan by granting to the Lender (i) a first mortgage lien on property consisting of Anthony James, 6100 W. Broadway, New Hope, Minnesota (the "Project), (ii) a security interest in all personal property constituting a part of the Project, (iii) an assignment to the Lender of all leases and rents there from arising out of the Project, and (iv) the execution of all documents necessary and to remarket the bonds. 2. That Francis W. Lang, as Managing General Partner, the partnerships general partner, is hereby authorized, empowered and directed to execute and deliver to the Lender a Loan Agreement, Promissory Note for the Bonds, Bond Purchase Agreement, and other required Bond Documents, Multifamily Note, a Multifamily Mortgage, Assignment of Rents and Security Agreement, UCC - 1 Financing Statements, a Repair Escrow Agreement, a Replacement Reserve Agreement and such other documents as may be necessary to effectuate the aforementioned financing; all such documents to be in such form and contain such terms as said General Partner may approve, such approval to be conclusively evidenced by the execution of the General Partner thereon which shall bind the Partnership. 3. That said General Partner be, and hereby is, authorized, empowered and directed to take such other action as it may deem necessary and appropriate to consummate the funding of the loan as herein above set forth. 4. That the terms and conditions of the Application, which was accepted by the General Partner on behalf of the Partnership, are, and they hereby are ratified, adopted, and confirmed. Dated: 2003 IS Limited Partner Broadway LaNel, a imited Partnership CONSENT OF THE PARTNERS OF BROADWAY LANEL, A LIMITED PARTNERSHIP The undersigned, a Limited Partner of Broadway LaNel, a Limited Partnership, a Minnesota Limited Partnership (the "Partnership") hereby consents to the following actions: That the Partnership remarket the existing tax exempt Housing Development Revenue Bonds (The Bonds) in the amount of $2,655,000 and borrow the amount of $1,155,000 from Glaser Financial Group, Inc., an approved seller/servicer for Fannie Mae ("Lender") for a total mortgage debt of $3,810,000. This is pursuant to the terms and conditions of that certain loan application dated May 12, 2003, and secure said loan by granting to the Lender (i) a first mortgage lien on property consisting of Anthony James, 6100 W. Broadway, New Hope, Minnesota (the 'Project), (ii) a security interest in all personal property constituting a part of the Project, (iii) an assignment to the Lender of all leases and rents there from arising out of the Project, and (iv) the execution of all documents necessary and to remarket the bonds. 2. That Francis W. Lang, as Managing General Partner, the partnerships general partner, is hereby authorized, empowered and directed to execute and deliver to the Lender a Loan Agreement, Promissory Note for the Bonds, Bond Purchase Agreement, and other required Bond Documents, Multifamily Note, a Multifamily Mortgage, Assignment of Rents and Security Agreement, UCC - 1 Financing Statements, a Repair Escrow Agreement, a Replacement Reserve Agreement and such other documents as may be necessary to effectuate the aforementioned financing; all such documents to be in such form and contain such terms as said General Partner may approve, such approval to be conclusively evidenced by the execution of the General Partner thereon which shall bind the Partnership. 3. That said General Partner be, and hereby is, authorized, empowered and directed to take such other action as it may deem necessary and appropriate to consummate the funding of the loan as herein above set forth. 4. That the terms and conditions of the Application, which was accepted by the General Partner on behalf of the Partnership, are, and they hereby are ratified, adopted, and confirmed. Dated: g, 7 2003 By: l 7—,d f Limite artner Broadway LaNel, a Limited Partnership CONSENT OF THE PARTNERS OF BROADWAY LANEL, A LIMITED PARTNERSHIP The undersigned, a Limited Partner of Broadway LaNel, a Limited Partnership, a Minnesota Limited Partnership (the 'Partnership") hereby consents to the following actions: 1. That the Partnership remarket the existing tax exempt Housing Development Revenue Bonds (The Bonds) in the amount of $2,655,000 and borrow the amount of $1,155,000 from Glaser Financial Group, Inc., an approved seller/servicer for Fannie Mae ("Lender") for a total mortgage debt of $3,810,000. This is pursuant to the terms and conditions of that certain loan application dated May 12, 2003, and secure said loan by granting to the Lender (i) a first mortgage lien on property consisting of Anthony James, 6100 W. Broadway, New Hope, Minnesota (the 'Project), (ii) a security interest in all personal property constituting a part of the Project, (iii) an assignment to the Lender of all leases and rents there from arising out of the Project, and (iv) the execution of all documents necessary and to remarket the bonds. 2. That Francis W. Lang, as Managing General Partner, the partnerships general partner, is hereby authorized, empowered and directed to execute and deliver to the Lender a Loan Agreement, Promissory Note for the Bonds, Bond Purchase Agreement, and other required Bond Documents, Multifamily Note, a Multifamily Mortgage, Assignment of Rents and Security Agreement, UCC - 1 Financing Statements, a Repair Escrow Agreement, a Replacement Reserve Agreement and such other documents as may be necessary to effectuate the aforementioned financing; all such documents to be in such form and contain such terms as said General Partner may approve, such approval to be conclusively evidenced by the execution of the General Partner thereon which shall bind the Partnership. 3. That said General Partner be, and hereby is, authorized, empowered and directed to take such other action as it may deem necessary and appropriate to consummate the funding of the loan as herein above set forth. 4. That the terms and conditions of the Application, which was accepted by the General Partner on behalf of the Partnership, are, and they hereby are ratified, adopted, and confirmed. Dated: '� , 9 , 2003 By: (I Dte�dt C'C (� Limited Partner Broadway LaNel, a Limited Partnership CONSENT OF THE PARTNERS OF BROADWAY LANEL, A LIMITED PARTNERSHIP The undersigned, a Limited Partner of Broadway LaNel, a Limited Partnership, a Minnesota Limited Partnership (the "Partnership") hereby consents to the following actions: 1. That the Partnership remarket the existing tax exempt Housing Development Revenue Bonds (The Bonds) in the amount of $2,655,000 and borrow the amount of $1,155,000 from Glaser Financial Group, Inc., an approved seller/servicer for Fannie Mae ("Lender") for a total mortgage debt of $3,810,000. This is pursuant to the terms and conditions of that certain loan application dated May 12, 2003, and secure said loan by granting to the Lender (i) a first mortgage lien on property consisting of Anthony James, 6100 W. Broadway, New Hope, Minnesota (the "Project), (ii) a security interest in all personal property constituting a part of the Project, (iii) an assignment to the Lender of all leases and rents there from arising out of the Project, and (iv) the execution of all documents necessary and to remarket the bonds. 2. That Francis W. Lang, as Managing General Partner, the partnerships general partner, is hereby authorized, empowered and directed to execute and deliver to the Lender a Loan Agreement, Promissory Note for the Bonds, Bond Purchase Agreement, and other required Bond Documents, Multifamily Note, a Multifamily Mortgage, Assignment of Rents and Security Agreement, UCC - 1 Financing Statements, a Repair Escrow Agreement, a Replacement Reserve Agreement and such other documents as may be necessary to effectuate the aforementioned financing; all such documents to be in such form and contain such terms as said General Partner may approve, such approval to be conclusively evidenced by the execution of the General Partner thereon which shall bind the Partnership. That said General Partner be, and hereby is, authorized, empowered and directed to take such other action as it may deem necessary and appropriate to consummate the funding of the loan as herein above set forth. 4. That the terms and conditions of the Application, which was accepted by the General Partner on behalf of the Partnership, are, and they hereby are rarified, adopted, and confirmed. Dated: 2003 By: Limi ed Pa er Broa aNeel, a Limited Partnership AUG- 6-03 WED 13:41 B FAX N0. 6123385986 P. 01 CONSENT OF THE PARTNERS OF BROADWAY LANEL, A LIMITED PARTNERSHIP The undersigned, a Limited Partner of Broadway LaNcl, a Limited Partnership, a Minnesota Limited Partnership (the "Partnership") hereby consents to the following actions: Dated: Un That the Partnership remarket the existing tax exempt Housing Development Revenue Bonds (The Bonds) in the amount of $2,655,000 and borrow the amount of $1,155,000 from Glaser Financial Group, Inc., an approved seller/servicer for Fannie Mae ("Lender") for a total mortgage debt of $3,810,000. This is pursuant to the terms and conditions of that certain loan application dated May 12, 2003, and secure said loan by granting to the Lender (i) a first mortgage lien on property consisting of Anthony James, 6100 W. Broadway, New Hope, Minnesota (the 'Project), (ii) a security interest in all personal property constituting a part of the Project, (iii) an assignment to the Lender of all leases and rents there from arising out of the Project, and (iv) the execution of all documents necessary and to remarket the bonds. 2. That Francis W. Lang, as Managing General Partner, the partnerships general partner, is hereby authorized, empowered and directed to execute and deliver to the Lender a Loan Agreement, Promissory Note for the Bonds, Bond Purchase Agreement, and other required Bond Documents, Multifamily Note, a Multifamily Mortgage, Assignment of Rents and Security Agreement, UCC - 1 Financing Statements, a Repair Escrow Agreement, a Replacement Reserve Agreement and such other documents as may be necessary to effectuate the aforementioned financing; all such documents to be in such form and contain such terms as said General Partner may approve, such approval to be conclusively evidenced by the execution of the General Partner thereon which shall bind the Partnership. 3. That said General Partner be, and hereby is, authorized, empowered and directed to take such other action as it may deem necessary and appropriate to consummate the funding of the loan as herein above set forth. 4. That the tenns and conditions of the Application, which was accepted by the General Partner on behalf of the Partnership, are, and they hereby are ratified, adopted, and confirmed. 7,21 , 2003 CONSENT OF THE PARTNERS OF BROADWAY LANEL, A LIMITED PARTNERSHIP The undersigned, a Limited Partner of Broadway LaNel, a Limited Partnership, a Minnesota Limited Partnership (the 'Partnership") hereby consents to the following actions: Dated: That the Partnership remarket the existing tax exempt Housing Development Revenue Bonds (The Bonds) in the amount of $2,655,000 and borrow the amount of $1,155,000 from Glaser Financial Group, Inc., an approved seller/servicer for Fannie Mae ("Lender") for a total mortgage debt of $3,810,000. This is pursuant to the terms and conditions of that certain loan application dated May 12, 2003, and secure said loan by granting to the Lender (i) a first mortgage lien on property consisting of Anthony James, 6100 W. Broadway, New Hope, Minnesota (the 'Project), (ii) a security interest in all personal property constituting a part of the Project, (iii) an assignment to the Lender of all leases and rents there from arising out of the Project, and (iv) the execution of all documents necessary and to remarket the bonds. 2. That Francis W. Lang, as Managing General Partner, the partnerships general partner, is hereby authorized, empowered and directed to execute and deliver to the Lender a Loan Agreement, Promissory Note for the Bonds, Bond Purchase Agreement, and other required Bond Documents, Multifamily Note, a Multifamily Mortgage, Assignment of Rents and Security Agreement, UCC - 1 Financing Statements, a Repair Escrow Agreement, a Replacement Reserve Agreement and such other documents as may be necessary to effectuate the aforementioned financing; all such documents to be in such form and contain such terms as said General Partner may approve, such approval to be conclusively evidenced by the execution of the General Partner thereon which shall bind the Partnership. 3. That said General Partner be, and hereby is, authorized, empowered and directed to take such other action as it may deem necessary and appropriate to consummate the funding of the loan as herein above set forth. 4. That the terms and conditions of the Application, which was accepted by the General Partner on behalf of the Partnership, are, and they hereby are ratified, adopted, and confirmed. 2003 Limited Partner Broadway LaNel, a Limited Partnership CONSENT OF THE PARTNERS OF BROADWAY LANEL, A LIMITED PARTNERSHIP The undersigned, a Limited Partner of Broadway LaNel, a Limited Partnership, a Minnesota Limited Partnership (the 'Partnership") hereby consents to the following actions: That the Partnership remarket the existing tax exempt Housing Development Revenue Bonds (The Bonds) in the amount of $2,655,000 and borrow the amount of $1,155,000 from Glaser Financial Group, Inc., an approved seller/servicer for Fannie Mae ("Lender") for a total mortgage debt of $3,810,000. This is pursuant to the terms and conditions of that certain loan application dated May 12, 2003, and secure said loan by granting to the Lender (i) a first mortgage lien on property consisting of Anthony James, 6100 W. Broadway, New Hope, Minnesota (the "Project), (ii) a security interest in all personal property constituting a part of the Project, (iii) an assignment to the Lender of all leases and rents there from arising out of the Project, and (iv) the execution of all documents necessary and to remarket the bonds. 2. That Francis W. Lang, as Managing General Partner, the partnerships general partner, is hereby authorized, empowered and directed to execute and deliver to the Lender a Loan Agreement, Promissory Note for the Bonds, Bond Purchase Agreement, and other required Bond Documents, Multifamily Note, a Multifamily Mortgage, Assignment of Rents and Security Agreement, UCC - 1 Financing Statements, a Repair Escrow Agreement, a Replacement Reserve Agreement and such other documents as may be necessary to effectuate the aforementioned financing; all such documents to be in such form and contain such terms as said General Partner may approve, such approval to be conclusively evidenced by the execution of the General Partner thereon which shall bind the Partnership. 3. That said General Partner be, and hereby is, authorized, empowered and directed to take such other action as it may deem necessary and appropriate to consummate the funding of the loan as herein above set forth. 4. That the terms and conditions of the Application, which was accepted by the General Partner on behalf of the Partnership, are, and they hereby are ratified, adopted, and confirmed. Dated: (LA'2003 By:9. qiii artner Broadway LaNel, a Limited Partnership CONSENT OF THE PARTNERS OF BROADWAY LANEL, A LIMITED PARTNERSHIP The undersigned, a Limited Partner of Broadway LaNel, a Limited Partnership, a Minnesota Limited Partnership (the "Partnership") hereby consents to the following actions: That the Partnership remarket the existing tax exempt Housing Development Revenue Bonds (The Bonds) in the amount of $2,655,000 and borrow the amount of $1,155,000 from Glaser Financial Group, Inc., an approved seller/servicer for Fannie Mae ("Lender") for a total mortgage debt of $3,810,000. This is pursuant to the terms and conditions of that certain loan application dated May 12, 2003, and secure said loan by granting to the Lender (i) a first mortgage lien on property consisting of Anthony James, 6100 W. Broadway, New Hope, Minnesota (the "Project), (ii) a security interest in all personal property constituting a part of the Project, (iii) an assignment to the Lender of all leases and rents there from arising out of the Project, and (iv) the execution of all documents necessary and to remarket the bonds. 2. That Francis W. Lang, as Managing General Partner, the partnerships general partner, is hereby authorized, empowered and directed to execute and deliver to the Lender a Loan Agreement, Promissory Note for the Bonds, Bond Purchase Agreement, and other required Bond Documents, Multifamily Note, a Multifamily Mortgage, Assignment of Rents and Security Agreement, UCC - 1 Financing Statements, a Repair Escrow Agreement, a Replacement Reserve Agreement and such other documents as may be necessary to effectuate the aforementioned financing; all such documents to be in such form and contain such terms as said General Partner may approve, such approval to be conclusively evidenced by the execution of the General Partner thereon which shall bind the Partnership. 3. That said General Partner be, and hereby is, authorized, empowered and directed to take such other action as it may deem necessary and appropriate to consummate the funding of the loan as herein above set forth. 4. That the terms and conditions of the Application, which was accepted by the General Partner on behalf of the Partnership, are, and they hereby are ratified, adopted, and confirmed. Dated: 7/ c�2 Broadway LaNel, a Limited CONSENT OF THE PARTNERS OF BROADWAY LANEL, A LIMITED PARTNERSHIP The undersigned, a Limited Partner of Broadway LaNel, a Limited Partnership, a Minnesota Limited Partnership (the 'Partnership") hereby consents to the following actions: That the Partnership remarket the existing tax exempt Housing Development Revenue Bonds (The Bonds) in the amount of $2,655,000 and borrow the amount of $1,155,000 from Glaser Financial Group, Inc., an approved seller/servicer for Fannie Mae ("Lender") for a total mortgage debt of $3,810,000. This is pursuant to the terms and conditions of that certain loan application dated May 12, 2003, and secure said loan by granting to the Lender (i) a first mortgage lien on property consisting of Anthony James, 6100 W. Broadway, New Hope, Minnesota (the 'Project), (ii) a security interest in all personal property constituting a part of the Project, (iii) an assignment to the Lender of all leases and rents there from arising out of the Project, and (iv) the execution of all documents necessary and to remarket the bonds. 2. That Francis W. Lang, as Managing General Partner, the partnerships general partner, is hereby authorized, empowered and directed to execute and deliver to the Lender a Loan Agreement, Promissory Note for the Bonds, Bond Purchase Agreement, and other required Bond Documents, Multifamily Note, a Multifamily Mortgage, Assignment of Rents and Security Agreement, UCC - 1 Financing Statements, a Repair Escrow Agreement, a Replacement Reserve Agreement and such other documents as may be necessary to effectuate the aforementioned financing; all such documents to be in such form and contain such terms as said General Partner may approve, such approval to be conclusively evidenced by the execution of the General Partner thereon which shall bind the Partnership. That said General Partner be, and hereby is, authorized, empowered and directed to take such other action as it may deem necessary and appropriate to consummate the funding of the loan as herein above set forth. 4. That the terms and conditions of the Application, which was accepted by the General Partner on behalf of the Partnership, are, and they hereby are ratified, adopted, and confirmed. Dated: ( 2003 LE LaNel, a Limited Partnership CITY OF PLYMOUTH, MINNESOTA $2,655,000 CITY OF NEW HOPE, MINNESOTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT), SERIES 2003 BORROWER TAX CERTIFICATE THIS BORROWER TAX CERTIFICATE, dated August 14, 2003, is made by Broadway LaNel, A Limited Partnership, a Minnesota limited partnership (the `Borrower"), in connection with the execution and delivery of (i) the Trust Indenture, dated as of August 1, 2003 (the "Indenture"), by and between the City of New Hope, Minnesota, a municipal corporation and political subdivision of the State of Minnesota (the "Issuer") and U.S. Bank National Association (the "Trustee"), (ii) the Financing Agreement, dated as of August 1, 2003, between the Issuer, the Trustee, the Borrower (the "Financing Agreement") and (iii) the Deed and Covenants Running With the Land relating to the Mortgaged Property, dated as of December 1, 1985, among the Borrower and the Issuer, as amended and supplemented by First Amendment to Deed and Covenants Running With the Land, dated as of September 1, 1993, between the Borrower, the Trustee, and the New Hope Economic Development Authority (the "EDA"), as amended and supplemented by Second Amendment to Deed and Covenants Running with the Land, dated as of August 1, 2003 between the Borrower, the Trustee and the EDA (as so amended the "Deed"), between the Issuer and the Borrower, for the purpose of refunding the Issuer's Development Refunding Revenue Bonds (Broadway LaNel Project), Series 1993, currently outstanding in the aggregate principal amount of $2,810,000 (the "Prior Bonds") through the issuance of the Issuer's Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 (the "Bonds"). WHEREAS, the Internal Revenue Code of 1954 (the "1954 Code"), Title XIII of the Tax Reform Act of 1986 (the "Act"), the Internal Revenue Code of 1986 (the "1986 Code," and, together with the 1954 Code, the "Code"), and the regulations promulgated with respect thereto (the "Regulations"), impose certain limitations on the uses and investment of the proceeds of the Bonds and of certain other moneys relating to the Bonds; WHEREAS, such provisions of the Code, the Act and the Regulations, relate to the conditions under which interest on the Bonds will be excluded from gross income for federal income tax purposes; and WHEREAS, the Borrower has determined to deliver this Borrower Tax Certificate (the "Certificate") and the Issuer has determined to deliver an Arbitrage Certificate (the "Arbitrage Certificate") in order to set forth certain representations and warranties, and establish certain expectations, relating to (i) the use of the proceeds of the Prior Bonds (and bonds refunded thereby), (ii) the operation of the multifamily rental housing facility previously financed by the Prior Bonds (and bonds refunded thereby), and refinanced by the Bonds, (iii) the use and investment of the proceeds of the Bonds and of certain other moneys relating thereto, all in order to assure that interest on the Bonds will be excluded from gross income for federal income tax purposes; NOW, THEREFORE, the Borrower hereby represents, certifies, covenants and agrees as follows: I. IN GENERAL 1.1 Pumose of Certificate. The Borrower is delivering this Certificate to Dorsey & Whitney LLP, Bond Counsel, with the understanding that Dorsey & Whitney LLP will rely upon this Certificate in rendering its opinion that interest on the Bonds is excluded from gross income under Section 103 of the Code. 1.2 Date of Issuance. The Bonds are being issued on the date of this Certificate. Such date is referred to herein as the "Closing Date." 1.3 Purpose of Financing. The Bonds are being issued to pay and redeem the Prior Bonds on September 15, 2003 (the "Redemption Date'). The Prior Bonds were issued in the original principal amount of $3,300,000 pursuant to an Indenture of Trust, dated as of September 1, 1993 (the "Prior Indenture"), to current refund the Issuer's Multifamily Housing Revenue Bonds (Broadway LaNel Project), issued on December 30, 1985 (the "Original Bonds"), which Original Bonds were issued to provide funds to pay the costs of acquisition, construction and equipping of the multifamily rental housing facility (the "Project") more fully described in this Certificate. The Bonds are being issued to refinance the Project by refunding the Prior Bonds. Payment of debt service on the Bonds will be secured by a credit enhancement instrument (the "`Credit Facility") issued by Fannie Mae on the Closing Date. 1.4 Definitions. Capitalized terms used herein which are not otherwise defined herein shall have the respective meanings set forth in the Indenture and in the Arbitrage Certificate. 1.5 The Borrower has duly authorized, executed and delivered each of the following (the `Borrower Documents"): (i) the Financing Agreement; (ii) the Regulatory Agreement; and (iii) the Bond Purchase Agreement. 1.6 The Borrower has carefully reviewed that information and representations and warranties of the Borrower contained in each of the Borrower Documents relating to the restrictions required to preserve the exclusion from gross income of interest on the Bonds under the Code and Treasury Regulations applicable thereto (the "Regulations"). Such information and representations and warranties are true and correct in all material respects as of the date hereof. -2- 1.7 The Borrower has complied with all agreements and satisfied all conditions contained in the Borrower Documents to be performed or satisfied at or prior to the date hereof in order to cant' out, give effect to and consummate the transactions contemplated by the Offering Circular, the Borrower Documents and the Indenture. 1.8 It is understood that the completeness and accuracy of this Certificate will be relied upon by the Issuer and Bond Counsel for the Bonds (hereinafter defined) and that any omission or inaccuracy could cause interest on the Bonds to become included in the calculation of gross income of all recipients for federal income tax purposes. The Borrower has consulted with such legal, accounting and fiscal consultants as deemed necessary to provide this Certificate. 1.9 The Borrower hereby represents, covenants and warrants to and for the benefit of the Issuer, the Bondholders and Bond Counsel that, to the best of the Borrower's knowledge, the information shown on the IRS Form 8038 included in the transcript for the Bonds is true, correct and complete. II. REPRESENTATIONS, CERTIFICATIONS, EXPECTATIONS AND WARRANTIES 2.1 Project Description and Operation. (a) The Project is owned and operated by the Borrower. The Project is located on a single parcel or contiguous parcels of land. The Project consists of 73 unit rental housing development. The Project consists of one or more buildings or structures containing one or more similarly constructed residential units, which are used on other than a transient basis, and certain facilities which are functionally related and subordinate to such units (including, without limitation, parking spaces available to all tenants and recreational facilities for the exclusive use of Project tenants or their guests); (ii) each unit in the Project is rented or available for rental on a continuous basis to members of the general public; (iii) the Project consists of a single "project", and for this purpose, proximate buildings or structures are part of the same project only if owned for federal income tax purposes by the same person and if the buildings were financed pursuant to a common plan. (Buildings or structures are proximate if they are all located on a single parcel of land or several parcels of land which are contiguous except for the interposition of a road, street, stream or similar property); (iv) the Project is not, or does not otherwise include, a hotel, motel, dormitory, fraternity or sorority house, rooming house, hospital, nursing home, retirement home, sanitarium, rest home or trailer park or court; (v) the Project contains more than 5 units; (vi) each dwelling unit in the Project consists of separate and complete facilities for living, sleeping, eating, cooking and sanitation for a single person or family; and (vii) each dwelling unit occupied by Qualifying Tenants and Low Income Tenants (as each is defined in the Regulatory Agreement) are of similar size and are otherwise substantially similar to dwelling units occupied by other tenants of the Project, and Qualifying Tenants or Low Income Tenants enjoy equal access to all amenities of the Project. M31 (b) The Project has been, at all times since the date of issuance of the Original Bonds, a qualified residential rental project as defined in Section 103(b)(4)(A) of the 1954 Code. The Project has been, at all times since the date of issuance of the Original Bonds, in compliance with the Regulatory Agreement, as amended, with respect to the Project executed by the Issuer and Borrower in connection with the issuance of the Original Bonds and the Prior Bonds. For purposes of this subsection, temporary noncompliance with the Regulatory Agreement for a period of no more than 60 days is considered compliance with the Regulatory Agreement. Further, the failure to comply with the regular reporting or prior approval procedures set forth in the Regulatory Agreement is not considered failure to comply with the Regulatory Agreement, as long as the Project has otherwise been in compliance with the Regulatory Agreement. 2.2 Useful Life. The remaining weighted average reasonably expected economic life of the facilities comprising the Project and refinanced by the Bonds is at least 25 years. The weighted average maturity of the Bonds is 29.919 years. 2.3 Application of Funds Held Under Prior Indenture No Transferred Proceeds. The Prior Trustee is holding the following amounts in the following funds under the Prior Indenture: Bond Fund: $145,608.07 Reserve Fund: $230,735.77 Repair and Replacement Fund: $0.78 The Reserve Fund was originally funded with proceeds of the Prior Bonds or Original Bonds. The amounts in the Bond Fund were provided by the monthly payments required to be made by the Borrower to the Prior Trustee to pay the scheduled semiannual principal and interest payments due on the Prior Bonds. The amounts in the Repair and Replacement Fund were provided by the monthly payments required to be made by the Borrower to the Prior Trustee to pay costs of repairs and improvements to the Project. Funds in the Bond Fund in the amount of $145,608.07 and funds in the Reserve Fund in the amount of $184,117.84 will be applied together with the proceeds of the Bonds in the amount of $7,655,000 to pay the scheduled principal and interest due on the Prior Bonds on September 1, 2003 ($196,787.50) and the principal, redemption, premium, and interest due on the Prior Bonds on September 15, 2003 ($2,787,938.41). Funds in the Repair and Replacement Fund and the remaining amounts in the Reserve Fund following the application thereof as provided in the prior sentence will be wired by the Prior Trustee to the Commonwealth Land Title Insurance Company on behalf of the Borrower to pay costs of issuance of the Bonds. No proceeds of the Prior Bonds will become "transferred proceeds" of the Bonds (as defined in Regulations Section 1.148-9) upon the payment and redemption of the Prior Bonds on the Redemption Date. 2.4 Certain Matters Relating to the Construction of the Project and the Payment of the Costs Associated With the Construction of the Project and the Issuance of the Original Bonds. All proceeds of the Bonds will be used for the refunding of the Prior Bonds, and all proceeds of the Prior Bonds were used for the refunding of the Original Bonds. Proceeds of the Original Bonds, together with the investment earnings thereon, were applied to pay costs of the Project. ME Not less than ninety percent (90%) of the Original Bond Proceeds transferred to the trustee for the Original Bonds were spent for costs of construction and other costs which, for federal income tax purposes, were chargeable to the capital account of the Project or would be so chargeable with a proper election to the Borrower. Substantially all of the Project costs paid from Original Bond Proceeds were paid or incurred after the date upon which the governing body of the Issuer adopted a resolution of intent to issue the Original Bonds for the purpose of financing the Project. The original use of the Project commenced with Parkside at Medicine Lake Partnership, a Minnesota partnership, a related person to the Borrower. 2.5 No Impermissible Transfer of Project Ownership. The Borrower hereby represents and covenants that there has been no transfer, sale, assignment or assumption of the Project or the Financing Agreement, except to a "related person" to the Borrower (as defined in Section 144(a)(3) of the 1986 Code). The Borrower will not sell or transfer its interest in the Project, or any of its obligations under the Financing Agreement, to an unrelated party within six months following the date of issuance and delivery of the Bonds. 2.6 Transition Relief. The Sale Proceeds of the Bonds will be used exclusively for the current refunding of the Prior Bonds on the Redemption Date, the Sale Proceeds of the Prior Bonds (other than accrued interest) were used exclusively for the current refunding of the Original Bonds. The issue price of the Prior Bonds did not exceed the outstanding principal amount of the Original Bonds, and the issue price of the Bonds does not exceed the outstanding amount of the Prior Bonds. At the time of issuance of the Original Bonds and Prior Bonds, respectively the weighted average maturity of such bonds was less than 120% of the weighted average remaining economic life of the Project, and, as of the Closing Date, the weighted average maturity of the Bonds is less than 120% of the weighted average remaining economic life of the Project. 2.7 Federal Guarantee. The Borrower will not directly or indirectly use or permit the use of any proceeds of the Bonds or any other funds of the Issuer or the Borrower or any related party or take or omit to take any action that would cause the Bonds to be obligations that are "federally guaranteed" within the meaning of Section 149(b) of the 1986 Code. In furtherance of this covenant, the Borrower will not allow the payment of principal or interest with respect to the Bonds to be guaranteed (directly or indirectly) in whole or in part by the United States or any agency or instrumentality thereof. Except as provided in the next sentence, the Borrower will not use 5% or more of the proceeds of the Bonds to make or finance loans the payment of principal or interest with respect to which is guaranteed in whole or in part by the United States or any agency or instrumentality thereof, nor will it invest 5% or more of the proceeds in federally insured deposits or accounts. The preceding sentence shall not apply to: (a) investments during any applicable temporary period until the proceeds are needed for the purpose for which the Bonds are issued; (b) investments in a bona fide debt service fund; and (c) investments in obligations issued by the United States Department of Treasury. -5- 2.8 Prohibited Facilities. No proceeds of the Original Bonds were used to acquire or construct (i) a private or commercial golf course; (ii) a country club; (iii) a massage parlor; (iv) a tennis club; (v) a skating facility of any type; (vi) a racket sports facility of any type; (vii) a hot tub facility; (viii) a suntan facility; (ix) a racetrack; (x) an airplane; (xi) a skybox facility of any type; (xiii) a gambling facility of any type; or (xiv) a store that sells alcoholic beverages. The tenant amenities referred to in Section 2.1 are considered a part of the Project since they are of a character and size commensurate with the character and size of the Project and are functionally related and subordinate to the rest of the Project. 2.9 Land Expenditures. Less than 25% of the proceeds of the Original Bonds were spent on costs chargeable to the capital account of land or interests in land. 2.10 Single Issue. All of the Bonds are deemed to be sold on the Closing Date pursuant to the same plan of financing. All of the Bonds are expected to be paid out of substantially the same source of funds. No other governmental obligations that are expected to be paid out of substantially the same source of funds as the Bonds were or are to be sold within the 31 -day period beginning 15 days prior to the Closing Date, pursuant to the same plan of financing as the Bonds. The Borrower reasonably expects the revenues of the Project to be sufficient to pay debt service on the Bonds. 2.11 Imputed Proceeds. The purchase price of each obligation that is part of the Bonds is at least 95% of the obligation's face amount. The Bonds will bear a variable rate of interest pursuant to the terms of the Indenture. Accordingly, none of the obligations that comprise the Bonds has a stated interest rate (determinable at the date of issue) that increases over the term of the obligation. 2.12 Costs of Issuance. No proceeds of the Bonds will be used to pay costs associated with the issuance of the Bonds, all such costs being paid from funds supplied by the Borrower. ARBITRAGE REPRESENTATIONS, CERTIFICATIONS, EXPECTATIONS AND WARRANTIES 3.1 Reliance. The Borrower acknowledges that this Certificate will be relied upon by the Issuer for purposes of the Arbitrage Certificate. 3.2 No Replacement Proceeds. Neither the Borrower nor any related person will use any Gross Proceeds directly or indirectly to replace funds of the Issuer, the Borrower or any related person if such funds are or will be used directly or indirectly to acquire Investment Property reasonably expected to produce a yield materially higher than the yield on the Bonds. 3.3 No Abusive Arbitrage Device. The Bonds are not and will not be part of a transaction or series of transactions that (i) enables the Issuer, the Borrower or any related person to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage and (ii) overburdens the market for tax-exempt obligations in any manner, including without limitation, by selling bonds that would not otherwise be sold or selling more 171a bonds, or issuing them sooner, or allowing them to remain outstanding longer, than would otherwise be necessary. 3.4 Arbitrage Certificate. The undersigned has carefully reviewed the Arbitrage Certificate and hereby certifies that, to the best of the Borrower's knowledge, information and belief, all information and statements set forth therein are true and correct. 3.5 Hedge Accounts. The Borrower has established with or for the benefit of Fannie Mae (i) a Hedge Reserve Escrow Account pursuant to the provisions of Hedge Reserve Escrow Account Security Agreement, dated as August 1, 2003, between the Borrower, Glaser Financial Group, Inc., a Minnesota corporation ("Glaser"), and Fannie Mae, and (ii) a Hedge Account pursuant to the provisions of a Hedge Assignment and Security Agreement, dated as of August 1, 2003, between the Borrower, Glaser and Fannie Mae. Amounts from time to time held in said Accounts shall be considered to be Gross Proceeds of the Bonds and subject to the calculation of yield reduction payments as described in Regulations Section 1.148-5(c) unless the Borrower obtains and files with the Trustee an opinion of bond or tax counsel reasonably acceptable to the Trustee that such fends need not be considered Gross Proceeds under applicable provisions of the 1986 Code and Regulations. No funds or accounts other than those set forth in this Section 5.7 have been established or are expected to be established by the Issuer or the Borrower in connection with the Bonds. 3.6 No Qualified Hedge. The Borrower has entered into an interest rate hedging contract (the "Hedge") with Bear Stearns Financial Products Inc. (the "Counterparty"), which requires that the Borrower pay an up -front fee. In exchange, the Counterparty will pay amounts from time to time that relate to the amount by which an objective floating rate index ( reasonably expected to approximate the floating rate on the Bonds from time to time) exceeds a fixed cap or strike rate, based on a notional amount that will always equal the outstanding principal amount of the Bonds. The parties will bifurcate the Hedge for accounting purposes to separate the prepayment element (the "Hedge Investment") from the hedge element, if any (the "True Hedge"). This accounting separation is done by applying the implicit borrowing or discount rate of the Counterparty to the initial fee for the Hedge such that the present value of the deemed periodic payments of the True Hedge equals the initial fee. The True Hedge will not constitute a "qualified hedge" under Regulations Section 1.148-4(h). As of the Closing Date, Borrower acknowledges that Bond Counsel has advised that the Hedge has a "significant investment element." The Borrower will treat the Hedge Investment as Investment Property allocated to Gross Proceeds of the Bonds and subject to the calculation of yield reduction payments as described in Regulations Section 1.148-5(c), unless the Borrower receives and furnishes to the Trustee an opinion of bond or tax counsel reasonably acceptable to the Trustee to the effect that failure to so treat the Hedge Investment and calculate yield reduction payments will not adversely affect the exclusion of interest on the Bonds from gross income under Section 103 of the Code. During the life of the Bonds, the Borrower expects to enter into additional interest rate cap contracts materially the same as the Hedge. The Borrower will notify the Issuer and the Trustee of any such hedge and, if any portion of such hedge can be treated as a "qualified hedge," will direct the Issuer to identify such on the Issuer's books and records. The Borrower agrees that it will not enter into any other hedging arrangements, unless the Borrower receives -7- (and delivers to the Trustee) an opinion of bond or tax counsel reasonably acceptable to the Trustee that such other hedging arrangements will not adversely affect the exclusion from federal gross income of interest on the Bonds. The pricing of any Hedge will represent current market interest or swap rates with no amounts (other than the initial lump sum fee) to be paid or received other than payments from the counterparty which, if received, will correspond in time with debt service payments on the Bonds. The Issuer, the Borrower and any counterparty will not be "related persons" within the meaning of Section 144(a)(3) of the Code. Any Hedge will be based upon an interest rate index. Payments to the counterparty will be made from the same source of funds as payments of debt service on the Bonds. 1&V FEDERAL GUARANTEE The Borrower will not take any action or fail to take any action if the result of such action or failure to act will cause the Bonds to become "federally guaranteed." Unless otherwise excepted under Section 149(b) of the Code, the Bonds will be considered "federally guaranteed" if (a) the payment of principal and interest with respect to the Bonds is guaranteed in whole or in part by the United States or any agency or instrumentality thereof, (b) 5 percent or more of the proceeds of the Bonds are (i) to be used to make loans, the payment of which are guaranteed in whole or part by the United States or any agency or instrumentality thereof, or (ii) to be invested directly or indirectly in federally insured deposits or accounts, or (c) the payment of principal of or interest on the Bonds is otherwise indirectly guaranteed in whole or part by the United States or any agency or instrumentality thereof. The Bonds are issued to refund the Prior Bonds issued to provide a residential rental project and accordingly, paragraph (1) of Section 149(b) of the Code does not apply to the Bonds except that the proceeds of the Bonds will not be invested in federally insured deposits or accounts. V. REBATE AND YIELD REDUCTION COVENANTS 5.1. Undertakings. The Borrower acknowledges that the Treasury has issued regulations (Regulations Sections 1.148-1 through 1.148-11, 1.150-1 and 1.150-2) with respect to certain of these undertakings, including the proper method for computing whether any rebate amount or yield reduction payment is due the federal government. The Borrower covenants that it will undertake to determine precisely what is required with respect to the rebate and yield reduction provisions contained in Section 148(f) of the Code and said Regulations from time to time and will comply with any requirements that may be applicable to the Bonds. Except to the extent inconsistent with any requirements of the Code or the Regulations or future regulations, the Issuer and the Borrower will undertake the methodology described in this Certificate. 5.2 Recordkeening. The Borrower shall maintain or cause to be maintained detailed records with respect to each Nonpurpose Investment attributable to Gross Proceeds of the Bonds, including: (a) purchase date; (b) purchase price; (c) information establishing fair market value on in the date such investment became a Nonpurpose Investment; (d) any accrued interest paid; (e) face amount; (f) coupon rate; (g) periodicity of interest payments; (h) disposition price; (i) any accrued interest received; and 0) disposition date. Such detailed recordkeeping is required to facilitate the calculation of the Rebate Requirement and Yield Reduction Requirement. 5.3 Rebate Requirement and Yield Reduction Calculation and Pavment. (a) The Borrower hereby undertakes to remit to the United States Department of the Treasury, within 60 days of September 15, 2003 (being the date the Prior Bonds are fully paid and redeemed), 100% of the accrued rebate liability existing in connection with the Prior Bonds, if any. (b) The Borrower will prepare or cause to be prepared a calculation of the Rebate Requirement and Yield Reduction Requirement consistent with the rules described in this Section 5.3, within 60 days of each five year anniversary. Concurrent with the submission of each such calculation, the Borrower shall transfer to the Trustee for deposit in the Rebate Fund the amount indicated by the calculation as necessary to increase the sum held in the Rebate Fund to the sum of the Rebate Requirement and Yield Reduction Requirement or, if appropriate, direct the Trustee to decrease the sum held in the Rebate Fund to the sum of the Rebate Requirement and Yield Reduction Requirement and to return the excess to the Borrower. (c) For purposes of calculating the Rebate Requirement and Yield Reduction Requirement, (i) the aggregate amount earned with respect to a Nonpurpose Investment shall be determined by assuming that the Nonpurpose Investment was acquired for an amount equal to its fair market value (determined as provided in Section 1.148-5(d)(6) of the Treasury Regulations as applicable) at the time it becomes a Nonpurpose Investment, and (ii) the aggregate amount earned with respect to any Nonpurpose Investment shall include any unrealized gain or loss with respect to the Nonpurpose Investment (based on the assumed purchase price at fair market value and adjusted to take into account amounts received with respect to the Nonpurpose Investment and earned original issue discount or premium) on the first date when there are no outstanding Bonds or when the investment ceases to be a Nonpurpose Investment. (d) The Borrower shall pay, or cause the Trustee to pay, from the Rebate Fund to the United States Department of the Treasury not later than 60 days after the end of the fifth Bond Year and each succeeding fifth Bond Year, an amount equal to 90% and, not later than 60 days after the first date when there are no outstanding Bonds, an amount equal to 100% of the Rebate Requirement (determined as of the end of the immediately preceding Bond Year). Additionally, to the extent not included in the payment of the Rebate Requirement, the Borrower shall pay, or cause the Trustee to pay, from the Rebate Fund to the United States Department of the Treasury not later than 60 days after the end of the fifth Bond Year and each succeeding fifth Bond Year, and not later than 60 days after the first date when there are no outstanding Bonds, an amount equal to 100% of the Yield Reduction Requirement (determined as of the end of the immediately preceding Bond Year). (e) Each payment required to be made pursuant hereto shall be filed with the Internal Revenue Service Center, Ogden, Utah 84201, on or before the date such payment is due, and in shall be accompanied by Form 8038-T. The Borrower shall retain records of the calculations required by this Section 5.3 until 6 years after the first date when there are no outstanding Bonds. 5.4 Investments and Dispositions. (a) General Rule. No Investment Property may be acquired with Gross Proceeds for an amount (including transaction costs, except as otherwise provided in Section 1.148-5(e) of the Treasury Regulations) in excess of the fair market value of such Investment Property. No Investment Property may be sold or otherwise disposed of for an amount (including transaction costs, except as otherwise provided in Section 1.148-5(e) of the Treasury Regulations) less than the fair market value of the Investment Property. (b) Fair Market Value. In general, the fair market value of any Investment Property is the price which a willing buyer would pay to a willing seller to acquire the Investment Property, with no amounts paid to artificially reduce or increase the yield on such Investment Property. This section describes various safe harbors for determining fair market value. Other methods may be used to establish fair market value, provided, however, that such methods comply with the requirements of Section 1.148-5(d)(6) of the Treasury Regulations. (c) Arm's-length Purchase and Sales. If Investment Property is acquired pursuant to an arm's length transaction without regard to any amount paid to reduce the yield on the Investment Property, the fair market value of the Investment Property shall be the amount paid for the Investment Property (without increase for transaction costs, except as otherwise provided in Section 1.148-5(e) of the Treasury Regulations). If Investment Property is sold or otherwise disposed of in an arm's length transaction without regard to any reduction in the disposition price to reduce the Rebate Requirement, the fair market value of the Investment Property shall be the amount realized from the sale or other disposition of the Investment Property (without reduction for transaction costs, except as otherwise provided in Section 1.148-5(e) of the Treasury Regulations). (d) SLGS. If a United States Treasury obligation is acquired directly from or disposed of directly to the United States Department of the Treasury (as in the case of the United States Treasury Securities - State and Local Government Series ("SLGS") obligations), such acquisition or disposition shall be treated as establishing a market for the obligation and as establishing the fair market value of the obligation. (e) Investment Contracts. The purchase price of any Investment Property acquired pursuant to an investment contract will be considered fair market value if the Issuer and Borrower comply with the provisions of Section 1.148-5(d)(6)(iii) of the Regulations, and the Borrower covenants to comply with said provisions in the acquisition of any investment contract. (f) Certificates of Deposit. The purchase price of a certificate of deposit issued by a commercial bank that has a fixed interest rate, a fixed principal payment schedule, a fixed maturity and a substantial penalty for early withdrawal will be considered to be fair market value if the Issuer and Borrower comply with the provisions of Section 1.148-5(d)(6)(ii) of the Regulations, and the Borrower covenants to comply with said provisions in the acquisition of any certificate of deposit. -10- (g) Broker Compensation. For purposes of computing the yield on any Investment Property which has been acquired through a broker or other intermediary obtaining bids for such Investment Property, any compensation which is received by such broker or other intermediary, whether payable by or on behalf of the obligor or obligee under such Investment Property, shall be treated as set forth in Regulations Section 1.148-5(e). Any broker or other intermediary compensation with respect to an investment contract that exceeds 0.05 percent of the amount reasonably expected to be invested per year will be treated as additional earnings to the Issuer and the Borrower. 5.5 Segregation of Proceeds. In order to perform the calculations required by the Code, it is necessary to track separately all of the Gross Proceeds. To that end, the Issuer and the Borrower shall cause to be established separate subaccounts or shall cause the Trustee to take such other accounting measures as are necessary in order to account fully for all Gross Proceeds. 5.6 Filing Requirements. The Borrower will file or cause to be filed such reports or other documents with the Internal Revenue Service as are required by the Code. 5.7 Retention of Firm. The Borrower shall engage a firm qualified in such matters to monitor or to advise them with respect to compliance with the Rebate Requirement and Yield Reduction Requirement. 5.8 Universal Can. Pursuant to the provisions of Section 1.148-6(b) of the Regulations, for purposes of determining, inter alia, compliance with yield restriction and arbitrage rebate provisions of Section 148 of the Code, amounts that would otherwise be Gross Proceeds allocable to the Bonds shall be allocated (and remain allocated) to the Bonds only to the extent that the value of the Nonpurpose Investments allocated to the Bonds does not exceed the value of the outstanding Bonds (i.e., the universal cap). Value shall be determined in accordance with the provisions of Sections 1.148-4(e) and 1.148-5(d), respectively, of the Regulations. For purposes of complying with the universal cap provisions of Section 1.148-6(b) of the Regulations, the Borrower will compute the amount of the universal cap and the value of the Nonpurpose Investments as of the dates required pursuant to Section 1.148-6(b)(2)(iii) of the Regulations; provided that the universal cap need not be applied on any otherwise required date if its application on that date would not result in a reduction or reallocation of Gross Proceeds of the Bonds. OA OTHER MATTERS 6.1 Certification of Proceeds. On the basis of the foregoing, it is hereby certified that the proceeds of the Prior Bonds have been used in a manner that would cause interest on the Prior Bonds to qualify for tax exemption under Section 103 of the Code. The Borrower has regularly used, and will regularly use, the Project in its trade or business and is thus a "substantial user," as defined in Section 147(a) of the Code. 6.2 Expectations. The undersigned is an authorized representative of the Borrower and are acting for and on behalf of the Borrower in executing this Certificate. To the best of the -11- knowledge and belief of the undersigned, there are no other facts, estimates or circumstances that would materially change the expectations and certifications as set forth herein, and said expectations are reasonable. 6.2 Amendments. Notwithstanding any provision of this Certificate, the Borrower may amend this Certificate and thereby alter any actions allowed or required by this Certificate if such amendment is based on an opinion of bond or tax counsel reasonably acceptable to the Trustee. 6.3 Survival of Defeasance. Notwithstanding any provision of this Certificate, the Indenture or the Financing Agreement to the contrary, the obligation to remit the Rebate Requirement and Yield Reduction Requirement, if any, to the United States Department of the Treasury and to comply with all other requirements contained in this Certificate shall survive the defeasance of the Bonds. [The remainder of this page has intentionally left blank] 12- Dated: August 14, 2003 BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership [Signature Page to Borrower Tax Certificate] S-1 $2,655,000 CITY OF NEW HOPE, MINNESOTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT), SERIES 2003 CERTIFICATE OF THE UNDERWRITER U.S. Bancorp Piper Jaffray Inc. (the "Underwriter") has acted as the Underwriter of the $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 (the "Bonds"), and hereby certifies and represents the following, based upon the information available to it: A. Issue Price. 1. As of the date the purchase agreement was entered into by the Issuer, the Borrower and the Underwriter with respect to the Bonds (the "Sale Date"), the Underwriter reasonably expected to sell the Bonds to the general public (excluding bond houses, brokers, or similar persons acting in the capacity of underwriters or wholesalers) in a bona fide public offering at par. 2. In our opinion, and based upon our estimate as of the date hereof, the issue price of the Bonds (par) is within a reasonable range of, and should reflect, the fair market price for such Bonds as of the Sale Date. 3. As of the date hereof, all of the Bonds have actually been offered to the general public at par. 4. At least 10% of the Bonds have been sold at par. B. Credit Facility. 1. The present value of the amount paid to obtain the Credit Facility is less than the present value of the interest reasonably expected to be saved as a result of having the Credit Facility, using the reasonably expected yield with respect to the Bonds (as if such Bonds had been issued and sold as a fixed rate issue) as the discount factor for this purpose. 2. To the best knowledge of the undersigned, the amounts paid to Fannie Mae for the Credit Facility represent a reasonable fee that resulted from arm's length negotiations. 3. The amounts paid (or to be paid) for the Credit Facility is within a normal range of charges for providing credit enhancement comparable to the Credit Facility in similar transactions. All terms not defined herein have the meanings ascribed to those terms in the Trust Indenture, dated as of August 1, 2003, between the Issuer and U.S. Bank National Association, as Trustee, pursuant to which the Bonds are being issued. Dated: August 14, 2003. U.S. BANCORP PIPER JAFFRAY, INC. By:� ItsManaging Director 2 ( $2,655,000 CITY OF NEW HOPE, MINNESOTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT), SERIES 2003 UNDERWRITER'S RECEIPT The undersigned officer of U.S. Bancorp Piper Jaffray Inc. (the "Underwriter") hereby acknowledges receipt from U.S. Bank National Association, as Trustee, of the City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003, in the aggregate principal amount of $2,655,000 (the "Bonds"), in the form and with the terns set forth in the Trust Indenture, dated as of August 1, 2003, between the Issuer and the Trustee. The Underwriter further acknowledges receipt of, or waives the requirement for, each opinion, document and certificate contemplated by Section 6(c) of the Bond Purchase Agreement dated as of August 14, 2003, between the Underwriter, the Issuer and Broadway LaNel, A Limited Partnership, a Minnesota limited partnership, and agrees that each such opinion, document and certificate, to the extent received, is satisfactory to the Underwriter in form and substance. Dated: August 14, 2003. U.S. BANCORP PIPER JAFFRAY INC. By: Its Managing Director OFFERING CIRCULAR New Issue - Book Entry Only Ratings: Moodv's Investors Service"Aaa/VMIG I" (See "RATINGS" herein) In the opinion ofDorsev & Whimev LLP, as Bond Coumd, based on existing law and assuming continuing compliance with the requirements afSecdon 103(b)(4)(A) of rhe Internal Revenue Code of 1954. as amended (rhe '1954 Code"). and applicable current provisions ofthe internal Revenue Code of 1986. as amended (rhe "1986 Code'), interest on the Bonds is excludable from gross income for federal income tar purposes and is excludable from the net taxable income of individuals, musts and a Tones for Stale of Minnesota income rax purposes. except far anv period during which the Bonds are held by a person who. within the meaning of Section 103(b)(13) of the 1954 Code is a substantial user of the facilities refinanced with proceeds of the Bonds or a related person !hetero. Interest on the Bonds is not an item of tar preference for proposer of calculating the federal and Minnesota alternative minimum taxable income of individuals and corporations bur is includable in adjusted current earnings of corporations in determining alternative minimum taxable income for purposes of federal and Minnesota alternative minimum taxes. Interest "the Bolls is includable in rhe income of corporations acrd jinanctal instita,ions for purposes ofthe State ofMinnesora franchise rax. No opinion will be expressed by Bond Counsel with respect to the tax-exempt stains of imererr on The Bondsfrom and after the firs, Adjustment Date, ifanv. (See "Tar Exemption and Related Corutderattons') $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003 Dated: Date of Delivery Price: 100% Due: July 15, 2033 The Boras are being issued and delivered under a Trust Indenture, dated as of August 1, 2003 (the "Indenture'), by and between the City of New Hope, Minnesota (the "Issuer") and U.S. Bank National Association, as trustee (the 'Trustee'), to provide funding for a mortgage loan the "Loan") to be made by the Issuer to Broadway LaNel, a Limited Partnership, a Minnesota limited partnership (the "Bomweer"). The proceeds of the Loan will be used to refund bonds previously issued by the Issuer for the benefit of 0e Borrower with respect to a 73 -unit multifamily residential rental complex and certain related facilities ahe "Project'), located in New Hope, Minnesota The Loan will be made pursuant to a Financing Agreement, dated as of August 1, 2003, among the Issueq the Borrower and the Trustee. Fannie Mae has agreed to provide credit enhancement for the Loan and liquidity support for the Bonds pursuant to and subject to the limitations of the Direct Pay Irrevocable Transferable Credit Enhancement instrument (the "Credit Facility") described herein. Ail FannieMaea The Bonds will be issued as weekly variable rate demand bonds and will bear interest at the Weekly Variable Rate to be determined on a weekly basis as desrnbed herein. Interest on the Bonds will be payable on the fifteenth day of each month, commencing September 15, 2001 Subject to satisfaction of certain conditions in the Indenture, the Bonds may be adjusted to one of the other interest rate Modes permitted by the Indenture (other permitted Modes being the Reset Rate and the Fixed Rate). If the Bonds are proposed to be adjusted to one of the other Modes, the Bonds will be subject to mandatory tender for purchase and the Bondholders will not have the right to retain their Bonds. See -THE BONDS — Mandatory Tender and Purchase" herein. THIS OFFERING CIRCULAR DESCRIBES THE BONDS ONLY DURING THE INITIAL WEEKLY VARIABLE RATE PERIOD FOR THE BONDS, WHICH IS THE PERIOD BEGINNING ON THE CLOSING DATE AND ENDING ON THE DATE ON WHICH THE INTEREST RATE ON THE BONDS IS ADJUSTED TO A RESET RATE OR TO THE FIXED RATE. Payment of the principal of and interest on the Bonds will be secured, to the extent described herein, by the Loan and by certain other mmurca all assets constituting the trust estate under the Indenture, all as described herein. In addition, credit enhancement for the Loan will be provided by Fannie Mae under the Credit Facility. The Credit Facility will also provide liquidity support for the purchase of tendered Bonds. The Credit Facility may be replaced by an Alternate Credit Facility at the option of the Borrower, which replacement will cause a mandatory tender of the Bonds. The Credit Facility (or Alternate Credit Facility) will remain in effect at least throughout the initial Weekly Variable Rate Period. The Bonds are issuable only as fully registered bonds, without coupons, in the denomination of $TOO,000 or any greater integral multiple of $5,000. The Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC'). Purchase of beneficial interests in the Bonds will be made in book -entry only form. DTC will act as securities depository for the Bonds. So long as the Bonds arc registered in the name of Cede & Co., as nominee of DTC, references herein to the registered owners of the Bonds shall mean Cede & Co. and shall not mean the beneficial owners of the Bonds. Purchasers of beneficial interests in the Bonds will not receive physical delivery of Bonds. Payments of principal of, premium, if any, and interest on the Bonds and the payment of the purchase price of tendered Bonds will be made directly to DTC or its nominee, Cede & Co., by the Trustee, so long as DTC is the registered owner of the Bonds. DTC will remit such payments to the applicable DTC Participants. The disbursements of such payments will be made by DTC participants to the beneficial owners of the Bonds. See'THE BONDS — Book -Entry Only' herein. So long as the Bonds bear interest at a Weekly Variable Rate, the registered owners of the Bonds will have the right to tender their Bonds for purchase to U.S. Bank National Association, as Tender Agent, at its Principal Office (identified in this Official Statement), on any Business Day upon seven days written notice. The Bonds are also subject to mandatory tender and purchaseon each Adjustment Date and each Proposed Adjustment Date, upon replacement of the Credit Facility with an Alternate Credit Facility and under certain tubes circumstances as provided in the Indenture. See "THE BONDS — Optional Tdlder' and'THE BONDS — Mandatory Tender and Purchase" herein. The Bonds are subject to special mandatory redemption and optional redemption prior to maturity as descried herein. See'THE BONDS — Redemption Provisions" herein. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE ISSUER THE STATE OF MINNESOTA, OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM AMOUNTS PLEDGED TO THE PAYMENT THEREOF UNDER THE INDENTURE PURSUANT TO WHICH THE BONDS WERE ISSUED. FANNIE MAE'S OBLIGATIONS WITH RESPECT TO THE BONDS ARE SOLELY AS PROVIDED IN THE CREDIT FACILITY. THE OBLIGATIONS OF FANNIE MAE UNDER THE CREDIT FACILITY WILL BE OBLIGATIONS SOLELY OF FANNIE MAE, A FEDERALLY CHARTERED STOCKHOLDER -OWNED CORPORATION. FANNIE MAE'S OBLIGATIONS ARE NOT BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA, OR ANY AGENCY THEREOF, OR OF FANNIE MAE AND ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA, ANY AGENCY THEREOF OR FANNIE MAE. This cover page contains certain information for quick reference only. II is not a summary of this issue. Investors must read the entire Offering Circular to obtain information essential to the making of an informed investment decision. The Bonds are offered when, as and if issued and received by the Underwriter, subject to the approval of validity by Dorsey & Whiney LLP, Minneapolis, Minnesota, Band Counsel. Certain legal matters will be passed on for Fannie Mae by its Legal Department and by its counsel, Squire, Sanders & Dempsey L.L.P., Cleveland, Ohio, and for the Borrower by its counsel, Stephen J. Davi, Esq., St. Louis Park, Minnesota. Cmain legal matters will be passed on for the Underwriter by Gray, Plant, Monty, Mooty & Bennett, P.A, Minneapolis. Minnesota. It is expected that the Bonds will be delivered through the facilities of The Depository Trust Company in New York, New York, on m about August l4, 2003. U.S. BANCORP PIPER JAFFRAY INC. August 6, 2003 TABLE OF CONTENTS INTRODUCTION Page THEISSUER...................................................................................................................................4 ESTIMATED SOURCES AND USES OF FUNDS.......................................................................4 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS...............................................5 CERTAINBONDHOLDERS' RISKS............................................................................................6 THEBONDS...................................................................................................................................8 FANNIEMAE...............................................................................................................................18 THE BORROWER AND THE PROJECT....................................................................................19 THELOAN SERVICER...............................................................................................................20 TAX EXEMPTION AND RELATED CONSIDERATIONS.......................................................21 LEGALMATTERS.......................................................................................................................25 NOLITIGATION..........................................................................................................................25 RATINGS......................................................................................................................................25 UNDERWRITING........................................................................................................................26 CONTINUINGDISCLOSURE.....................................................................................................26 MISCELLANEOUS......................................................................................................................26 EXHIBIT A PROPOSED FORM OF OPINION OF BOND COUNSEL EXHIBIT B SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE EXHIBIT C SUMMARY OF CERTAIN PROVISIONS OF THE FINANCING AGREEMENT EXHIBIT D SUMMARY OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT EXHIBIT E SUMMARY OF CERTAIN PROVISIONS OF THE REIMBURSEMENT AGREEMENT EXHIBIT F SUMMARY OF CERTAIN PROVISIONS OF THE NOTE EXHIBIT G FORM OF CREDIT FACILITY i sufficient to pay the principal of, and up to 34 days interest (computed at the Maximum Rate) on, the Bonds when due in accordance with the terms of the Indenture and as described in this Offering Circular. The form of the Credit Facility is attached as Exhibit G. If the Credit Provider notifies the Trustee that an event of default by the Borrower has occurred and is continuing under the Reimbursement Agreement and directs the Trustee to redeem all or a portion of the Bonds or to purchase all of the Bonds, the Bonds will be subject to special mandatory redemption in whole or in part or to mandatory tender in whole. Information regarding the Credit Provider is contained herein under the caption "FANNIE MAE." Upon replacement or termination of the Credit Facility, the Bonds will be subject to mandatory tender as described below under the caption "THE BONDS—Mandatory Tender and Purchase." Limited Obligation THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER AND DO NOT CONSTITUTE A GENERAL OR MORAL OBLIGATION OF THE ISSUER OR A DEBT OR INDEBTEDNESS OF THE ISSUER, THE STATE OF MINNESOTA OR ANY POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION, NOR A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWER OF ANY OF THE FOREGOING. THE BONDS ARE PAYABLE SOLELY FROM: (1) REVENUES DERIVED UNDER THE TERMS OF THE FINANCING AGREEMENT AND THE NOTE; (2) A PRINCIPAL RESERVE FUND; AND (3) THE CREDIT FACILITY, ALL AS DESCRIBED HEREIN. Enforceability of Remedies The remedies available to the Trustee and the owners of the Bonds upon an event of default under the Credit Facility, the Indenture, the Regulatory Agreement or the Financing Agreement are in many respects dependent upon regulatory and judicial actions which are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds and such documents will be qualified as to the enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. CERTAIN BONDHOLDERS' RISKS The purchase of the Bonds will involve a number of risks. The following is a summary, which does not purport to be comprehensive or definitive, of some risk factors. SECURITY AND SOURCES OF PAYMENT FOR THE BONDS General Under the terms of the Indenture, the Bonds are secured by a pledge of the Trust Estate comprised of the following: (a) all right, title and interest of the Issuer in and to the Financing Agreement, the Loan, including the Note, the Security Instrument and the other Loan Documents, reserving, however, the Reserved Rights; (b) all rights to receive payments on the Note and under the other Loan Documents, including all proceeds of insurance and condemnation awards; (c) all right, title and interest of the Issuer in and to the Revenues, the Net Bond Proceeds and to the accrued interest, if any, derived from the sale of the Bonds and all Funds, Accounts and Investments under the Indenture (including, without limitation, moneys, documents, securities, investments, Investment Income, instruments, and general intangibles on deposit or otherwise held by the Trustee under the Indenture), but excluding moneys in the Fees Account, the Rebate Fund and the Costs of Issuance Fund unless and to the extent funded with Net Bond Proceeds (including within such exclusion Investment Income retained in the Costs of Issuance Fund and the Rebate Fund); (d) all Funds, money and securities, and any and all other rights and interests in property, whether tangible or intangible, from time to time conveyed, mortgaged, pledged, assigned or transferred by delivery or by writing of any kind to the Trustee as additional security under the Indenture for the benefit of the Bondholders and the Credit Provider; and (e) all of the proceeds of the foregoing, including, but not limited to, Investments and Investment Income (except as excluded in paragraph (c) above). The foregoing (collectively the "Trust Estate") are pledged for the equal and proportionate benefit, security and protection (subject to the terms of the Indenture) of (a) all registered owners of the Bonds, without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the others of the Bonds and (b) the Credit Provider to secure the payment of all amounts owed to the Credit Provider under the Credit Facility Documents and the Loan Documents (including the Reimbursement Agreement). The Trust Estate, together with the Credit Facility, comprise the Security for the Bonds. Under the Assignment, Fannie Mae has the right to direct the Trustee to assign the Loan to Fannie Mae, but only upon filing with the Trustee a certification reaffirming Fannie Mae's obligations under the Credit Facility. Fannie Mae is obligated to assign the Mortgage Loan Rights to the Trustee upon any Wrongful Dishonor (as defined in the Assignment) under the Credit Facility. Credit Facility In addition to the other security provided under the Indenture, the Credit Facility provides credit enhancement for the Loan and liquidity support for the Bonds. The Credit Facility is an irrevocable direct pay obligation of the Credit Provider for the purpose of providing an amount THE ISSUER The Issuer is a municipal corporation and political subdivision of the State. The Bonds are authorized and issued by the Issuer pursuant to the Act. The Issuer's governing body adopted the Resolution on July 28, 2003 authorizing the issuance and sale of the Bonds. The Issuer makes no representation regarding the security for the Bonds or the suitability of the Bonds for investment. The Issuer undertakes no obligation to administer or monitor the Project or the operation thereof. The Bonds are special, limited obligations of the Issuer payable solely from the revenues described herein. The Bonds shall not constitute a general obligation of the Issuer, the State of Minnesota or any political subdivision thereof, and shall not be a charge against the general credit or taxing powers of the Issuer or the State of Minnesota. ESTIMATED SOURCES AND USES OF FUNDS The sources of funds and the uses thereof in connection with the issuance of the Bonds are expected to be approximately as set forth below: Sources Bond Proceeds $2,655,000 Fannie Mae Taxable Subordinate Loan* 1,155,000 Prior Bonds Existing Funds 380,000 Total Sources $4,190,000 Uses Refund Prior Bonds $2,985,000 Escrow Funds 52,000 Costs of Issuance of Bonds and Loan 282,000 Distribution to Borrower 871,000 Total Uses $4,190,000 * The Fannie Mae Taxable Subordinate Loan will be secured by a second mortgage on the Project, and will be cross -defaulted with the Loan. The Taxable Subordinate Loan will be amortized over approximately 190 months. H DESCRIBED HEREIN. THE CREDIT FACILITY ALSO SECURES THE PURCHASE PRICE OF BONDS TENDERED PURSUANT TO THE INDENTURE. THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER AND DO NOT CONSTITUTE A GENERAL OR MORAL OBLIGATION OF THE ISSUER OR A DEBT OR INDEBTEDNESS OF THE ISSUER, THE STATE OF MINNESOTA OR ANY POLITICAL SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION, NOR A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWER OF ANY OF THE FOREGOING. THE BONDS ARE PAYABLE SOLELY FROM: (1) REVENUES DERIVED UNDER THE TERMS OF THE FINANCING AGREEMENT AND THE NOTE; (2) A PRINCIPAL RESERVE FUND; AND (3) THE CREDIT FACILITY, ALL AS DESCRIBED HEREIN. FANNIE MAE'S OBLIGATIONS WITH RESPECT TO THE BONDS ARE SOLELY AS PROVIDED IN THE CREDIT FACILITY. THE OBLIGATIONS OF FANNIE MAE UNDER THE CREDIT FACILITY WILL BE OBLIGATIONS SOLELY OF FANNIE MAE, A FEDERALLY CHARTERED STOCKHOLDER -OWNED CORPORATION AND WILL NOT BE BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. THE BONDS ARE NOT A DEBT OF THE UNITED STATES OF AMERICA OR ANY AGENCY OR INSTRUMENTALITY THEREOF, OR OF FANNIE MAE. THE BONDS ARE NOT GUARANTEED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES OF AMERICA. Summaries of the Indenture, the Financing Agreement, the Regulatory Agreement, the Reimbursement Agreement and the Note and the form of the Credit Facility are attached as Exhibits to this Offering Circular. All references herein to the Indenture, the Financing Agreement, the Regulatory Agreement, the Credit Facility, the Reimbursement Agreement and the Note and all other documents and agreements are qualified in their entirety by reference to such documents and agreements, and all references to the Bonds are qualified by reference to the form thereof included in the Indenture, copies of which are available for inspection at the corporate trust office of the Trustee located at U.S. Bank National Association, 180 East Fifth Street, St. Paul, MN 55101. 3 Filing encumbering the Project (the "Security Instrument"). The Note is a nonrecourse obligation of the Borrower subject to certain limited exceptions. Payments on the Loan will be made by the Borrower to Glaser Financial Group, Inc., a Minnesota corporation (the "Loan Servicer"). The principal amount and payment provisions of the Note have been established and structured so that (a) the outstanding principal amount of the Note will equal the aggregate principal amount of Outstanding Bonds and (b) the interest payable on the Note will not be less than the interest payable on the Outstanding Bonds. The payments required to be made by the Borrower under the Note, if timely made by the Borrower, are intended to be sufficient in amount to pay, when due, the principal of and interest on the Outstanding Bonds. On the Closing Date, the Issuer will, pursuant to an Assignment and Intercreditor Agreement, dated as of August 1, 2003 (the "Assignment"), among the Issuer, the Trustee and Fannie Mae and acknowledged and agreed to by the Borrower, assign the Loan, the Note, the Security Instrument and the other Loan Documents, without recourse, to the Trustee and Fannie Mae, as their interests may appear. Upon such assignment, the Loan will be part of the Trust Estate. Pursuant to the Assignment, Fannie Mae has the exclusive right to exercise all rights and remedies (other than Reserved Rights) under the Note, Security Instrument, Financing Agreement, and all of the other Loan Documents ( the "Assigned Documents"). Fannie Mae also has the right, upon filing with the Trustee a certification reaffirming Fannie Mae's obligations under the Credit Facility, to direct the Trustee to assign all of its right, title and interest in the Assigned Documents to Fannie Mae. The Loan will be made by the Issuer in accordance with the requirements of Fannie Mae and subject to the terms and conditions of a Commitment (the "Fannie Mae Commitment") issued by Fannie Mae to the Loan Servicer with respect to the Loan. Under the Fannie Mae Commitment, Fannie Mae has agreed, in connection with the Loan, but subject to the terms and conditions of the Fannie Mae Commitment, to provide credit enhancement and liquidity support for the Bonds pursuant to, and subject to, the limitations of, a Credit Enhancement Instrument (Direct Pay) (the "Credit Facility") the form of which is attached as Exhibit G. The obligations of the Borrower to reimburse Fannie Mae for any funds provided by Fannie Mae under the Credit Facility are set forth in a Reimbursement Agreement, dated as of August 1, 2003 (the "Reimbursement Agreement"), between the Borrower and Fannie Mae. See "SECURITY FOR THE BONDS - Credit Facility" herein. In order to assure compliance with the applicable provisions of the Internal Revenue Code of 1954, as amended (the "1954 Code"), the use and operation of the Project is subject to a Deed and Covenants Running with the Land, dated as of December 30, 1985, as amended (the "Regulatory Agreement"), between the New Hope Economic Development Authority, as assignee of the New Hope Housing and Redevelopment Authority, and the Borrower, which requires that 20% of the units in the Project be occupied by individuals or families of low or moderate income. See Exhibit D, "SUMMARY OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT," attached hereto. THIS OFFERING CIRCULAR DESCRIBES THE BONDS ONLY FOR THE PERIOD BEGINNING ON THE CLOSING DATE AND CONTINUING UNTIL THE FIRST ADJUSTMENT DATE APPLICABLE TO THE BONDS. DURING SUCH PERIOD, PAYMENTS DUE ON THE LOAN ARE SECURED BY THE CREDIT FACILITY 2 OFFERING CIRCULAR $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003 INTRODUCTION The following introductory statement is subject in all respects to more complete information contained elsewhere in this Offering Circular. The order and placement of materials in this Offering Circular, which includes the cover page and Exhibits hereto, are not to be deemed to be a determination of relevance, materiality or relative importance, and this Offering Circular, including the cover page and Exhibits hereto, must be considered in its entirety. All capitalized terms used in this Offering Circular that are not otherwise defined herein shall have the meanings ascribed to them in the Indenture, the Financing Agreement, the Regulatory Agreement, the Reimbursement Agreement and the Credit Facility (as each such term is hereinafter defined). The purpose of this Offering Circular is to set forth certain information in connection with the issuance and delivery of $2,655,000 aggregate principal amount of the Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003 (the "Bonds") to be issued by the City of New Hope, Minnesota (the "Issuer"). The Bonds are being issued pursuant to the laws of the State of Minnesota (the "State"), particularly Minnesota Statutes, Chapters 462A and 462C, as amended (the "Act"), and a bond resolution adopted by the Issuer on July 28, 2003 (the "Resolution"). The Bonds are being issued and delivered pursuant to a Trust Indenture, dated as of August 1, 2003 (the "Indenture"), by and between the Issuer and U.S. Bank National Association, as trustee (the "Trustee"). Certain capitalized terms used herein are defined in Exhibit B attached hereto. The Bonds are being issued to provide funding for a mortgage loan (the "Loan") to be made by the Issuer to Broadway LaNel, a Limited Partnership, a Minnesota limited partnership (the `Borrower"). The proceeds of the Loan will be used to refund a previously issued series of bonds, the proceeds of which were used to refinance the acquisition and construction of a 73 -unit complex of multifamily rental housing units and certain related facilities (the "Project"), located at the comer of 61st Street and West Broadway in the City of New Hope, Minnesota. The Loan will be made pursuant to a Financing Agreement, dated as of August 1, 2003 (the "Financing Agreement"), among the Issuer, the Trustee and the Borrower. Pursuant to the Indenture, the Issuer will assign the Financing Agreement (including all of the rights of the Issuer thereunder except for the Issuer's Reserved Rights), together with other property comprising the Trust Estate, to the Trustee for the benefit of the registered owners of the Bonds and Fannie Mae ("Fannie Mae" or the "Credit Provider"). The Issuer will originate the Loan on the Closing Date. The Loan will be evidenced by a multifamily note (the "Note") executed by the Borrower in favor of the Issuer and secured by a first lien priority Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture No dealer, broker, salesman or other person has been authorized by the Issuer, the Borrower, Fannie Mae, the Underwriter or the Remarketing Agent to give any information or to make any representations other than those contained in this Offering Circular and, if given or made, such other information or representation must not be relied upon as having been authorized by any or the foregoing. This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information in this Offering Circular has been obtained from the Issuer, the Borrower, Fannie Mae (to the limited extent noted below) and DTC and other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation of, the Underwriter, the Remarketing Agent, the Issuer, except with respect to the description under the captions "THE ISSUER" and "NO LITIGATION — The Issuer," or Fannie Mae, except with respect to the description under the caption "FANNIE MAE." In particular, the Issuer has not participated in the preparation of in this Offering Circular, has not made an independent investigation with respect to information contained herein, and assumes no responsibility for the accuracy or completeness of information contained herein except with respect to the information under the captions "THE ISSUER" and "NO LITIGATION — The Issuer." Fannie Mae has not provided or approved any information in this Offering Circular except with respect to the description under the caption "FANNIE MAE," takes no responsibility for any other information contained in this Offering Circular, and makes no representation as to the contents of this Offering Circular (other than with respect to the description under the caption "FANNIE MAE"). Without limiting the foregoing, Fannie Mae makes no representation as to the suitability of the Bonds for any investor, the feasibility or performance of the Project, or compliance with any securities, tax or other laws or regulations. Fannie Mae's role with respect to the Bonds is limited to providing the Credit Facility to the Trustee. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Offering Circular nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the information referenced herein since the date hereof. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND OTHERS AT A PRICE LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ii No Personal Liability of Borrower The Borrower has not been nor will it be (subject to certain exceptions to nonrecourse liability for the benefit of Fannie Mae and the Issuer set forth in the Financing Agreement, the Note and the Security Instrument) personally liable for payments on the Loan, nor will the Borrower be (subject to certain exceptions to nonrecourse liability set forth in the Note and the Security Instrument and subject to certain exceptions to nonrecourse liability set forth in the Financing Agreement with respect to the Issuer and the payment of the rebate amount) personally liable under the other documents executed in connection with the issuance of the Bonds and the making of the Loan. All payments on the Loan are expected to be derived from revenues generated by the Project. Limited Security The Bonds are special, limited obligations of the Issuer payable solely from certain funds pledged to and held by the Trustee pursuant to the Indenture. No Acceleration or Early Redemption Upon Loss of Tax Exemption on the Bonds THE BONDS ARE NOT SUBJECT TO ACCELERATION OR REDEMPTION, AND THE RATE OF INTEREST ON THE BONDS IS NOT SUBJECT TO ADJUSTMENT, BY REASON OF THE INTEREST ON THE BONDS BEING INCLUDED IN GROSS INCOME FOR PURPOSES OF FEDERAL INCOME TAXATION. Such event could occur (and perhaps retroactively to the date of issuance) if the Borrower (or any subsequent owners of the Project) does not comply with the provisions of the Financing Agreement and the Regulatory Agreement which are designed, if complied with, to satisfy the continuing compliance requirements of the 1954 Code in order for the interest on the Bonds to be excludable from gross income for purposes of federal income taxation. Early Redemption or Mandatory Tender Purchasers of Bonds, including those who purchase Bonds at a price in excess of their principal amount or who hold such a Bond trading at a price in excess of par, should consider the fact that the Bonds are subject to special mandatory redemption or mandatory tender prior to maturity at a redemption price equal to their principal amount plus accrued interest, without premium. Special mandatory redemption or mandatory tender could occur for a number of reasons; for example, the Bonds are subject to special mandatory redemption in the event that the Loan is prepaid as a result of a casualty or condemnation affecting the Project; similarly, the Bonds are subject to special mandatory redemption or mandatory tender if there is a default under the Loan. See "THE BONDS -- Redemption Provisions - Special Mandatory Redemption." Economic Feasibility The economic feasibility of the Project depends in large part upon its being substantially occupied at projected rent levels and being operated at projected expense levels. There can be no assurance that the Borrower will be able to rent units in the Project at projected rental rates, or 7 operate and maintain the Project at projected expense levels, both of which are necessary in order to enable the Borrower to make timely payments on the Loan. Rental Housing Restrictions The Project is subject to certain federal, state and local restrictions on the use and occupancy of the Project, including the requirement that 20% of the units in the Project must be occupied by or held for occupancy by low and moderate income persons for the periods and as otherwise required under Section 103(b)(4)(A) of the Code. Compliance with these limitations is required in order to preserve the exclusion of the interest on the Bonds from gross income for federal income tax purposes, and accordingly the Borrower has covenanted to comply with those limitations throughout the term of the Bonds. Effects of those limitations will be both to limit the market of tenants eligible to occupy the Project, and to limit the capacity of those tenants to pay rental increases. A consequence of the limitations described above may be to artificially suppress the operating income available from the Project, which may have an adverse effect on the ability of the Borrower to pay debt service on the Loan. Competing Facilities The Project will face competition from other multifamily housing developments and will face additional competition in the future as a result of the construction of new, or the renovation of existing, facilities. The Project is approximately 17 years old. No assurance can be given that the Project will compete successfully against newer rental housing. Furthermore, no assurance can be given that occupancy of the Project will not be adversely affected by the availability of other housing facilities in the market area of the Project and elsewhere, including other housing facilities that the Borrower may develop in the same market area as the Project. Any competing facilities could adversely affect occupancy and revenues of the Project. Enforceability and Bankruptcy The remedies available to the Trustee and the holders of the Bonds upon an event of default under the Financing Agreement, the Credit Facility or the Indenture are in many respects dependent upon regulatory and judicial actions which are often subject to discretion and delay. Under existing laws and judicial decisions, the remedies provided under the aforesaid documents may not readily be available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds and the aforesaid documents will be qualified including, among others, by the fact that the enforceability of certain legal rights related to the Bonds is subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. THE BONDS General The Bonds are dated and will mature on the Dated Date and Maturity Date, respectively, set forth on the cover hereof. Interest on the Bonds will be payable to the registered owner 0 thereof, as of the close of business on the Record Date, in accordance with the terms set forth in the Indenture, on each Interest Payment Date. The initial rates of interest on the Bonds will be determined in connection with the initial offering of the Bonds and will be effective through and including Wednesday, August 20, 2003. Thereafter, the interest rate on each series of Bonds will be determined by U.S. Bancorp Piper Jaffray Inc., or its successor as Remarketing Agent (the "Remarketing Agent"), not later than 4:00 p.m. Eastern time on each Rate Determination Date and on each such date will be the minimum rate of interest necessary, in the best professional judgment of the Remarketing Agent, taking into consideration prevailing market conditions, to enable the Remarketing Agent to remarket all of the Bonds on such Rate Determination Date at par, plus accrued interest, if any, thereon (the "Weekly Variable Rate"); the Weekly Variable Rate so determined will be effective for the seven day period beginning on Thursday of each week through and including the following Wednesday. The Remarketing Agent will provide notice of the Weekly Variable Rate (a) before 5:00 p.m., Eastern time, on the Rate Determination Date by telephone to any Beneficial Owner upon request and to the Loan Servicer and the Credit Provider, and (b) not later than the Business Day next succeeding such Rate Determination Date, by Electronic Means to the other parties specified in the Indenture. Interest on the Bonds during the Weekly Variable Rate Period will be computed on the basis of a 365- or 366 -day year, as applicable, for the actual number of days elapsed from and including the last Interest Payment Date to, but not including, the next Interest Payment Date. If, during the Weekly Variable Rate Period, the Remarketing Agent fails or refuses to determine the Weekly Variable Rate applicable for any seven-day period, the interest rate to be borne by the Bonds during such seven-day period will be the latest BMA Index Rate published on or immediately before the Rate Determination Date (or, in the event the BMA Index Rate is no longer published, the last determined Weekly Variable Rate). See Exhibit B, "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE–Definitions". Adjustment of the Interest Rate on the Bonds At the option of the Borrower, the interest rate on all Outstanding Bonds may, with the consent of Fannie Mae, and otherwise subject to the additional requirements set out in the Indenture, be adjusted from the Weekly Variable Rate to a Reset Rate for a Reset Period specified by the Borrower or to the Fixed Rate for the Fixed Rate Period (the date of such adjustment is an "Adjustment Date"). Such adjustment may be made on any Interest Payment Date designated by the Borrower upon delivery by the Borrower to the Issuer, the Tender Agent, Fannie Mae, the Loan Servicer, the Remarketing Agent and the Trustee of at least 45 days' notice of the proposed adjustment. The Reset Rate or the Fixed Rate, as the case may be, will be determined by the Remarketing Agent in accordance with the procedures set forth in the Indenture. The Indenture requires that on the Adjustment Date there be delivered an Opinion of Bond Counsel stating that the adjustment of the interest rate on the Bonds to a Reset Rate or to the Fixed Rate is authorized and permitted by the Indenture and the laws of the State, and will not adversely affect the exclusion from gross income for federal income tax purposes of the interest payable on the Bonds. The Bonds are subject to mandatory tender and purchase on each Adjustment Date, as set forth in, and in accordance with, the Indenture. See"—Mandatory Tender and Purchase" below. Not later than 30 days prior to the Adjustment Date, the Trustee will give notice to Bondholders 9 of the proposed Adjustment Date and that all Bonds are thereupon subject to mandatory tender and purchase. Optional Tender Subject to the provisions of the Indenture, during the Weekly Variable Rate Period, any Bond will be purchased by the Trustee on behalf of and as agent for the Borrower, but solely from the sources provided in the Indenture, on the demand of the Beneficial Owner thereof, on any Business Day at a purchase price equal to 100% of the principal amount thereof plus accrued interest, if any, to the date of purchase, upon receipt by the Tender Agent at its Designated Office, of a notice (the "Bondholder Tender Notice") which states: (a) the number and principal amount (or portion thereof provided that the portion of the Bond retained is an Authorized Denomination) of such Bond; (b) the name, address and tax identification number of the Beneficial Owner of the Bond demanding such payment; and (c) the date on which such Bond is to be purchased, which date shall be a Business Day not prior to the seventh day next succeeding the date of the delivery of the Bondholder Tender Notice to the Tender Agent. By delivering a Bondholder Tender Notice, the Beneficial Owner irrevocably agrees to deliver such Bond (with an appropriate transfer of registration form executed in blank and accompanied by a guaranty of signature satisfactory to the Tender Agent) to the Designated Office of the Tender Agent or any other address designated by the Tender Agent, at or prior to 10:00 a.m., Eastern time, on the date of purchase specified in the Bondholder Tender Notice; provided, however, that such Bond will be so purchased only if the Bond so delivered to the Tender Agent conforms in all respects to the description thereof in the Bondholder Tender Notice. The determination by the Tender Agent of a Beneficial Owner's compliance with the Bondholder Tender Notice requirements and whether Bonds delivered conform in all respects to the description thereof in the Bondholder Tender Notice is in the sole discretion of the Tender Agent and is binding on the Borrower, the Issuer, the Remarketing Agent, Fannie Mae, the Trustee, the Tender Agent, the Loan Servicer and the Beneficial Owner of the Bonds. Any election by a Beneficial Owner to tender a Bond or Bonds (or portion thereof) for purchase on a Business Day will be irrevocable and will be binding on the Beneficial Owner making such election and on any transferee of such Beneficial Owner. If after delivery to the Tender Agent of a Bondholder Tender Notice, the Beneficial Owner making such election fails to deliver such Bond or Bonds described in the Bondholder Tender Notice to the Tender Agent on the applicable purchase date, the untendered Bond or Bonds or portion thereof (each an "Untendered Bond" or "Untendered Bonds") described in such Bondholder Tender Notice will be deemed to have been properly tendered for purchase and, to the extent that there is on deposit in the Bond Purchase Fund on the applicable purchase date an amount sufficient to pay the purchase price thereof, such Untendered Bond or Bonds (or portion thereof) will, on such purchase date, cease to bear interest and no longer be considered to be Outstanding under the Indenture. The Trustee will promptly give notice by registered or certified mail to each Beneficial Owner of any Bond which has been deemed to have been purchased, which notice will state that interest on such Untendered Bond ceased to accrue on and after the date of purchase and that moneys representing the purchase price of such Untendered Bond are available against delivery thereof at the Designated Office of the Tender Agent. If for any reason a Beneficial Owner fails to deliver such Untendered Bond to the Tender Agent on the purchase date, the Issuer will execute and the Tender Agent will authenticate and deliver to the 10 Remarketing Agent for redelivery to the purchaser a new Bond or Bonds in replacement of the Bond not so delivered. The replacement of any such previously Outstanding Bond will not be deemed to create new indebtedness, but such Bond as is issued in replacement will be deemed to evidence the indebtedness previously evidenced by the Bond not so delivered. Notwithstanding the above, during any period that the Bonds are issued in book -entry only form pursuant to the Indenture, (a) any Bondholder Tender Notice delivered as described in the Indenture must also (i) provide evidence satisfactory to the Tender Agent that the party delivering the notice is the Beneficial Owner of the Bonds or a custodian for the Beneficial Owner referred to in the notice, and (ii) if the Beneficial Owner is other than a DTC Participant, identify the DTC Participant through whom the Beneficial Owner will direct transfer; (b) on or before the purchase date, the Beneficial Owner must direct (or if the Beneficial Owner is not a DTC Participant, cause its DTC Participant to direct) the transfer of such Bonds on the records of DTC to the account of, or as directed by, the Trustee; and (c) it will not be necessary for Bonds to be physically delivered on the date specified for purchase thereof, but such purchase will be made as if such Bonds had been so delivered, and the purchase price thereof will be paid to DTC. See "—Book -Entry Only" below. Upon surrender of any Bond for purchase in part only, the Issuer will execute and the Tender Agent will authenticate and deliver to the holder thereof a new Bond or Bonds of the same maturity and interest rate, of Authorized Denominations and in an aggregate principal amount equal to the unpurchased portion of the Bond surrendered. Any Tendered Bonds that have been remarketed will be deemed to continue to be Outstanding for all purposes and will continue to be fully secured by the Indenture until paid at maturity or redemption prior to maturity. Payment for Tendered Bonds will be made by the Trustee at or before 4:00 p.m., Eastern time, on the date specified in the Bondholder Tender Notice, first, from remarketing proceeds on deposit in the Bond Purchase Fund, second, from proceeds of a payment under the Credit Facility, and third, from moneys from the Borrower. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Credit Facility." Mandatory Tender and Purchase The Bonds are subject to mandatory tender and purchase by the Trustee on behalf of and as agent for the Borrower on each Mandatory Tender Date. Such purchase will be at a purchase price equal to 100% of the principal amount thereof, plus accrued interest, if any, to the applicable Mandatory Tender Date. In any such event, the holder of any Bond may not elect to retain its Bond. Mandatory Tender Dates shall include each proposed Adjustment Date, each Adjustment Date, each Substitution Date and each Extension Date. The Borrower, with the prior written consent of the Credit Provider, may call for the mandatory tender of the Bonds of a series for the purpose of establishing a different method of determining interest for such Bonds. Not less than 30 days prior to any proposed Adjustment Date, or not less than 10 days prior to any Substitution Date or Extension Date (absent the Trustee's receipt of a binding commitment to extend the Alternate Credit Facility then in effect and a required opinion of Bond Counsel), the Trustee will give notice to the Bondholders of the proposed Adjustment Date, Substitution Date or Extension Date, as applicable, and that the Bonds are required to be tendered on the proposed 11 Adjustment Date, Substitution Date or Extension Date, as applicable. Such notice will state that the Bondholders will not have the right to elect to retain their Bonds. Any such notice will be conclusively presumed to have been duly given when mailed by the Trustee as described in this paragraph whether or not the registered owner actually receives the notice. In addition, the Bonds are subject to mandatory tender on the earliest practicable date (which shall be a Mandatory Tender Date) after notice thereof has been given to Bondholders, which notice shall be given to the Bondholders upon receipt by the Trustee of written notice from Fannie Mae directing acceleration of the Loan following an Event of Default under the Reimbursement Agreement and directing that the Bonds be subject to mandatory tender. Immediately upon receipt by the Trustee of written notice or actual knowledge of any of the foregoir_g events, the Trustee will give notice by mail to the owners of the Bonds stating that (a) such event has occurred, (b) such Bonds are required to be tendered on the Mandatory Tender Date specified in such notice, and (c) the owners thereof will not have the right to elect to retain such Bonds. On each Mandatory Tender Date, Bondholders will be required to tender their Bonds to the Tender Agent for purchase by the Trustee on behalf of and as agent for the Borrower. Any Bond which is not so tendered ("Untendered Bond") will be deemed to have been tendered to the Tender Agent as of such Mandatory Tender Date, and, from and after such Mandatory Tender Date, will cease to bear interest and no longer will be considered to be Outstanding under the Indenture. In the event of a failure by a Bondholder to deliver a Bond on the Mandatory Tender Date, such Bondholder will not be entitled to any payment (including any interest to accrue from and after the Mandatory Tender Date) other than the purchase price for such Untendered Bond, and such Untendered Bond will no longer be entitled to the benefits of the Indenture, except for the purpose of payment of the purchase price of such Untendered Bond. If for any reason a Bondholder fails to deliver such Bond to the Tender Agent on the Mandatory Tender Date, the Issuer will execute, and the Tender Agent will authenticate and deliver to the Remarketing Agent for redelivery to the purchaser, a new Bond or Bonds in replacement of the Bond not so delivered. The replacement of any such previously Outstanding Bond will not be deemed to create new indebtedness, but such Bond as is issued in replacement will be deemed to evidence the indebtedness previously evidenced by the Bond not so delivered. Notwithstanding the above, during any period that the Bonds are issued as Book -entry Bonds, (a) notice will be given as described in the Indenture only to the entity designated in the Letter of Representations; and (b) it shall not be necessary for Bond(s) to be physically delivered on the date specified for purchase of such Bond(s), but such purchase shall be made as if such Bond(s) had been so delivered, and the purchase price of such Bond(s) shall be paid to DTC. Payment for Tendered Bonds will be made by the Trustee at or before 4:00 p.m., Eastern time, on the Mandatory Tender Date, first, from remarketing proceeds on deposit in the Bond Purchase Fund, second, from proceeds of a payment under the Credit Facility, and, third from moneys provided by the Borrower. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Credit Facility." 12 Wrongful Dishonor or Acceleration There will be no remarketing of Bonds in connection with any optional mandatory tender of Bonds if the Trustee shall have given notice to the Remarketing Agent that a Wrongful Dishonor has occurred and is continuing. There will be no purchase of Bonds in connection with any mandatory tender of Bonds if the Trustee shall have given notice to the Remarketing Agent that there has occurred and is continuing an acceleration of Bonds pursuant to the Indenture. Payment of the Bonds upon acceleration will be secured by the Credit Facility and will be made in accordance with the provisions of the Indenture. Redemption Provisions The Bonds are subject to optional and special mandatory redemption at the times and redemption prices set forth in the Indenture and in Authorized Denominations, provided that after such redemption, no Bondholder may hold Bonds in an amount less than an Authorized Denomination. Optional Redemption. The Bonds are subject to optional redemption upon optional prepayment of the Loan in accordance with the terms of the Loan Documents (a) in whole, upon optional prepayment by the Borrower of the Loan in whole, or (b) in corresponding part, upon optional prepayment by the Borrower of the Loan in part. Optional redemptions may be made in accordance with the terms of the Indenture during a Weekly Variable Rate Period in whole or in part on any Interest Payment Date and on any Adjustment Date, at a redemption price equal to 100% of the principal amount redeemed plus accrued interest to the redemption date. Special Mandatory Redemption. The Bonds are subject to special mandatory redemption on the earliest practicable Redemption Date for which timely notice of redemption can be given pursuant to the Indenture following the occurrence of the event requiring such redemption and at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to the Redemption Date, in accordance with the following: The Bonds will be redeemed in whole or in part, at the direction of the Credit Provider, in the event and to the extent that proceeds of insurance from any casualty to, or proceeds of any award from any condemnation of, or any award as part of a settlement in lieu of condemnation of, the Mortgaged Property ("Proceeds") are applied in accordance with the Security Instrument to the prepayment of the Loan; The Bonds will be redeemed in whole or in part at the written direction of the Credit Provider given to the Trustee, and in the amount specified by the Credit Provider if the redemption is in part, upon the occurrence of an Event of Default under (and as defined in) the Reimbursement Agreement; The Bonds will be redeemed in whole or in part on each Adjustment Date in an amount equal to the amount transferred from the Principal Reserve Fund to the Redemption Account. See Exhibit B, "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE — Principal Reserve Fund — Disbursements from the Principal Reserve Fund;" and 13 The Bonds will be redeemed in whole or in part on any Interest Payment Date during the Weekly Variable Rate Period in an amount equal to the amount transferred from the Principal Reserve Fund to the Redemption Account. See Exhibit B, "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE — Principal Reserve Fund — Disbursements from the Principal Reserve Fund." In the event of a redemption of the Bonds in whole, the Bonds may, upon satisfaction of certain conditions set forth in and in accordance with the terms of the Indenture, be purchased in lieu of redemption. Partial Redemption If less than all the Outstanding Bonds shall be called for redemption, the Trustee shall select by lot, in such manner as it shall in its discretion determine, the Bonds, or portions thereof, to be redeemed except that, notwithstanding the foregoing, any Pledged Bonds Outstanding will be called for redemption before any other Bonds are selected for redemption and, if applicable, the Bonds with the highest interest rate will be called for redemption before any other Bonds are selected for redemption, according to the selection process set out in the Indenture. If there shall be called for redemption less than the entire principal amount of a Bond, the Issuer will execute and the Trustee will authenticate and deliver, upon surrender of such Bond, without charge to the holder thereof, in exchange for the unredeemed principal amount of such Bond, at the option of such holder, Bonds, in the amount of the unredeemed principal of the surrendered Bond, of the same maturity, interest rate, and tenor in any Authorized Denomination. Notice of Redemption Notice of a redemption of Bonds will be mailed by the Trustee by first-class mail, not less than 10 days before the Redemption Date, to each Registered Owner of the Bonds to be redeemed in whole or in part at the Registered Owner's address appearing on the Bond Register. At the same time notice of redemption is sent to the Registered Owners, the Trustee will send notice of redemption by first class mail, overnight delivery service or other overnight means, postage or charges prepaid (or as specified below) (a) to the Rating Agency, (b) if the Bonds are not subject to the Book -Entry System, to any Securities Depositories holding Bonds and (c) at least two of the national information services (described in the Indenture) that disseminate securities redemption notices. If notice is given to the applicable Registered Owners as provided above, the failure of any Bondholder to receive such notice or any defect in any notice so mailed or in its content or in the manner in which notice is given will not affect the validity or sufficiency of the proceedings for the redemption of such Bonds. No notice of redemption is required for a redemption pursuant to clause (c) above under the subheading "Special Mandatory Redemption." Any notice of optional redemption described under the subheading "Optional Redemption" above is conditional upon the Trustee's receipt of sufficient moneys to effect the redemption. If such condition is not met, or if the Credit Provider otherwise directs the Trustee following an Event of Default under the Reimbursement Agreement, such optional redemption shall be rescinded. All Bonds so called for redemption will cease to bear interest on the date specified for redemption, provided funds for their redemption have been duly deposited with the Trustee pursuant to the Indenture and, thereafter, the owners of such Bonds called for redemption shall 14 have no rights in respect thereof, except to receive payment of the redemption price for such Bonds. Book -Entry Only The Bonds will be issued and delivered on the date of delivery thereof as fully -registered bonds in the name of Cede & Co., as nominee of DTC, as registered owner of the Bonds. Purchasers of such Bonds will not receive physical delivery of bond certificates. For purposes of this Offering Circular, so long as all of the Bonds are immobilized in the custody of DTC, references to Bondholders, holders, Bondowners or Owners mean DTC or its nominee. The information in this section concerning DTC and the DTC book -entry system has been obtained from DTC and none of the parties mentioned herein takes any responsibility for the accuracy or completeness thereof. The Beneficial Owners (as defined herein) should confirm the following information with DTC or the DTC Participants. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully - registered securities in the name of Cede & Co., DTC's partnership nominee ("Cede"). One fully -registered Bond certificate will be issued for the Bonds in the aggregate principal amount of each maturity and will be deposited with DTC. DTC is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a `blearing corporation" within the meaning of the New York Uniform Commercial Code and a `blearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants (the "Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book -entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants'). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (`Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners 15 will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book -entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede. The deposit of Bonds with DTC and their registration in the name of Cede effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede. If less than all of the Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede will consent or vote with respect to Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede's consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date identified in a listing attached to the Omnibus Proxy. Principal and interest payments on the Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on a payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as in the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee, the Tender Agent, the Borrower, the Remarketing Agent, Fannie Mae or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Trustee or the Issuer, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. The requirement for physical delivery of Bonds in connection with a demand for purchase or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records. THE ISSUER, THE TRUSTEE, THE TENDER AGENT, FANNIE MAE, THE LOAN SERVICER, THE REMARKETING AGENT AND THE BORROWER SHALL HAVE NO RESPONSIBILITY OR OBLIGATION WITH RESPECT TO THE ACCURACY OF THE RECORDS OF DTC, CEDE & CO. OR ANY DTC PARTICIPANT WITH RESPECT TO ANY OWNERSHIP INTEREST IN THE BONDS, THE DELIVERY TO ANY DTC PARTICIPANT OR ANY INDIRECT PARTICIPANT OR ANY OTHER PERSON, OTHER THAN CEDE & 16 CO., AS NOMINEE OF DTC, AS SHOWN ON THE BOND REGISTER, OF ANY NOTICE WITH RESPECT TO THE BONDS, INCLUDING ANY NOTICE OF REDEMPTION, THE PAYMENT TO ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OR ANY OTHER PERSON, OTHER THAN CEDE & CO., AS NOMINEE OF DTC, AS SHOWN ON THE BOND REGISTER, OF ANY AMOUNT WITH RESPECT TO PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON, THE BONDS OR ANY CONSENT GIVEN BY CEDE & CO., AS NOMINEE OF DTC. SO LONG AS CERTIFICATES FOR THE BONDS ARE NOT ISSUED PURSUANT TO THE INDENTURE AND THE BONDS ARE REGISTERED TO DTC, THE ISSUER, THE BORROWER, FANNIE MAE, THE LOAN SERVICER, THE TENDER AGENT, THE REMARKETING AGENT AND THE TRUSTEE SHALL TREAT DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY AS, AND DEEM DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY TO BE, THE ABSOLUTE OWNER OF THE BONDS FOR ALL PURPOSES WHATSOEVER, INCLUDING WITHOUT LIMITATION (1) THE PAYMENT OF PRINCIPAL AND INTEREST ON THE BONDS, (2) GIVING NOTICE OF REDEMPTION AND OTHER MATTERS WITH RESPECT TO THE BONDS, (3) REGISTERING TRANSFERS WITH RESPECT TO THE BONDS AND (4) THE SELECTION OF BONDS FOR REDEMPTION. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving written notice to the Issuer, the Remarketing Agent, the Tender Agent, the Borrower and the Trustee. The Issuer or the Borrower, with the consent of the other, may terminate the services of DTC with respect to the Bonds. Under any such circumstances, unless a successor securities depository is appointed to undertake the functions of DTC under the Indenture, Bond certificates are required to be printed and delivered as described in the Indenture. According to DTC, the foregoing information with respect to DTC has been provided to the Industry for informational purposes only and is not intended to serve as a representation, warranty or contract modification of any kind. Remarketing Agent Pursuant to a Remarketing Agreement, dated as of August 1, 2003 (the "Remarketing Agreement'), by and between U.S. Bancorp Piper Jaffray Inc. (the "Remarketing Agent') and the Borrower, U.S. Bancorp Piper Jaffray Inc. has been appointed Remarketing Agent. The Remarketing Agent will determine the interest rates on the Bonds in accordance with the Indenture and is required to use its best efforts to remarket the Bonds in accordance with the Remarketing Agreement and the Indenture. 17 FANNIE MAE Fannie Mae is a federally chartered and stockholder -owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. 1716 et seq. It is the largest investor in home mortgage loans in the United States with a net portfolio of $823 billion of mortgage loans as of March 31, 2003. Fannie Mae was originally established in 1938 as a United States government agency to provide supplemental liquidity to the mortgage market and became a stockholder -owned and privately managed corporation by legislation enacted in 1968. Fannie Mae purchases, sells and otherwise deals in mortgages in the secondary market rather than as a primary lender. It does not make direct mortgage loans but acquires mortgage loans originated by others. In addition, Fannie Mae issues mortgage-backed securities ("MBS"), primarily in exchange for pools of mortgage loans from lenders. Fannie Mae receives guaranty fees for its guarantee of timely payment of principal of and interest on MBS certificates. Fannie Mae is subject to regulation by the Secretary of Housing and Urban Development ("HUD") and the Director of the independent Office of Federal Housing Enterprise Oversight within HUD. Approval of the Secretary of Treasury is required for Fannie Mae's issuance of its debt obligations and MBS. Five of the eighteen members of Fannie Mae's Board of Directors are appointed by the President of the United States, and the other thirteen are elected by the holders of Fannie Mae's common stock. The securities of Fannie Mae are not guaranteed by the United States and do not constitute a debt or obligation of the United States or any agency or instrumentality thereof other than Fannie Mae. As of March 31, 2003, Fannie Mae's core capital' was $29.5 billion. Information on Fannie Mae and its financial condition is contained in Fannie Mae's most current annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K that are filed with the SEC. The SEC filings are available at the SEC's website at www.sec.gov. The periodic reports filed by Fannie Mae with the SEC are also available on Fannie Mae's web site at http://www.fanniemae.com/ir/sec. Fannie Mae makes no representation as to the contents of this Offering Circular, the suitability of the Bonds for any investor, the feasibility of performance of any project, or compliance with any securities, tax or other laws or regulations. Fannie Mae's role with respect to the Bonds is limited to issuing and discharging its obligations under the Credit Facility and exercising the rights reserved to it in the Indenture and the Reimbursement Agreement. ' Core capital is the sum of (a) the stated value of outstanding common stock, (b) the stated value of outstanding noncumulative perpetual preferred stock, (c) paid -in capital, and (d) retained earnings. IN THE BORROWER AND THE PROJECT The following information has been provided by the Borrower for use herein. Neither the Issuer, the Underwriter, Fannie Mae, the Loan Servicer nor any of their respective counsel, members, commissioners, officers or employees make any representations as to the accuracy or sufficiency of such information. The Borrower The Borrower is Broadway LaNel, a Limited Partnership, a Minnesota limited partnership. The Borrower was organized in December of 1985. The general partners of the Borrower are Francis W. Lang, an individual residing in the City of Edina, Minnesota, and Eugene M. Nelson, an individual residing in the City of Bloomington, Minnesota. The Borrower constructed the Project in 1996, and the Project was placed in service in December of that year. The Borrower owns no substantial assets other than the Project. The obligations and liabilities of the Borrower under the Financing Documents (as defined in the Reimbursement Agreement) are of a nonrecourse nature and are limited to the Borrower's interest in the Project and moneys derived from the operation of the Project. Neither the Borrower nor its partners have any personal liability for payments under the Financing Documents. Furthermore, no representation is made that the Borrower has substantial funds available for the Project. Accordingly, neither the Borrower's financial statements nor those of any of its partners nor of the property manager are included in this Offering Circular. The Property Manager Lang -Nelson Associates, Incorporated, a Minnesota corporation, is the management agent (the "Agent") for the Project. Several affiliated entities own, manage and market, and invest in real estate ventures. Affiliated entities own or have an interest in 20 residential and commercial properties in the Minneapolis/St. Paul metropolitan area. They have approximately 3,000 residential units under management. The Project The Project is a four-story 73 -unit senior rental apartment building (with the first level used for parking) located at the comer of 61st Street and West Broadway in the City of New Hope, Minnesota. The property is situated on approximately 2.29 acres of land. The building is constructed with concrete first level parking and a wood frame structure system with brick exterior. Common amenities of the Project available to all tenants include an exercise room, party room with full kitchen, laundry facilities on each floor, storage units, intercom phone security system and professional on-site management and maintenance. 19 The property contains 73 rental units with the following breakdown: Individual apartment units include an oven, range, hood, dishwasher, garbage disposal, refrigerator and air conditioner. Utilities are individually metered for electricity, but there is central hot water and hot water heating. There are 60 covered garage spaces and 31 surface parking spaces. The Project is currently approximately 93.2 percent occupied. No major physical improvements to the Project are presently contemplated. Payment of the principal of and interest on the Bonds will be secured, to the extent described herein, by the Loan and by certain other resources and assets constituting the trust estate under the Indenture, but primarily by the Credit Facility. Accordingly, neither the prior operating history of the Project nor the future operating expectations of the Project are included in this Offering Circular. Environmental Matters According to a Phase I Environmental Site Assessment ("ESA"), dated June 18, 2003 prepared by Peer Engineering, Inc., based on visual observation from a site visit as well as a historical land use review and other records, the ESA identified no "Recognized Environmental Conditions" associated with the Project site. THE LOAN SERVICER The following information has been provided by the Loan Servicer for use herein. While the information is believed to be reliable, neither the Issuer, the Underwriter, Fannie Mae, the Borrower nor any of their respective counsel, members, commissioners, offlicers or employees make any representations as to the accuracy or sufficiency of such information. Glaser Financial Group, Inc., a Minnesota corporation (the "Loan Servicer"), will perform mortgage servicing functions with respect to the Loan on behalf of Fannie Mae and in accordance with Fannie Mae's requirements. The servicing arrangements between Fannie Mae and the Loan Servicer for the servicing of the Loan are solely between Fannie Mae and the Loan Servicer and neither the Issuer nor the Trustee is deemed to be party thereto or has any claim, right, obligation, duty or liability with respect to the servicing of the Loan. The Loan Servicer will be obligated, pursuant to its arrangements with Fannie Mae and Fannie Mae's servicing requirements, to perform diligently all services and duties customary to the servicing of mortgages, as well as those specifically prescribed by Fannie Mae. Fannie Mae 20 Average # Units Unit Tune Square Feet Current Rent 51 1 Bedroom/1 Bath 830 $895 4 1 plus Bedroom/1 Bath 933 $897 6 2 Bedroom/1 Bath 1,123 $1,020 12 2 Bedroom/1.75 Bath 1,184 $1,060 73 Individual apartment units include an oven, range, hood, dishwasher, garbage disposal, refrigerator and air conditioner. Utilities are individually metered for electricity, but there is central hot water and hot water heating. There are 60 covered garage spaces and 31 surface parking spaces. The Project is currently approximately 93.2 percent occupied. No major physical improvements to the Project are presently contemplated. Payment of the principal of and interest on the Bonds will be secured, to the extent described herein, by the Loan and by certain other resources and assets constituting the trust estate under the Indenture, but primarily by the Credit Facility. Accordingly, neither the prior operating history of the Project nor the future operating expectations of the Project are included in this Offering Circular. Environmental Matters According to a Phase I Environmental Site Assessment ("ESA"), dated June 18, 2003 prepared by Peer Engineering, Inc., based on visual observation from a site visit as well as a historical land use review and other records, the ESA identified no "Recognized Environmental Conditions" associated with the Project site. THE LOAN SERVICER The following information has been provided by the Loan Servicer for use herein. While the information is believed to be reliable, neither the Issuer, the Underwriter, Fannie Mae, the Borrower nor any of their respective counsel, members, commissioners, offlicers or employees make any representations as to the accuracy or sufficiency of such information. Glaser Financial Group, Inc., a Minnesota corporation (the "Loan Servicer"), will perform mortgage servicing functions with respect to the Loan on behalf of Fannie Mae and in accordance with Fannie Mae's requirements. The servicing arrangements between Fannie Mae and the Loan Servicer for the servicing of the Loan are solely between Fannie Mae and the Loan Servicer and neither the Issuer nor the Trustee is deemed to be party thereto or has any claim, right, obligation, duty or liability with respect to the servicing of the Loan. The Loan Servicer will be obligated, pursuant to its arrangements with Fannie Mae and Fannie Mae's servicing requirements, to perform diligently all services and duties customary to the servicing of mortgages, as well as those specifically prescribed by Fannie Mae. Fannie Mae 20 will monitor the Loan Servicer's performance and has the right to remove the Loan Servicer with or without cause. The duties performed by the Loan Servicer include general loan servicing responsibilities, collection and remittance of principal and interest payments, administration of mortgage escrow accounts and collection of insurance claims. In addition, the Loan Servicer has certain billing, collection and remittance obligations under the Assignment and the Note. The selection or replacement of the Loan Servicer is in the sole and absolute discretion of Fannie Mae. The servicing arrangements between the Loan Servicer and Fannie Mae are subject to amendment or termination from time to time without the consent of the Issuer, the Trustee or the Borrower, and none of the Trustee, the Issuer or the Borrower have any rights under, and none is a third party beneficiary of, the servicing arrangements between the Loan Servicer and Fannie Mae. The Loan Servicer is an approved DUS seller/servicer under Fannie Mae's Delegated Underwriting and Servicing product line. The Loan Servicer makes no representation as to the contents of this Offering Circular (other than with respect to the description under the caption "THE LOAN SERVICER"), the suitability of the Bonds for any investor, the feasibility of performance of the Project or compliance with any securities, tax or other laws or regulations. The Loan Servicer's role is limited to underwriting and servicing the Loan on behalf of Fannie Mae. TAX EXEMPTION AND RELATED CONSIDERATIONS Tax Exemption In the opinion of Dorsey & Whitney LLP, as Bond Counsel, under federal and Minnesota laws, regulations, rulings and decisions in effect on the date of issuance of the Bonds, interest on the Bonds is not includable in gross income for federal income tax purposes or in taxable net income of individuals, trusts or estates for Minnesota income tax purpose, except for any period during which a Bond is owned by a person who is a "substantial user" of the Project or a "related person" within the meaning of Section 103(b)(13) of the 1954 Code. Interest on the Bonds is includable in taxable income of corporations and financial institutions for purposes of the Minnesota franchise tax. In rendering its opinion, Bond Counsel will rely on certificates furnished by the Borrower as to the nature, use, cost and useful life of the Project and the use and investment of the proceeds of the original bonds, the Prior Bonds and the Bonds. A form of such opinion is included as Exhibit A to this Offering Circular. Certain provisions of the 1954 Code and the 1986 Code impose continuing requirements which must be met after the issuance of the Bonds in order for the interest on the Bonds to be and remain excludable from federal gross income and Minnesota taxable net income. These requirements include, but are not limited to, certain limitations with respect to the use and occupancy of the Project (see "Tenancy Requirements under Section 103(b)(4)(A) of the 1954 Code" below), restrictions on the yield and investment of Bond proceeds and a requirement that certain investment earnings be rebated on a periodic basis to the United States. Noncompliance with such requirements may cause interest on the Bonds to become includable in federal gross income and in Minnesota taxable net income retroactive to their date of original issue, irrespective in some cases of the date on which such noncompliance occurs or is ascertained. 21 As a condition to converting the interest on the Bonds to a Reset Rate or a Fixed Rate under the Indenture, the Borrower must deliver to the Trustee an opinion of bond counsel stating in effect that such conversion to the Reset Rate or Fixed Rate is authorized and permitted by the Indenture and will not impair the validity or the tax-exempt status of interest on the Bonds. No opinion will be expressed by Dorsey & Whitney LLP, as Bond Counsel, with respect to the tax- exempt status of interest on the Bonds from and after the first Adjustment Date, if any. The 1995 Minnesota Legislature has enacted a statement of intent that interest on obligations of Minnesota governmental units and Indian tribes be included in net income of individuals, estates and trusts for Minnesota income tax purposes if a court determines that Minnesota's exemption of such interest unlawfully discriminates against interstate commerce because interest on obligations of governmental issuers located in other states is so included. This provision applies to taxable years that begin during or after the calendar year in which any such court decision becomes final, irrespective of the date on which the obligations were issued. The Borrower is not aware of any judicial decision holding that a state's exemption of interest on its own bonds or those of its political subdivisions or Indian tribes, but not of interest on the bonds of other states or their political subdivisions or Indian tribes, unlawfully discriminates against interstate commerce or otherwise contravenes the United States Constitution. Nevertheless, the Borrower cannot predict the likelihood that interest on the Bonds would become taxable under this Minnesota statutory provision. Related Considerations Interest on the Bonds 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 or the Minnesota alternative minimum tax applicable to individuals, estates and trusts, but is includable in adjusted current earnings of corporations in determining alternative minimum taxable income for purposes of federal and Minnesota alternative minimum taxes. Section 86 of the 1986 Code and corresponding provisions of Minnesota law require recipients of certain Social Security and railroad retirement benefits to take into account interest on the Bonds in determining the taxability of such benefits. Passive investment income, including interest on the Bonds, may be subject to taxation under Section 1375 of the 1986 Code and corresponding provisions of Minnesota law for an S corporation that has accumulated earnings and profits at the close of the taxable year if more than twenty-five percent of its gross receipts is passive investment income. Interest on the Bonds may be includable in the income of a foreign company for purposes of the branch profits tax imposed by Section 884 of the 1986 Code and is includable in the net investment income of foreign insurance companies for purposes of Section 842(b) of the 1986 Code. In the case of an insurance company subject to the tax imposed by Section 831 of the 1986 Code, the amount which otherwise would be taken into account as losses incurred under Section 832(b)(5) of the 1986 Code must be reduced by an amount equal to fifteen percent of the interest on the Bonds that is received or accrued during the taxable year. Section 265 of the 1986 Code denies a deduction of interest on indebtedness incurred or continued to purchase or carry the Bonds, and Minnesota law similarly denies a deduction for such interest expenses in the case of individuals, estates and trusts. Indebtedness may be allocated to the Bonds for this purpose even though not directly traceable to the purchase of the Bonds. Federal and Minnesota laws also restrict the deductibility of other expenses allocable to the Bonds. In the case of a financial institution no deduction is allowed under the 22 1986 Code for that portion of the holder's interest expense which is allocable to interest on the Bonds within the meaning of Section 265(b) of the 1986 Code. THE FOREGOING IS NOT INTENDED TO BE AN EXHAUSTIVE DISCUSSION OF COLLATERAL TAX CONSEQUENCES ARISING FROM RECEIPT OF INTEREST ON THE BONDS. PROSPECTIVE PURCHASERS OR BONDHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO COLLATERAL TAX CONSEQUENCES, INCLUDING WITHOUT LIMITATION THE DETERMINATION OF GAIN OR LOSS ON THE SALE OF A BOND, THE CALCULATIONS OF ALTERNATIVE MINIMUM TAX LIABILITY, THE INCLUSION OF SOCIAL SECURITY OR OTHER RETIREMENT PAYMENTS IN TAXABLE INCOME, THE DISALLOWANCE OF DEDUCTIONS FOR CERTAIN EXPENSES ATTRIBUTABLE TO THE BONDS, AND STATE AND LOCAL TAX RULES. Tenancy Requirements Under Section 103(b)(4)(A) of the 1954 Code Specifically, the opinion of Bond Counsel assumes compliance since the date of issuance of the original bonds and continuing compliance with the covenants regarding the requirements of Section 103(b)(4)(A) of the 1954 Code and the regulations promulgated thereunder with respect to the Project and the accuracy and completeness of certificates relating thereto furnished by the Borrower. Failure to meet such requirements at any time since the date of issuance of the original bonds, and continuing throughout the term of the original bonds, the Prior Bonds and the Bonds, could result in taxation of interest on the Bonds from the date of issuance. The Borrower will covenant that, in connection with the construction and operation of the Project, it and its predecessors in interest have complied and will continue to comply with the requirements of Section 103(b)(4)(A) of the 1954 Code and the regulations promulgated thereunder. Under Section 103(b)(4)(A) of the 1954 Code, the interest on the Bonds will remain excludable from gross income for purposes of federal income tax only if, at all times during the "qualified project period" (as defined below), 20% or more of the residential units in the Project are occupied or held for occupancy by households the income of which is 80% or less of area median gross income. Under the 1954 Code, the income of tenants of the Project and the median gross income must be determined pursuant to regulations and information published pursuant to Section 8 of the United States Housing Act of 1937, as amended. However, under Section 103(b)(4)(A) of the 1954 Code, the percentage of median gross income which qualifies as low or moderate income is based on a family of four and is not subject to adjustments for family size. The 1954 Code requires that the low- and moderate -income occupancy requirement be continuously satisfied during the qualified project period. However, under the 1954 Code, a unit occupied by an individual or family who at the commencement of occupancy is of low or moderate income is treated as such during the entire tenancy of the individual or family in such unit, irrespective of any changes in income. In addition, if a unit occupied by a low or moderate income tenant is subsequently vacated, the 1954 Code provides that such unit is treated as being occupied by an individual or family of low or moderate income until reoccupied (other than for a 23 temporary period of not more than 31 days), at which time the character of the unit is redetermined. The "qualified project period" is defined by the 1954 Code as the period beginning on the first day upon which 10% of the residential units in the Project are occupied and ending on the latest of (a) the date which is 10 years after the date upon which 50% of the residential units in such Project are first occupied, (b) the date which is subsequent to initial occupancy of the first unit in Project by a period of time equal to one-half of the term of the Bonds with the longest maturity, or (c) the date upon which any assistance provided with respect to the Project under Section 8 of the United States Housing Act of 1937, as amended, terminates. Compliance With Requirements of the Code In order to comply with the foregoing requirements of the Code, and in particular the requirements of Section 103(b)(4)(A) of the 1954 Code, the bond documentation contains covenants regarding the foregoing requirements and providing for the enforcement thereof. In addition, the Borrower will enter into the Regulatory Agreement with the City providing, among other things, that the Project will be maintained and available for rental for the periods and in the manner described in the foregoing paragraphs. (See "The Regulatory Agreement' in Exhibit D hereto.) The Regulatory Agreement is recorded in the real property records of the county in which the Project is located, and the covenants undertaken therein are intended to be restrictive, binding upon and running with the title to the Project. HOWEVER, THE ENFORCEABILITY OF THE PROVISIONS OF THE REGULATORY AGREEMENT AND THE FINANCING AGREEMENT MAY BE SEVERELY LIMITED AND MAY NOT BE SUFFICIENT TO PREVENT INTEREST ON THE BONDS FROM BECOMING INCLUDABLE IN GROSS INCOME FOR PURPOSES OF FEDERAL INCOME TAXATION. If the Issuer or the Borrower should fail to comply with the covenants in the bond documents, if the foregoing representations should be determined to be inaccurate or incomplete or if the Borrower or its predecessors in interest have heretofore failed or should fail to comply with the provisions of the Code, interest on the Bonds could become taxable from the date of delivery of such Bonds, regardless of the date on which the event causing such taxability occurs. Other Tax Matters No assurance can be given that any future legislation or clarification or amendments to the Code, if enacted into law, will not contain a proposal which could cause the interest on the Bonds to be subject directly or indirectly to federal or State of Minnesota income taxation, adversely affect the market price or marketability of the Bonds or otherwise prevent the owners from realizing the full current benefit of the status of the interest thereon. INVESTORS SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THEIR ACQUISITION, HOLDING OR DISPOSITION OF THE BONDS. 0 LEGAL MATTERS The authorization and validity of the Bonds will be subject to the approving opinion of Dorsey & Whitney LLP, Minneapolis, Minnesota, Bond Counsel. The Bond Opinion will be limited to matters relating to authorization and validity of the Bonds and to the tax-exempt status of interest on the Bonds as described in the Section "TAX EXEMPTION AND RELATED CONSIDERATIONS." Bond Counsel has not been engaged to investigate the financial resources of the Borrower or Fannie Mae or their ability to provide for payment of the Bonds, and the Bond Opinion will make no statement as to such matters or as to the accuracy or completeness of this Offering Circular or any other information that may have been relied on by anyone in making the decision to purchase the Bonds. Certain legal matters will be passed upon for the Borrower by its legal counsel, Stephen J. Davis, Esq., St. Louis Park, Minnesota, for Fannie Mae by its Legal Department and by its special counsel, Squire, Sanders & Dempsey L.L.P., Cleveland, Ohio, and for the Underwriter by Gray, Plant, Mooty, Mooty & Bennett, P.A., Minneapolis, Minnesota. The payment of fees and expenses of Bond Counsel and the other counsel listed above is contingent upon the issuance of the Bonds. NO LITIGATION The Issuer There is not now pending or, to the knowledge of the Issuer, threatened any proceeding or litigation against the Issuer seeking to restrain or enjoin the issuance or delivery of the Bonds or questioning or affecting the validity of the Bonds or the proceedings and authority under which they are to be issued. Neither the creation, organization or existence, nor the title of the present members or other officers of the Issuer to their respective offices is being contested. The Borrower There is not now pending or, to the best knowledge of the Borrower, threatened any proceeding or litigation against the Borrower affecting the ability of the Borrower to enter into or deliver the Financing Agreement, the Loan Documents, the Credit Facility Documents or the Regulatory Agreement, seeking to restrain or enjoin the Borrower's execution and delivery of the agreements described in this Offering Circular, or contesting the existence or powers of the Borrower with respect to the transactions described in this Offering Circular. RATINGS The Bonds have been assigned the ratings set forth on the cover page hereof by Moody's Investors Service, Inc. (the "Rating Agency"). Such ratings reflect only the views of the Rating Agency at the time the ratings are given, and the Issuer makes no representation as to the appropriateness of the ratings. An explanation of the significance of such ratings may be obtained only from the Rating Agency. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward, suspended or withdrawn entirely by the Rating Agency, if, in its judgment, circumstances so warrant. Any such 25 downward revision, suspension or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. UNDERWRITING U.S. Bancorp Piper Jaffray Inc. (the "Underwriter") has agreed, subject to certain conditions, to purchase the Bonds from the Issuer for compensation (through a fee paid by the Borrower) equal to $26,550. In addition, the Underwriter will receive a reimbursement for certain of its expenses relating to the issuance and sale of the Bonds. The Underwriter intends to offer the Bonds to the public initially at the offering price set forth on the cover page of this Offering Circular, which offering price may subsequently change without any requirement of prior notice. The Underwriter reserves the right to join with dealers and other underwriters in offering the Bonds to the public. The Underwriter may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at prices lower than the public offering prices. In connection with its offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter will send a copy of the Offering Circular in final form to each purchaser of Bonds within one business day following receipt thereof by the Underwriter. U.S. Bancorp Piper Jaffray Inc. will be the initial Remarketing Agent for the Bonds. For its services as Remarketing Agent, U.S. Bancorp Piper Jaffray Inc. will be paid a fee per annum equal to 0.125% of the outstanding principal amount of the Bonds. CONTINUING DISCLOSURE During the time the Bonds bear interest at a Weekly Variable Rate pursuant to the Indenture, the Bonds are exempt from the continuing disclosure requirements of Securities Exchange Commission Rule 15c2 -12(b)(5). Accordingly, no continuing disclosure with respect to the Bonds, the Borrower, Fannie Mae or the Issuer will be provided to the owners of the Bonds so long as the Bonds bear interest at a Weekly Variable Rate. Pursuant to the Remarketing Agreement, the Borrower will covenant and agree that on and after adjustment of the Bonds to a Reset Rate or the Fixed Rate it will comply with and carry out all of the provisions of a Continuing Disclosure Agreement between the Borrower and the Trustee to be executed and delivered as a condition to the adjustment of the interest rate with respect to such Bonds to a Reset Rate or the Fixed Rate. MISCELLANEOUS Any statements in this Offering Circular involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Offering Circular is not to be construed as a contract or agreement between the Issuer and the purchasers or owners of any of the Bonds. 26 EXHIBIT A PROPOSED FORM OF OPINION OF BOND COUNSEL The form of the legal approving opinion of Dorsey & Whitney LLP, Bond Counsel, is set forth below. The actual opinion will be delivered on the date of delivery of the bonds referred to therein and may vary from the form set forth to reflect circumstances both factual and legal at the time of such delivery. Recirculation of the Offering Circular shall create no implication that Dorsey & Whitney LLP has reviewed any of the matters set forth in such opinion subsequent to the date ofsuch opinion. [To be dated the date of issuancs of the Bonds] City of New Hope New Hope, Minnesota Broadway LaNel, A Limited Partnership Minneapolis, Minnesota U.S. Bancorp Piper Jaffray Inc. Minneapolis, Minnesota Fannie Mae Washington, D.C. Re: $2,655,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 City of New Hope, Minnesota Ladies and Gentlemen: We have acted as Bond Counsel in connection with the authorization, issuance and sale by the City of New Hope, Minnesota (the "City"), of its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003, in the aggregate principal amount of $2,655,000, dated, as originally issued, as of the date hereof (the "Series 2003 Bonds"). For the purpose of rendering this opinion, we have examined: (1) a Trust Indenture, dated as of August 1, 2003 (the "Indenture"), between the City and U.S. Bank National Association, of Saint Paul, Minnesota, as trustee (the "Trustee"); (2) a Financing Agreement, dated as of August 1, 2003 (the "Financing Agreement'), between the City, Broadway LaNel, a Limited Partnership, a Minnesota limited partnership (the "Borrower"), and the Trustee; (3) a Deed and Covenants Running With the Land, dated as of December 1, 1985, between the New Hope Housing and Redevelopment Authority, as grantor, and the Borrower, as grantee, as amended and supplemented by the First Amendment to Deed and Covenants running with the Land, dated as of September 1, 1993, between the Borrower, the trustee for the Prior Bonds and the New Hope Economic Development Authority, as amended and supplemented by the Second Amendment to Deed and Covenants Running With the Land, dated as of August 1, 2003, between the Borrower, the Trustee and the New Hope Economic Development Authority (as so amended and supplemented, the "Regulatory Agreement'); (4) certified copies of certain A-1 resolutions of the governing body of the City authorizing the execution and delivery of the Indenture, the Financing Agreement, the Regulatory Agreement, the Bonds and other documents; (5) the form of the Bonds; and (6) such other proceedings, certificates, affidavits and other documents as we consider necessary in order to render this opinion. As to questions of fact material to our opinion, we have assumed the authenticity of and relied upon certified proceedings, affidavits and certificates fumished to us without undertaking to verify the same by independent investigation. From such examination and on the basis of existing law, it is our opinion that: (1) The City is a municipal corporation and political subdivision validly existing under the Constitution and laws of the State of Minnesota and is authorized thereby to issue the Bonds, to loan the proceeds thereof to the Borrower to refund certain outstanding multifamily housing development revenue refunding bonds of the City and to pledge the loan repayments to be received pursuant to, and certain of its interests in, the Financing Agreement as security for the payment of the principal of, premium, if any, and interest on the Bonds. (2) The Financing Agreement, the Indenture and the Regulatory Agreement have each been duly and validly authorized, executed and delivered by the City and, assuming the due and valid authorization, execution and delivery by the other parties thereto, are valid and binding special, limited obligations of the City enforceable in accordance with their terms. (3) The Bonds have been duly and validly authorized and executed by the City and are valid and binding special, limited obligations of the City, enforceable in accordance with their terms and the terms of the Indenture. The Bonds are equally and ratably secured by and entitled to the benefits provided by the Indenture. The Bonds are not general obligations or indebtedness of the City within the meaning of any constitutional or statutory limitation, and do not constitute or give rise to a charge against the general credit or taxing power of the City, but are payable solely from revenues derived from the sources described in the granting clauses of the Indenture. The Bonds are also secured, equally and ratably, by the Credit Enhancement Instrument delivered by Fannie Mae, but we express no opinion as to the validity or enforceability of the Credit Enhancement Instrument. (4) Interest on the Bonds is not includable in gross income of the recipient for federal income tax purposes or in taxable net income of individuals, trusts or estates for Minnesota income tax purposes; provided that (a) no opinion is expressed as to the exemption from federal or Minnesota income taxation for any period during which any Bond is held by a person who is a "substantial user" of the Mortgaged Property (as defined in the Indenture) or a "related person" within the meaning of Section 103(b)(13) of the Internal Revenue Code of 1954, as amended (the "1954 Code"); and (b) use of the Mortgaged Property in a manner inconsistent with the provisions of Section 103(b)(4)(A) of the 1954 Code or noncompliance with certain covenants contained in the Regulatory Agreement, the Indenture or the Financing Agreement could cause the interest on the Bonds to become includable in gross income for federal income tax purposes and in taxable net income for Minnesota income tax purposes. Interest on the Bonds is subject to the Minnesota franchise tax imposed on corporations and financial institutions. Interest on the Bonds is not an item of tax preference which is included in alternative minimum taxable income A-2 for purposes of the federal alternative minimum tax applicable to all taxpayers or to the Minnesota alternative minimum tax applicable to individuals, estates and trusts, but such interest is includable in adjusted current earnings for purposes of determining the alternative minimum taxable income of corporations for purposes of federal and Minnesota alternative minimum taxes. As a condition to converting the interest on the Bonds under the Indenture to a Reset Rate or a Fixed Rate (each as defined in the Indenture), the Borrower must deliver to the Trustee an opinion of bond counsel stating in effect that such conversion to the Reset Rate or Fixed Rate is authorized and permitted by the Indenture and will not impair the validity or the tax-exempt status of interest on the Bonds. We express no opinion with respect to the tax-exempt status of interest on the Bonds from and after the first Adjustment Date, if any. The opinions expressed in paragraph (4) above are subject to the condition of compliance by the City, the Borrower and the Trustee with all requirements of the 1954 Code and the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon may be, and continue to be, excluded from gross income for federal income tax purposes. Noncompliance with such requirements could result in the inclusion of interest on the Bonds in gross income for federal and Minnesota income tax purposes, retroactive to the date of issuance of the Bonds. Except as stated in this opinion, we express no opinion regarding federal, state or other tax consequences to owners of the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds, the Indenture, the Financing Agreement, and the Regulatory Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and may also be subject to principles of equity, whether considered at law or in equity. In rendering these opinions we have relied upon representations of the City, the Borrower and others, including representations as to (i) the nature, use, cost and economic life of the facilities refinanced by the Bonds, (ii) the application of the proceeds of the multifamily housing development revenue bonds refunded by the Bonds and the proceeds of the bonds refunded by such bonds, (iii) the intended application of the proceeds of the Bonds, and (iv) other factual matters relating to the exemption of the interest on the Bonds from federal income taxation. We have not been engaged, and have not undertaken, to review the accuracy, completeness or sufficiency of the Offering Circular or other offering material relating to the Bonds and we express no opinion relating thereto (excepting only the matters set forth as our opinion in the Offering Circular). Very truly yours, A-3 EXHIBIT B SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE The following is a brief summary of certain provisions of the Indenture. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to the Indenture, a copy of which is on file with the Tnistee. Definitions The following are definitions set forth in the Indenture and used in this Offering Circular: "Account" means any account within a Fund. "Act of Bankruptcy" means any proceeding instituted under the Bankruptcy Code or other applicable insolvency law by or against the Issuer. "Adjustment Date" means any date on which the interest rate on the Bonds is adjusted to a different Mode or to a different Reset Rate, including any Reset Date and the Fixed Rate Adjustment Date. An Adjustment Date may only occur on an Interest Payment Date, or if such date is not a Business Day, the following Business Day. "Advance" means an advance made under the Credit Facility. "Alternate Credit Facility" means a letter of credit (whether or not so named), surety bond, insurance policy, standby bond purchase agreement, credit enhancement instrument, collateral purchase agreement, mortgage backed security or similar agreement, instrument or facility (other than the initial Credit Facility) provided in accordance with the Financing Agreement. "Alternate Credit Provider" means the provider of an Alternate Credit Facility. "Assignment" means the Assignment and Intercreditor Agreement, dated as of August 1, 2003, by and among the Issuer, the Trustee and Fannie Mae and acknowledged and agreed to by the Borrower, as it may be amended, modified, supplemented or restated from time to time. "Authorized Attesting Officer" means the City Manager or the City Clerk of the Issuer, or such other officer or official of the Issuer who, in accordance with the laws of the State, the bylaws or other governing documents of the Issuer, or practice or custom, regularly attests or certifies official acts and records of the Issuer, and includes any assistant or deputy officer to the principal officer or officers exercising such responsibilities. "Authorized Borrower Representative" means any person who, at any time and from time to time, may be designated as the Borrower's authorized representative by written certificate famished to the Issuer, the Loan Servicer, the Credit Provider and the Trustee containing the specimen signature of such person and signed on behalf of the Borrower by or on behalf of any authorized partner of the Borrower which certificate may designate an alternate or alternates. The Trustee may conclusively presume that a person designated in a written certificate filed with it as an Authorized Borrower Representative is an Authorized Borrower Representative until IN such time as the Borrower files with it (with a copy to the Issuer, the Loan Servicer and the Credit Provider) a written certificate identifying a different person or persons to act in such capacity. "Authorized Denomination" means, (a) during any Weekly Variable Rate Period, $100,000 or any integral multiple of $5,000 in excess of $100,000; and (b) during any Reset Period or the Fixed Rate Period, $5,000 or any integral multiple of $5,000. "Authorized Officer" means the mayor, city manager and any other officer or employee of the Issuer designated by certificate of any of the foregoing as authorized by the Issuer to perform a specified act, to sign a specified document or otherwise take action with respect to the Bonds. "Available Moneys" means, as of any date of determination (i) the proceeds of the Bonds, (ii) remarketing proceeds received from the Remarketing Agent or any purchaser of Bonds (other than funds provided by the Borrower, the Issuer, any Affiliate of either the Borrower or the Issuer or any guarantor of the Loan), (iii) moneys received by the Trustee pursuant to a draw on the Credit Facility, (iv) any other amounts, including the proceeds of refunding bonds, with respect to which the Trustee has received an Opinion of Counsel acceptable to each Rating Agency to the effect that the use of such amounts to make payments on the Bonds would not violate Section 362(a) of the Bankruptcy Code (or that relief from the automatic stay provisions of such Section 362(a) would be available from the bankruptcy court) or be avoidable as preferential payments under Section 544, 547 or 550 of the Bankruptcy Code should the Issuer of the Borrower become a debtor in proceedings commenced under the Bankruptcy Code, (v) the price paid by the Credit Provider for the purchase of Bonds in lieu of redemption pursuant to the terms of the Indenture, and (vi) Investment Income derived from the investment of moneys described in clause (i), (ii), (iii) or (iv). "Bankruptcy Code" means Title 11 of the United States Code entitled `Bankruptcy," as in effect now and in the fixture, or any successor statute. "Beneficial Owner" means, for any Bond which is held by a nominee, the beneficial owner of such Bond. "BMA Index Rate" means the rate published in The Bond Market Association Municipal Swap Index, produced by Municipal Market Data, a Thomson Financial Services Company, or its successors. "Bond Counsel"means (a) on the Closing Date, Dorsey & Whitney, LLP or (b) after the Closing Date, any law firm selected by the Issuer and acceptable to the Credit Provider, of nationally recognized standing in matters pertaining to the exclusion from gross income for federal income tax purposes of the interest payable on bonds issued by states and political subdivisions. "Bond Documents" means the Bonds, the Indenture, the Financing Agreement, the Regulatory Agreement (and other agreements relating to the rental restrictions on the Mortgaged Property), the Bond Purchase Agreement, the Assignment, the Credit Facility, the Tax Certificate, the Remarketing Agreement, the Reimbursement Agreement, any Tender Agent I Agreement, and all other documents, instruments and agreements executed and delivered in connection with the issuance, sale, delivery and/or remarketing of the Bonds, and as each such document, instrument or agreement may be amended, modified, supplemented, or restated from time to time. "Bondholder," "Holder," "Owner" or "Registered Owner" means, with respect to any Bond, the owner of the Bond as shown on the Bond Register. "Bondholder Tender Notice" means a written notice meeting the requirements of the Indenture. "Bond Purchase Fund' means the Bond Purchase Fund created by the Indenture. "Bond Register" means the Bond Register maintained by the Trustee pursuant to the Indenture. "Book -Entry Bonds" means that part of the Bonds for which a Securities Depository or its nominee is the Bondholder. "Book -Entry System" means an electronic system in which the clearance and settlement of securities transactions is made through electronic book -entry changes. "Business Day" means any day other than (a) a Saturday or a Sunday, (b) any day on which banking institutions located in the City of New York, New York, or the city in which the Principal Office of the Trustee, the Remarketing Agent or the Loan Servicer is located are required or authorized by law or executive order to close, (c) prior to the Fixed Rate Adjustment Date, a day on which the New York Stock Exchange is closed, or (d) so long as the Credit Facility is in effect, any day on which the Credit Provider is closed. "Closing Date" means the date on which the Bonds are issued and delivered. "Code" means the Internal Revenue Code of 1954, as amended ("1954 Code"), and the Internal Revenue Code of 1986, as amended ("1986 Code"), in each case to the extent made applicable to matters relating to the Bonds and the Mortgaged Property by Section 1313(a) of the Tax Reform Act of 1986; each reference to the Code is deemed to include (i) any successor internal revenue law, and (ii) the applicable regulations whether final, temporary or proposed under the Code or such successor law. Any reference to a particular provision of the Code is deemed to include any successor provision of any successor internal revenue law and applicable regulations whether final, temporary or proposed under such provision or successor provision. "Costs of Issuance" means: (a) the fees, costs and expenses of (i) the Issuer, the Issuer's counsel and the Issuer's financial advisor, if any, (ii) the Underwriter (including discounts to the Underwriter or other purchasers of the Bonds, other than original issue discount, incurred in the issuance and sale of the Bonds) and the Underwriter's counsel, (iii) Bond Counsel, (iv) the Trustee and the Trustee's counsel, (v) the Loan Servicer and the Loan Servicer's counsel, if any, (vi) the Credit Provider and the Credit Provider's counsel, (vii) the Borrower's counsel and the Borrower's financial advisor, if any, and (viii) the Rating Agency; (b) costs of printing the offering documents relating to the sale of the Bonds; and (c) all other fees, costs and expenses directly associated with the authorization, issuance, sale and delivery of the Bonds, including printing costs, costs of reproducing documents, filing and recording fees, and any fees, costs and expenses required to be paid to the Loan Servicer in connection with the origination of the Loan. "Costs of Issuance Deposit" means the deposit to be made by the Borrower with the Trustee on the Closing Date to pay Costs of Issuance. "Costs of Issuance Fund" means the Costs of Issuance Fund created by the Indenture. "Credit Facility" means the Credit Enhancement Instrument, dated as of the Closing Date, issued by Fannie Mae to the Trustee, or any Alternate Credit Facility in effect at the time, as any such facility may be amended, modified, supplemented or restated from time to time. "Credit Facility Account" means the Credit Facility Account of the Revenue Fund. "Credit Facility Documents" means the Reimbursement Agreement, the Certificate of Borrower, all Collateral Agreements (as that term is defined in the Security Instrument), the Hedge Documents, the Hedge Security Agreement, the Hedge Reserve Escrow Account Security Agreement, the Pledge Agreement and all other agreements and documents securing the Credit Provider or otherwise relating to the provision of the Credit Facility, as any such agreement may be amended, supplemented or restated from time to time. "Credit Provider" means, so long as the initial Credit Facility is in effect, Fannie Mae, or so long as any Alternate Credit Facility is in effect, the Alternate Credit Provider then obligated under the Alternate Credit Facility. "Custodian" means the custodian under the Pledge Agreement. "Dated Date" means the date designated as such on the face of the Bonds. "Designated Office" of the Trustee, the Tender Agent, the Remarketing Agent or the Loan Servicer means, respectively, the office of the Trustee, the Tender Agent, the Remarketing Agent or the Loan Servicer at the respective address set forth in the Indenture or at such other address as may be specified in writing by the Trustee, the Tender Agent, the Remarketing Agent or the Loan Servicer, as applicable, as provided in the Indenture. "Electronic Means" means facsimile or telecopy transmission or other similar electronic means of communication approved in writing by the Credit Provider. "Event of Default" means, as used in any Transaction Document, any event described in that document as an Event of Default. "Extension Date" means, with respect to any Alternate Credit Facility, the date which is five Business Days prior to the expiration date of the Alternate Credit Facility then in effect. "Extraordinary Items" means, with respect to the Trustee, reasonable compensation for extraordinary services and/or reimbursement for reasonable extraordinary costs and expenses, including reasonable fees and expenses of its counsel. "Fees Account" means the Fees Account of the Revenue Fund. "Fixed Rate" means the fixed rate of interest borne by the Bonds during any Fixed Rate Period. "Fixed Rate Adjustment Date" means the date on which the interest rate on the Bonds adjusts from the Weekly Variable Rate or a Reset Rate to the Fixed Rate pursuant to the Indenture. "Fixed Rate Period" means the period of time beginning on the Fixed Rate Adjustment Date and ending on the Maturity Date. "Fund' means any fund created under the Indenture. "Government Obligations" means direct obligations of, and obligations on which the full and timely payment of principal and interest is unconditionally guaranteed by, the full faith and credit of the United States of America. "Hedge Documents" has the meaning given that term in the Hedge Security Agreement. "Hedge Reserve Escrow Account Security Agreement" means the Hedge Reserve Escrow Account Security Agreement, dated as of August 1, 2003, between the Borrower, Fannie Mae and the Loan Servicer, as amended, supplemented or restated from time to time. "Hedge Security Agreement" means the Hedge Security Agreement, dated as of August 1, 2003, by and among the Borrower, the Loan Servicer and Fannie Mae. "Highest Rating Category" has the meaning, with respect to an Investment, given in this definition. If the Bonds are rated by a Rating Agency, the term "Highest Rating Category" means, with respect to an Investment, that the Investment is rated by each Rating Agency in the highest rating given by that Rating Agency for that general category of security. If at any time the Bonds are not rated (and, consequently, there is no Rating Agency), then the term "Highest Rating Category" means, with respect to an Investment, that the Investment is rated by S&P or Moody's in the highest rating given by that rating agency for that general category of security. By way of example, the Highest Rating Category for tax-exempt municipal debt established by S&P is "A-1+" for debt with a term of one year or less and "AAA" for a term greater than one year, with corresponding ratings by Moody's of "MIG -1" (for fixed rate) or "VMIG-1" (for variable rate) for one year or less and "Aaa" for greater than one year. If at any time (i) the Bonds are not rated, (ii) both S&P and Moody's rate an Investment, and (iii) one of those ratings is below the Highest Rating Category, then such Investment will, nevertheless, be deemed to be rated in the Highest Rating Category if the lower rating is no more than one rating category IM below the highest rating category of that Rating Agency. For example, an Investment rated "AAA" by S&P and "AO" by Moody's is rated in the Highest Rating Category. If, however, the lower rating is more than one full rating category below the Highest Rating Category of that Rating Agency, then the Investment will be deemed to be rated below the Highest Rating Category. For example, an Investment rated "AAA" by S&P and "A 1" by Moody's is not rated in the Highest Rating Category. "Interest Account" means the Interest Account of the Revenue Fund. "Interest Payment Date" means (a) during any Weekly Variable Rate Period, the fifteenth day of each calendar month commencing September 15, 2003; (b) during any Reset Period and during the Fixed Rate Period each January 15 and July 15 following the Adjustment Date, provided that the first Interest Payment Date at such Reset Rate may only occur on a date which is at least 30 days after the Adjustment Date; (c) for Bonds subject to redemption, the date of such redemption; (d) each Adjustment Date; (e) the Maturity Date; and (f) for all Bonds any date determined pursuant to the default provisions of the Indenture. "Interest Requirement" means, during (a) the Weekly Variable Rate Period, 34 days (or such other number of days as is acceptable to the Rating Agency) interest on the Bonds at the Maximum Rate (on the basis of actual days elapsed in a 365 or 366 -day year) and (b) a Reset Period or the Fixed Rate Period, 210 days interest at the Reset Rate or the Fixed Rate, respectively (on the basis of a 360 -day year and twelve 30 -day months) or such other number of days as is acceptable to the Rating Agency. "Investment" means any Permitted Investment and any other investment held under the Indenture that does not constitute a Permitted Investment. "Investment Income" means the earnings, profits and accreted value derived from the investment of moneys pursuant to the Indenture. "Loan" means the loan made by the Issuer to the Borrower pursuant to the terms and provisions of the Financing Agreement for the purpose of providing funds to the Borrower to refund the Prior Bonds. "Loan Documents" means, collectively, the Note, the Security Instrument and all other documents, agreements and instruments evidencing, securing or otherwise relating to the Loan, as each such document, agreement or instrument may be amended, supplemented or restated from time to time. Neither the Financing Agreement nor the Regulatory Agreement is a Loan Document and neither document is secured by the Security Instrument. "Loan Fund" means the Loan Fund created by the Indenture. "Loan Servicer" means Glaser Financial Group, Inc., a Minnesota corporation, as servicer of the Mortgage Loan, and any successor servicer appointed by the Credit Provider. "Mandatory Tender Date" means any date on which Bonds are required to be tendered pursuant to the Indenture, including any Adjustment Date, Substitution Date, Extension Date, or other date as provided in the Indenture. "Maturity Date" means July 15, 2033. "Maximum Rate" means 12% per annum; provided, however, that the Maximum Rate may be increased if the Trustee receives (i) the written consent of the Credit Provider and the Borrower to a specified higher Maximum Rate not to exceed the lesser of the maximum rate permitted by law to be paid on the Bonds and the maximum rate chargeable on the Loan; (ii) an opinion of Bond Counsel to the effect that such higher Maximum Rate is permitted by law and will not adversely affect either the validity of the Bonds or the exclusion of the interest payable on the Bonds from gross income for federal income tax purposes; and (iii) a new or amended Credit Facility in an amount equal to the sum of (A) the then outstanding principal amount of the Bonds, and (B) the new Interest Requirement calculated using the new Maximum Rate. "Mode" means any of the Weekly Variable Rate, the Reset Rate and the Fixed Rate. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation, and its successors and assigns, or if it shall be dissolved or shall no longer assign credit ratings to long-term debt, then any other nationally recognized statistical rating agency, designated by the Credit Provider, as assigns credit ratings. "Mortgaged Property" means the real property described in the Security Instrument, together with all improvements, fixtures, and personal property (to the extent of the Borrower's interest therein) and located on such real property. "Net Bond Proceeds" means the total proceeds derived from the issuance, sale and delivery of the Bonds, representing the total purchase price of the Bonds, including any premium paid as part of the purchase price of the Bonds, but excluding the accrued interest, if any, on the Bonds paid by the initial purchaser(s) of the Bonds. "Note" means the Multifamily Note, dated as of August 1, 2003, together with all addenda and schedules, executed by the Borrower in favor of the Issuer, as the same may be amended, modified, supplemented or restated from time to time, or any Multifamily Note executed in substitution therefor, as such substitute note may be amended, modified, supplemented or restated from time to time. "Opinion of Counsel" means a written opinion of legal counsel, acceptable to the recipient(s) of such opinion; if the opinion is with respect to an interpretation of federal tax laws or regulations or bankruptcy matters, such legal counsel shall also be an attorney or firm of attorneys experienced in such matters. "Outstanding" means, when used with reference to the Bonds at any date as of which the amount of Outstanding Bonds is to be determined, all Bonds which have been authenticated and delivered under the Indenture except: Bonds canceled or delivered for cancellation at or prior to such date; Bonds deemed to be paid in accordance with the defeasance provisions of the Indenture; and ME Bonds in lieu of which others have been authenticated under the Indenture. In determining whether the owners of a requisite aggregate principal amount of Outstanding Bonds have concurred in any request, demand, authorization, direction, notice, consent or waiver under the provisions of the Indenture, Bonds which are owned or held by or for the account of the Borrower and Pledged Bonds shall be disregarded and deemed not to be Outstanding under the Indenture for the purpose of any such determination unless all Bonds are owned or held by or for the account of the Borrower and/or Pledged Bonds. In determining whether the Trustee shall be conclusively protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which are either registered in the name of or known by the Trustee to be held for the account of the Borrower, including Pledged Bonds, shall be disregarded. "Permitted Investments" means, to the extent authorized by law for the investment of moneys of the Issuer: (i) Government Obligations; (ii) direct obligations of, and obligations on which the full and timely payment of principal and interest is unconditionally guaranteed by, any agency or instrumentality of the United States of America (other than the Federal Home Loan Mortgage Corporation) or direct obligations of the World Bank, which obligations are rated in the Highest Rating Category; (iii) obligations, in each case rated in the Highest Rating Category, of (a) any state or territory of the United States of America, (b) any agency, instrumentality, authority or political subdivision of a state or territory, or (c) any public benefit or municipal corporation the principal of and interest on which are guaranteed by such state or political subdivision; (iv) any written repurchase agreement entered into with a Qualified Financial Institution whose unsecured short-term obligations are rated in the Highest Rating Category; (v) commercial paper rated in the Highest Rating Category; (vi) (a) interest-bearing negotiable certificates of deposit, interest-bearing time deposits, interest-bearing savings accounts and bankers' acceptances, issued by a Qualified Financial Institution if either (a) the Qualified Financial Institution's unsecured short-term obligations are rated in the Highest Rating Category or (b) such deposits or accounts are fully insured by the Federal Deposit Insurance Corporation; (vii) an agreement held by the Trustee for the investment of moneys at a guaranteed rate (an "Investment Agreement") with (a) the Credit Provider or (b) a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category, or whose obligations are unconditionally guaranteed or insured by a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category, provided that the Investment Agreement is in a form lim acceptable to the Credit Provider, and provided, further, that the Investment Agreement includes the following restrictions: (1) the invested funds are available for withdrawal without penalty or premium at any time that (a) the Trustee is required to pay moneys from the Fund(s) to which the Investment Agreement is applicable or (b) any Rating Agency indicates that it will lower, suspend or withdraw or actually lowers, suspends or withdraws the ratings on the Bonds on account of the rating of the Qualified Financial Institution providing, guaranteeing or insuring, as applicable, the Investment Agreement; (2) the Investment Agreement, and if applicable the guarantee or insurance, is the unconditional and general obligation of the Qualified Financial Institution providing, and, if applicable, the Qualified Financial Institution guaranteeing or insuring, the Investment Agreement, and is not subordinated to any other unsecured unsubordinated obligation of the provider; (3) the Trustee receives an Opinion of Counsel that the Investment Agreement is legal, valid, binding and enforceable, in accordance with its terms, upon the Qualified Financial Institution providing the Investment Agreement and, if applicable, an Opinion of Counsel that any guaranty or insurance policy provided by a Qualified Financial Institution guaranteeing or insuring the Investment Agreement is legal, valid, binding and enforceable, in accordance with its terms, upon such Qualified Financial Institution; and (4) the Investment Agreement provides that if during its term the rating of the Qualified Financial Institution providing, guaranteeing or insuring, as applicable, the Investment Agreement is withdrawn or suspended by any Rating Agency or falls below the Highest Rating Category, such Qualified Financial Institution will, within ten (10) days following the withdrawal, suspension or downgrade, either: (a) (1) collateralize the Investment Agreement (if the Investment Agreement is not already collateralized) with Permitted Investments described in paragraph (i) or (ii) above by depositing such collateral with the Trustee or a third party custodian, such collateralization to be effected in a manner and in an amount sufficient to maintain the then -current ratings of the Bonds, or, if the Investment Agreement is already collateralized, increase the collateral with Permitted Investments described in paragraph (i) or (ii) above by depositing such collateral with the Trustee or a third party custodian, such collateralization to be effected in a manner and in an amount sufficient to maintain the then -current ratings of the Bonds, (2) transfer the Investment Agreement and the rights and obligations of the Qualified Financial Institution under the Investment Agreement to a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category or whose obligations are unconditionally guaranteed or insured by a Qualified Financial Institution whose unsecured long- term obligations are rated in the Highest Rating Category or (3) deliver a guarantee from a Qualified Financial Institution whose unsecured long-term obligations are rated in the Highest Rating Category or (b) at the request of the 9M Trustee or the Credit Provider, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the Trustee unless required by law (the Investment Agreement may provide that the Qualified Financial Institution providing the Investment Agreement shall have the right to elect among the actions described in clauses (a)(1), (a)(2) and (a)(3), but shall not have the right to elect the action described in clause (b) as an alternative to the actions described in clauses (a)(1), (a)(2) and (a) (3); (viii) any money market mutual fund (including those managed or offered by the Trustee or any of its affiliates) registered under the Investment Company Act of 1940, as amended, that have been rated "AAAm-G" or "AAAm" by S&P or "Aaa" by Moody's, so long as the portfolio of such money market mutual fund is limited to Government Obligations and/or agreements to purchase Government Obligations; if approved in writing by the Credit Provider, a money market mutual fund portfolio may also contain obligations and agreements to repurchase obligations described in paragraphs (ii) or (iii) above; a money market mutual fund is not a Permitted Investment if both S&P and Moody's rate the money market mutual fund and one such rating is below the level required by this paragraph (viii); and (ix) any other investment authorized by the laws of the State if such investment is approved by the Credit Provider; provided that Permitted Investments shall not include the following: (1) any investment with a final maturity or any agreement with a term greater than one year from the date of the investment (except (a) obligations that provide for the optional or mandatory tender, at par, by the holder of such obligations at least once within one year of the date of purchase, (b) Government Obligations irrevocably deposited with the Trustee for payment of Bonds pursuant to Article IX of the Indenture and (c) investments listed in paragraph (vii) and (ix) above), (2) any obligation (other than obligations described in paragraph (i) and (ii) above) with a purchase price greater or less than the par value of such obligation, (3) any asset-backed security, including mortgage- backed securities, real estate mortgage investment conduits, collateralized mortgage obligations, credit card receivable asset-backed securities and auto loan asset-backed securities, (4) any interest -only or principal -only stripped security, (5) any obligation bearing interest at an inverse floating rate, (6) any investment which may be prepaid or called at a price less than its purchase price prior to stated maturity, (7) any investment the interest rate on which is variable and is established other than by reference to a single interest rate index plus a single fixed spread, if any, and which interest rate moves proportionately with that index, (8) any investment described in paragraph (iv) or (vii) above with a Qualified Financial Institution (as defined in clause (d) of the definition of "Qualified Financial Institution") if the Qualified Financial Institution does not agree to submit to jurisdiction, venue and service of process in the United States of America in the Investment Agreement and (9) any investment to which the Rating Agency has added an "r" highlighter or a "t" highlighter. "Person" means any natural person, firm, partnership, association, limited liability company, corporation, company or public body. "Pledge Agreement" means the Pledged Bonds Custody and Security Agreement, dated as of August 1, 2003, by and among the Borrower, the Trustee, as collateral agent for the Credit Provider, and the Credit Provider, as such agreement may be amended, modified, supplemented or restated from time to time or any similar agreement with the provider of an Alternate Credit Facility. "Pledged Bond" means any Bond purchased with amounts provided by the Credit Provider under the Credit Facility and pledged to the Credit Provider. Date. "Principal Amount" means the original principal amount of the Bonds on the Closing "Principal Reserve Amount" means $531,000. "Principal Reserve Fund' means the Principal Reserve Fund created by the Indenture. "Principal Reserve Schedule" means the Schedule of Deposits to Principal Reserve Fund attached to and a part of the Reimbursement Agreement, as such schedule may be amended, modified, supplemented or restated from time to time. "Prior Bonds" means the Issuer's Multifamily Housing Refunding Revenue Bonds (Broadway LaNel Project) Series 1993, issued in the original principal amount of $3,300,000. "Qualified Financial Institution" means any of. (i) bank or trust company organized under the laws of any state of the United States of America, (ii) national banking association, (iii) savings bank, a savings and loan association, or an insurance company or association chartered or organized under the laws of any state of the United States of America, (iv) federal branch or agency pursuant to the International Banking Act of 1978 or any successor provisions of law or a domestic branch or agency of a foreign bank which branch or agency is duly licensed or authorized to do business under the laws of any state or territory of the United States of America, (v) government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York, (vi) securities dealer approved in writing by the Credit Provider the liquidation of which is subject to the Securities Investors Protection Corporation or other similar corporation, and (vii) any other entity which is acceptable to the Credit Provider. With respect to an entity which provides an agreement held by the Trustee for the investment of moneys at a guaranteed rate as set out in paragraph (vii) of the definition of the term "Permitted Investments" or an entity which guarantees or insures, as applicable, the agreement, a "Qualified Financial Institution" may also be a corporation or limited liability company organized under the laws of any state of the United States of America. "Rate Determination Date" means (a) with respect to the Weekly Variable Rate, Wednesday of each week, commencing Wednesday, August 20, 2003, or if such Wednesday is not a Business Day the immediately succeeding day or if such immediately succeeding day is not a Business Day, then the first Business Day preceding such Wednesday; provided, however, that upon any adjustment to the Weekly Variable Rate Mode from a Reset Rate, the first Rate Determination Date shall be the Business Day prior to the Adjustment Date and (b) with respect to any Reset Rate and the Fixed Rate, the date selected by the Remarketing Agent which date shall be a Business Day not less than five Business Days prior to the Adjustment Date. B-11 "Rating Agency" means any national rating agency then maintaining a rating on the Bonds. "Rebate Analyst" means a person that is (a) qualified and experienced in the calculation of rebate payments under Section 148 of the Code and compliance with the arbitrage rebate regulations promulgated under the Code, (b) chosen by the Borrower and (c) engaged for the purpose of determining the amount of required deposits, if any to the Rebate Fund. "Rebate Fund"means the Rebate Fund created under the Indenture. "Record Date" means, with respect to any Interest Payment Date, if (a) the Bonds bear interest at the Weekly Variable Rate, the Business Day preceding the Interest Payment Date and (b) the Bonds bear interest at a Reset Rate or the Fixed Rate, the first day of the month in which the Interest Payment Date occurs. "Redemption Account" means the Redemption Account of the Revenue Fund. "Redemption Date" means any date upon which Bonds are to be redeemed pursuant to the Indenture. "Registered Owner" means any owner of Bonds as shown on the Bond Register. "Regulatory Agreement" means the Deed and Covenants Running With the Land, dated as of December 1, 1985, between the New Hope Housing and Redevelopment Authority, as grantor, and the Borrower, as grantee, as amended and supplemented by the First Amendment to Deed and Covenants running with the Land, dated as of September 1, 1993, between the Borrower, the trustee for the Prior Bonds and the New Hope Economic Development Authority, as amended and supplemented by the Second Amendment to Deed and Covenants Running With the Land, dated as of August 1, 2003, between the Borrower, the Trustee and the New Hope Economic Development Authority, as it may be subsequently amended, supplemented or restated from time to time. "Reimbursement Agreement" means the Reimbursement Agreement, dated as of August 1, 2003, between the Credit Provider and the Borrower, as amended, modified, supplemented or restated from time to time, or any agreement entered into in substitution therefor. "Remarketing Agent" means U.S. Bancorp Piper Jaffray Inc., or any successor as Remarketing Agent designated in accordance with the Indenture. "Remarketing Agreement" means the Remarketing Agreement, dated as of August 1, 2003 between the Borrower and the Remarketing Agent, as amended, modified, supplemented or restated from time to time, or any agreement entered into in substitution therefor with a substitute Remarketing Agent. "Reserved Rights" means those certain rights of the Issuer under the Financing Agreement to indemnification and to payment or reimbursement of fees and expenses of the Issuer, its right to give and receive notices and to enforce notice and reporting requirements and B-12 restrictions on transfer of ownership, its right to inspect and audit the books, records and premises of the Borrower and of the Project, its right to collect attorneys fees and related expenses, its right to specifically enforce the Borrower's covenant to comply with applicable federal tax law and State law (including the Act as defined in the Indenture and the rules and regulations of the Issuer, if any), and its rights to give or withhold consent to amendments, changes, modifications and alterations to the Financing Agreement relating to the Reserved Rights. "Reset Date" means any date which the Bonds begin to bear interest at a Reset Rate for the Reset Period then beginning. "Reset Period" means each period of ten or more years selected by the Borrower, or such shorter period as may be selected by the Borrower with the prior written consent of the Credit Provider, during which the Bonds bear interest at a Reset Rate. "Reset Rate" means the rate of interest borne by the Bonds as determined in accordance with the Indenture. "Revenue Fund"means the Revenue Fund created by the Indenture. "Revenues" means all (a) payments made under the Note, (b) payments made under the Credit Facility and (c) Investment Income (excluding Investment Income earned from moneys on deposit in the Principal Reserve Fund, the Fees Account, the Rebate Fund and the Costs of Issuance Fund, but including Investment Income earned on Net Bond Proceeds deposited in the Costs of Issuance Fund and Investment Income on such Investment Income). "Securities Depository" means, initially, The Depository Trust Company, New York, New York, and its successors and assigns, and any replacement securities depository appointed under the Indenture. "Security" means the Trust Estate and the Credit Facility. "Security Instrument" means the Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, dated as of August 1, 2003, together with all riders and exhibits, securing the Note and the obligations of the Borrower to the Credit Provider under the Credit Facility Documents, executed by the Borrower with respect to the Mortgaged Property, as it may be amended, modified, supplemented or restated from time to time, or any security instrument executed in substitution therefor, as such substitute security instrument may be amended, modified, supplemented or restated from time to time. "Set Rate Interest" has the meaning given to that term in the Note. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors and assigns, or if it shall be dissolved or shall no longer assign credit ratings, then any other nationally recognized statistical rating agency, designated by the Credit Provider, as assigns credit ratings. "State" means the State of Minnesota. B-13 "Substitution Date" means the date upon which an Alternate Credit Facility is to be substituted for the Credit Facility then in effect, which date must be an Interest Payment Date during a Weekly Variable Rate Period or an Adjustment Date which immediately follows a Reset Period. "Supplemental Indenture" means any indenture duly authorized and entered into between the Issuer and the Trustee amending or supplementing the Indenture in accordance with the provisions of the Indenture. "Tax Certificate" means the Tax Certificate executed by the Issuer and the Borrower dated the Closing Date, as amended, supplemented or restated from time to time. "Tax Event" has the meaning given to that term in the Indenture. "Tender Agent" means, initially, the Trustee and thereafter its successor as Tender Agent under the Indenture. "Tender Agent Agreement" means any Tender Agent Agreement to be entered into by the Issuer, the Trustee and the Tender Agent in the event that the Trustee does not serve as Tender Agent under the Indenture, as such agreement may be amended, modified, supplemented or restated from time to time. "Tender Date" means any Mandatory Tender Date or any other date on which Bondholders are permitted under the Indenture to tender their Bonds for purchase. "Tendered Bond" means any Bond which has been tendered to the Tender Agent for purchase pursuant to the Indenture. "Transaction Documents" means the Bond Documents, the Loan Documents and the Credit Facility Documents. "Trust Estate" means the property, interests, rights, money, securities and other amounts pledged and assigned by the Issuer to the Trustee pursuant to the Indenture and the property, interests, rights, money, securities and other amounts pledged and assigned by the Issuer to the Trustee and the Credit Provider pursuant to the Assignment. "Trustee" means U.S. Bank National Association, duly organized and existing under the laws of the United States of America, or its successors or assigns, or any other corporation or association resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at any time serving as successor trustee under the Indenture. "Trustee's Annual Fee" means the annual ongoing trust administration fee of the Trustee calculated and payable semiannually in advance on each August 15 and February 15. "Underwriter" means U.S. Bancorp Piper Jaffray Inc. �I "Weekly Variable Rate" means the variable rate of interest per annum for the Bonds determined from time to time during the Weekly Variable Rate Period, in accordance with the Indenture. "Weekly Variable Rate Period" means the period of time beginning on the Closing Date or on the Adjustment Date on which the interest rate on each series of Bonds is adjusted from the Reset Rate to the Weekly Variable Rate and ending on the day preceding the next succeeding Adjustment Date or the Maturity Date. "Wrongful Dishonor" means an uncured failure by the Credit Provider to make an Advance to the Trustee upon proper presentation of documents which conform to the terms and conditions of the Credit Facility. Funds and Accounts The following Funds and Accounts are created with the Trustee under the Indenture: (a) the Loan Fund; (b) the Revenue Fund and within the Revenue Fund, the Interest Account, the Credit Facility Account, the Redemption Account and the Fees Account; (c) the Principal Reserve Fund; (d) so long as any Bonds are Outstanding and have not been adjusted to the Fixed Rate, the Bond Purchase Fund; (e) the Costs of Issuance Fund; and (f) the Rebate Fund. The Trustee shall hold and administer the Funds and Accounts in accordance with the Indenture. Loan Fund The amount on deposit in the Loan Fund shall be disbursed by the Trustee to the trustee for the Prior Bonds on the date of issuance of the Bonds to pay the outstanding principal of the Prior Bonds. Revenue Fund—Interest Account Deposits Into the Interest Account. The Trustee will deposit each of the following amounts into the Interest Account: (a) moneys provided by or on behalf of the Borrower relating to an interest payment under the Note; B-15 (b) all Investment Income on the Funds and Accounts (except that Investment Income earned on amounts on deposit in the Rebate Fund, the Costs of Issuance Fund and the Principal Reserve Fund shall be credited to and be retained in those respective Funds); and (c) any other moneys made available for deposit into the Interest Account from any other source. Disbursements From the Interest Account. The Trustee is instructed to disburse or transfer, as applicable, moneys on deposit in the Interest Account at the following times and apply such moneys in the following manner and in the following order of priority: (a) on each Interest Payment Date during any Reset Period or Fixed Rate Period, Redemption Date and any date of acceleration of the Bonds, the Trustee will disburse (x) to the Credit Provider, the amount of any Advance under the Credit Facility relating to the payment of interest on the Bonds, or (y) in the event of a Wrongful Dishonor until such Wrongful Dishonor is cured, to the Bondholders, an amount equal to the interest due on the Bonds on such date; (b) Upon the receipt of written notice from the Credit Provider or the Loan Servicer that there is any unreimbursed Advance under the Credit Facility or any other payment due from the Borrower to the Credit Provider under the Loan Documents, the Bond Documents or the Credit Facility Documents which remains unpaid, the Trustee shall transfer any Investment Income earned on the Interest Account from and after the preceding Interest Payment Date or the Closing Date, as applicable, to the Credit Provider up to the amount stated as unpaid in the aforementioned notice; (c) on each Interest Payment Date the Trustee shall, unless (a) there is a deficiency in the Principal Reserve Fund, the Fees Account or the Rebate Fund or (b) an Event of Default under the Reimbursement Agreement or any Bond Document or a default under any Loan Document has occurred and is continuing, disburse to the Borrower the Investment Income earned on the Interest Account from and after the preceding Interest Payment Date or the Closing Date, as applicable. If a deficiency exists in the Principal Reserve Fund, the Fees Account or the Rebate Fund, such Investment Income shall be transferred to the Principal Reserve Fund, the Fees Account and/or the Rebate Fund, in that order of priority, prior to any payment to the Borrower. Revenue Fund—Redemption Account Deposits Into the Redemption Account. The Trustee shall deposit each of the following amounts into the Redemption Account: (a) any payment or prepayment of principal of the Note; (b) all amounts required under the Indenture to be transferred from the Principal Reserve Fund to the Redemption Account; M (c) any Available Moneys provided by or on behalf of the Borrower to fund premium on the Bonds to be paid in connection with a redemption of the Bonds; (d) any other amount received by the Trustee and required by the terms of the Indenture or the Financing Agreement to be deposited into the Redemption Account. Disbursements From the Redemption Account. On each Redemption Date, date of acceleration of the Bonds and Maturity Date, the Trustee will disburse from the Redemption Account (x) to the Credit Provider, the amount of any Advance under the Credit Facility relating to the payment of principal on the Bonds, or (y) in the event of a Wrongful Dishonor, to the Bondholders, an amount equal to the principal due on the Bonds on such date. In addition, on any date on which premium payable on Bonds in connection with a redemption of such Bonds is due, the Trustee shall disburse to the Bondholders, from the segregated subaccount in the Redemption Account, Available Moneys in an amount sufficient to pay such premium. Revenue Fund—Credit Facility Account Deposits Into the Credit Facility Account. The Trustee will deposit into the Credit Facility Account all amounts advanced under the Credit Facility, except advances for the payment of the Issuer's Fee and for Pledged Bonds. No other moneys shall be deposited into the Credit Facility Account. The Credit Facility Account shall be closed at such time as the Credit Provider has no continuing liability under the Credit Facility. Disbursements From the Credit Facility Account. The Trustee will, on each date on which a payment is due under the Indenture and in respect of which an Advance is made under the Credit Facility, apply such Advance to the payment of the amounts in respect of which such Advance was made. Amounts on deposit in the Credit Facility Account will be applied solely to the payment of principal of and interest on the Bonds and the purchase price of Bonds tendered for purchase. Amounts in the Credit Facility Account will not be applied to the payment of principal of, or interest on, any Pledged Bonds. Revenue Fund—Fees Account Deposits Into the Fees Account. The Trustee will deposit into the Fees Account the payments made by the Borrower under the Financing Agreement for payment of the Issuer's Fee, Trustee's Annual Fee, the fees and expenses of the Rebate Analyst and the fees of the Tender Agent and the Remarketing Agent (collectively, the "Third Party Fees"), and amounts derived from the Credit Facility for the payment of the Issuer's Fee. No other moneys shall be deposited into the Fees Account. Disbursements From the Fees Account. On any date on which any amounts are required to pay any Third Party Fees or the Issuer's Fee, such amounts will be withdrawn by the Trustee from the Fees Account and applied to the payment of such fees, in satisfaction of the obligations of the Borrower under the Financing Agreement. In the event the amount in the Fees Account is insufficient to pay such fees, the Trustee shall make written demand on the Borrower for the amount of such insufficiency and, pursuant to the terns of the Financing Agreement, the Borrower shall be liable to promptly pay the amount of such insufficiency to the Trustee within B-17 five Business Days after the date of the Trustee's written demand. Notice of the insufficiency shall be provided by the Trustee to the Loan Servicer. Principal Reserve Fund Deposits Into the Principal Reserve Fund. The Trustee will deposit each of the following amounts into the Principal Reserve Fund: (a) each monthly payment made in accordance with the Principal Reserve Schedule, as such schedule may be amended; and (b) Investment Income earned on amounts on deposit in the Principal Reserve Fund. Disbursements From the Principal Reserve Fund (a) On each Adjustment Date the amount on deposit in the Principal Reserve Fund will be transferred to the Redemption Account and used to redeem Bonds. (b) On the tenth Business Day prior to each Interest Payment Date during the period the Bonds bear interest at the Weekly Variable Rate, an amount equal to the difference between the amount on deposit in the Principal Reserve Fund (rounded downward to the nearest multiple of $100,000) and the Principal Reserve Amount will be transferred to the Redemption Account and used to redeem Bonds. (c) Pay to the Borrower, Investment Income on moneys in the Principal Reserve Fund on the Interest Payment Date following receipt by the Trustee of such interest or profits; provided, however, that there is no deficiency in the Interest Account, the Redemption Account, the Principal Reserve Fund, the Fees Account or the Rebate Fund, and that no default exists under the Credit Facility Documents, any Loan Document or any Bond Document. If a deficiency exists in the Interest Account, the Redemption Account, the Principal Reserve Fund, the Fees Account or the Rebate Fund, the Trustee will transfer such Investment Income to the Interest Account, the Redemption Account, the Principal Reserve Fund, the Fees Account and/or the Rebate Fund, in that order of priority, prior to any payment to the Borrower. Disbursement at the Direction of the Credit Provider. Amounts on deposit in the Principal Reserve Fund will be disbursed, at the written direction of the Credit Provider: (a) to pay any amounts required to be paid by the Borrower under the Loan Documents, the Bond Documents or any Reimbursement Agreement (including without limitation any amounts required to be paid to the Credit Provider) or in reimbursement of any amounts required to be paid by the Credit Provider under the Credit Facility; (b) with the written consent of the Borrower (so long as no Event of Default under (and as defined in) the Credit Facility Documents has occurred and is continuing) to make improvements or repairs to the Project; and/or MM (c) for any other purpose approved in writing by the Credit Provider. Bond Purchase Fund The Trustee will deposit each of the following amounts into the Bond Purchase Fund: (i) all remarketing proceeds received upon the remarketing of Tendered Bonds to any person; and (ii) Pledged Bond Advances under the Credit Facility to the extent that moneys obtained pursuant to (i) above are insufficient on any date to pay the purchase price of Tendered Bonds. Moneys in the Bond Purchase Fund shall be held exclusively for the payment of the purchase price of Tendered Bonds to the former owners of such Bonds upon presentation of the Bonds to the Tender Agent pursuant to the Indenture, provided that such amounts shall be paid to the Credit Provider on the purchase date in reimbursement of the Credit Provider for amounts provided under the Credit Facility in respect of the purchase price of Tendered Bonds. Amounts held to pay the purchase price for more than two (2) years shall be applied in the same manner as provided under the Indenture with respect to unclaimed payments of principal and interest. Costs of Issuance Fund Deposits Into the Costs of Issuance Fund. On the Closing Date, the Trustee shall deposit the Costs of Issuance Deposit into the Costs of Issuance Fund. Disbursements From the Costs of Issuance Fund. The Trustee shall disburse moneys on deposit in the Costs of Issuance Fund, pursuant to requisitions in the form attached to the Indenture, signed by an Authorized Borrower Representative, to pay Costs of Issuance. The Trustee may conclusively rely on such requisitions for purposes of making such disbursements. Moneys on deposit in the Costs of Issuance Deposit Account shall not be part of the Trust Estate and shall be used solely to pay Costs of Issuance. Any moneys remaining in the (a) Costs of Issuance Fund one month after the Closing Date and not needed to pay unpaid Costs of Issuance will be returned to the Borrower. Upon final disbursement, the Trustee will close the Costs of Issuance Fund. Rebate Fund Deposits; Administration. The Trustee will hold and apply the Rebate Fund as provided in the Tax Certificate. Within 30 days after each Computation Date (as defined in the Tax Certificate), and within 55 days after the date on which no Bonds are Outstanding, the Borrower or the Trustee shall cause the Rebate Analyst to deliver to the Trustee and the Issuer a certificate stating whether any rebate payment is required to be made, as set forth in the Tax Certificate, and the Borrower shall deliver to the Trustee any amount so required to be paid. All money at any time deposited into the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy any rebate requirement (as calculated by the Rebate Analyst) to the United States Government. Neither the Issuer, the Borrower, the Bondholders nor the Credit Provider shall have any rights in or claim to such moneys. Nonpresentment of Bonds In the event any Bond is not presented for payment when the principal of such Bond becomes due, either at maturity or at the date fixed for redemption of such Bond or otherwise, if amounts sufficient to pay such Bond have been deposited with the Trustee for the benefit of the owner of the Bond and have remained unclaimed for two years after such principal has become due and payable, such amounts will be paid to the Credit Provider (if owed), with any excess paid to the Borrower. Upon such payment, all liability of the Issuer and the Trustee to the,holder of any Bond for the payment of such Bond shall cease and be completely discharged. The cost of such publication will be paid from the unclaimed amount held by the Trustee. The obligation of the Trustee to pay any such amounts to the Credit Provider or the Borrower shall be subject to laws applicable to disposition of unclaimed property. Investments Moneys held as part of any Fund or Account will be invested and reinvested in Permitted Investments. Permitted Investments shall have maturities corresponding to, or shall be available for withdrawal without penalty no later than, the dates upon which such moneys will be needed for the purpose for which such moneys are held. Moneys on deposit in the (a) Interest Account shall be invested only in investments described in paragraphs (i), (ii), (iii) and (viii) of the definition of Permitted Investments, (b) Redemption Account shall be invested only in investments described in paragraph (i) of the definition of Permitted Investments, (c) Bond Purchase Fund and the Credit Facility Account shall be held uninvested and (d) Costs of Issuance Fund shall, until disbursed or returned to the Borrower, be invested only in investments described in paragraph (viii) of the definition of Permitted Investments. Permitted Investments shall be held by or under the control of the Trustee. Investment Income from moneys held in the Loan Fund, if any, the Rebate Fund, the Costs of Issuance Fund and the Principal Reserve Fund shall be retained in the respective Fund or Account where earned. All other Investment Income from moneys held in all other Funds and Accounts, upon receipt, shall be deposited into the Interest Account. Limitations on Liability Notwithstanding any other provision of the Indenture to the contrary: (a) the obligations of the Issuer with respect to the Bonds are not general obligations of the Issuer but are special, limited obligations of the Issuer payable by the Issuer solely from the Security for the Bonds; (b) nothing contained in the Bonds or in the Indenture shall be considered as assigning or pledging any funds or assets of the Issuer other than the Trust Estate; (c) the Bonds shall not be a debt of the State, the Issuer or of any other political subdivision of the State, and neither the State, the Issuer nor any other political subdivision of the State shall be liable for the payment of the Bonds; 1 (d) neither the faith and credit of the Issuer, the State nor of any other political subdivision of the State are pledged to the payment of the principal of or interest on the Bonds; (e) no failure of the Issuer to comply with any term, condition, covenant or agreement in the Indenture or in any document executed by the Issuer in connection with the Mortgaged Property, or the issuance, sale and delivery of the Bonds will subject the Issuer to liability for any claim for damages, costs or other charges except to the extent that the same can be paid or recovered from the Trust Estate; and (f) the Issuer will not be required to advance any moneys derived from any source other than the Trust Estate for any of the purposes of the Indenture, any of the other Bond Documents or any of the Loan Documents, whether for the payment of the principal or redemption price of, or interest on, the Bonds, the payment of Third Party Fees or administrative expenses or otherwise. Credit Facility; Alternate Credit Facility No Disposition of Credit Facility. The Trustee may not transfer, assign or release the Credit Facility, except to a successor Trustee under the Indenture. Alternate Credit Facility. The Trustee will accept any Alternate Credit Facility delivered to the Trustee in accordance with the provisions of the Financing Agreement and the Indenture, in substitution for the Credit Facility then in effect, subject to the terms of the Credit Facility Documents. Not later than the tenth day immediately before any Substitution Date the Trustee shall give notice to each Bondholder of the substitution of such Alternate Credit Facility for the Credit Facility then in effect and that on the Substitution Date the Bonds shall be subject to mandatory tender as provided in the Indenture. Defeasance Provision for Payment of Bonds. Any Bond in a Reset Mode or a Fixed Rate Mode (but not in a Weekly Variable Rate Period) shall be deemed to have been paid within the meaning of the Indenture if (a) there has been irrevocably deposited with the Trustee either (i) sufficient Available Moneys or (ii) Government Obligations which are not subject to early redemption and which are purchased with Available Moneys, of such maturities and interest payment dates and bearing such interest as will, without further investment or reinvestment of either the principal amount of such Government Obligations or the interest earnings on Government Obligations (the earnings to be held in trust also), be sufficient, together with any Available Moneys, as verified by a written report of an independent certified public accountant for the payment on their respective maturity dates, or redemption dates prior to maturity, of the principal of such Bonds and redemption premium, if any, and interest to accrue on such Bonds to such maturity or redemption dates; provided, however, that the Trustee has received, at the expense of the Borrower, an Opinion of Bond Counsel to the effect that such deposit with the Trustee B-21 and consequent defeasance of the Bonds does not adversely affect the excludability of the interest payable on the Bonds from gross income for federal income tax purposes; (b) all Third Party Fees due or to become due have been paid or sufficient additional moneys to make the required payments have been irrevocably deposited with the Trustee; and (c) for any such Bonds to be redeemed on any date prior to their maturity, the Trustee has received in form satisfactory to it irrevocable instructions to redeem such Bonds on a date on which the Bonds are subject to redemption, and either evidence satisfactory to the Trustee that all redemption notices required by the Indenture have been given or irrevocable power authorizing the Trustee to give such redemption notices. The Trustee shall redeem the Bonds specified by such irrevocable instructions on the date specified by such irrevocable instructions. Defeased Bonds No Longer Outstanding. At such times as a Bond shall be deemed to be paid under the Indenture, it shall no longer be secured by or entitled to the benefits of the Indenture, except for the purposes of payment in accordance with the terms of the Indenture. Defaults and Remedies Events of Default. Each of the following constitutes an Event of Default under the Indenture: (a) default in the payment when due and payable of any interest due on any Bond (other than a Pledged Bond); (b) default in the payment when due and payable of (i) the principal of any Bond (other than a Pledged Bond), whether at the stated maturity of the Bond or upon any redemption of the Bond, or (ii) the purchase price of any Tendered Bond (other than a Pledged Bond); (c) written notice to the Trustee from the Credit Provider of default by the Issuer in the observance or performance of any other of the covenants, agreements or conditions on the part of the Issuer included in the Indenture or in the Bonds (other than an Event of Default set forth in paragraph (a) or (b) above) and the continuance of such default for a period of 30 days after receipt of written notice of the default from the Trustee to the Issuer, the Borrower, the Loan Servicer and the Credit Provider; (d) written notice to the Trustee from the Credit Provider of an Event of Default under (and as defined in) the Reimbursement Agreement; (e) written notice to the Trustee from the Credit Provider of an Act of Bankruptcy; and (f) a Wrongful Dishonor. B-22 Nondefault and Prohibition of Mandatory Redemption Upon Tax Event. The occurrence of any event (a "Tax Event') which results in the interest payable on the Bonds being includable for federal income tax purposes, in the gross income of the Bondholders, including, but not limited to, any violation of any provision of the Regulatory Agreement or any of the other Bond Documents, shall not (a) constitute an Event of Default under the Indenture or permit any party (other than the Credit Provider) to accelerate, or require acceleration of, the Loan or the Bonds, or give rise to a mandatory redemption of the Bonds, unless the Credit Provider, in its sole and absolute discretion, provides written notice to the Trustee that such Tax Event constitutes a default under the Reimbursement Agreement, or (b) give rise to a mandatory redemption of the Bonds, or (c) give rise to the payment to the Bondholders of any amount, denoted as "supplemental interest," "additional interest," "penalty interest," "liquidated damages," "damages" or otherwise, in addition to the amounts payable to the owners of the Bonds prior to the occurrence of the Tax Event. Nothing contained in the Indenture shall be deemed to amend or modify the terms of the Loan Documents. Promptly upon determining that a Tax Event has occurred, the Borrower or the Trustee shall, by notice in writing to the Credit Provider and the Loan Servicer, inform the Credit Provider, the Loan Servicer, all Registered Owners of the Bonds and the Remarketing Agent, that a Tax Event has occurred and whether the Tax Event has been cured, is curable within a reasonable period, or is incurable. Notwithstanding the availability of the remedy of specific performance to cure a Tax Event that is curable within a reasonable period, neither the Issuer nor the Trustee shall have, upon the occurrence of a Tax Event, any right or obligation to cause or direct acceleration of the Bonds or the Loan, to enforce the Note or to foreclose the Security Instrument, to accept a deed to the Mortgaged Property in lieu of foreclosure, or to effect any other comparable conversion of the Mortgaged Property. Acceleration. Upon: (a) the occurrence of the Event of Default described in paragraph (f) under "Events of Default" above, the Trustee may, and shall upon the written request of Bondholders owning not less than 51% in aggregate principal amount of Bonds then Outstanding, by written notice to the Issuer, the Borrower, the Credit Provider, and the Loan Servicer, declare the principal of all Bonds then Outstanding (if not then due and payable) and the interest accrued, and to accrue, on the Outstanding Bonds to the date of payment immediately due and payable; or (b) the occurrence of an Event of Default described in paragraphs (a), (b), (c), (d) or (e) under "Events of Default' above, the Trustee may, upon receiving the prior written consent of the Credit Provider, and shall, upon the written direction of the Credit Provider, by written notice to the Issuer, the Borrower, the Credit Provider, and the Loan Servicer, declare the principal of all Bonds then Outstanding (if not then due and payable) and the interest accrued, and to accrue, on the Outstanding Bonds to the date of declaration immediately due and payable. B-23 Redemption and Mandatory Tender. Upon the receipt by the Trustee from the Credit Provider of notice of an Event of Default under the Reimbursement Agreement: (a) the Bonds shall be redeemed in whole or in part in the amount specified by and at the direction of the Credit Provider; or (b) the Bonds shall be subject to mandatory tender at the direction of the Credit Provider to that effect. Notwithstanding anything to the contrary in the Indenture, if the Credit Provider directs that the Bonds be redeemed in part as provided in the Indenture, the Credit Provider may further direct on one or more occasions that the Bonds be redeemed in whole or in part or that the Bonds be subject to mandatory tender. Notice. Upon any decision to accelerate payment of the Bonds, the Trustee is required to notify the Bondholders of the declaration of acceleration, that interest on the Bonds will cease to accrue upon such declaration, and that payment of such Bonds will be made upon presentment of the Bonds at the Designated Office of the Trustee. Such notice must be sent by registered mail or overnight delivery service, postage prepaid, or, at the Trustee's option, may be given by Electronic Means to each Registered Owner of Bonds at such Registered Owner's last address appearing in the Bond Register. Any defect in or failure to give notice of such declaration shall not affect the validity of such declaration. Immediate notice will be given as provided in the Indenture upon the direction of the Credit Provider to redeem the Bonds in whole or in part after an Event of Default under the Reimbursement Agreement. Notice will be given as provided in the Indenture upon any direction of the Credit Provider that the Bonds be subject to mandatory tender after any Event of Default under the Reimbursement Agreement. Other Remedies. Subject to the Trustee's right to be indemnified to its satisfaction, upon the occurrence and continuance of an Event of Default, the Trustee may, with or without taking action to accelerate the Bonds, but only with the prior written consent of the Credit Provider, and shall, at the direction of the Credit Provider if the Event of Default occurs under paragraph (c), (d) or (e) under "Events of Default" above, pursue any of the following remedies: (a) an action in mandamus or other suit, action or proceeding at law or in equity (i) to enforce the payment of the principal of, premium, if any, or interest on the Bonds then Outstanding, (ii) for the specific performance of any covenant or agreement contained in the Indenture, the Financing Agreement or the Regulatory Agreement or (iii) to require the Issuer to carry out any other covenant or agreement with Bondholders and to perform its duties under the Act; (b) the liquidation of the Trust Estate pledged under the Indenture; or (c) an action or suit in equity, to enjoin any acts or things which may be unlawful or in violation of the rights of the Bondholders and to execute any other papers and documents and do and perform any and all such acts and things as may be necessary or advisable in the opinion of the Trustee in order to have the respective claims of the Bondholders against the Issuer allowed in any bankruptcy or other proceeding. IM, Remedies Not Exclusive. No right or remedy conferred upon or reserved to the Trustee (or to the Bondholders) by the Indenture is intended to be exclusive of any other right or remedy, but each and every such right and remedy shall be cumulative and shall be in addition to any other right or remedy given to the Trustee or to the Bondholders under the Indenture or under the Financing Agreement, the Regulatory Agreement or the Credit Facility or now or later existing at law or in equity. Waiver. To the extent not precluded by law or the Indenture, the Trustee, upon notice to and with the prior written consent of the Credit Provider may waive any Event of Default under the Indenture and its consequences and, if the Trustee has accelerated payment of the Bonds, rescind the declaration of acceleration and shall do so upon the written request of (a) the Credit Provider or (b) Bondholders owning not less than 51% in aggregate principal amount of Bonds then Outstanding and the Credit Provider, provided that there shall be no such waiver or rescission unless the principal and interest on the Bonds in arrears (without regard to the acceleration), together with interest installments at the applicable rate or rates of interest borne by the Bonds on such overdue principal and, to the extent permitted by law, on such overdue interest, will have been paid or provided for by the Borrower or by the Credit Provider and all fees and expenses of the Trustee shall have been paid or provided for by the Borrower or the Credit Provider. In the case of any such waiver, the Issuer, the Borrower, the Trustee and the Bondholders shall be restored to their former positions and rights under the Indenture. The Trustee may not waive any Event of Default under the Indenture unless, the Trustee receives confirmation from the Credit Provider that after the waiver, the Credit Facility will remain in effect in an amount equal to the aggregate principal amount of the Bonds outstanding (other than Pledged Bonds) plus the Interest Requirement, provided that such waiver will be permitted without the Credit Facility remaining in effect if (a) the Issuer consents to the waiver, (b) the Rating Agency then rating the Bonds is notified and the Trustee gives written notice to the Bondholders that the ratings on the Bonds may be reduced or withdrawn upon the occurrence of such waiver, and (c) 100% of the Bondholders consent to the waiver. Rights To Direct Proceedings. Notwithstanding anything contained in the Indenture to the contrary, the Credit Provider itself or Bondholders owning not less than 51% in aggregate principal amount of Bonds then Outstanding, but only with the prior written consent of the Credit Provider, will have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture or any other proceedings under the Indenture. Limitations on Bondholders' Rights. No Bondholder shall have the right to enforce the provisions of the Indenture or the Financing Agreement, or to institute any proceeding in equity or at law for the enforcement of the Indenture or the Financing Agreement, or to take any action with respect to an Event of Default under the Indenture or an "Event of Default" under (and as defined in) the Financing Agreement, or to institute, appear in or defend any suit or other proceeding with respect to the Indenture or the Financing Agreement upon an Event of Default unless (a) such Event of Default is a Wrongful Dishonor, (b) such Bondholder has given the Trustee, the Issuer, the Credit Provider, the Loan Servicer and the Borrower written notice of the Event of Default, (c) the holders of not less than 51% in aggregate principal amount of Bonds then Outstanding shall have requested the Trustee in writing to institute such proceeding, (d) the B-25 Trustee has been afforded a reasonable opportunity to exercise its powers or to institute such proceeding, (e) the Trustee has been offered indemnity where required, and (f) the Trustee has thereafter failed or refused to exercise such powers or to institute such proceeding within a reasonable period of time. No Bondholder shall have any right in any manner whatever to affect, disturb or prejudice the pledge of revenues or of any other moneys, Funds, Accounts or securities under the Indenture. Application of Moneys. Amounts derived from payments under the Credit Facility shall be deposited into the Credit Facility Account and applied solely to pay the principal of and interest on the Bonds and shall not be applied to pay any fees or expenses or advances of the Trustee or the Issuer, including amounts in respect of indemnification. All other moneys received by the Trustee pursuant to any action taken following an Event of Default and all moneys on deposit in the Funds and Accounts (other than the Rebate Fund, the Costs of Issuance Fund and the Fees Account) shall be deposited into the Interest Account and the Redemption Account, as applicable, after payment first of any ordinary costs and expenses of the Trustee. The balance of such moneys, less such amounts as the Trustee determines may be needed for possible use in paying future fees and expenses and for the preservation and management of the Mortgaged Property (as identified and required by the Credit Provider), shall be applied as set forth in the following subsections. Principal on Bonds Not Due and Payable. Unless the principal of all Bonds has become or been declared due and payable, all such moneys shall be applied: FIRST, to the payment of all interest then due on the Bonds, in the order of the maturity of such interest and, if the amount available shall not be sufficient to pay in full said amount, then to the payment ratably, of the amounts due, without any discrimination or privilege; SECOND, to the payment of the unpaid principal of any of the Bonds which shall have become due (other than Bonds matured or called for redemption for the payment of which moneys are held pursuant to the Indenture), in the order of their due dates upon which they became due, with interest on such Bonds from the respective dates upon which they became due at the rate or rates borne by the Bonds, to the extent permitted by law, and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal due on such date, to the persons entitled to such payment without any discrimination or privilege; THIRD, to the payment of amounts owed to the Credit Provider under the Credit Facility Documents and the Loan Documents, as specified to the Trustee in writing by the Credit Provider and then to any amounts due to the Trustee for Extraordinary Items, for this purpose including the costs and expenses of any proceedings resulting in the collection of such moneys and of advances incurred or made by the Trustee. Principal on Bonds Declared Due and Payable. If the principal of all the Bonds has become or been declared due and payable, all such moneys shall be applied first, to the payment of the principal and interest then due and unpaid upon the Bonds, without preference or priority M of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably according to the amounts due respectively for principal and interest to the persons entitled to payment, until all such principal and interest has been paid; second, to the payment of the Credit Provider amounts owed to it under the Credit Facility Documents and the Loan Documents; and third, to the payment of any other amounts due and payable under the Indenture. Trustee Resignation of Trustee. The Trustee may resign only upon giving 60 days prior written notice to the Issuer, the Credit Provider, the Loan Servicer, the Borrower, and to each Registered Owner of Bonds then Outstanding as shown on the Bond Register. Notwithstanding such notice, such resignation shall take effect only upon the appointment of a successor Trustee in accordance with the Indenture and the acceptance of such appointment by such successor Trustee. Removal of Trustee. The Trustee may be removed at any time, upon 30 days prior written notice to the Trustee (or 10 days prior written notice to the Trustee in the event the Trustee does not deem any indemnity offered it as satisfactory), (a) by the Issuer, with the prior written consent of the Credit Provider (unless a Wrongful Dishonor has occurred and is continuing) and, unless such removal is for cause, the Borrower, (b) by an instrument or concurrent instruments in writing delivered to the Issuer, the Credit Provider, the Loan Servicer, the Trustee and the Borrower, signed by the owners of not less than 51% in aggregate principal amount of Bonds then Outstanding, and approved by the Credit Provider, which written instrument shall designate a successor Trustee or (c) by the Credit Provider. Such removal shall not be effective until a successor Trustee satisfying the requirements of the Indenture is appointed and has accepted its appointment. Appointment of Successor Trustee. Upon the resignation or removal of the Trustee, a successor Trustee must be appointed by the Borrower with the prior written consent of the Credit Provider. If, in the case of resignation or removal of the Trustee, no successor is appointed within 30 days after the notice of resignation or within 30 days after removal, as the case may be, then, in the case of a resignation, the resigning Trustee shall appoint a successor with the prior written consent of the Issuer, the Credit Provider and the Borrower (unless the Borrower is in default under any Bond Document or Loan Document or if an event has occurred which, with notice or the passage of time or both, would constitute such a default) or apply to a court of competent jurisdiction for the appointment of a successor Trustee and, in the case of a removal, the Credit Provider shall have the right to appoint a successor Trustee or to apply to a court of competent jurisdiction for the appointment of a successor Trustee. Qualifications of Successor Trustee. Any successor Trustee (a) shall be a bank or trust company organized under the laws of the United States of America or any state of the United States of America, having (or its parent having) a combined capital stock, surplus and undivided profits aggregating at least $25,000,000 or a wholly owned subsidiary of an entity meeting that requirement, and (b) shall accept in writing its duties and responsibilities under the Indenture, the Financing Agreement, the Assignment and the Regulatory Agreement. Such written acceptance shall be filed with the Issuer, the Credit Provider, the Loan Servicer and the Borrower. The successor Trustee shall give notice of such succession by first-class mail, postage prepaid, to B-27 each Bondholder at the address of such Bondholder shown on the Bond Register. Upon appointment of a successor Trustee, the resigning or removed Trustee, as the case may be, shall assign all of its right, title and interest in the Security, including its right, title and interest in the Credit Facility and the Indenture, to the successor Trustee. Supplemental Indentures; Amendments Supplemental Indentures Not Requiring Bondholder Consent. The Issuer and the Trustee, without the consent of or notice to any of the Bondholders, may enter into an indenture or indentures supplemental to the Indenture for one or more of the purposes set forth below: (a) to cure any ambiguity or to correct or supplement any provision contained in the Indenture or in any supplemental indenture which may be defective or inconsistent with any other provision contained in the Indenture or in any supplemental indenture; (b) to amend, modify or supplement the Indenture in any respect if, in the judgment of the Trustee, such amendment, modification or supplement is not materially adverse to the interests of the Bondholders; (c) to grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Bondholders or the Trustee, or to grant or pledge to the Trustee for the benefit of the Bondholders any additional security other than that granted or pledged under the Indenture; (d) to modify, amend or supplement the Indenture or any supplemental indenture in such manner as to permit the qualification of the Indenture or such supplemental indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute then in effect, or to permit the qualification of the Bonds for sale under the securities laws of any of the States of the United States; (e) to appoint a successor trustee, separate trustee or co -trustee, or a separate Tender Agent, Paying Agent, if any, or Bond Registrar in the manner provided in the Indenture; (f) to make any change requested by the Credit Provider which, in the judgment of the Trustee, is not materially adverse to the interests of the Bondholders, including, but not limited to, provision of a Credit Facility other than or in substitution for the initial Credit Facility, provided that the provision of such other Credit Facility does not adversely affect the ratings then in effect for the Bonds; (g) to make any changes in the Indenture or in the terms of the Bonds necessary or desirable in order to maintain the ratings awarded to the Bonds by the Rating Agency or to otherwise comply with requirements of any Rating Agency then rating the Bonds; LIMA (h) to comply with the Code and the regulations and rulings issued with respect to the Code, to the extent determined as necessary or desirable in the Opinion of Bond Counsel; (i) to modify, alter, amend or supplement the Indenture in any other respect, including amendments which would otherwise require Bondholder consent, if (i) such amendments will take effect on a Mandatory Tender Date following the purchase of Tendered Bonds or (ii) notice of the proposed supplemental indenture is given to Bondholders (in the same manner as notices of redemption are given) at least 30 days before the effective date of such amendment, modification, alteration or supplement and, on or before such effective date, the Bondholders have the right to demand purchase of their Bonds pursuant to the optional tender provisions of the Indenture; or 0) to change any of the time periods for provision of notice relating to: (i) the remarketing of Bonds and (ii) the determination of the interest rate on the Bonds. Supplemental Indentures Requiring Bondholder Consent. Exclusive of supplemental indentures described in the preceding paragraph and subject to the terms and provisions contained in this paragraph, the Issuer, in its sole discretion, and the Trustee may, with the consent of Bondholders owning 51% or more in aggregate principal amount of Bonds then Outstanding, from time to time, execute indentures supplemental to the Indenture for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Indenture or in any supplemental indenture, provided that nothing in this paragraph shall permit, or be construed as permitting: (a) an extension of the maturity of the principal of or interest on, or the mandatory redemption date of, any Bond, without the consent of the Owners of all of the Bonds then Outstanding; (b) a reduction in the principal amount of, or the rate of interest on, any Bond, without the consent of the Owner of such Bond; (c) a preference or priority of any Bond or Bonds over any other Bond or Bonds, without the consent of the Owners of all such Bonds; (d) the creation of a lien prior to or on parity with the lien of the Indenture, without the consent of the Owners of all of the Bonds then Outstanding; (e) a change in the percentage of Bondholders necessary to waive an Event of Default or otherwise approve matters requiring Bondholder approval under the Indenture, including consent to any supplemental indenture, without the consent of the Owners of all the Bonds then Outstanding; (f) a transfer, assignment or release of the Credit Facility (or modification of the provisions of the Indenture governing such transfer, assignment or release), other than as permitted by the Indenture, the Assignment or the Credit Facility, without the consent of the Owners of all of the Bonds then Outstanding; IM (g) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental indenture, without the consent of the Owners of all of the Bonds then Outstanding; (h) the creation of any lien other than a lien ratably securing all of the Bonds at any time Outstanding under the Indenture, without the consent of the Owners of all of the Bonds then Outstanding; or (i) the amendment of the provisions of the Indenture relating to the amendment thereof, without the consent of the Owners of all of the Bonds then Outstanding. No Bondholder Consent Required for Amendment to Loan Documents. Unless a Wrongful Dishonor has occurred and is continuing, the Credit Provider alone may consent to any amendment to the Loan Documents, and no consent of the Issuer, the Trustee and the Bondholders is required, provided that any amendment or substitute of the Note requires a rating confirmation. Amendments to the Credit Facility. The Credit Facility may only be amended, supplemented or otherwise changed with the consent of the Trustee and the owners of a majority of all Outstanding Bonds except that at the request of the Credit Provider, the Trustee will exchange the Credit Facility with the Credit Provider for a new Credit Facility issued by the Credit Provider, provided that there is delivered to the Trustee (i) a written confirmation from the Rating Agency to the effect that such exchange shall not adversely affect the rating then in effect for the Bonds and (ii) a written opinion of Bond Counsel to the effect that such exchange will not adversely affect the excludability of interest on the Bonds from gross income for federal income tax purposes. No such exchange shall require the approval of the Issuer, the Trustee or any of the Bondholders or constitute or require a modification or supplement to the Indenture. Notwithstanding the foregoing, the Trustee may consent, without the consent of the owners of the Bonds, to any amendment to the Credit Facility not addressed above which does not prejudice in any material respect the interests of the Bondholders. No amendment may be made to the Credit Facility which would reduce the amounts required to be paid under the Credit Facility or change the time for payment of such amounts; provided, however, that any such amounts may be reduced without such consent solely to the extent that such reduction represents a reduction in any fees payable from such amounts. Required Approvals. No amendment, supplement, change or modification may be made to any Bond Document, the Credit Facility, any Loan Document or any other document executed and delivered in connection with the Bonds without the prior written consent of the Credit Provider, unless a wrongful dishonor has occurred and is continuing. Anything in the Indenture to the contrary notwithstanding, a supplement or amendment or other document described amendatory of the Indenture which affects any rights or obligations of the Borrower or the Remarketing Agent shall not become effective unless and until the Borrower or the Remarketing Agent, as applicable (if the Borrower or the Remarketing Agent, respectively, is not then in default under any Bond Document or any Loan Document and if no event shall have occurred which, with notice or the passage of time or both, would constitute such a default shall have occurred and be continuing), has consented in writing to the execution of such supplemental '®t indenture, amendment or other document. The Trustee shall not be required to enter into any supplement or amendment or other document which is, in the judgment of the Trustee, to the prejudice of the Bondholders and the Trustee. Opinions of Counsel. The Trustee may obtain, at the Borrower's expense, and shall be fully protected in relying upon, an Opinion of Counsel as conclusive evidence that any supplement or amendment to the Indenture is authorized and permitted by the Indenture and, if applicable, is not materially adverse to the interests of the Bondholders. No supplement or amendment with respect to the Indenture shall be effective until the Issuer and the Trustee shall have received an Opinion of Bond Counsel to the effect that such supplement or amendment will not adversely affect the exclusion from gross income, for federal income tax purposes, of the interest payable on the Bonds. B-31 EXHIBIT C SUMMARY OF CERTAIN PROVISIONS OF THE FINANCING AGREEMENT The following is a brief summary of certain provisions of the Financing Agreement. The summary does not purport to be complete or definitive and is qualified in its entirety by reference to the Financing Agreement, a copy of which is on file with the Trustee. Definitions The following is a list of the definitions used in this Exhibit C and not defined elsewhere in this Offering Circular: "Borrower Documents" means the Bond Documents to which the Borrower is a party, the Loan Documents to which the Borrower is a party, and all other documents to which the Borrower is a party and which are being executed and delivered by the Borrower in connection with the transactions provided for in the Bond Documents and the Loan Documents. The Mortgage Loan Upon the issuance and delivery of the Bonds, the Issuer will apply the Net Bond Proceeds in the amount of $2,655,000 to fund the Loan. Disbursements shall be made from the Loan Fund as provided in the Indenture. In repayment of the Loan, the Borrower will make payments on the Note, which shall, at all times and in all events, be sufficient to repay the Loan (including all payments of principal and interest when due) and to timely pay, when due, the principal of, premium, if any, and interest on the Bonds. The Loan will (a) be evidenced by the Note, (b) be in a principal amount equal to $2,655,000, (c) bear interest as set forth therein, (d) be payable on the terms provided in the Note, (e) be secured by, among other instruments, the Security Instrument and as otherwise provided in the other Loan Documents and/or the Financing Agreement and (f) be subject to optional and involuntary prepayment at the times, in the manner and on the terms, and have such other terms and provisions as are, set forth in the Loan Documents. The Loan shall be deemed to have been made in full to the Borrower immediately upon the deposit of the Net Bond Proceeds into the Loan Fund. Credit Facility The Borrower agrees to cause credit enhancement for the Loan or the Bonds and liquidity support for the Bonds to be in effect in the amounts and during the periods as required by the Indenture. From time to time, the Borrower may arrange for the delivery to the Trustee of one or more Alternate Credit Facilities meeting the requirements of the Indenture in substitution for the Credit Facility then in effect. C-1 Payment of Third -Party Fees and Expenses In addition to all fees, costs, expenses and other amounts required to be paid by the Borrower under the Note, and the Reimbursement Agreement, the Financing Agreement requires the Borrower to pay, without duplication, the following fees and expenses: Issuer. The Issuer's Fee and costs and expenses incurred by the Issuer at any time in connection with the Bonds. Trustee. The Trustee's acceptance fee, if any, which shall be paid on the Closing Date, the Trustee's Annual Fee, and all advances, out-of-pocket expenses, fees, costs and other charges reasonably and necessarily incurred by the Trustee under the Indenture and Extraordinary Items. Tender Agent. The fees, costs and expenses of the Tender Agent, all advances, out-of- pocket expenses, fees, costs and other charges reasonably and necessarily incurred by the Tender Agent in performing its duties as Tender Agent under the Indenture and the Pledge Agreement. Remarketing Agent. The fees, costs and expenses of the Remarketing Agent and the costs and expenses of the Remarketing Agent which the Borrower is obligated to pay under the Remarketing Agreement. Rebate Analyst. The annual or other periodic fees of the Rebate Analyst. Rating Agency. The annual rating maintenance fee of each Rating Agency. Costs of Issuance. All Costs of Issuance not otherwise provided for in the Financing Agreement. Bond Costs. All costs of registering, printing, reprinting, preparing and delivering any replacement bonds required under the Indenture and in connection with the registration, printing, reprinting or transfer of Bonds. Adjustment or Conversion of Interest Rate; Tender, Purchase, Remarketing or Reoffering of Bonds. All fees, costs and expenses of any change in Mode or of any tender, purchase, remarketing or reoffering of any Bonds. The fees, costs and expenses of any tender, purchase, remarketing or reoffering of Bonds must be paid by the Borrower in advance in accordance with the Remarketing Agreement or other agreement relating to the remarketing or reoffering of the Bonds. Borrower's Obligations Upon Tender of Bonds If any Tendered Bond is not remarketed on any Tender Date and a sufficient amount is not available in the Bond Purchase Fund for the purpose of paying the purchase price of such Bond, the Borrower will cause to be paid to the Trustee pursuant to the Credit Facility or otherwise pay in Available Moneys by the applicable times provided in the Indenture, an amount equal to the principal amount of all Bonds tendered and not remarketed, together with interest accrued to the Tender Date. C-2 Redemption Premium The Borrower shall pay all redemption premium, if any, payable with respect to each redemption of any of the Bonds. The Borrower shall make each such payment, or cause such payment to be made, in Available Moneys. Obligation of the Borrower to Pay Deficiencies The Borrower shall pay any deficiency resulting from any loss due to a default under any investment in any Fund or Account or a change in value of any investment. Reports and Information The Borrower will file such certificates and other reports with the Issuer and the Trustee as are required by the Transaction Documents. The Borrower will provide to the Issuer all information necessary to enable the Issuer to complete and file all forms and reports required by the laws of the State and the Code in connection with the Mortgaged Property and the Bonds. Personal Liability of Borrower Except as provided in the last sentence of this paragraph, the obligations of the Borrower under the Financing Agreement and the obligations of the Borrower under the Regulatory Agreement to pay money, including the obligations of the Borrower with respect to the Reserved Rights, shall be (i) general obligations of the Borrower with recourse to the Borrower personally but not to any of its partners, and (ii) subordinate and junior in priority, right of payment and all other respects to any and all obligations of the Borrower under the Loan Documents and to the Credit Provider under or in respect of the Credit Facility Documents. Nothing in this paragraph shall apply to the obligations of the Borrower under any of the Loan Documents. Events of Default Each of the following constitutes an Event of Default under the Financing Agreement: (a) The Borrower fails to pay when due any amount payable by the Borrower under the Financing Agreement. (b) The Borrower fails to observe or perform any covenant or obligation in the Financing Agreement on its part to be observed or performed (other than covenants or obligations described under paragraph (a)) for a period of 30 days after receipt of written notice from the Trustee specifying such failure and requesting that it be remedied, provided, however, that if the failure cannot be corrected within such period, it shall not constitute an Event of Default if the failure is correctable without material adverse effect on the validity or enforceability of the Bonds or on the exclusion from gross income, for federal income tax purposes, of the interest on the Bonds, and if corrective action is instituted by the Borrower within such period and diligently pursued until the failure is corrected, and provided further that any such failure is cured within 90 days of receipt of notice of such failure. C-3 (c) The Credit Provider provides written notice to the Trustee of an Event of Default under the Financing Agreement by reason of the occurrence of an Event of Default under the Reimbursement Agreement. No Event of Default under the Reimbursement Agreement shall constitute a default under the Financing Agreement unless specifically declared to be so by the Credit Provider. Remedies Subject to the Assignment, whenever any Event of Default occurs and is continuing under the Financing Agreement, the Issuer or its assigns, may take one or any combination of the following remedial steps: (a) by written notice to the Borrower, declare all amounts then due and payable on the Note to be immediately due and payable; (b) exercise any of the rights and remedies provided in the Loan Documents; and (c) take whatever action at law or in equity may appear necessary or desirable to collect the amounts then due and afterward to become due, or to enforce performance and observance of any obligation, agreement or covenant of the Borrower under the Financing Agreement. Notwithstanding the foregoing provisions, the Issuer may enforce its Reserved Rights as provided in the Assignment. Amendment The Financing Agreement and all other documents contemplated by the Financing Agreement to which the Issuer is a party may be amended or terminated only as permitted by the Indenture, provided that no amendment to the Financing Agreement will be binding upon any party to the Financing Agreement until such amendment is reduced to writing and executed by the parties to the Financing Agreement, provided further that no amendment, supplement or other modification to the Financing Agreement or any other Bond Document will be effective without the prior written consent of the Credit Provider. Limited Liability of Issuer All obligations of the Issuer under the Financing Agreement, the Regulatory Agreement and the Indenture shall be special, limited obligations of the Issuer, payable solely and only from the Trust Estate. No owner or owners of any of the Bonds shall ever have the right to compel any exercise of the taxing power of the State or the Issuer or any political subdivision or other public body for the payment of the Bonds, nor to enforce the payment of the Bonds against any property of the State or the Issuer or any such political subdivision or other public body, except, in respect of the Issuer, as provided in the Indenture. No member, officer, agent, employee or attorney of the Issuer, including any person executing the Financing Agreement on behalf of the Issuer, shall be liable personally under the Financing Agreement. No recourse shall be had for the payment of the principal of or the interest on the Bonds, for any claim based on or in respect of the Bonds or based on or in respect of the Financing Agreement, against any member, officer, employee or agent, as such, of the Issuer or any successor whether by virtue of any constitution, C-4 statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance of the Financing Agreement and as part of the consideration for the issuance of the Bonds, expressly waived and released. C-5 EXHIBIT D SUMMARY OF CERTAIN PROVISIONS OF THE REGULATORY AGREEMENT The following is a summary of certain provisions of the Regulatory Agreement. Such summary does not purport to be comprehensive or definitive, and reference is made to such document for a full and complete statement of its terms. Certain Definitions "Qualified Project Period" means the period beginning on August 12, 2003 and ending on the later of the date (a) which is 10 years after the date on which 50% of the residential units in the Project Facilities are first occupied, (b) which is 50% of the total number of days comprising the term of the Bonds after the date on which any of the units in the Project Facilities are occupied, (c) on which any assistance provided with respect to the Project Facilities under Section 8 of the United States Housing Act of 1937 terminates, or (d) of retirement of the Bonds (including all refundings). "Qualifying Tenants" means individuals or families with adjusted income, calculated in the manner prescribed in Treasury Regulation Section 1.167(k) -3(b)(3), which does not exceed eighty percent (80%) of the median gross income for the area in which the Project Facilities are located, determined in a manner consistent with determinations of median gross income made under the leased housing program established under Section 8 of the United States Housing Act of 1937, as amended. In no event, however, will the occupants of a unit be considered to be of low or moderate income if all the occupants are students, no one of which is entitled to file a joint return. Use and Operation of the Project Facilities; Rental Requirements In order to satisfy the requirements of Section 103(b)(4)(A) of the 1954 Code, the Borrower has covenanted that at all times during the Qualified Project Period, at least 20% of the completed residential units in the Project Facilities will be occupied (within the meaning of Treasury Regulation Section 1.103-8(b)(5)(ii) under Section 103(b)(4)(A) of the 1954 Code) by Qualifying Tenants and the Borrower will advise the Issuer and the Trustee in writing of such designation and of any revision thereof. For purposes of satisfying the requirement that 20% of the completed residential units be occupied by Qualifying Tenants, the following principles apply: (i) an individual who qualifies as a Qualifying Tenant at the time he or she first occupies a unit will be deemed a Qualifying Tenant as long as he or she continues to reside in such unit even though the occupant subsequently ceases to meet the income or the other requirements of a Qualifying Tenant, and (ii) when a Qualifying Tenant leaves a unit, such unit will be considered as occupied by a Qualifying Tenant if it is held vacant and available for such occupancy until it is reoccupied by another tenant, other than on a temporary period which in no event will exceed 31 days, at which time the status of the new tenant as a Qualifying Tenant is to be determined. In order to satisfy certain other requirements of the 1954 Code, as applicable, the Borrower has covenanted that: D-1 (i) the Project Facilities were constructed for the purpose of providing residential rental property, and the Borrower shall own, manage and operate the Project Facilities as a residential rental project comprised of residential dwelling units and facilities functionally related and subordinate thereto, in accordance with Section 103(b)(4)(A) of the 1954 Code; (ii) all units comprising the Project Facilities shall be rented or available for rental to the general public on a continuous basis; (iii) each dwelling unit in the Project Facilities shall contain separate and complete facilities for living, sleeping, eating, cooking and sanitation for a single person or family; (iv) none of the residential units in the Project Facilities shall at any time be utilized on a transient basis; and neither the Project Facilities nor any portion thereof shall ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, hospital, nursing home, sanitarium, rest home or trailer park or court; and (v) the residential units in the Project Facilities shall be leased or rented to members of the general public and the Borrower will not give preference in renting dwelling units in the Project Facilities to any particular class or group or persons, other than Qualifying Tenants. Events of Default; Enforcement If the Borrower defaults in the performance or observance of any covenant or restriction set forth in the Regulatory Agreement and such default remains uncured for a 30 -day period after the Trustee gives notice to the Company of the default, the Trustee may, and in the case of a default affecting the taxability of the interest on the Bonds, will, declare that the Company is in default under the Regulatory Agreement and the Trustee may institute and prosecute any proceedings at law or in equity to abate, prevent or enjoin any such violation or to specifically enforce the covenants of the Regulatory Agreement, or to recover monetary damages caused by such violation or attempted violation. The Trustee may enforce the rights or remedies of the Issuer under the Regulatory Agreement without the prior written consent of the Issuer. No delay in enforcing the provisions described above as to any breach or violation shall impair, damage or waive the right to enforce the same or to obtain relief against or recover for the continuation or repetition of such breach or violation or any similar breach or violation thereof at any later time or times. Filing The Regulatory Agreement has been filed in the appropriate public real estate records, and provides that the covenants of the Borrower therein shall be covenants running with the land and shall be binding upon and insure to the benefit of and be a burden on any subsequent purchaser, grantee, owner or lessee of any portion of the Project Facilities and any other person or entity having any right, title or interest therein throughout the Qualifying Project Period. D-2 EXHIBIT E SUMMARY OF CERTAIN PROVISIONS OF THE REIMBURSEMENT AGREEMENT The following statements are a brief summary of certain provisions of the Reimbursement Agreement. The summary does not purport to be complete, and reference is made to the Reimbursement Agreement for a full and complete statement of the provisions thereof. All capitalized terms used in this summary of the Reimbursement Agreement with respect to the Project have the meanings given to those terms in Exhibit A of this Offering Circular or as elsewhere defined in this summary. The Credit Facility is issued pursuant to the Reimbursement Agreement which obligates the Borrower, among other things, to reimburse Fannie Mae for funds advanced by Fannie Mae under the Credit Facility and to pay various fees and expenses, in each case as provided in the Reimbursement Agreement. The Reimbursement Agreement sets forth various affirmative and negative covenants of the Borrower, including certain financial and operational requirements, some of which are more restrictive with respect to the Borrower than similar covenants in the Financing Agreement. The Borrower's obligations to Fannie Mae under the Reimbursement Agreement are secured by the Security Instrument. Events of Default The occurrence of any one or more of the following events constitutes an event of default under the Reimbursement Agreement: (a) the Borrower fails to pay when due any amount payable by the Borrower under the Reimbursement Agreement, the Note, the Financing Agreement, the Security Instrument or any other Transaction Document; or (b) the occurrence of any Event of Default under any Transaction Document other than the Reimbursement Agreement beyond any cure period set forth in that Transaction Document; or (c) fraud or material misrepresentation or material omission by Borrower, or any of its officers, directors, trustees, general partners or managers, Key Principal or any guarantor: (i) contained in the Reimbursement Agreement, the Certificate of Borrower or any other Borrower Document or any certificate delivered by the Borrower to Credit Provider or to the Loan Servicer pursuant to the Reimbursement Agreement or any other Borrower Document; or (ii) in connection with (i) the application for or creation of the Loan or the credit enhancement or liquidity for the Bonds provided by the Credit Enhancement Instrument, (ii) any financial statement, rent roll, or other report or E-1 information provided to provided to Credit Provider or the Loan Servicer during the term of the Reimbursement Agreement or the Loan, or (iii) any request for Credit Provider's consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement or contained in the Reimbursement Agreement, the Certificate of Borrower or any other Borrower Document or any certificate delivered by the Borrower to Credit Provider or to the Loan Servicer pursuant to the Reimbursement Agreement or any other Borrower Document; or (d) a Tax Event (as that term is defined in the Indenture) occurs; or (e) any failure by the Borrower to perform or observe any of its obligations under the Reimbursement Agreement (other than as set forth in paragraphs (a) through (d) above), as and when required, which continues for a period of 30 days after notice of such failure by Credit Provider or the Loan Servicer to the Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Credit Provider's or the Loan Servicer's judgment, absent immediate exercise by Credit Provider of a right or remedy under the Reimbursement Agreement, result in harm to Credit Provider, impairment of the Multifamily Note, the Reimbursement Agreement, the Security Instrument or any other security given under any other Borrower Document; Remedies Upon an Event of Default Upon the occurrence of an Event of Default under the Reimbursement Agreement, the Obligations (as defined in the Reimbursement Agreement) and all amounts owing under the Reimbursement Agreement may be declared by the Credit Provider to become immediately due and payable without presentment, demand, protest or notice of any kind, including notice of default, notice of intent to accelerate or notice of acceleration. In addition to the foregoing, the Credit Provider will have the right to take such action at law or in equity, without notice or demand, as it deems advisable to protect and enforce the rights of the Credit Provider against the Borrower in and to the Mortgaged Property, including, but not limited to, the following actions: (i) deliver to the Trustee written notice that an Event of Default has occurred under the Reimbursement Agreement and direct the Trustee to take such action pursuant to the Financing Documents as the Credit Provider may determine, including a direction to the Trustee to declare the Bonds then outstanding immediately due and payable in accordance with the terms and conditions of the Indenture; (ii) demand cash collateral or Permitted Investments in the full amount of the obligations under the Bonds (to the extent related to the Loan) whether or not then due and payable by the Credit Provider under the Credit Facility; and (iii) exercise any rights and remedies available to the Credit Provider under the Financing Documents. E-2 EXHIBIT F SUMMARY OF CERTAIN PROVISIONS OF THE NOTE The following is a brief summary of certain provisions of the Note. The summarydoes not purport to be complete or definitive and is qualified in its entirety by reference to the Note, a copy of which is on file with the Trustee. Defined Terms. All capitalized terms used in this summary of the Note have the meanings given to those terms in Exhibit A of this Offering Circular or as elsewhere defined in this summary. Note Interest. While the Bonds bear interest at a Weekly Variable Rate, the rate of interest borne by the Note (the "Note Interest') shall accrue on the unpaid principal of the Note from, and including, the Closing Date until paid in full at a variable rate of interest which floats and changes with, and is equal to, the Weekly Variable Rate. Note Interest shall not exceed the Maximum Rate, as the Maximum Rate may change in accordance with the Indenture. During the Weekly Variable Rate Period, Note Interest shall be computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as applicable. Payment of Principal and Interest. The Borrower will pay the principal of and interest on the Note as follows: (a) Primary Payment Obligation. The Borrower will pay principal of, premium, if any, and interest on the Note at the times and in the amounts necessary to pay all principal of, premium, if any, and interest on, the Bonds as they become due, whether at maturity, by acceleration, by optional, mandatory or mandatory sinking fund redemption or otherwise. While the Bond bear interest at the Weekly Variable Rate, the Note Interest will be paid in arrears on the 15`h day of each calendar month, commencing September 15, 2003. (b) Payment at Maturity Date. The Borrower will pay all unpaid principal of and interest on the Note on the earlier of July 15, 2033, or the date on which the unpaid principal balance of the Note becomes due, whether by acceleration or otherwise (the "Maturity Date"). (c) Amendment of Note After Adjustment to Fixed Rate Mode. Upon the adjustment of the Bonds to a Fixed Rate, the Note shall be amended to provide for monthly payments of principal to provide sufficient funds to pay the corresponding principal maturities of the Bonds, including any Sinking Fund Payments. (d) Obligations of the Borrower Unconditional. The obligations of the Borrower to make the payments required by and perform its other obligations under the Note shall be absolute and unconditional and shall not be subject to diminution by set-off, recoupment, counterclaim, abatement or otherwise. Principal Reserve Fund. Pursuant to the Reimbursement Agreement, the Borrower will make monthly payments for deposit into the Principal Reserve Fund, to be applied by the Trustee in any manner directed by the Credit Provider pursuant to the Indenture. The Loan will not be deemed paid or prepaid by reason of any deposit into the Principal Reserve Fund and the amount F-1 on deposit in the Principal Reserve Fund shall not be a credit against the principal amount of the Note. However, if any amount in the Principal Reserve Fund is used in accordance with the Indenture to make a principal payment on the Bonds, the amount so applied will be credited to the principal amount of the Note. If any amount from the Principal Reserve Fund is used in accordance with the Indenture to make an interest payment on the Bonds (excluding the interest component of the purchase price of any Pledged Bond unless such purchase occurs on an Interest Payment Date for the Bonds), the amount used will be a payment of interest on the Loan. No application of any amount in the Principal Reserve Fund for any other purpose will be credited against the unpaid principal of or interest on the Note. Security. The Security Instrument, among other things, secures the Note. Acceleration. If an Event of Default under the Security Instrument has occurred and is continuing, the entire unpaid principal balance, all accrued Note Interest, the prepayment premium payable under the Note, if any, and all other amounts payable under the Note or under any other Loan Document will at once become due and payable, at the option of the Issuer, without any prior notice to the Borrower. Default Rate. If any monthly installment or any other payment due under the Note remains past due for more than four days, interest will accrue on the unpaid principal balance of the Note from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at the Default Rate or, if less, the maximum interest rate which may be collected from the Borrower under applicable law. As used herein, the "Default Rate" means an annual rate equal to the sum of (a) the prime rate of interest as reported from day to day in The Wall Street Journal (notwithstanding that such publication shows the prime rate of interest for the preceding Business Day) as the base rate on corporate loans posted by at least 75 percent of the nation's 30 largest banks, or, if such rate is no longer available, then the base rate or prime rate of interest of any "Money Center" bank designated from time to time by the Credit Provider, in its discretion; and (b) two percentage points. Limits on Personal Liability. (a) Except as otherwise provided in the Note and the other Loan Documents, the Borrower will have no personal liability under the Note, the Security Instrument or any other Loan Document for the repayment of the Note or for the performance of any other obligations of the Borrower under the Loan Documents, and the Issuer's only recourse for the satisfaction of the Note and the performance of such obligations shall be the Issuer's exercise of its rights and remedies with respect to the Mortgaged Property and any other collateral held by the Issuer as security for the Note. (b) The Borrower will be personally liable to the Issuer for the repayment of a portion of the Note equal to any loss or damage suffered by the Issuer as a result of (1) failure of the Borrower to pay to the Issuer upon demand after an Event of Default under the Security Instrument, all rents to which the Issuer is entitled under the Security Instrument and the amount of all security deposits collected by the Borrower from tenants then in residence; (2) failure of the Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of the F-2 Borrower to comply with the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4) fraud or written material misrepresentation by the Borrower, Key Principal (as defined in the Security Instrument) or any officer, director, partner, member or employee of the Borrower in connection with the application for or creation of the Loan or any request for any action or consent by the Issuer; or (5) failure to apply rents, first, to the payment of reasonable operating expenses (other than Project management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with the Issuer executed in connection with the Loan) and then to amounts payable under the Note, the Security Instrument or any other Loan Document. (c) The Borrower will become personally liable to the Issuer for the repayment of all of the principal of and interest on the Note and for the payment, performance and observation of all obligations, covenants and agreements of the Borrower contained in the Security Instrument, including the payment of all sums advanced by or on behalf of Issuer to protect the security of the Note under the Security Instrument, upon the occurrence of any of the following Events of Default: (1) the Borrower's acquisition of any property or operation of any business not permitted by the Security Instrument; or (2) a Transfer (as that term is defined in the Security Instrument) that is an Event of Default under the Security Instrument. (d) To the extent that the Borrower has personal liability under the provisions of the Note, the Issuer may exercise its rights against the Borrower personally without regard to whether the Issuer has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to the Issuer under the Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this paragraph, the term "Mortgaged Property" shall not include any funds that (1) have been applied by the Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default under the Security Instrument, or (2) the Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding. Voluntary and Mandatory Prepayments. Although the Borrower may have the right to prepay the Loan in accordance with the Note, the Reimbursement Agreement may limit the Borrower's exercise of these rights without the written consent of the Credit Provider. (a) Prepayment Premium. Any prepayment of the principal of the Note will result in a redemption of a corresponding amount of the Bonds. If the Note is prepaid by a voluntary prepayment or mandatory prepayment as described below, the Borrower will pay, in addition to the other amounts due under the Note, a prepayment premium equal to the premium, if any, due upon redemption of the corresponding Bonds as provided in the Indenture. The Credit Facility does not secure any premium due on the redemption of Bonds. (b) Voluntary Prepayments. During a Weekly Variable Rate Period, the Borrower may voluntarily prepay the principal balance of the Note, in whole or in part; F-3 provided that any such partial payment must be in an amount corresponding to the Authorized Denomination of the Bonds. (c) Mandatory Prepayments. Each of the following will be or will require a mandatory prepayment of the principal of the Note: (1) any reduction of the Loan by reason of the use of amounts from the Principal Reserve Fund for the payment of, the principal of any of the Bonds (including the principal component of the Bonds by reason of redemption or defeasance of the Bonds), except for the payment of scheduled principal of any Bond; (2) other than as described in clause (I), any application by the Issuer of any collateral or other security to the repayment of any principal of the Note; (3) any reduction of the Loan by reason of the withdrawal of any amount from any Fund or Account under the Indenture, not described in clauses (1) or (2), resulting in a payment, redemption or defeasance of any of the Bonds in the absence of acceleration, except to the extent that such funds are applied to, or the reimbursement to the Credit Provider for an Advance made for, a Sinking Fund Payment required by the Indenture for the redemption of any of the Bonds, the payment of the principal of any Bond as such principal is scheduled to be paid or a voluntary prepayment of the Note which causes a voluntary redemption of Bonds; (4) the Issuer's exercise of the right of acceleration of the Note; and (5) any acceleration or mandatory redemption of the Bonds. (d) Borrower's Payment Obligation in Connection with a Prepayment. The Borrower will pay all of the following amounts in connection with any prepayment of the Note (whether voluntary or mandatory): (1) the principal of the Loan being prepaid; (2) interest on the principal of the Loan being prepaid to the effective date of prepayment in accordance with the Note; (3) to the extent not covered by the amount required in clause (2), interest payable on the Bonds to the redemption date of such Bonds; (4) the prepayment premium, if any, payable with respect to the prepayment of the Loan; and (5) to the extent not covered by the amount required in clause (4), the redemption premium, if any, payable with respect to the redemption of the Bonds. (e) Application of Partial Prepayment. Any partial prepayment of the principal of the Note will not extend or postpone the due date of any subsequent monthly installments, if any, or change the amount of such installments; provided, however, that the amount of subsequent monthly installments, if any, will be reamortized as necessary to correspond to the remaining payments due on the Bonds; provided further, however, that the unpaid principal of and interest on the Note, all other obligations of the Borrower for the payment of money under the Note and all obligations of the Borrower for the payment of money under the Security Instrument will be due and payable on the Maturity Date, if not sooner paid. F-4 EXHIBIT G FORM OF CREDIT FACILITY DIRECT PAY IRREVOCABLE TRANSFERABLE CREDIT ENHANCEMENT INSTRUMENT (Broadway LaNel Project) August _, 2003 U.S. $2,684,678 Relating to Loan U.S. Bank National Association, as Trustee Mail Code: EP-MN-WS3C 60 Livingston Avenue St. Paul, Minnesota 55107-2292 At the request of Broadway LaNel, a Limited Partnership ("Borrower"), Fannie Mae ("Fannie Mae") issues this direct pay irrevocable, transferable Credit Enhancement Instrument to U.S. Bank National Association ("Trustee"), not in its individual or corporate capacity but solely as Trustee for the owners of $2,655,000 aggregate principal amount of the City of New Hope, Minnesota, Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 ("Bonds") issued pursuant to the Trust Indenture ("Indenture") dated as of August 1, 2003 between the City of New Hope, Minnesota ("Issuer") and the Trustee. 1. Definitions. Capitalized terms used in this Credit Enhancement Instrument have the meanings given to those terms in this Section I or elsewhere in this Credit Enhancement Instrument. "Advance" means a Principal Advance, Interest Advance or Pledged Bonds Advance, as such terms are defined in Section 3. "Affiliate" as applied to any person, means any other person directly or indirectly controlling, controlled by, or under common control with, that person. For the purposes of this definition, "control' (including with correlative meanings, the terms "controlling", `controlled by" and "under common control with"), as applied to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Direct Pay Credit Enhancement Instrument (Broadway LaNel Project) person, whether through the ownership of voting securities, partnership interests or by contract or otherwise. "Amount Available" has the meaning given that term in Section 2. "Business Day" means any day other than (i) a Saturday or a Sunday, (ii) any day on which banking institutions located in the City of New York, New York are required or authorized by law or executive order to close, (iii) any day on which banking institutions located in the city or cities in which the Designated Office (as that term is defined in the Indenture) of the Trustee, the Remarketing Agent or the Loan Servicer is located are required or authorized by law or executive order to close, (iv) prior to the date upon which the interest rate on the Bonds adjusts to a fixed rate mode, a day on which the New York Stock Exchange is closed or (v) any day on which Fannie Mae is closed. "Certificate" means any certificate in the form attached to this Credit Enhancement Instrument as an Exhibit or such other form as provided in Section 3. If the certificate is submitted to Fannie Mae by personal delivery or by telecopy, the certificate must be signed by one who purports to be an authorized officer of the Trustee. If the certificate is submitted to Fannie Mae in any other medium (such as e-mail or a web based medium), the certificate must be authenticated as provided in the related Presentation Protocol. "Credit Enhancement Instrument" means this Direct Pay Irrevocable Transferable Credit Enhancement Instrument as the same may be amended, supplemented or restated from time to time. "Excluded Bond" means any Bond which is not Outstanding (as that term is defined in the Indenture), any Bond registered in the name of or otherwise owned, directly or indirectly, by the Borrower or any Affiliate of the Borrower or any Pledged Bond. "Expiration Date" means the Expiration Date stated in Section 7. "Interest Portion" has the meaning given that term in Section 2. "Loan" means the mortgage loan made by the Issuer to the Borrower pursuant to the Financing Agreement for the purpose of providing funds to the Borrower to repay the Prior Loan and cause the refunding of the Prior Bonds. "Loan Servicer" means initially Glaser Financial Group, Inc. or any other entity approved by Fannie Mae in its discretion as the servicer of the Loan, and any permitted successors or assigns. "Note" means the Multifamily Note (together with all addenda thereto) dated as of August 1, 2003, executed by the Borrower in favor of the Issuer, as the same may be amended, supplemented or restated from time to time or any mortgage note executed in substitution therefor in accordance with the terms of the Bond Documents, as such substitute note may be amended, supplemented or restated from time to time. Direct Pav Credit Enhancement Instrument 2 (Broadway LaNel Project) "Pledged Bond" means any Bond during the period from and including the date of its purchase by the Trustee on behalf of and as agent for the Borrower with the proceeds of an Advance under this Credit Enhancement Instrument, to, but excluding, the date on which the Pledged Bonds Advance made by the Credit Provider on account of such Pledged Bond is reinstated under this Credit Enhancement Instrument. "Presentation Protocol" means an agreement between Fannie Mae and the Trustee regarding one or more media through which the Trustee may present Certificates to Fannie Mae under this Credit Enhancement Instrument, as such agreement may be amended, supplemented or restated from time to time. "Principal Portion" has the meaning given that term in Section 2. "Reimbursement Agreement" means the Reimbursement Agreement, dated as of August 1, 2003, between Fannie Mae and the Borrower, as such agreement may be amended, supplemented or restated from time to time. "Remarketing Agent" means the remarketing agent under the Indenture. "Reset Rate" means the rate of interest borne by the Bonds for a period of ten or more years (or such shorter period as consented to by Fannie Mae) as determined in accordance with the Indenture. "Tender Agent" means the tender agent under the Indenture. "Termination Date" means, subject to Section 7(d), the date on which this Credit Enhancement Instrument terminates in accordance with Section 7(b). "Trustee" means U.S. Bank National Association, a national banking association, having a designated corporate trust office in St. Paul, Minnesota, not in its individual or corporate capacity, but solely as trustee under the Indenture, or any permitted successor trustee under the Indenture. 2. Amount Available. Subject to the terms and conditions of this Credit Enhancement Instrument, Fannie Mae irrevocably authorizes the Trustee to draw on Fannie Mae, from time to time, from and after the date of this Credit Enhancement Instrument to, and including, the earlier of the Expiration Date or the Termination Date, a maximum aggregate amount not exceeding $2,684,678 (as such amount may be reduced or reinstated from time to time in accordance with Section 8, "Amount Available"), of which: (a) up to $2,655,000 ("Principal Portion") may be drawn with respect to the unpaid principal of the Bonds or, as the case may be, the principal portion of the purchase price of the Bonds; and (b) up to $29,678 ("Interest Portion"), or 34 days interest on the Bonds (calculated at an assumed rate on the Bonds of 12% per annum on the basis of a year of 365 days), may be drawn with respect to interest actually accrued on the Bonds or, as the case may be, the interest portion of the purchase price of the Bonds. Direct Pay Credit Enhancement Instrument (Broadway LaNel Project) 3. Advances. Each demand for an Advance shall be made by the Trustee's presentation to Fannie Mae of a Certificate: (a) in the form of Exhibit A to pay principal of the Bonds (other than Excluded Bonds) due as a result of the acceleration, defeasance, redemption or stated maturity thereof ("Principal Advance"); (b) in the form of Exhibit B to pay interest on the Bonds (other than Excluded Bonds) on or prior to their stated maturity date ("Interest Advance"); and (c) in the form of Exhibit C to pay principal of, plus accrued interest on, Bonds tendered for purchase pursuant to the Indenture ("Pledged Bonds Advance"). Any Certificate submitted to Fannie Mae by the Trustee shall have all blanks appropriately completed and shall be signed by one who states therein that he or she is an authorized officer of the Trustee. Fannie Mae's obligation to honor any demand for an Advance is a direct pay obligation, without regard to whether the Borrower has made any such payment. Neither demands for, nor Advances, may be made under this Credit Enhancement Instrument to pay (i) principal of, interest on or the purchase price of, any Excluded Bond, (ii) premium that may be payable upon the redemption of any of the Bonds or (iii) interest that may accrue on any of the Bonds on or after the maturity of such Bond. Fannie Mae may amend the form of any Certificate or delete any of the information, statements and certifications set out in the form of any Certificate to accommodate the sending of such Certificate by a medium pursuant to a Presentation Protocol. No such amendment may require any additional information, statement or certification than that required by such form of certificate attached to this Credit Enhancement Instrument on the date of issuance. 4. Presentation of Certificates. Each Certificate must be given to Fannie Mae by: (a) personal delivery at 3900 Wisconsin Avenue, Washington, D.C. 20016, Attention: Vice President, Multifamily Services; or (b) telecopy to phone number 202-752-8374, immediately followed by telephonic notice to the Vice President, Multifamily Services at telephone number 202-752-7869; or (c) such other medium as Fannie Mae and the Trustee may agree in a Presentation Protocol from time to time. A Presentation Protocol may provide that the Trustee may not submit a Certificate by telecopy after a stated date or may only submit Certificates by telecopy after a certain date with the prior written permission of Fannie Mae, in which case subsection (b) shall be automatically deemed amended to that effect. Fannie Mae will notify the Trustee in writing of any change in address or telecopy number to which all Certificates must be delivered or of any change relating to the person to be called for Direct Pay Credit Enhancement Instrument 4 (Broadway LaNel Project) telephonic notices confirming telecopy communications. Any such written notice shall be effective upon receipt by the Trustee. 5. Fannie Mae's Engagement. Upon due receipt by Fannie Mae of a Certificate conforming to the terms and conditions of this Credit Enhancement Instrument, Fannie Mae will honor payment of the amount specified in such Certificate if presented as specified below on or before the earlier of the Expiration Date or the Termination Date: (a) If a presentation in respect of a Principal Advance, Interest Advance or Pledged Bonds Advance relating to a mandatory tender pursuant to Section 4.2(b) of the Indenture is made: (1) at or prior to 12:00 noon Eastern time on a Business Day, payment shall be made to the Trustee of the amount specified no later than 1:00 p.m. Eastern time on the next following Business Day. (2) after 12:00 noon Eastern time on a Business Day, payment shall be made to the Trustee of the amount specified no later than 1:00 p.m. Eastern time on the second following Business Day. (b) If a presentation in respect of a Pledged Bonds Advance (other than a Pledged Bonds Advance relating to a mandatory tender pursuant to Section 4.2(b) of the Indenture) is made: (1) at or prior to 10:30 a.m. Eastern time on a Business Day, payment shall be made to the Trustee of the amount specified no later than 1:30 p.m. Eastern time on the same Business Day. (2) after 10:30 a.m. Eastern time on a Business Day, payment shall be made to the Trustee of the amount specified no later than 1:30 p.m. Eastern time on the next following Business Day. All Advances made under this Credit Enhancement Instrument will be made with Fannie Mae's own funds in immediately available funds. 6. Nonconforming Tender. If a demand for payment under this Credit Enhancement Instrument made by the Trustee does not conform to the terms and conditions of this Credit Enhancement Instrument, Fannie Mae will notify the Trustee of such lack of conformity within a reasonable time after delivery of such demand for payment, such notice to be promptly confirmed in writing to the Trustee, and Fannie Mae shall hold all documents at the Trustee's disposal or, at the Trustee's option, return the same to the Trustee. 7. Expiration and Termination. (a) Expiration. This Credit Enhancement Instrument shall expire at 4:00 p.m. Eastern time on July 20, 2033 ("Expiration Date"). Direct Pav Credit Enhancement Instrument (Broadway LaNel Project) (b) Termination Before Expiration Date. This Credit Enhancement Instrument shall automatically terminate prior to the Expiration Date on the first to occur of (i) the honoring by Fannie Mae of an Advance which automatically and permanently reduces the Principal Portion to zero, (ii) 4:00 p.m. Eastern time on the day following the last day of any period during which the Bonds bear interest at a Reset Rate unless Fannie Mae has notified the Trustee prior to such date that it elects to waive such termination, and (iii) Fannie Mae's receipt of a Certificate in the form of Exhibit G (which shall be conclusive evidence of the matters set forth therein). The date determined in the preceding sentence is the "Termination Date." (c) Delivery. Upon the Expiration Date or the Termination Date, whichever first occurs, the Trustee shall deliver this Credit Enhancement Instrument to Fannie Mae for cancellation. (d) Business Day Convention. In the event that any date on which this Credit Enhancement Instrument would otherwise expire or terminate is not a Business Day, this Credit Enhancement Instrument shall continue in effect and shall not expire or terminate until 4:00 p.m. Eastern time on the next Business Day. 8. Reduction and Reinstatement of Amount Available. The Amount Available shall be reduced or reinstated from time to time in accordance with this Section. (a) Automatic Reduction on Making any Advance. The Amount Available shall be reduced automatically by the amount of each Advance paid by Fannie Mae, notwithstanding any act or omission, whether authorized or unauthorized, of the Trustee or any officer, director, employee or agent of the Trustee in connection with any Advance or the proceeds of such Advance or otherwise in connection with this Credit Enhancement Instrument. Each reduction shall be permanent or subject to reinstatement as provided in this Section. Such reduction shall be applied to the Principal Portion and the Interest Portion as appropriate for the Advance to which the reduction relates. (b) Permanent Reduction for each Principal Advance. The Principal Portion and Interest Portion shall be reduced automatically and permanently upon the making of any Principal Advance as follows: (1) the Principal Portion will be reduced by the amount of the Principal Advance; and (2) the Interest Portion will be reduced by an amount equal to 34 days of interest (calculated at the rate of 12% per annum on the basis of a year of 365 days) on the amount of the related permanent reduction of the Principal Portion. (c) Permanent Reduction on Notice from the Trustee. The Amount Available shall be reduced automatically by the amounts specified in any Certificate in the form of Exhibit E which is delivered to Fannie Mae. Such reduction shall be applied to the Principal Portion, and the Interest Portion as set out in the Certificate. Direct Pay Credit Enhancement Instrument 6 (Broadway LaNel Project) (d) Reinstatement of Interest Portion for Interest Advance. Except for a permanent reduction of the Interest Portion under subsection (b)(2), the amount of the Interest Portion reduced by an Interest Advance shall be reinstated immediately and automatically. (e) Reinstatement of Pledged Bonds Advance. The Principal Portion and the Interest Portion shall be reinstated after each Pledged Bonds Advance upon receipt by Fannie Mae of money equal to the amount by which the Trustee requests Fannie Mae to increase the Principal Portion and the Interest Portion in a Certificate of Reinstatement in the form of Exhibit F. Upon any permanent reduction of the Amount Available, Fannie Mae may deliver to the Trustee a substitute Credit Enhancement Instrument in exchange for this Credit Enhancement Instrument, in an amount available equal to the then current Amount Available, but otherwise having terms identical to this Credit Enhancement Instrument. 9. Discharge of Obligations. Only the Trustee may demand an Advance under this Credit Enhancement Instrument. Upon payment to the Trustee of the amount specified in any Certificate presented under this Credit Enhancement Instrument, Fannie Mae shall be fully discharged of its obligation under this Credit Enhancement Instrument with respect to such Certificate and Fannie Mae shall not thereafter be obligated to make any further payment to the Trustee or any other person in respect of such Certificate for payment of principal of, purchase price of, or interest on any Bond. 10. Nature of Fannie Mae's Obligations. Fannie Mae's obligation to make Advances to the Trustee upon the proper presentation of documents which conform to the terms and conditions of this Credit Enhancement Instrument is absolute, unconditional and irrevocable, shall be fulfilled strictly in accordance with this Credit Enhancement Instrument, and shall not be affected by any right of set-off, recoupment or counterclaim Fannie Mae might otherwise have against the Issuer, the Trustee, the Tender Agent, the Remarketing Agent, the Borrower, the Loan Servicer or any other person. Fannie Mae's obligations under this Credit Enhancement Instrument are primary obligations and shall not be affected by the performance or non-performance by the Issuer under the Indenture or the Bonds or by the Borrower under the Note or the Reimbursement Agreement or by the performance or non-performance of any party under any other agreement between or among any of the Issuer, the Trustee, the Borrower or Fannie Mae. 11. Transfer. This Credit Enhancement Instrument may be successively transferred in whole only, to each successor Trustee under the Indenture. Any such transfer shall be effective upon receipt by Fannie Mae of a signed copy of the instrument effecting such transfer signed by the transferor and by the transferee in the form attached as Exhibit H (which shall be conclusive evidence of such transfer). In each such case, the transferee instead of the transferor shall, without the necessity of further action, be entitled to all the benefits of and rights under this Credit Enhancement Instrument in the transferor's place. 12. Notices and Deliveries. All documents, notices and other communications, other than Certificates, shall be in writing and personally delivered to Fannie Mae at the address (and to the Direct Pay Credit Enhancement Instrument % (Broadwav LaNel Project) attention of the party) set out in Section 4(a) or may be sent to Fannie Mae by telecopy immediately followed by telephonic notice as set out in Section 4(b), as such address, telephone numbers and parties to whom such notices are sent are changed by Fannie Mae pursuant to Section 4. 13. Governing Law. This Credit Enhancement Instrument shall be governed by the laws of the District of Columbia, including the Uniform Commercial Code as in effect in the District of Columbia. 14. Entire Credit Enhancement Instrument. This Credit Enhancement Instrument sets forth in full the terms of Fannie Mae's undertaking and shall not in any way be amended, amplified or limited by reference to any document, instrument or agreement referred to in this Credit Enhancement Instrument (including, without limitation, the Bonds) or in which this Credit Enhancement Instrument is referred to or to which this Credit Enhancement Instrument relates, except for (i) the Exhibits referred to in this Credit Enhancement Instrument and (ii) any Presentation Protocol, all of which shall be deemed fully incorporated into this Credit Enhancement Instrument as if fully set forth herein. FANNIE MAE By: Name: Title: Direct Pav Credit Enhancement Instrument 8 (Broadway LaNel Project) Exhibit A CERTIFICATE FOR "PRINCIPAL ADVANCE" DIRECT PAY Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument') $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the direct pay Credit Enhancement Instrument, that: (1) Demand for Advance. The Trustee demands an Advance in the amount of S under the Principal Portion of the Available Amount to be used to pay principal of the Bonds due as a result of the acceleration, defeasance, redemption or stated maturity of the Bonds pursuant to the Indenture. (2) When the Advance Must be Made. If this demand for Advance is made: (a) at or prior to 12:00 noon Eastern time on a Business Day, you must pay the Advance no later than 1:00 p.m. Eastern time on the next following Business Day. (b) after 12:00 noon Eastern time on a Business Day, you must pay the Advance no later than 1:00 p.m. Eastern time on the second following Business Day. (3) Where the Advance Must be Made. Please pay the Advance demanded by this Certificate to the Trustee at [specify account]. (4) Amount Available. Upon the payment of the Advance: (a) Reduction of Amount Available. The Amount Available shall be reduced automatically and permanently by Sfinsert amount of reduction] of which: (1) S is attributable to the Principal Portion; and (2) S is attributable to the Interest Portion. (b) New Amount Available. The Amount Available will be S , of which: (I) S will be the Principal Portion; and Direct Pav Credit Enhancement Instrument A-1 (Broadway LaNel Project) (2) $ will be the Interest Portion. (5) Other Matters. (a) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (b) The principal of the Bonds (other than Excluded Bonds) that is due on [Trustee: complete this blank using the first Business Day after the date of this Certificate) is $ . The amount of the Advance demanded in Paragraph I does not exceed such amount of principal. (c) The amount of the Advance (i) does not exceed the Principal Portion of the Amount Available on the date of this Certificate and (ii) was computed in accordance with the Bonds and the Indenture. (d) Upon the payment referred to in Paragraph 1, the aggregate principal amount of all Bonds outstanding will be $ (e) Upon receipt by the Trustee of the Advance, (i) the Trustee will apply the same directly for the purpose specified in Paragraph 1, and (ii) no portion of said amount shall be applied by the Trustee for any purpose other than as set forth in Paragraph 1. (f) The proceeds of the Advance demanded by this Certificate will not be applied to any payment on any Excluded Bonds. (g) The aggregate principal amount of all Excluded Bonds outstanding is (h) The amount of interest (computed at the Maximum Interest Rate (as that term is defined in the Indenture), which currently is ' percent per annum) on the basis of the actual number of days elapsed over a year of 365 or 366 days, as applicable), accruing on the Bonds referred to in subparagraph (d) above in any period of " days is $ Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument. Trustee: Fill in current Maximum Interest Rate. Trustee: Fill in number of days of interest coverage required to be supplied by the Interest Portion. Direct Pav Credit Enhancement Instrument A-2 (Broadway LaNel Project) IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the _ day of U.S. BANK NATIONAL ASSOCIATION, as Trustee 0 Authorized Officer Direct Pay Credit Enhancement Instrument A -.i (Broadway LaNel Project) Exhibit B CERTIFICATE FOR "INTEREST ADVANCE" DIRECT PAY Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument') $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the Credit Enhancement Instrument, that: (1) Demand for Advance. The Trustee demands an Advance in the amount of $ under the Interest Portion of the Available Amount to be used to pay interest on the Bonds (other than Excluded Bonds) on or prior to their stated maturity date. (2) When the Advance Must be Made. If this demand for Advance is made: (a) at or prior to 12:00 noon Eastern time on a Business Day, you must pay the Advance no later than 1:00 p.m. Eastern time on the next following Business Day. (b) after 12:00 noon Eastern time on a Business Day, you must pay the Advance no later than 1:00 p.m. Eastern time on the second following Business Day. (3) Where the Advance Must be Made. Please pay the Advance demanded by this Certificate to the Trustee at [specify account]. (4) Other Matters. (a) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (b) The amount of the Advance referred to in Paragraph 1 was computed in accordance with the Bonds and the Indenture and does not exceed the amount of interest that is (i) due on the Business Day following the date of this Certificate on the Bonds and (ii) the Interest Portion of the Amount Available on the date of this Certificate. (c) Upon receipt by the Trustee of the amount demanded by this Certificate, (i) the Trustee will apply the same directly for the purpose specified in Paragraph I and (ii) no portion of said amount shall be applied by the Trustee for any purpose other than as set forth in Paragraph 1. Direct Pay Credit Enhancement Instrument B-1 (Broadway LaNel Project) (d) The proceeds of the Advance demanded by this Certificate will not be applied to any payment on any Excluded Bonds. Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument. IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the day of U.S. BANK NATIONAL ASSOCIATION, as Trustee Authorized Officer Direct Pay Credit Enhancement Instrument B-2 (Broadway LaNel Project) Exhibit C CERTIFICATE FOR "PLEDGED BONDS ADVANCE" DIRECT PAY Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument") $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the Credit Enhancement Instrument, that: (1) Demand for Advance. The Trustee demands an Advance in the amount of $ consisting of (i) $ under the Principal Portion of the Amount Available to be used to pay the principal portion of the purchase price of Bonds and (ii) $ under the Interest Portion of the Amount Available to be used to pay the interest portion of the purchase price of Bonds purchased pursuant to Section 4.1(a), 4.2(a) or 4.2(b) of the Indenture ("Tendered Bonds"). (2) When the Advance Must be Made. (Trustee: check applicable box) ❑ The Advance relates to a mandatory tender of Bonds pursuant to Section 4.2(b) of the Indenture. Accordingly, if this demand for Advance is made: (w) at or prior to 12:00 noon Eastern time on a Business Day, you must pay the Advance no later than 1:00 p.m. Eastern time on the next following Business Day. (x) after 12:00 noon Eastern time on a Business Day, you must pay the Advance no later than 1:00 p.m. Eastern time on the second following Business Day. ❑ The Advance does not relate to a mandatory tender of Bonds pursuant to Section 4.2(b) of the Indenture. Accordingly, if this demand for Advance is made: (y) at or prior to 10:30 a.m. Eastern time on a Business Day, you must pay the Advance no later than 1:30 p.m. Eastern time on the same Business Day. (z) after 10:30 a.m. Eastern time on a Business Day, you must pay the Advance no later than 1:30 p.m. Eastern time on the next following Business Day. Direct Pav Credit Enhancement Instrument C-1 (Broadway LaNel Project) (3) Where the Advance Must be Made. Please pay the Advance demanded by this Certificate to the Trustee at [specify account]. (4) Other Matters. (a) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (b) The amount demanded pursuant to Paragraph 1 does not exceed the amount necessary, at the time of the presentation of this Certificate to Fannie Mae, to pay the purchase price of the Tendered Bonds which the Remarketing Agent has not remarketed or for which the Remarketing Agent has not received sufficient remarketing proceeds to pay the purchase price of the Tendered Bonds. (c) The principal component of the aggregate purchase price of the Tendered Bonds that is due on the date of this Certificate is $ , and the amount of the Advance relating to the Principal Portion referred to in Paragraph I does not exceed such amount of principal. The aggregate accrued interest component of the purchase price of the Tendered Bonds that is due on the date of this Certificate is $ and the amount of the Advance relating to the Interest Portion referred to in Paragraph 1 does not exceed such amount. (d) On the date of this Certificate, (i) the principal portion of the Advance does not exceed the Principal Portion of the Amount Available and (ii) the interest portion of the Advance does not exceed the Interest Portion of the Amount Available. The amount of the Advance was computed in accordance with the Bonds and the Indenture. (e) Upon receipt by the Trustee of the Advance demanded by this Certificate, (i) the Trustee will apply the same directly for the purpose specified in Paragraph I and (ii) no portion of said amount shall be applied by the Trustee for any purpose other than as set forth in Paragraph 1. (f) The proceeds of the Advance demanded by this Certificate will not be applied to defease, redeem or pay (whether at stated maturity or by acceleration) any Excluded Bond. (g) Bonds in a principal amount equal to the Principal Portion of the Advance made under this Certificate will be delivered to U.S. Bank National Association, or if, and only if, delivery of the Bonds is not possible, a written entitlement order will be delivered to the applicable financial intermediaries on whose records ownership of the Pledged Bonds is reflected directing the intermediaries to credit the security entitlement to the Pledged Bonds to the account of U.S. Bank National Association for the benefit of Fannie Mae and a written confirmation of such credit will be delivered to the U.S. Bank National Association. Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument. Direct Pay Credit Enhancement Instrument C_2 (Broadway LaNel Project) IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the _ day of _. U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer Dire" Pay Credit Enhancement Instrument C-3 (Broadway LaNel Project) ]Exhibit D] [RESERVED] Direct Pav Credit Enhancement Instrument D -j (Broadway LaNel Project) Exhibit E CERTIFICATE OF REDUCTION Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument') $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the Credit Enhancement Instrument, as follows: (1) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (2) The aggregate principal amount of Bonds outstanding has been reduced to $ (3) Effective on [insert date]: (a) the Amount Available shall be reduced by $ , of which (i) $ is a reduction of the Principal Portion and (ii) $ is a reduction of the Interest Portion; (b) after such reduction, the Amount Available will be $ , of which (i) $ will be the Principal Portion and (ii) $ will be the Interest Portion; and (c) after such reduction, the Amount Available will be not less than the aggregate unpaid principal amount of the Bonds Outstanding (as that term is defined in the Indenture). By its execution hereof, Broadway LaNel, a Limited Partnership ("Borrower") certifies to Fannie Mae that the Trustee is authorized to deliver this Certificate to Fannie Mae. The Borrower and the Trustee further certify that the amounts specified in Paragraph 3 have been determined in accordance with the terms and conditions of the Indenture and the Reimbursement Agreement. Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument. Direct Pay Credit Enhancement Instrument E-1 (Broadway LaNel Project) IN WITNESS WHEREOF, the Trustee and the Borrower have executed and delivered this Certificate as of the _ day of U.S. BANK NATIONAL ASSOCIATION, as Trustee Authorized Officer BROADWAY LANEL, A LIMITED PARTNERSHIP Authorized Officer Direct Pay Credit Enhancement Instrument E-2 (Broadway LaNel Project) Exhibit F CERTIFICATE OF REINSTATEMENT Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument") $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned, a duly authorized officer of the Trustee named below ("Trustee"), certifies to Fannie Mae, with reference to the Credit Enhancement Instrument, as follows: (1) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (2) The Trustee has received notification from the Tender Agent that Bonds pledged to Fannie Mae by the Borrower which were acquired with the proceeds of a Pledged Bonds Advance under the Credit Enhancement Instrument are to be remarketed or sold. The Trustee has received and is transferring to Fannie Mae the amount set forth in Paragraph 3. (3) Upon receipt by Fannie Mae of this certificate and $ the Available Amount will be increased as follows: (a) the Principal Portion of the Amount Available will be increased by $ , but such increase shall not cause the Principal Portion to exceed the original Principal Portion less the sum of (i) all Principal Advances paid by Fannie Mae in accordance with the Credit Enhancement Instrument and (ii) the aggregate of all reductions of the Principal Portion pursuant to any Certificate of the Trustee in the form of Exhibit E; and (b) the Interest Portion of the Amount Available will be increased by $ , but such increase shall not cause the Interest Portion to exceed the original Interest Portion less the aggregate of (i) all Interest Advances for interest which have not been reinstated in accordance with the Credit Enhancement Instrument, subject to the reinstatement of such amounts as set forth in the Credit Enhancement Instrument, (ii) all reductions of the Interest Portion due to any permanent reduction of the Principal Portion of the Amount Available and (iii) to the extent not addressed in (ii), all reductions of the Interest Portion pursuant to any Certificate of the Trustee in the form of Exhibit E. (4) Fannie Mae shall promptly release or direct Fannie Mae's custodian in writing to release the Pledged Bonds to the Tender Agent in a principal amount corresponding to the Principal Portion identified in Paragraph 3 or, if such release is not possible, Fannie Mae shall be deemed to consent to the delivery of a written entitlement order to the applicable financial intermediary Direct Pay Credit Enhanmment Instrument F-1 (Broadway LaNel Project) on whose records ownership of such Pledged Bonds is reflected to credit the ownership entitlement to such Bonds to the account as directed by the Trustee. Such release or deemed consent shall be conclusive evidence of the reinstatement of the Principal Portion and Interest Portion as described in Paragraph 3. Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument. IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the day of U.S. BANK NATIONAL ASSOCIATION, as Trustee Authorized Officer Direct Pav Credit Enhancement Instrument F-2 (Broadway LaNcl Project) Exhibit G NOTICE OF TERMINATION Fannie Mae 3900 Wisconsin Avenue, N.W. Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument") $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned, a duly authorized officer of the undersigned Trustee ("Trustee"), certifies to Fannie Mae, with respect to the Credit Enhancement Instrument, that the Trustee is authorized to file this notice pursuant to the Indenture. Any capitalized, but undefined, term used in this Certificate is used as defined in the Credit Enhancement Instrument. The undersigned certifies to Fannie Mae: * (a) None of the Bonds are Outstanding under the Indenture. (b) The Trustee has received an Alternate Credit Facility (as such term is defined in the Indenture) as permitted by the Indenture and the Reimbursement Agreement. * Trustee: Check applicable paragraph Pursuant to the Indenture we enclose the Credit Enhancement Instrument for cancellation. Very truly yours, U.S. BANK NATIONAL ASSOCIATION, as Trustee M Authorized Officer Dated: Direct Pay Credit Enhancement Instrument G -t (Broadway LaNel Project) By its execution hereof, Broadway LaNel, a Limited Partnership ("Borrower") hereby certifies to Fannie Mae that all conditions precedent to the cancellation of the Credit Enhancement Instrument and substitution of an Alternate Credit Facility set forth in the Indenture and the Reimbursement Agreement have been satisfied and hereby joins in the Trustee's instructions to Fannie Mae may cancel the same. BROADWAY LANEL, A LIMITED PARTNERSHIP 0 Authorized Officer Direct Pay Credit Enhancement Instrument G-2 (Broadway LaNel Project) Exhibit H CERTIFICATE FOR SUCCESSOR TRUSTEE Fannie Mae 3900 Wisconsin Avenue Washington, D.C. 20016 Attention: Director, Multifamily Services Re: Credit Enhancement Instrument relating to Loan No. ("Credit Enhancement Instrument') $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 The undersigned is a duly authorized officer of the Trustee under the Indenture for the holders of the Bonds The Trustee transfers all rights in the Credit Enhancement Instrument to , subject to the terms and conditions of the Credit Enhancement Instrument. The Trustee certifies that the transferee is the successor Trustee under the Indenture referred to in the Credit Enhancement Instrument and such successor Trustee has been approved in writing by Fannie Mae. The transferee acknowledges below that it is the successor Trustee. Such successor Trustee has entered into a written agreement to be bound by the Assignment and Intercreditor Agreement dated as of August 1, 2003 by and among Fannie Mae, the Trustee and the Issuer. By this transfer, all rights of the undersigned Trustee in the Credit Enhancement Instrument are transferred to the transferee and the transferee shall have the sole rights as the beneficiary, including sole rights relating to any amendments, whether increases or extensions or other amendments and whether now existing or hereafter made. All amendments are to be advised direct to the transferee without necessity of any consent of or notice to the undersigned. U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer Direct Pay Credit Enhancement Instrument II -1 (Broadway LaNel Project) The above signature of an officer or other authorized representative conforms to that on file with us. Said officer or representative is authorized to sign for said party. U.S. BANK NATIONAL ASSOCIATION Authorized Officer Indenture. acknowledges that it is the successor to as Trustee under the Authorized Officer GP:1477928 Q Direct Pay Credit Enhancement Instrument II -Z (Broadway LaNel Project) Fannie Mae: Fannie Mae If by mail or 3900 Wisconsin Avenue N.W. overnight carrier: Drawer AM Washington, D.C. 20026-2899 Attention: Director, Multifamily Asset Management Telephone: (202) 752-2854 Fax: (202) 752-3542 Re: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003/Glaser Financial Group, Inc. and: Fannie Mae 3900 Wisconsin Avenue, N.W. Drawer AM Washington, D.C. 20026-2899 Attention: Vice President, Multifamily Services Telephone: (202) 752-7869 Fax: (202)752-8369 Re: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refixnding Bonds (Broadway LaNel Project) Series 2003/Glaser Financial Group, Inc. If by messenger: To the above two addressees at 4000 Wisconsin Avenue, N.W., deleting Drawer AM The Remarketing Agent, the Issuer, the Borrower, the Trustee, the Loan Servicer and Fannie Mae may, by notice given under this Agreement, designate other addresses to which subsequent notices, requests, reports or other communications shall be directed. (b) This Agreement shall inure to the benefit of and be binding only upon the parties hereto and their respective successors and assigns. The terms "successors" and "assigns" shall not include any purchaser of any of the Bonds merely because of such purchase. No Bondholder or other third party other than Fannie Mae shall have any rights or privileges hereunder. The Borrower and Remarketing Agent hereby acknowledge and agree that Fannie Mae is a third party beneficiary of this Agreement and shall be entitled to enforce its rights hereunder as if it were a party to this Agreement. (c) All of the representations and warranties of the Borrower and the Remarketing Agent in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of the Remarketing Agent or the Borrower, (ii) the offering and sale of and any payment for any Bonds hereunder or (iii) termination or cancellation of this Agreement. 10 (d) This Agreement and each provision hereof may be amended, changed, waived, discharged or terminated only by an instrument in writing signed by the parties hereto and only with the prior written consent of Fannie Mae. (e) Nothing herein shall be construed to make any party an employee of the other or to establish any fiduciary relationship between the parties except as expressly provided herein. (f) If any provision of this Agreement shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable for any reason, such circumstances shall not have the effect of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatsoever. (g) This Agreement may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute one and the same document. 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership 12 GP 1477927 J2 13 U.S. BANCORP PIPER JAFFRAY INC. By Its Managing Director CLOSING CERTIFICATE OF FANNIE MAE Re: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Apartments), Series 2003 This Certificate of Federal National Mortgage Association ("Fannie Mae") is being executed and delivered on behalf of Fannie Mae by the undersigned, an authorized officer of Fannie Mae. The undersigned certifies, on behalf of Fannie Mae, that the attached information regarding Fannie Mae is accurate and may be included in the Official Statement for the bonds described above. Attachment Dated: August 14, 2003 FANME M Title: Excerpt for Bond Official Statements (Credit Enhancement Facility Transactions Only) MAY 2003 Fannie Mae is a federally chartered and stockholder -owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. 1716 et seq. It is the largest investor in home mortgage loans in the United States with a net portfolio of $823 billion of mortgage loans as of March 31, 2003. Fannie Mae was originally established in 1938 as a United States government agency to provide supplemental liquidity to the mortgage market and became a stockholder -owned and privately managed corporation by legislation enacted in 1968. Fannie Mae purchases, sells, and otherwise deals in mortgages in the secondary market rather than as a primary lender. It does not make direct mortgage loans but acquires mortgage loans originated by others. hi addition, Fannie Mae issues mortgage-backed securities ("MBS"), primarily in exchange for pools of mortgage loans from lenders. Fannie Mae receives guaranty fees for its guarantee of timely payment of principal of and interest on MBS certificates. Fannie Mae is subject to regulation by the Secretary of Housing and Urban Development ("HUD") and the Director of the independent Office of Federal Housing Enterprise Oversight within HUD. Approval of the Secretary of Treasury is required for Fannie Mae's issuance of its debt obligations and MBS. Five of the eighteen members of Fannie Mae's Board of Directors are appointed by the President of the United States, and the other thirteen are elected by the holders of Fannie Mae's common stock. The securities of Fannie Mae are not guaranteed by the United States and do not constitute a debt or obligation of the United States or any agency or instrumentality thereof other than Fannie Mae. As of March 31, 2003, Fannie Mae's core capital' was $29.5 billion. Information on Fannie Mae and its financial condition is contained in Fannie Mae's most current annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K that are filed with the SEC. The SEC filings are available at the SEC's website at www.sec.gov. The periodic reports filed by Fannie Mae with the SEC are also available on Fannie Mae's web site at http://www.fanniemae.com/ir/sec. Fannie Mae makes no representation as to the contents of this Official Statement, the suitability of the bonds for any investor, the feasibility of performance of any project, or compliance with any securities, tax or other laws or regulations. Fannie Mae's role with respect to the Bonds is limited to issuing and discharging its obligations under the Credit Enhancement Facility and exercising the rights reserved to it in the Indenture and the Reimbursement Agreement. ' Core Capital is the sum of (a) the stated value of outstanding common stock, (b) the stated value of outstanding noncumulative perpetual preferred stock, (c) paid -in capital, and (d) retained earnings. CERTIFICATE OF FANNIE MAE CITY OF NEW HOPE, MINNESOTA $2,655,000 VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BOND, SERIES 2003 (BROADWAY LANEL PROJECT) On behalf of Fannie Mae ("Credit Provider") the undersigned certifies that (a) the Facility Fee (as such term is defined in the Reimbursement Agreement entered into by the borrower identified therein in connection with the issuance of the above referenced Bonds ("Reimbursement Agreement")) to be paid to the Credit Provider in consideration of the Credit Provider's providing credit enhancement pursuant to the Credit Enhancement Instrument (as defined in the Reimbursement Agreement) (i) is to be paid solely for the providing of such credit enhancement, (ii) was negotiated at arms length, and (iii) is within the normal range of charges by the Credit Provider with respect to similar transactions solely for providing such credit enhancement and liquidity support; and (b) the Credit Provider does not expect to make any payments pursuant to the G•edit Enhancement Instrument with respect to which the Credit Provider will not be reimbursed. Dated: August 12, 2003 EXECUTION COPY REIMBURSEMENT AGREEMENT THIS REIMBURSEMENT AGREEMENT dated as of August 1, 2003 is between BROADWAY LaNEL, A LIMITED PARTNERSHIP ("Borrower"), a Minnesota limited partnership, and FANNIE MAE ("Fannie Mae"), a federally -chartered and stockholder -owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. § 1716, et seq. ARTICLE I DEFINITIONS SECTION I.I. Defined Terms. All capitalized terms used in this Agreement have the meanings given to those terms in this Section 1.1 or elsewhere in this Agreement unless the context or use clearly indicates a different meaning. Any capitalized term used in this Agreement but not defined in this Agreement shall be used as defined in the Indenture. The following terms have the following meanings: "Act" means Minnesota Statutes, Chapters 462A and 462C, as amended. "Activity Fee" has the meaning given to that term in Section 4.2. "Advance" means the advance of funds by Fannie Mae to the Trustee under the Credit Enhancement Instrument upon presentation of a certificate by the Trustee. "Assigned Documents" has the meaning given to that term in Section 2.1 of the Assignment. "Assigned Rights" has the meaning given to that term in Section 2.1 of the Assignment. The Reserved Rights are not included in the Assigned Rights. "as their interests may appear" or "as its interest may appear" means, with reference to any of the Assigned Rights, the respective interests, exclusive of the Reserved Rights of the Issuer, of Fannie Mae and of the Trustee to such documents and rights as set forth in the Assignment. "Assignment" means the Assignment and Intercreditor Agreement, dated as of August 1, 2003 by the Issuer to Fannie Mae and the Trustee, as their interests may appear, and acknowledged by the Borrower, as it may be amended, supplemented or restated from time to time. "Amount Available" means the amount set out in the Credit Enhancement Instrument as the Amount Available, as such amount may be reduced or reinstated from time to time in accordance with the Credit Enhancement Instrument. Reimbursement Agreement (Broadway LaNci Project) "Bond Documents" means the Assignment, the Bonds, the Bond Purchase Agreement, the Credit Enhancement Instrument, the Financing Agreement, the Indenture, the Pledge Agreement, the Regulatory Agreement (and any other agreement relating to rental restrictions on the Mortgaged Property), the Remarketing Agreement, the Tax Certificate, any Tender Agent Agreement, and all other documents, instruments and agreements executed and delivered in connection with the issuance, sale, delivery and/or remarketing of the Bonds, as each such agreement or instrument may be amended, supplemented or restated from time to time. "Borrower" means Broadway LaNel, a Limited Partnership, a Minnesota limited partnership. "Borrower Documents" means the Bond Documents to which the Borrower is a party, the Credit Facility Documents to which the Borrower is a party and the Loan Documents and all other documents to which the Borrower is a party and which are being executed and delivered by the Borrower in connection with the transactions provided for in the Bond Documents, the Loan Documents and the Credit Facility Documents. "Business Day" means any day other than (i) a Saturday or a Sunday, (ii) any day on which banking institutions located in the City of New York, New York are required or authorized by law or executive order to close, (iii) any day on which banking institutions located in the city or cities in which the Designated Office of the Trustee, the Remarketing Agent or the Loan Servicer is located are required or authorized by law or executive order to close, (iv) prior to the Fixed Rate Adjustment Date, a day on which the New York Stock Exchange is closed or (v) so long as a Credit Facility is in effect, any day on which the Credit Provider is closed. "Certificate" has the meaning given to that term in the Credit Enhancement Instrument. "Certificate of Borrower" means the Certificate of Borrower dated August 1, 2003, as it may be amended, supplemented or restated from time to time. "Change Date" means the effective date of any adjustment in the Monthly Deposit Amount to be made by the Borrower pursuant to Section 6.4 during any period in which a Hedge with an original term of less than seven years is in effect. "Closing Date" means the date on which the Bonds are issued and delivered to or upon the order of the Underwriter (as that term is defined in the Indenture) to fund the Loan. "Code" means the Internal Revenue Code of 1954, as amended ("1954 Code" and the Internal Revenue Code of 1986, as amended ("1986 Code"), in each case to the extent made applicable to matters relating to the Bonds and the Mortgaged Property by Section 1313(a) of the Tax Reform Act of 1986; each reference to the Code will be deemed to include (a) any successor internal revenue law and (b) the applicable regulations whether final, temporary or proposed under the Code or such successor law. Any reference to a particular provision of the Code will be deemed to include (a) any successor provision of any successor internal revenue law and (b) applicable regulations whether final, temporary or proposed under such provision or successor or provision. Reimbursement Agreement 2 (Broadway LaNel Project) "Collateral Agreement" means any separate agreement between the Borrower and Fannie Mae for the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to assure completion of repairs or improvements specified in that agreement, or assuring reduction of the outstanding principal balance of the Note if the occupancy of or income from the Mortgaged Property does not increase to a level specified in that agreement, or any other agreement or agreements between Borrower and Fannie Mae which provide for the establishment of any other fund, reserve or account. "Counterparty" means the provider of a Hedge, including any guarantor of the provider of a Hedge. "Credit Enhancement Instrument" means the Credit Enhancement Instrument dated the Closing Date issued and delivered by Fannie Mae to the Trustee, as it may be amended, supplemented or restated from time to time. "Credit Enhancement Rate" means the number of basis points, as an annual rate, set out in the attached Schedule A as the Credit Enhancement Rate. "Credit Facility Arrangements" means the agreements of Fannie Mae and the Borrower set forth in this Agreement and the transactions contemplated in this Agreement, including, without limitation, (i) any commitment to issue the Credit Enhancement Instrument, to extend credit, to purchase any obligation of the Issuer or the Borrower, or to extend any other financial accommodation to or for the benefit of the Borrower, (ii) any issuance, extension or maintenance of any of the foregoing and (iii) any pledge, purchase or carrying of any obligation of or for the benefit of the Borrower. "Credit Facility Documents" means the Reimbursement Agreement, the Certificate of Borrower, all Collateral Agreements, the Hedge Documents, the Hedge Reserve Escrow Security Agreement, the Hedge Security Agreement, the Pledge Agreement and all other agreements and documents securing the Credit Provider or otherwise relating to the provision of the Credit Facility, as any such agreement may be amended, supplemented or restated from time to time. "DUS Guide" means the Fannie Mae Delegated Underwriting and Servicing Guide in its present form and as amended, supplemented or restated from time to time by Fannie Mae, including any DUS Lender Memos, announcements or guide updates (all references to Parts, Chapters, Sections and other subdivisions of the DUS Guide shall be deemed references to (i) the Parts, Chapters, Sections and other subdivisions in effect on the Closing Date and (ii) any successor provisions to such Parts, Chapters, Sections and other subdivisions). "Event of Default" means, as used in any Transaction Document, any event described in that document as an Event of Default. Any "Event of Default" as described in any Transaction Document is not an "Event of Default" in any other Transaction Document unless that other Transaction Document specifically so provides. Reimbursement Agreement 3 (Broadway LaNel Project) "Expiration Date" means, subject to Section 7(d) of the Credit Enhancement Instrument, the date the Credit Enhancement Instrument expires, if not earlier terminated, as set out in the attached Schedule A. "Facility Fee" has the meaning given to that term in Section 4.1. "Financing Agreement" means the Financing Agreement dated as of August 1, 2003 among the Issuer, the Trustee and the Borrower, as amended, supplemented or restated from time to time. "Governmental Authority" means any governmental unit, department, board, agency, commission, administrative body, office, authority or court, of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence. "Hedge" has the meaning given to that term in Section 6.1. "Hedge Account" means the Hedge Account established and maintained pursuant to the Hedge Security Agreement. "Hedge Security Agreement" means (a) the Hedge Security Agreement, dated August 1, 2003 among the Borrower, the Loan Servicer and Fannie Mae, (b) any assignment by the Borrower of any Subsequent Hedge to Fannie Mae, in each case as such agreement may be amended, supplemented or restated from time to time. "Hedge Documents" means the documents evidencing a Hedge, including any guaranty provided in relation to any Hedge. "Hedge Reserve Escrow Account" means the Hedge Reserve Escrow Account established and maintained pursuant to the Hedge Reserve Escrow Account Security Agreement. "Hedge Reserve Escrow Account Security Agreement" means the Hedge Reserve Escrow Account Security Agreement dated as of August 1, 2003 among the Borrower, the Loan Servicer and Fannie Mae as such agreement may be amended, supplemented or restated from time to time. "Hedge Term" means, with respect to a Hedge, the period from the effective date of the Hedge to the stated expiration date of the Hedge. "Hedging Arrangement" means any interest rate swap, interest rate cap or other arrangement, contractual or otherwise, which has the effect of an interest rate swap or interest rate cap or which otherwise (directly or indirectly, derivatively or synthetically) hedges interest rate risk associated with being a debtor of variable rate debt or any agreement or other arrangement to enter into any of the above on a future date or after the occurrence of one or more events in the future. Reimbursement Agreement 4 (Broadway LaNel Project) "Indenture" means the Trust Indenture, dated as of August 1, 2003 between the Issuer and the Trustee, as it may be amended, supplemented or restated from time to time. "Initial Hedge" has the meaning given to that term in Section 6.1. "Issuer" means the City of New Hope, Minnesota, a municipal corporation and political subdivision of the State of Minnesota, and its successors and assigns. "Key Principal" means the individuals whose names are set forth at the foot of the Note. "Liquidity Rate" means the number of basis points, as an annual fee, set out in the attached Schedule A as the Liquidity Rate. "Loan" means the Loan made by the Issuer to the Borrower pursuant to the Financing Agreement for the purpose of providing funds to the Borrower to repay the Prior Loan and cause the refunding of the Prior Bonds. "Loan Documents" means, collectively, the Note, the Security Instrument and all other documents, agreements and instruments evidencing, securing or otherwise relating to the Loan, as each such document, agreement or instrument may be amended, supplemented or restated from time to time. Neither the Financing Agreement nor the Regulatory Agreement is a Loan Document and neither document is secured by the Security Instrument. "Loan Servicer" means the multifamily mortgage servicer designated from time to time by the Credit Provider. "Loan Servicer's Rate" means the number of basis points, as an annual fee, set out in the attached Schedule A as the Loan Servicer's Rate. "Loan Year" has the meaning given to that term in the attached Schedule B. "Monthly Deposit Amount" means the amount the Borrower is obligated to pay to the Loan Servicer for deposit into the Hedge Reserve Fund during any period in which a Hedge with an original term of less than seven years is in effect all as set out in Section 6.4. "Mortgaged Property" means the real property described in the Security Instrument, together with all improvements, fixtures and personal property (to the extent of the Borrower's interest therein) and located on such real property. "Note" means the Multifamily Note (together with all addenda thereto) dated as of August 1, 2003, executed by the Borrower in favor of the Issuer, as the same may be amended, supplemented or restated from time to time or any Note executed in substitution therefor in accordance with the Bond Documents, as such substitute note may be amended, supplemented or restated from time to time. "Note Interest Payment Date" has the meaning given to that term in the Note. Reimbursement Agreement (Broadway LaNel Project) "Note Interest Period" means, with respect to the Loan, the period from, and including, the Closing Date, or as the case may be, a Note Interest Payment Date to, but excluding, the next Note Interest Payment Date, or, as the case may be, the Maturity Date. "Obligations" means the obligations of the Borrower (i) to pay when due and payable principal and interest and any other amounts on the Loan, (ii) to pay when due and payable all amounts, including fees, costs, charges and expenses payable under this Agreement and the other Borrower Documents and (iii) to observe and perform each of the terms, conditions and provisions of the Borrower Documents. "Official Statement" means the Offering Circular or any reoffering or remarketing circular approved by the Borrower and issued in connection which the issuance or remarketing of the Bonds. "Partnership Agreement" means the partnership agreement of the Borrower. "Person" means a natural person, an estate, a trust, a corporation, a partnership, a limited liability company, association, public body or any other organization or entity (whether governmental or private). "Pledge Agreement" means the Pledged Bonds Custody and Security Agreement dated as of August 1, 2003 among the Borrower, U.S. Bank National Association, as collateral agent for Fannie Mae and Fannie Mae, as such agreement may be amended, supplemented or restated from time to time or any similar agreement with the provider of an Alternate Credit Facility. "Potential Default" means, as used in any Transaction Document, any event that has occurred which, with the giving of notice or the passage of time or both, would constitute an Event of Default as described in that document. Any "Potential Default' as described in any Transaction Document is not a "Potential Default' in any other Transaction Document unless that other Transaction Document specifically so provides. "Principal Reserve Fund Rate" means the number of basis points, as an annual rate, set out in the attached Schedule A as.the Principal Reserve Fund Rate. "Reimbursement Agreement" or "Agreement' means this Reimbursement Agreement between the Borrower and Fannie Mae, as this Agreement may be amended, supplemented or restated from time to time. "Security Instrument" means the Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, dated as of August 1, 2003, together with all riders and exhibits, securing the Note and the obligations of the Borrower to the Credit Provider under the Credit Facility Documents, executed by the Borrower with respect to the Mortgaged Property, as it may be amended, supplemented or restated from time to time, or any mortgage, deed of trust or deed to secure debt executed in substitution therefor, as such substitute mortgage, deed of trust or deed to secure debt may be amended, supplemented or restated from time to time. Reimbursement Agreement 6 (Broadway LaNel Project) "Servicing Agreement" means any agreement with respect to the servicing of the Loan between Fannie Mae and the entity designated from time to time by Fannie Mae as the Loan Servicer, as each such agreement may be amended, supplemented or restated from time to time; provided that the Servicing Agreement may be the DUS Guide made applicable to the Loan by agreement between Fannie Mae and the Loan Servicer. "Servicing Payment Date" means the Business Day which is two Business Days prior to the date any payment is due on the Note. "State" means the State of Minnesota. "Strike Rate" means six percent (6.00%). "Subsequent Hedge" has the meaning given to that term in Section 6.1 of this Agreement. "Term" has the meaning given to that term in Section 13.8. "Termination Date" means, subject to Section 7(d) of the Credit Enhancement Instrument, the date on which the Credit Enhancement Instrument terminates. "Transaction Documents" means the Bond Documents, the Loan Documents, the Hedge Documents and the Credit Facility Documents. "Underwriting Rate" means the percentage, as an annual rate, set out in the attached Schedule A as the Underwriting Rate. "Withdrawal" means any withdrawal of funds from the Principal Reserve Fund under the Indenture. SECTION 1.2 Rules of Construction. The rules of construction set forth in Section 1.2 of the Indenture shall apply to this Agreement in their entirety, except that: (a) in applying such rules, the term "Agreement' shall be substituted for the term "Indenture;" and (b) to the extent specifically provided in this Agreement or in any other Transaction Document, a "request," "order," "demand," "application," "appointment," "notice," "statement," "certificate," "consent," "direction" or similar action must be: (1) inscribed on a tangible medium or retrievable in perceivable form and stored in electronic (that is, technology having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities) or other medium; and (2) signed or authenticated as provided in such Transaction Document. Reimbursement Agreement (Broadway LaNel Project) ARTICLE II CREDIT ENHANCEMENT INSTRUMENT; REIMBURSEMENT SECTION 2.1. Agreement to Execute and Deliver Credit Enhancement Instrument. Subject to the terms and conditions of this Agreement, Fannie Mae agrees to issue and deliver the Credit Enhancement Instrument on the Closing Date for the account of the Borrower in favor of the Trustee in the Amount Available and expiring on the Expiration Date. The Credit Enhancement Instrument will be delivered to provide credit enhancement and liquidity support for the Bonds. SECTION 2.2. Borrower's Reimbursement Obligations: Advances. The Borrower unconditionally agrees, without notice or demand, to pay to the Loan Servicer for remittance to Fannie Mae the amounts set out in this Section. (a) Principal Advances and Interest Advances. The Borrower shall reimburse the amount of each Principal Advance and Interest Advance on the date on which Fannie Mae makes such Advance by no later than 2:00 p.m. Eastern time. When, as and to the extent Fannie Mae receives reimbursement on account of a Principal Advance and Interest Advance with the proceeds of any corresponding payment made by the Borrower on the Loan or under the Financing Agreement, the Borrower shall be deemed to have reimbursed Fannie Mae to the same extent on account of such Principal Advance or Interest Advance. (b) Pledged Bonds Advances. The Borrower shall reimburse the amount of any Pledged Bonds Advance on the first to occur of (i) the effective date of any Alternate Credit Facility, (ii) the date on which the Pledged Bonds purchased with such Advance are remarketed by the Remarketing Agent and the proceeds of the remarketing are delivered to the Trustee or the Tender Agent, (iii) the date on which the Pledged Bonds purchased with such amounts are redeemed or otherwise paid in full and cancelled, (iv) the date on which the Credit Enhancement Instrument terminates as a liquidity facility for the Bonds, (v) the date on which the Credit Enhancement Instrument terminates in full, and (vi) the date which is one year following the date such Pledged Bonds Advance was made. The Borrower shall make such payment by no later than 2:00 p.m. Eastern time on the date when due. The amount the Borrower is required to pay under this subsection shall be reduced as and to the extent that remarketing proceeds of the related Pledged Bonds become available and are applied to such reimbursement. SECTION 2.3. Borrower's Reimbursement Obligations: Withdrawals from the Principal Reserve Fund. The Borrower unconditionally agrees, without notice or demand, to pay to the Loan Servicer for remittance to Trustee for deposit into the Principal Reserve Fund the amounts set out in this Section. Each such payment shall be paid by no later than 2:00 p.m. Eastern time on the day when due. (a) Withdrawals other than for Pledged Bonds. The Borrower shall replenish the amount of each Withdrawal (other than a Withdrawal relating to Pledged Bonds) on the date on which the Trustee makes such Withdrawal. Reimbursement Agreement 8 (Broadway LaNel Project) (b) Withdrawals Relating to Pledged Bonds. The Borrower shall replenish the amount of each Withdrawal used to reimburse Fannie Mae for any Pledged Bonds Advance on the first to occur of (i) the effective date of any Alternate Credit Facility, (ii) the date on which the Pledged Bonds purchased with such amounts are remarketed by the Remarketing Agent and the proceeds of the remarketing are delivered to the Trustee or the Tender Agent, (iii) the date on which the Pledged Bonds purchased with such amounts are redeemed or otherwise paid in full and cancelled, (iv) the date on which the Credit Enhancement Instrument terminates, or terminates earlier as a liquidity facility for the Bonds and (v) the date which is one year following such Advance. The amount the Borrower is required to pay under this subsection shall be reduced as and to the extent that (i) remarketing proceeds of the related Pledged Bonds become available and are applied to such replenishment or (ii) such Pledged Bonds are redeemed or otherwise paid in full and cancelled. SECTION 2.4 Prepayment of Loan: Substitution of Alternate Credit Facility or Termination of Credit Enhancement Instrument Facility. (a) No Prepayment, Substitution or Termination During Certain Periods. The Borrower may not prepay the Loan, substitute an Alternate Credit Facility for the Credit Enhancement Instrument or terminate Fannie Mae's credit enhancement and liquidity for the Bonds unless on or before the date of such prepayment, substitution or termination the Borrower prepays or legally defeases all other loans which are both (i) secured by a lien on the Mortgaged Property and (ii) either owned by Fannie Mae or guaranteed or otherwise credit enhanced by Fannie Mae. Nothing in this Agreement shall be interpreted to mean that Fannie Mae consents to the prepayment or legal defeasance of any such other loan other than in accordance with the express terms of such loan. (b) Prepayment of Loan Otherwise Allowed. Except as provided in subsection (a), the Borrower may elect to prepay the Loan in accordance with the Note; provided, however that prior to or simultaneously with such prepayment the Borrower pays in full all amounts owing to Fannie Mae or the Loan Servicer under this Agreement (including (i) any reimbursement to Fannie Mae pursuant to Section 2.3 on account of a mandatory or other tender of Bonds occurring as a part of or at the same time as such prepayment and (ii) any Termination Fee) or under any of the other Borrower Documents. (c) Substitution and Termination Otherwise Allowed. Except as provided in subsection (a), the Borrower may elect to substitute an Alternate Credit Facility for the Credit Enhancement Instrument or terminate Fannie Mae's credit enhancement and liquidity for the Bonds; provided, however that prior to or simultaneously with the effectiveness of any Alternate Credit Facility or termination: (1) Fannie Mae is replaced or terminated as the provider of both credit enhancement and liquidity support for the Bonds; (2) all amounts owing to Fannie Mae or the Loan Servicer under this Agreement (including (i) any reimbursement to Fannie Mae pursuant to Section 2.3 on Reimbursement Agreement 9 (Broadway LaNel Project) account of a mandatory or other tender of Bonds occurring as a part of or at the same time as the termination or substitution and (ii) any Termination Fee) or under any of the other Borrower Documents are paid in full; and (3) if an Alternate Credit Facility is to be provided, the provision of the Alternate Credit Facility will result in a rating on the Bonds by each Rating Agency in the highest short-term rating category and one of the three highest long-term rating categories, or both, as applicable for the Mode then in effect. SECTION 2.5 Adiustments of Interest Rate Modes and Reset Rates on the Bonds. The Borrower shall not adjust the rate on the Bonds from one Mode to another Mode or maintain the Bonds in the Reset Mode at the expiration of a Reset Period without Fannie Mae's prior written consent. Any preliminary consent given by Fannie Mae to a change in Mode may be subject to the satisfaction of one or more conditions precedent as Fannie Mae may determine. SECTION 2.6 SECURITY AGREEMENT: Pledge of Rights to Certain Funds and Investments. To secure the Borrower's obligations under this Agreement, to the extent that the Borrower retains an interest in and to any funds or accounts or investments of funds and accounts now or hereafter held (i) by the Trustee under the Indenture as security for the payment of the Bonds, including, without limitation, the Principal Reserve Fund, any and all loan funds, construction funds, escrow funds, revenue funds, debt service funds, reserve funds, redemption funds and other funds and securities and other instruments comprising investments of any of the foregoing and interest and other income derived from any of the foregoing held as security for the payment of the Bonds, and (ii) by the Loan Servicer with respect to payments under any of the Loan Documents, the Borrower hereby grants to Fannie Mae a security interest in such interests, funds, accounts and investments as they may now or from time to time after the date of this Agreement exist. Such grant shall be subject only to the rights of the Trustee under the Indenture. The Borrower agrees to defend Fannie Mae's rights and security interests created by this Section against the claims and demands of all persons. In addition to its other rights and remedies under this Agreement and the other Borrower Documents, Fannie Mae shall have all the rights and remedies of a secured party under the Uniform Commercial Code of the State or other applicable law with respect to the security interests created by this Section. Fannie Mae's rights under this Section are in addition to, and not in lieu of, its rights and remedies described elsewhere in this Agreement or under the Security Instrument. ARTICLE III LOAN SERVICING SECTION 3.1 Loan Servicing. As set out in the Assignment, the Borrower agrees that Fannie Mae has the sole and exclusive right to arrange for the servicing of the Loan and the Assigned Documents. The Borrower acknowledges that Fannie Mae has appointed the Loan Servicer to perform these functions as well as to service the obligations of the Borrower under this Agreement and the other Credit Facility Documents. Reimbursement Agreement 1() (Broadway LaNel Project) SECTION 3.2 Payments Directly to Loan Servicer. The Borrower shall make all payments and prepayments of the principal of and interest and any premium on the Loan (whether regularly scheduled payments, an optional prepayment or otherwise), all other amounts payable under any of the Loan Documents and all other fees, costs and expenses payable by the Borrower under the Financing Agreement, directly to the Loan Servicer in accordance with Section 3.3 for remittance to Fannie Mae or to the Trustee for remittance to the Person to whom owed. SECTION 3.3 Payments on Servicing Payment Dates. The Borrower shall pay all principal of and interest on the Loan (whether regularly scheduled payments, an optional prepayment or otherwise), any prepayment premium under the Note and all regularly scheduled payments of fees, costs and expenses set out in Section 2.5 of the Financing Agreement to the Loan Servicer two Business Days prior to the date such amounts are otherwise payable under the applicable Borrower Document (each, a "Servicing Payment Date"). For the purpose of calculating the amount of interest due on the Note and the amount of fees due under the Financing Agreement, the fact that the Borrower is required to make the payment on a Servicing Payment Date (rather than on the date such amounts are otherwise payable) will be ignored. SECTION 3.4 Mortgage Interest During Weekly Variable Rate. If the interest rate on the Bonds is a Weekly Variable Rate, the rate at which interest accrues on the Note is reset on the same day of each week. However, the end of a Note Interest Period may fall on any day of the week. Accordingly, for some Note Interest Periods, the Weekly Variable Rate in effect for the last few days of the Note Interest Period will not be known on the day the Loan Servicer invoices the Borrower for payments of Mortgage Interest. To provide for the orderly invoicing and payment of Mortgage Interest, the Loan Servicer will invoice the Borrower, and the Borrower will pay the amount invoiced by the Loan Servicer, as the combination of (i) Mortgage Interest accrued for those days of the Note Interest Period for which the Loan Servicer knows the rate at which Mortgage Interest accrues, plus (ii) for the remaining days of the Note Interest Period interest at two percentage points in excess of the Weekly Variable Rate in effect for the last week of such Note Interest Period for which the rate is known at the time of the invoice. If the amount invoiced by the Loan Servicer and paid by the Borrower is greater than the Mortgage Interest which actually accrued, the excess amount will be retained by the Loan Servicer and applied to the next payment of Mortgage Interest (or, if all of the Bonds have been repaid in full, returned to the Borrower). If the amount paid is less than the accrued Mortgage Interest, the Borrower will pay such deficiency within one Business Day of receipt of a restated invoice for Mortgage Interest for that Note Interest Period. ARTICLE IV FEES, COSTS AND EXPENSES SECTION 4.1 Facility Fee. The Borrower shall pay to Fannie Mae a facility fee ("Facility Fee") from (and including) the Closing Date to (and including) the first to occur of the Expiration Date and the Termination Date. The Facility Fee shall be payable on the Servicing Payment Date of each Note Interest Period and on the Termination Date. As each Servicing Payment Date is two Business Days prior to the end of the Note Interest Period in which it falls, Reimbursement Agreement 11 (Broadway LaNel Project) the Facility Fee will be a combination of the Facility Fee which has accrued from the first day of the Note Interest Period to the Servicing Payment Date and the Facility Fee which will accrue from the Servicing Payment Date through the end of the Note Interest Period. All payments of the Facility Fee are non-refundable. The Facility Fee shall be calculated on an annualized basis on the outstanding principal balance of the Loan and, to the extent applicable, the amount on deposit in the Principal Reserve Fund as at the end of the prior Note Interest Period. During the Weekly Variable Rate Period, the Facility Fee shall be computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as applicable. During any other period, the Facility Fee shall be computed on the basis of a 360 -day year comprised of twelve 30 -day months. The Facility Fee shall be the sum of the following: (a) Credit Enhancement Fee. The Credit Enhancement Rate multiplied by the result of subtracting (i) the aggregate principal amount (without regard to earnings) on deposit in the Principal Reserve Fund (but not in excess of the amount then scheduled to be on deposit in the Principal Reserve Fund in accordance with the attached Schedule C), from (ii) the unpaid principal balance of the Loan. (b) Principal Reserve Fund Fee. The Principal Reserve Fund Rate multiplied by the aggregate principal amount (without regard to earnings) on deposit in the Principal Reserve Fund (but not in excess of the amount then scheduled to be on deposit in the Principal Reserve Fund in accordance with the attached Schedule Q. (c) Loan Servicer's Fee. The Loan Servicer's Rate multiplied by the result of subtracting (i) the aggregate principal amount (without regard to earnings) on deposit in the Principal Reserve Fund (but not in excess of the amount then scheduled to be on deposit in the Principal Reserve Fund in accordance with the attached Schedule C) from (ii) the unpaid principal balance of the Loan. (d) Liquidity Fee. If a Reset Rate for a Reset Period with an original term of five years or less or the Weekly Variable Rate is in effect, the Liquidity Rate multiplied by the unpaid principal balance of the Loan. If a Reset Rate for a Reset Period with an original term of more than five years or a Fixed Rate is in effect, there is no Liquidity Fee for such period. SECTION 4.2 Activity Fee. The Borrower shall pay an activity fee ("Activity Fee") to Fannie Mae at the rates per annum on the unreimbursed amount of each Advance and the unreplenished amount of each Withdrawal as set out in this Section. The Activity Fee shall accrue on the basis of, during the Weekly Variable Rate Period, a 365- or 366 -day year, as applicable, for the actual number of days elapsed and during any Reset Period and the Fixed Rate Period, a year of 360 days of twelve 30 -day months. The Activity Fee shall accrue daily for the period from (and including) the day Fannie Mae makes an Advance or the Trustee makes the Withdrawal, as the case may be, to (but excluding) the day the reimbursement or replenishment is, or is deemed to be, fully paid. The Activity Fee shall be calculated and paid as follows: (a) Activity Fee for Principal Advance and Interest Advance and Withdrawals. The Activity Fee for any unreimbursed Principal Advance or Interest Advance and any unreplenished Withdrawal (other than a Withdrawal made to reimburse Fannie Mae for a Reimbursement Agreement 12 (Broadway LaNel Project) Pledged Bonds Advance) will be the Prime Rate plus two percentage points per annum. Accrued Activity Fee shall be due and payable from time to time on demand by Fannie Mae or the Loan Servicer, and without demand, shall be paid upon the reimbursement of any such Advance or the replenishment of any such Withdrawal, as applicable. (b) Activity Fee For Pledged Bonds Advance or Withdrawal. The Activity Fee for an unreimbursed Pledged Bonds Advance or an unreplenished Withdrawal made to reimburse Fannie Mae on account of a Pledged Bonds Advance will be the Prime Rate per annum. Such Activity Fee shall be due and payable on each Servicing Payment Date for the corresponding Note Interest Period. The Borrower shall be entitled to a credit against its obligation to pay the Activity Fee under this subsection in the amount of the Facility Fee (but excluding the Loan Servicer's Rate portion of the Facility Fee) actually paid by the Borrower for the corresponding period multiplied by a fraction the numerator of which is the daily average of the unreimbursed amount of the Pledged Bonds Advance (or, as the case may be, the unreplenished Withdrawal) during such accrual period and the denominator of which is the daily average of the unpaid principal balance of the Loan for the same period. Should the Borrower fail to reimburse the amount of any Pledged Bonds Advance when due in accordance with Section 2.2(b) or fail to replenish the amount of any Withdrawal made to reimburse Fannie Mae on account of a Pledged Bonds Advance when due in accordance with Section 2.3(b), then the Activity Fee will be the Prime Rate plus two percentage points per annum from such due date to the date such amounts are paid in full. As used in this Section, the term "Prime Rate" means an annual rate of interest equal to the prime rate of interest as reported from day to day in The Wall Street Journal (notwithstanding that such publication shows the prime rate of interest for the preceding Business Day) as the base rate on corporate loans posted by at least 75 percent of the nation's 30 largest banks, or, if such rate is no longer available, then the base rate or prime rate of interest of any "Money Center" bank designated from time to time by Fannie Mae, in its discretion. Any change in the Activity Rate due to a change in the prime rate of interest as reported in The Wall Street Journal shall take effect on the date of publication. SECTION 4.3 Transfer Fee. Upon the transfer of the Credit Enhancement Instrument to any successor Trustee under the Indenture, the Borrower shall pay to Fannie Mae the fee then customarily charged by Fannie Mae, but not exceeding $1,500, for transfers of its transferable credit enhancement instruments. SECTION 4.4 Termination Fee. (a)Termination Fee; Termination Fee Percentages. The Borrower shall pay a Termination Fee to the Loan Servicer for remittance to Fannie Mae if on or prior to the last day of the tenth Loan Year: (1) the Loan is prepaid (whether by a voluntary or a mandatory prepayment under the Note) in whole or in part; (2) the Borrower substitutes an Alternate Credit Facility for the Credit Enhancement Instrument; or Reimbursement Agreement 13 (Broadway LaNel Project) (3) the Borrower terminates Fannie Mae's credit enhancement and liquidity support for the Bonds. The Termination Fee shall be an amount determined by multiplying the principal amount of the Loan being prepaid, or, in the case of a substitution or termination, the principal balance of the Loan, times the percentage ("Termination Fee Percentage") applicable to the Loan Year in which the prepayment is made or substitution or termination occurs. The Termination Fee Percentages are set out in the Termination Fee Table contained in Schedule A. (b) Loan Year. Each Loan Year is a 12 month period beginning on the Closing Date or an anniversary of the Closing Date and ending the day before the next anniversary of the Closing Date. The first Loan Year begins on the Closing Date. (c) Termination Fee Not Payable. No Termination Fee shall be payable on account of a prepayment of the Loan: (1) to the extent the prepayment is made from insurance proceeds or awards or proceeds of condemnation under the Security Instrument; (2) to the extent the prepayment is made from proceeds of the Principal Reserve Fund transferred for a mandatory redemption of any Bonds to the extent that the amount transferred from the Principal Reserve Fund does not exceed (i) the aggregate of all deposits scheduled to have been made to the Principal Reserve Fund to the date of bond redemption according to Section 7.1 of this Agreement, less (ii) all amounts previously withdrawn from the Principal Reserve Fund associated with the mandatory redemption of Bonds on any prior dates; or (3) if, pursuant to Section 4.6, the Borrower substitutes an Alternate Credit Facility for the Credit Enhancement Instrument or terminates Fannie Mae's credit enhancement and liquidity support for the Bonds. SECTION 4.5 Costs. Fees and Expenses. In addition to the Borrower's obligations set forth in the Loan Documents, the Borrower agrees absolutely and unconditionally to pay, or cause to be paid, all of the following: (a) all fees, costs, charges and expenses (including the reasonable fees and expenses of attorneys, accountants and other experts) which Fannie Mae or the Loan Servicer may pay or incur in connection with any payment under the Credit Enhancement Instrument, including payments of any fees and charges in connection with any accounts established to facilitate payments under the Credit Enhancement Instrument, or the performance of Fannie Mae's obligations under the Credit Enhancement Instrument; (b) all fees, costs, charges and expenses (including the fees and expenses of attorneys, accountants and other experts) incurred by Fannie Mae or the Loan Servicer in connection with the administration or enforcement of or preservation of rights or remedies under this Agreement Reimbursement Agreement 14 (Broadway LaNel Project) or any of the Transaction Documents or in connection with the foreclosure upon, sale of or other disposition of any security granted pursuant to the Transaction Documents; (c) all payments or advances made by Fannie Mae or the Loan Servicer on behalf of the Borrower pursuant to any of the Transaction Documents; (d) all expenses incurred in connection with the execution and delivery of the Credit Enhancement Instrument, the sale of the Bonds and the preparation and review of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, including Rating Agency fees from which ratings were requested and received, any tax or governmental charge imposed in connection with the execution and delivery of the Credit Enhancement Instrument and the reasonable fees and disbursements of Fannie Mae's and the Loan Servicer's counsel and accountants, including fees and expenses relating to any (i) amendments, consents or waivers to this Agreement or any of the Transaction Documents (whether or not any such amendments, consents or waivers are entered into), (ii) requests to evaluate any substitute or additional collateral, (iii) requests by the Borrower for Fannie Mae to consider providing credit enhancement for any other bond issue or (iv) any proposed Hedge arrangement or proposed investment under the Indenture; and (e) all documentary stamp, recording, transfer, mortgage, intangible, filing or other taxes or fees and any and all liabilities with respect to, or resulting therefrom which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of or filing of record, recordation, release or discharge of, this Agreement or any Transaction Document, including all interest, fines and penalties for the failure to timely pay such amounts. The Borrower shall pay all such amounts in accordance with Section 5.1 on demand of Fannie Mae or the Loan Servicer. Any such payment will be due not later than five Business Days after demand. To the extent any such amount is a reimbursement to Fannie Mae or the Loan Servicer of an amount actually expended by either of them, the Borrower shall pay interest on such amount from, and including, the day such sum was expended by Fannie Mae or the Loan Servicer to, but excluding, the day such amount is reimbursed in full at an annual rate and otherwise as calculated in Section 5.5. SECTION 4.6 Yield Equivalency. (a) If. (1) after the date of this Agreement, there occurs any (i) new law, regulation, guideline or directive, (ii) change in applicable law, regulation, guideline or directive, or (iii) interpretation or change in interpretation of any of the foregoing by any court, central bank, administrative or governmental authority charged with the administration thereof (whether or not having the force of law) ("Regulatory Change"); and Reimbursement Agreement 15 (Broadway LaNel Project) (2) the Regulatory Change imposes, modifies or deems applicable any condition in connection with any of the Credit Facility Arrangements, including any reserve, deposit, insurance premium, assessment, fee, capital requirement, tax or withholding (other than any tax measured by or based upon the overall net income or other measure of income including, without limitation, alternative minimum tax, of Fannie Mae) or similar requirement applicable to any of the Credit Facility Arrangements; and (3) the effect of the Regulatory Change either increases the cost to Fannie Mae of extending, issuing or maintaining any of the Credit Facility Arrangements, or reduces any amount (or the effective return on any amount) received or receivable by Fannie Mae in connection with the Credit Facility Arrangements, in each case by an amount which Fannie Mae in its sole judgment deems material; then, upon written demand by Fannie Mae, the Borrower shall promptly pay to Fannie Mae, from time to time as specified by Fannie Mae, additional amounts which shall be sufficient to compensate Fannie Mae for all such increased costs or reductions in yield; provided, however, that the Borrower need not make such payment if it terminates Fannie Mae's credit enhancement and liquidity for the Bonds pursuant to Section 2.4 within three months after receipt of such notice from Fannie Mae. (b) Fannie Mae shall submit to the Borrower, at or prior to the making of each such demand, a certificate setting forth in reasonable detail such increased costs or yield reductions incurred by Fannie Mae as a result of any of the foregoing, which certificate shall be conclusive, absent manifest error, as to the amount thereof. In calculating such additional amounts of increase in cost or reduction in yield, Fannie Mae shall allocate the aggregate of such cost increases or yield reductions resulting from such event in a nondiscriminatory manner among counterparties having obligations to Fannie Mae similar to those of the Borrower. ARTICLE V PAYMENTS SECTION 5.1 Payments to Loan Servicer. The Borrower shall make all payments due under this Agreement to the Loan Servicer as required by Section 3.2 for remittance to Fannie Mae or to the Trustee for remittance to the Person to whom such payment is due, in lawful currency of the United States of America by wire transfer of immediately available funds to such bank and account as the Loan Servicer shall require from time to time. The Borrower shall make all such payments before 2:00 p.m. Eastern time on the date when due. If any payment is received on a Business Day after 2:00 p.m. Eastern time, such payment will be treated as received at 9:00 a.m. Eastern time on the next Business Day, and such extension of time will be included in the computation of interest, if any, and fees. SECTION 5.2 Late Charee. If any payment of the principal of or interest or any premium on the Note is not received by the Loan Servicer on the Servicing Payment Date and by the hour of the day when due, as required by this Agreement, the Borrower shall pay to the Loan Reimbursement Agreement 16 (Broadway LaNel Project) Servicer, immediately and without demand by the Loan Servicer, a late charge equal to five percent of the amount not so received. The Borrower acknowledges that its failure to make timely payments will cause the Loan Servicer and Fannie Mae to incur additional expenses in servicing and processing such payments, and that it is extremely difficult and impractical to determine those additional expenses. The Borrower agrees that the late charge payable pursuant to this Section represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Agreement, of the additional expenses the Loan Servicer and Fannie Mae will incur by reason of such late payment. The late charge is payable in addition to, and not in lieu of, any Activity Fee. SECTION 5.3 Payments on Business Days. In any case where the due date of any payment or the expiration of any time period falls on a day which is not a Business Day, then such payment will be due on, and such period will expire on, the next Business Day, except that interest, if any, and fees shall continue to accrue for the period after such stated date to the next Business Day. SECTION 5.4 Application of Payments. Payments made by the Borrower under this Agreement shall be applied to amounts then due and payable in any manner and in any order determined by Fannie Mae. The Borrower agrees that neither (i) Fannie Mae's or the Loan Servicer's acceptance of a payment from the Borrower in an amount that is less than all amounts then due and payable, nor (ii) Fannie Mae's or the Loan Servicer's application of such payment, shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction. SECTION 5.5 Interest on Amounts Not Paid When Due. Except as otherwise set out in Sections 4.2 or 4.5 and to the extent permitted by applicable law, the Borrower shall pay interest on any amount not paid when due under this Agreement at an annual rate equal to the Prime Rate (as that term is defined in Section 4.2) plus two percentage points from, and including, the day such amount is due to, but excluding, the day such amount is paid in full. Interest will be calculated on the basis of a 360 -day year and the actual number of days elapsed. SECTION 5.6 Risk of Loss. The Borrower assumes all risk of loss caused by any default under, or any change in value of, any investment in any Fund or Account under the Indenture or any account under the Hedge Security Agreement or the Hedge Reserve Escrow Security Agreement, without regard to the reason for loss. Should any such loss arise, the Borrower shall replenish the amount of the loss by payment to the Loan Servicer within 30 days after demand by the Loan Servicer or the Trustee. ARTICLE VI INTEREST RATE PROTECTION SECTION 6.1 Hedge. The Borrower shall acquire and maintain or replace, as appropriate, an interest rate cap ("Hedge") at all times during each Weekly Variable Rate Period to protect against fluctuations in the interest rate on the Loan. The obligation of the Borrower to acquire, maintain and replace Hedges as required by this Article shall not be diminished or Reimbursement Agreement 17 (Broadway LaNel Project) otherwise affected by any shortfall between the balance of the Hedge Reserve Escrow Account pursuant to Section 6.4 and the cost of any Hedge. Each Hedge must satisfy the following requirements: (a) Each Hedge must have an original term of seven years ("Seven Year Hedge") or five years ("Five Year Hedge"). (b) The notional amount of any Hedge must be the principal amount of the Bonds Outstanding, less the amount (if any) in the Principal Reserve Fund (without regard to earnings), as of the effective date of the Hedge. (c) If the Hedge ("Subsequent Hedge") replaces an expiring Hedge or a Hedge being terminated prior to its date of expiration, the Subsequent Hedge must be effective not later than the day following the last day the expiring or terminating Hedge remains in force and terminate on the earliest of (i) the last day of the seven- or five-year term, (ii) the date on which the Credit Enhancement Instrument terminates and (iii) the maturity date of the Bonds. Notwithstanding the above, but subject to Section 6.3, if a Hedge unexpectedly and unavoidably terminates on a date other than its scheduled expiration date, the Borrower shall, within ten days of such termination, obtain a new Hedge satisfying the requirements of this Section. (d) The Hedge must provide for monthly settlement on the 15th day of each month. (e) The Counterparty must pay a floating rate amount on the notional amount of the Hedge to the extent that the BMA Index Rate exceeds the Hedge strike rate on average over the monthly period. The Hedge strike rate for any Hedge must not be higher than the Strike Rate. (f) The Hedge must provide that if The Bond Market Association Municipal Swap Index is no longer published, the Counterparty must determine an appropriate index as a substitute for The Bond Market Association Municipal Swap Index. The substitute index must provide a rate of interest equivalent to the prevailing rate of interest borne by bonds that are (i) rated in the highest short-term rating category by Moody's or S&P, (ii) issued by not less than five "high grade" component issuers selected by the Counterparty which include, without limitation, issuers of general obligation bonds, (iii) subject to tender for purchase on not more than seven days notice and (iv) the interest on which is variable, determined on a weekly basis, excludable from gross income for federal income tax purposes, and not subject to a "minimum tax" or similar tax unless all tax-exempt bonds are subject to such tax. Each prospective provider of a Hedge ("Counterparty") must meet the minimum requirements for hedge counterparties set out in the DUS Guide and must be approved by Fannie Mae in advance in writing. Each Hedge must be provided by a Counterparty, evidenced and secured by Hedge Documents and written on such terms and conditions as are acceptable to Fannie Mae. Before seeking bids for a Hedge, the Borrower shall obtain Fannie Mae's written approval of the potential Counterparties, the terms and conditions on which bids for the Hedge will be solicited and the Hedge Documents to be entered into. Reimbursement Agreement 18 (Broadway LaNel Project) SECTION 6.2 Hedge Security Agreement; Delivery of Hedge Payments. The Borrower shall assign each Hedge in effect from time to time to Fannie Mae pursuant to a Hedge Security Agreement. Each Hedge Security Agreement must be in form and content acceptable to Fannie Mae. The Hedge Documents and the Hedge Security Agreement shall direct the Counterparty to make any payments directly to the Loan Servicer to be held and disbursed in accordance with the applicable Hedge Security Agreement. SECTION 6.3 Performance Under Hedge Documents. The Borrower shall timely perform all of its obligations under each Hedge Document in accordance with its terms. So long as the Borrower is required to maintain a Hedge, the Borrower shall not terminate, transfer or consent to any termination or transfer of any Hedge without Fannie Mae's prior written consent; provided, however, that when a Subsequent Hedge meeting the requirements of Section 6.1 becomes effective, the previous Hedge may be released from the lien granted to Fannie Mae. The release date may not be earlier than the effective date of the Subsequent Hedge. The Borrower shall not exercise any right or remedy under any Hedge Document without Fannie Mae's prior written consent and shall exercise its rights and remedies under the Hedge Documents as directed by Fannie Mae in writing. SECTION 6.4 Hedge Reserve Escrow Account Deposits. During any period in which a Five Year Hedge is in effect, the Borrower shall make monthly deposits ("Monthly Deposit") to the Loan Servicer to be held under the Hedge Reserve Escrow Account Security Agreement to provide moneys for the purchase of a Subsequent Hedge. Notwithstanding the first sentence, the Borrower shall not be obligated to make Monthly Deposits if a Five Year Hedge is in effect which expires no earlier than the Maturity Date. The Borrower shall make the Monthly Deposits on each Servicing Payment Date during the term of a Five Year Hedge. The first deposit will be due on the Servicing Payment Date in the next month after the effective date of such Five Year Hedge. The amount of each deposit (as adjusted from time to time, "Monthly Deposit Amount") shall be determined in accordance with this Section. (a) Initial Monthly Deposit Amount. Initially, the Monthly Deposit Amount will be 1/60th of the purchase price of the Five Year Hedge then coming into effect, until changed, if at all, by the recalculation of the Monthly Deposit Amount on any Change Date as described in subsection (b). (b) Change Dates. The Monthly Deposit Amount will be subject to adjustment each calendar year. The date on which any adjustment in the Monthly Deposit Amount becomes effective is called a "Change Date". The Change Date will fall in the same month each year as the month in which the related Five Year Hedge became effective. The Change Date will be the Servicing Payment Date of that month. The first Change Date related to a Five Year Hedge will occur in the next calendar year after such Hedge became effective. Subsequent Change Dates will fall on the Servicing Payment Date for that same month each following calendar year. Whenever a Subsequent Hedge which will be a Five Year Hedge is purchased, the Change Date will change. The new Change Date will fall on the Servicing Payment Date for the month in which the new Five Year Hedge became effective, commencing in the next calendar year after such Hedge became effective. Subsequent Change Dates will fall on the Servicing Payment Date Reimbursement Agreement 19 (Broadway LaNel Project) for that same month each following calendar year unless again changed in accordance with this subsection. (c) Determination of New Monthly Deposit Amount. One month before each Change Date, the Loan Servicer shall determine the cost of the next Subsequent Hedge, based on then existing market conditions, as if the next Subsequent Hedge were to be purchased at that time ("Trial Hedge Cost"). The Loan Servicer will then compare (i) the Trial Hedge Cost with (ii) the product of multiplying the Monthly Deposit Amount then in effect times 60. If the Trial Hedge Cost is not the higher number, no adjustment to the Monthly Deposit Amount will be made. If the Trial Hedge Cost is the higher number, the Loan Servicer shall adjust the Monthly Deposit Amount to be effective from (and including) the Change Date then about to occur ("Next Change Date"). The new Monthly Deposit Amount will be that amount which shall cause the deposit balance of the Hedge Reserve Escrow Account, at the expiration date of the then outstanding Hedge, to equal the Trial Hedge Cost, taking into consideration the balance of the Hedge Reserve Escrow Account immediately before the Next Change Date and the number of deposits remaining to be made over the months from (and including) the Next Change Date to the expiration date of the then outstanding Hedge. The Loan Servicer shall make the calculation on the assumption that the Borrower will make each monthly deposit in the full amount when due and no further adjustment to the Monthly Deposit Amount will be made after the adjustment taking effect on the Next Change Date. In calculating the new Monthly Deposit Amount, the Loan Servicer shall ignore any investment income on funds held under the Hedge Reserve Escrow Account Security Agreement. (d) Determination of Monthly Deposit Amount if Monthly Deposits Are Instituted after Period When no Monthly Deposits Were Required.. If the Borrower acquires a Five Year Hedge which commences after the expiration or termination of a Seven Year Hedge, the Borrower will again be required to make Monthly Deposits in accordance with this Section 6.4. SECTION 6.5 Fannie Mae Right to Convert to Reset Rate, Fixed Rate. (a) Right to Convert. At least 60 days prior to the date on which a Hedge expires, if the Bonds are in the Weekly Variable Rate Mode, the Borrower shall give notice and provide evidence satisfactory to Fannie Mae and the Loan Servicer that the Borrower will either secure a Subsequent Hedge or adjust the rate on the Bonds to a Reset Rate or the Fixed Rate, in each case in accordance with Sections 2.5 and 6.1 and the requirements of the Indenture. If the Borrower elects to secure a Subsequent Hedge, then (i) at least 30 days prior to the expiration of the existing Hedge, the Borrower shall notify Fannie Mae of the persons who will bid to be the Counterparty and the term and the terms of the Subsequent Hedge, and (ii) at least seven Business Days prior to the expiration of the Hedge, the Borrower shall provide Fannie Mae with evidence that the Subsequent Hedge has been obtained in accordance with the requirements of Section 6.1. (b) Reversion to Weekly Variable Rate Mode. If for any reason a proposed change in Mode or an adjustment from one Reset Rate to another Reset Rate fails to occur and the interest rate on the Bonds automatically reverts to the Weekly Variable Rate pursuant to the Reimbursement Agreement 20 (Broadway LaNel Project) Indenture, the Borrower shall either: (i) within ten days of such reversion, purchase a Subsequent Hedge which complies with the requirements of Section 6.1 or (ii) subject to Section 2.5, adjust the interest rate on the Bonds to a Fixed Rate or a Reset Rate on the next Interest Payment Date on the Bonds. (c) Further Right to Adjust. If the Borrower fails to satisfy any of the requirements of this Section 6.5 within the designated time period, Fannie Mae shall have the right, but not the obligation, to direct the Trustee on behalf of the Borrower to adjust the interest rate on the Bonds to a Reset Rate or a Fixed Rate or adjust or maintain the interest rate on the Bonds at the Weekly Variable Rate. No exercise, failure to exercise or revocation of any exercise of the foregoing right by Fannie Mae shall be, or be deemed to be, a waiver of any right of Fannie Mae under this Agreement, including the right to declare an Event of Default because of the Borrower's failure to comply with any of the requirements of this Article. (d) Power of Attorney. The Borrower hereby appoints Fannie Mae, acting through any officer of Fannie Mae, as the Borrower's attorney-in-fact, with full authority in the place and stead of the Borrower and in the name of the Borrower or otherwise, from time to time in Fannie Mae's discretion, to take any action and to execute any instrument which Fannie Mae may deem necessary or advisable to accomplish the purposes of this Section. The power of attorney established pursuant to this subsection shall be deemed coupled with an interest and shall be irrevocable. ARTICLE VII PRINCIPAL RESERVE FUND SECTION 7.1 Principal Reserve Fund Payments. The Borrower shall pay to the Loan Servicer, for remittance to the Trustee for deposit into the Principal Reserve Fund, the amounts set forth on the attached Schedule C, as such schedule may be amended from time to time. The Borrower's payments shall be due monthly on each Servicing Payment Date, commencing on the first Servicing Payment Date after the Closing Date. SECTION 7.2 Use of Principal Reserve Fund. The Borrower agrees that the amounts on deposit in the Principal Reserve Fund shall be used by the Trustee in any manner directed by Fannie Mae as the Credit Provider pursuant to the Indenture. Upon the adjustment of the interest rate on the Bonds to a Reset Rate or the Fixed Rate, the balance of moneys on deposit in the Principal Reserve Fund shall be used to redeem bonds on the Adjustment Date. SECTION 7.3 Reduction in Principal Reserve Fund Payments. In the event of a partial prepayment of the Loan, Fannie Mae and the Borrower shall amend Schedule C as necessary so that the amount of each scheduled deposit to the Principal Reserve Fund which falls after the effective date of such prepayment shall be reduced by an amount equal to the aggregate amount of such prepayment multiplied by a fraction (i) the numerator of which is the amount of any such scheduled deposit payment and (ii) the denominator of which is the aggregate amount of the then scheduled remaining deposit payments into the Principal Reserve Fund. Schedule C Reimbursement Agreement 21 (Broadway LaNel Project) shall for all purposes of this Agreement be deemed amended from and after the effective date of such prepayment to reflect such reductions. ARTICLE VIII CONDITIONS PRECEDENT TO ISSUANCE AND DELIVERY OF CREDIT ENHANCEMENT INSTRUMENT SECTION 8.1 Receipt of Documents. The obligation of Fannie Mae to issue and deliver the Credit Enhancement Instrument is subject to Fannie Mae or, if Fannie Mae so designates, the Loan Servicer, receiving on or before the Closing Date each of the following documents dated as of the Closing Date except as otherwise agreed, in form and substance satisfactory to Fannie Mae: (a) a copy, certified to be true, accurate and complete by a general partner of the Borrower, of resolutions of the Borrower authorizing the Borrower to execute, deliver and perform the Borrower Documents to which the Borrower is a party and other matters contemplated thereby, and of all other documents evidencing any other necessary action on the part of the Borrower to execute, deliver and perform the Borrower Documents (which certification shall state that such approvals are in full force and effect on the Closing Date); (b) [Reserved] (c) copies, certified to be true, accurate and complete by the Authorized Borrower Representative, of the certificate of limited partnership and Partnership Agreement of the Borrower and any amendments thereto (which certification shall state that such documents, as amended, are in full force and effect on the Closing Date), together with certificates of good standing issued by the Secretary of State of the State; (d) copies, certified to be true, accurate and complete by the Authorized Borrower Representative, of all consents, licenses and approvals necessary for the Borrower to enter into the Borrower Documents and the transactions contemplated by this Agreement and the other Borrower Documents; (e) [Reserved] (f) a certificate of the Borrower confirming that the conditions precedent set forth in the Transaction Documents have been satisfied and that the representations and warranties of the Borrower contained in the other Transaction Documents are true, correct and complete on and as of the Closing Date; (g) opinions of counsel to the Borrower and counsel to the Key Principal each in form and substance satisfactory to Fannie Mae addressing all matters required by Fannie Mae; Reimbursement Agreement 22 (Broadway LaNci Project) (h) fully executed copies of each Transaction Document (other than the Credit Enhancement Instrument), duly executed and delivered by the parties thereto (other than Fannie Mae), each of which shall be in full force and effect; (i) a recent Environmental Report pertaining to the Mortgaged Property, and all related due diligence completed to Fannie Mae's satisfaction; 0) unless waived by Fannie Mae or the Loan Servicer, a survey of the Mortgaged Property meeting the requirements of the DUS Guide; (k) opinions of bond counsel, Remarketing Agent's counsel and Issuer's counsel in form and substance satisfactory to Fannie Mae; (1) certified copies of all consents and authorizations, if any, necessary for the Issuer to execute, deliver and perform its obligations under the Bond Documents and the Loan Documents to which it is a party; (m) certified copies of the Issuer's charter or certificate of incorporation and by-laws, if any, and of the resolution or resolutions of the Issuer authorizing the execution, delivery and performance of its obligations under the Bond Documents and the Loan Documents to which it is a party and certified copies of all other documents evidencing any other official action of the Issuer taken with respect thereto as each is then in effect; (n) a true and correct copy of each rating letter from any rating agency rating the Bonds; (o) the Hedge Documents and the Hedge Security Agreement, containing terms and conditions consistent with this Agreement; (p) such documentation as is necessary to evidence the Permitted Investments to be in place as of the Closing Date; (q) confirmation that the title insurance company is committed to issue the title insurance policy insuring the lien of the Security Instrument in accordance with instructions submitted by Fannie Mae or the Loan Servicer to the title insurance company; (r) the title insurance policies or binders or certificates evidencing the matters referred to in clause q; (s) a Certificate of Insurance (ACORD Form 27), or equivalent in form acceptable to Fannie Mae, naming Fannie Mae as additional insured and originals of or certified copies of all insurance policies; (t) an executed original of the Servicing Agreement; Reimbursement Agreement 23 (Broadway LaNel Project) (u) the completion, filing and recording of UCC Financing Statements relating to, without limitation, the Security Instrument, the Hedge Security Agreement, and the security interest granted pursuant to Section 2.6; and (v) such other documents, instruments, certificates, approvals (and, if requested by Fannie Mae, certified duplicates of executed originals thereof) or opinions as Fannie Mae or the Loan Servicer may request. SECTION 8.2 Facts and Circumstances. The obligation of Fannie Mae to issue and deliver the Credit Enhancement Instrument is further subject to the requirement that each of the following statements is true on the Closing Date: (a) the Borrower has paid, or caused to be paid, Fannie Mae's and the Loan Servicer's fees, costs and expenses which are due and payable in accordance with the Borrower Documents on or before the Closing Date; (b) the title insurance company issuing the policy of title insurance insuring the lien of the Security Instrument has received for filing and/or recording in all applicable jurisdictions (or such filing and/or recording having been provided for in a manner satisfactory to Fannie Mae) all documents, including duly executed and acknowledged copies of the Security Instrument, UCC financing statements and other appropriate instruments, in form and substance satisfactory to Fannie Mae and in proper form for recordation, as may be necessary in the opinion of Fannie Mae to perfect the lien created by the Security Instrument, and the Borrower has paid, or caused to be paid, all taxes, fees and other charges payable in connection with such execution, delivery, recording and filing; (c) no material adverse change has occurred in the financial condition, business or prospects of the Borrower, or in the physical condition, operating performance or value of any of the Mortgaged Property from that shown in the application for the Loan delivered by the Borrower to the Loan Servicer; (d) the Borrower is in compliance with all of the terms and provisions set forth in this Agreement on its part to be observed or performed and the representations and warranties of the Borrower contained in the Certificate of Borrower and in the other Borrower Documents are true and correct on and as of the Closing Date as though made on and as of such date; and (e) no Potential Default or Event of Default under this Agreement has occurred and remains continuing. ARTICLE IX AFFIRMATIVE COVENANTS OF THE BORROWER The Borrower agrees to comply with each of the following continuously during the Term of this Agreement. Reimbursement Agreement 24 (Broadway LaNel Project) SECTION 9.1 Use of Proceeds of the Loan. The Borrower shall use the proceeds of the Loan solely for the purpose of repaying the Prior Loan and causing the current refunding of the Prior Bonds. SECTION 9.2 Compliance with the Borrower Documents. The Borrower shall comply with all the terms and conditions of each Borrower Document and shall use its best efforts to cause the Trustee at all times to comply with the terms of the Bond Documents. The Borrower acknowledges that Fannie Mae is a mortgagee of the Security Instrument and that Fannie Mae has all the rights, privileges and benefits granted to it therein. SECTION 9.3 Access to Records; Discussions With Officers and Accountants. In addition to the applicable requirements of the Security Instrument, the Borrower shall, with reasonable notice and upon the request of Fannie Mae or the Loan Servicer, permit, during normal business hours, Fannie Mae or the Loan Servicer to: (a) inspect, make copies and abstracts of, and have audited, the Borrower's books and records as may relate to the Obligations or the Mortgaged Property; (b) discuss the Borrower's affairs, finances and accounts with any of its officers and employees; (c) discuss the Borrower's affairs, finances and accounts with the Borrower's independent certified public accountants, provided that the Authorized Borrower Representative has been given the opportunity to be a party to such discussions; and (d) receive any other information that Fannie Mae deems necessary or relevant in connection with the Loan, the Borrower Documents, the Obligations or otherwise. The books and records of the Borrower and the books and records relating to the transactions contemplated by the provisions of the Borrower Documents shall be maintained at the address of the Borrower set forth in Schedule A, unless the Borrower shall otherwise advise Fannie Mae and the Loan Servicer in writing and provided that the Borrower has received the consent of Fannie Mae. SECTION 9.4 Inform Loan Servicer of Material Events. The Borrower shall inform the Loan Servicer and Fannie Mae in writing of each of the following (and shall deliver to the Loan Servicer copies of any related written communications and other documents relating to the following) of which it has knowledge: (a) Defaults. The occurrence of any Potential Default or Event of Default under this Agreement or under any other Transaction Document specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with respect to such event; Reimbursement Agreement 25 (Broadway LaNel Project) (b) Counterparty Rating Downgrade. The receipt of notice from the Counterparty that the unsecured, unsubordinated long term obligations of the Counterparty are at any time rated below AA minus by S&P or below Aa3 by Moody's; and (c) Legal Proceedings. The commencement of any proceeding by or against the Borrower or before any ._governmental unit, department, board, agency, commission, administrative body, office, authority or court, of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence, or before any arbitrator, which, if adversely determined, would have, or could be reasonably expected to have, a material adverse effect on the Borrower or the Mortgaged Property or adversely affect the tax-exempt status of the interest payable on the Bonds. The Borrower shall give each such notice promptly and in no event more than ten Business Days after the Borrower receives notice or has knowledge of the occurrence of the event. SECTION 9.5 Defense of Actions. The Borrower shall appear in and defend any action or proceeding purporting to affect the security for this Agreement or the rights or powers of Fannie Mae or the Loan Servicer hereunder or under the Loan Documents, and shall pay, in the manner required by Section 5. 1, all costs and expenses, including the cost of evidence of title and attorneys' fees, in any such action or proceeding in which Fannie Mae or the Loan Servicer may appear. If the Borrower fails to perform any of the covenants or agreements contained in this Agreement or any Loan Document, or if any action or proceeding is commenced that is not diligently defended by the Borrower which affects Fannie Mae's or the Trustee's interest in the Mortgaged Property or any part thereof, including eminent domain, code enforcement or proceedings of any nature whatsoever under any Federal or state law, whether now existing or hereafter enacted or amended, then Fannie Mae or the Loan Servicer may make such appearances, disburse such sums and take such action as Fannie Mae or the Loan Servicer deems necessary or appropriate to protect Fannie Mae's or the Trustee's interests. Such actions include disbursement of attorneys' fees, entry upon the Mortgaged Property to make repairs or take other action to protect the security of the Mortgaged Property, and payment, purchase, contest or compromise of any encumbrance, charge or lien which in the judgment of Fannie Mae or the Loan Servicer appears to be prior or superior to the Loan Documents. Neither Fannie Mae nor the Loan Servicer shall have any obligation to do any of the above. Fannie Mae and the Loan Servicer may take any such action without notice to or demand upon the Borrower. No such action shall release the Borrower from any obligation under this Agreement or any of the other Transaction Documents. In the event (i) that the Security Instrument is foreclosed in whole or in part or that any Loan Document is put into the hands of an attorney for collection, suit, action or foreclosure, or (ii) of the foreclosure of any mortgage, deed of trust or deed to secure debt prior to or subsequent to the Security Instrument or any Loan Document in which proceeding Fannie Mae is made a party or (iii) of the bankruptcy of the Borrower or any Key Principal or an assignment by the Borrower for the benefit of its creditors, the Borrower shall be chargeable with and agrees to pay all costs of collection and defense, including actual attorneys' fees in connection therewith and in connection with any appellate proceeding or post judgment action involved therein, which shall be due and payable together with all required service or use taxes. Reimbursement Agreement 26 (Broadway LaNel Project) SECTION 9.6 Further Assurances. The Borrower shall execute, acknowledge, record and/or file such statements, documents, agreements, UCC financing and continuation statements and such other instruments and do such further acts as Fannie Mae or the Loan Servicer from time to time may request as reasonably necessary, desirable or proper to carry out more effectively the purposes of the Borrower Documents, to subject to the lien and security interest of the Loan Documents any property intended by the terms of the Borrower Documents to be covered by the Loan Documents, including any renewals, additions, substitutions, replacements, betterments or appurtenances to any of the Mortgaged Property, or to evidence, perfect or otherwise implement or assure the lien and security interest intended by the terms of the Borrower Documents to be covered by the applicable Loan Documents or in order to exercise or enforce its rights under the Borrower Documents. In addition, the Borrower shall cooperate with any Rating Agency in connection with any review of the transactions described in the Borrower Documents which may be undertaken by the Rating Agency after the Closing Date. SECTION 9.7 Monitoring Compliance. Upon the request of Fannie Mae or the Loan Servicer from time to time and at any time certification of the matters set forth below is provided to the Issuer, the Trustee or any Governmental Authority, the Borrower shall promptly provide to Loan Servicer the following: (a) The Borrower's certification of the Mortgaged Property's compliance with the rules qualifying the interest payable on the Bonds for federal tax exemption pursuant to Section 103(b)(4)(A) of the Code and the regulations issued under Section 103(b)(4)(A) and the requirements of the Regulatory Agreement; (b) If the Mortgaged Property has received or receives a tax credit allocation, the Borrower's certification of the Mortgaged Property's compliance with the requirements of the Code and the regulations issued relating thereto and if the tax credits have not yet been syndicated, the Borrower's report regarding progress in syndicating the tax credit allocation until the syndication is completed; and (c) Such other documents, certificates and other information as may be deemed necessary or appropriate to enable the Loan Servicer to perform the functions under the Servicing Agreement. SECTION 9.8 Removal of Remarketing Agent. The Borrower shall immediately remove the Remarketing Agent and appoint another person, acceptable to Fannie Mae, as the Remarketing Agent, without interruption of service, if Fannie Mae so directs (i) at any time after the occurrence of an Event of Default under this Agreement or (ii) at any other time if Fannie Mae determines there is a basis in fact for the removal of the Remarketing Agent. The Borrower agrees that the failure of the Remarketing Agent to fulfill any of its duties (including failure to give any notice) under the Indenture or the Remarketing Agreement or the failure of the Remarketing Agent to continue to satisfy the minimum qualifications set out in the DUS Guide for eligible remarketing agents shall constitute a factual basis for the removal of the Remarketing Agent. Reimbursement Agreement 27 (Broadway LaNel Project) SECTION 9.9 Continuing Disclosure. The Borrower agrees to cooperate with the Remarketing Agent in complying with the federal securities laws relating to continuing disclosure that are applicable to the Bonds including, without limitation, Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as such rule may be amended from time to time. ARTICLE X NEGATIVE COVENANTS OF THE BORROWER The Borrower agrees not to do any of the following. Each agreement shall apply continuously during the Term of this Agreement. SECTION 10.1 Other Activities. The Borrower shall not (a) take, or omit to take, any action that, if taken or omitted, would jeopardize or adversely affect the tax-exempt status of the interest payable on the Bonds; (b) engage in any business or activity other than in connection with the ownership, management and operation of the Mortgaged Property; or (c) amend its Partnership Agreement or certificate of limited partnership in any manner inconsistent with this Agreement or the other Borrower Documents or which would have a material adverse affect on the rights and interests of Fannie Mae, without the prior written consent of Fannie Mae or the Loan Servicer. SECTION 10.2 No Amendments to Borrower Documents. Unless Fannie Mae otherwise consents in writing, the Borrower shall not agree to any amendment of, supplement to, or waiver, modification or termination of, any of the terms or provisions of any Borrower Document. The Borrower shall promptly give written notice to the Loan Servicer of any such amendment, supplement, waiver, modification or termination. SECTION 10.3 Chanties in Remarketing Agent. The Borrower will not remove the Remarketing Agent, or appoint or engage any Person as Remarketing Agent or change the fees payable to the Remarketing Agent, without Fannie Mae's prior written consent. SECTION 10.4 Official Statement. Without Fannie Mae's prior written consent, the Borrower will not allow any reference to Fannie Mae to be made in the Official Statement or allow any change in reference to Fannie Mae to be made in the Official Statement. SECTION 10.5 No Change. The Borrower will not voluntarily or involuntarily change its principal place of business, chief executive office, the state of its incorporation or formation or legal name, without at least 30 days prior written notice to Fannie Mae and the Loan Servicer, except in the event of a change in principal place of business or chief executive office necessitated by fire, flood or other calamity, in which case such notice shall be provided as soon as practicable. Reimbursement Agreement 28 (Broadway LaNel Project) SECTION 10.6 No Hedging Arrangements. Without the prior written consent of Fannie Mae or unless otherwise required by this Agreement, the Borrower will not enter into or guarantee, provide security for or otherwise undertake any form of contingent obligation with respect to any Hedging Arrangement. ARTICLE XI NATURE OF OBLIGATIONS; INDEMNIFICATION SECTION 11.1 Obligations of the Borrower Unconditional. To the fullest extent permitted by law, the obligations of the Borrower to repay the Loan and to make all payments and perform its other obligations under this Agreement and the Transaction Documents shall be absolute, unconditional and irrevocable, shall be paid and performed strictly in accordance with the applicable Transaction Documents under all circumstances, including, without limitation, the following circumstances: (i) any invalidity or unenforceability of the Credit Enhancement Instrument or any of the Transaction Documents; (ii) any amendment or waiver of, or any consent to departure from, the terms of the Credit Enhancement Instrument or any of the Transaction Documents, any extension of time or other modification of the terms and conditions for any act to be performed in connection with the Credit Enhancement Instrument or any of the Transaction Documents; (iii) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against the Issuer, the Trustee, the Tender Agent, Fannie Mae, the Loan Servicer, the Remarketing Agent or any other Person, whether in connection with any of the Transaction Documents, the Mortgaged Property or any unrelated transaction; (iv) any Certificate presented under the Credit Enhancement Instrument proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue, insufficient or inaccurate in any respect; (v) the use which may be made of the Credit Enhancement Instrument or the proceeds of any Advance under the Credit Enhancement Instrument, (vi) any act or omission of the Trustee or any other Person in connection therewith; (vii) the surrender or impairment of any security for the performance or observance of any of the agreements or terms of any of the Transaction Documents; (viii) defect in title to the Mortgaged Property, any act or circumstance that may constitute failure of consideration, destruction of, damage to or condemnation of the Mortgaged Property, commercial frustration of purpose, or any change in the tax or other laws of the United States of America or of the State or any political subdivision of either, (ix) the breach by the Issuer, the Trustee, the Tender Agent, the Remarketing Agent, Fannie Mae, the Loan Servicer or any other Person of any of its obligations under any Borrower Document; (x) any risk relating to the use of telecopy or other technology or medium for the making of requests for Advances, or (xi) any other circumstance, happening or omission whatsoever, whether or not similar to any of the foregoing. SECTION 11.2 Subrogation. To the extent of any Advance pursuant to the Credit Enhancement Instrument the Borrower agrees that Fannie Mae shall be fully subrogated to the rights of the Bondholders to any moneys paid or payable under the Loan and all security therefor under the Indenture. The Borrower agrees to execute such instruments and to take such actions Reimbursement Agreement 29 (Broadway LaNel Project) as, in the judgment of Fannie Mae, are necessary to evidence such subrogation and to perfect the rights of Fannie Mae. SECTION 11.3 Risk of Loss and Liability of Fannie Mae. (a) Risk of Loss. The Borrower assumes all risks of the acts or omissions of the Trustee and any transferee of the Credit Enhancement Instrument with respect to the use of the Credit Enhancement Instrument and the use of the proceeds of any drawing under the Credit Enhancement Instrument. Fannie Mae may accept any Certificate or other document that appears on its face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. (b) Liability of Fannie Mae. Fannie Mae shall be responsible to the Borrower, to the extent of any direct damages suffered by the Borrower which the Borrower proves were caused by: (1) Fannie Mae's willful misconduct or gross negligence in determining whether any Certificate presented under the Credit Enhancement Instrument complies with the terms of the Credit Enhancement Instrument; or (2) Fannie Mae's willful failure to pay or its gross negligence in not paying under the Credit Enhancement Instrument after the presentation to it by the Trustee (or a successor trustee under the Indenture to whom the Credit Enhancement Instrument has been transferred in accordance with its terms) of a Certificate complying with the Credit Enhancement Instrument. In no event shall Fannie Mae be liable to the Borrower or to any other Person for damages in excess of the Available Amount of the Credit Enhancement Instrument as such amount is reduced and reinstated from time to time pursuant to the Credit Enhancement Instrument. Fannie Mae shall not be liable for any consequential, indirect, special or punitive damages, all of which the Borrower waives. (c) Fannie Mae not Liable. Except as provided in subsection (b), neither Fannie Mae nor any of its employees, officers or directors shall be liable or responsible for any loss, cost, damage arising under any circumstance whatsoever, including, without limitation, all of the following: (1) the use which may be made of the Credit Enhancement Instrument, the use which may be made of the proceeds of any Advance under the Credit Enhancement Instrument or any act or omission of the Trustee or any other Person in connection therewith; (2) the validity, sufficiency or genuineness of any Certificate or other document; or of any endorsement, signature or authentication on any Certificate or other document, even if such Certificate or other document should, in fact, be in any or all respects invalid, insufficient, fraudulent or forged; Reimbursement Agreement 3 (] (Broadway LoNel Project) (3) payment by Fannie Mae against presentation of any Certificate which does not comply with the requirements of the Credit Enhancement Instrument, including failure of any Certificate to bear any reference or adequate reference to the Credit Enhancement Instrument; or (4) any other circumstances whatsoever in making or failing to make payment under the Credit Enhancement Instrument. SECTION 11.4 Indemnification. In addition to any and all rights of reimbursement, indemnification, subrogation or any other rights pursuant hereto or under law or equity, the Borrower hereby agrees to indemnify and hold harmless Fannie Mae, the Loan Servicer and their respective employees, officers, directors and agents from and against any and all claims, damages, losses, liabilities, reasonable costs or expenses whatsoever (including attorneys' fees) which such indemnified parry may incur (or which may be claimed against Fannie Mae by any person or entity whatsoever) by reason of or in connection with: (a) the execution and delivery or transfer of, or payment or failure to pay under, the Credit Enhancement Instrument; (b) the issuance, marketing, placement and sale of the Bonds and the making of the Loan; or (c) the use of the proceeds of the Bonds and the use of the proceeds of the Loan; provided that the Borrower shall not be required to indemnify Fannie Mae for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (i) Fannie Mae's willful misconduct or gross negligence in determining whether any document presented under the Credit Enhancement Instrument complies with the terms of the Credit Enhancement Instrument; or (ii) Fannie Mae's willful failure to pay or its gross negligence in not paying under the Credit Enhancement Instrument after the presentation to it by the Trustee (or a successor trustee under the Indenture to whom the Credit Enhancement Instrument has been transferred in accordance with its terms) of a Certificate complying with the Credit Enhancement Instrument. If any proceeding shall be brought or threatened against Fannie Mae by reason of or in connection with the events described in clause (a), (b) or (c), above (and except as otherwise provided in clause (i) or (ii), above), Fannie Mae shall promptly notify the Borrower in writing and the Borrower shall assume the defense thereof, including the employment of legal counsel and the payment of all costs of litigation. Notwithstanding the preceding sentence, Fannie Mae shall have the right to employ its own legal counsel and to determine its own defense of such action in any such case. SECTION 11.5 Defense of Indemnified Parties. In the event that any action or proceeding is brought against any indemnified party with respect to which indemnity may be sought under Section 11.4, the Borrower, upon written notice from the indemnified party, shall assume the investigation and defense of such action or proceeding, including the employment of counsel selected by the indemnified party, but acceptable to the Borrower, and shall assume the Reimbursement Agreement 31 (Broadway LaNel Project) payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion, urovided, however, that such indemnified party shall have the right to review and approve or disapprove any compromise or settlement. Each indemnified party shall have the right, if such indemnified party shall conclude in good faith that a conflict of interest exists, to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Borrower shall pay the reasonable fees and expenses of such separate counsel. If separate counsel are employed as described above, the Borrower and any such indemnified party agree to cooperate as may reasonably be required in order to ensure the proper and adequate defense of any such action, suit or proceeding, including, but not limited to, making available to each other, and their counsel and accountants, all books and records relating to such action, suit or proceeding. If any such counsel reasonably determines that the rendering of such assistance will adversely affect the defense or interests of its client, such counsel shall not be required to comply with the terms of the immediately preceding sentence. SECTION 11.6 Additional Indemnification. In addition to any and all rights of indemnification or any other rights of Fannie Mae or the Loan Servicer pursuant to this Agreement, or under law or equity, the Borrower agrees to indemnify, hold harmless and defend Fannie Mae, the Loan Servicer and their respective officers, directors, members, shareholders, officials, agents, independent contractors and employees from and against any and all claims, losses, liabilities (including penalties), actions, suits, judgments, demands, damages, costs, charges or expenses (including fees and expenses of attorneys, consultants and auditors and costs of investigation) and obligations whatsoever (herein collectively referred to as "Liabilities") of any nature arising out of or relating to the transactions contemplated by this Agreement or any of the other Transaction Documents by reason of. (a) any inaccuracy or alleged inaccuracy in any material respect, or any untrue statement or alleged untrue statement of a material fact, contained in the preliminary official statement or the official statement for the Bonds or any amendment or supplement thereto, or by reason of the omission or alleged omission to state therein a material fact necessary to make such statements, in the light of the circumstances under which they were made, not misleading; (b) to the extent not covered by paragraph (a), any act, statement or omission, by or on behalf of the Borrower in connection with the offering, issuance, sale, delivery or any remarketing or reoffering (from time to time) of the Bonds; (c) all reasonable costs, counsel fees, expenses or liabilities incurred in connection with any such claim referred to in clause (a) or (b) above; provided, however, that the Borrower will not be liable in any such case to the extent that any Liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Borrower by or on behalf of Fannie Mae specifically for use in connection with the preparation of the official statement. This indemnity will be in addition to any liability which the Borrower may otherwise have. If any action or proceeding (including any governmental investigation) is brought or asserted against Fannie Mae, the Loan Servicer or other indemnified party in respect of which indemnity may be sought from the Borrower Reimbursement Agreement 32 (Broadway LaNel Project) pursuant to this Section 11.6, Fannie Mae, the Loan Servicer or such other party, as the case may be, shall promptly notify the Borrower in writing, and the Borrower shall assume the payment of all expenses incurred by Fannie Mae, the Loan Servicer or such other party in connection with the defense thereof as and to the extent provided in Section 11.5 above. SECTION 11.7 Survival. This Article shall survive the termination of this Agreement and foreclosure of the Security Instrument or other disposition of the Mortgaged Property to the fullest extent permitted by law. All amounts due under Sections 11.4 and 11.6 shall be payable immediately on written demand. ARTICLE XII EVENTS OF DEFAULT; REMEDIES SECTION 12.1 Events of Default. The occurrence of any one or more of the following events shall constitute an Event of Default under this Agreement: (a) the Borrower fails to pay when due any amount payable by the Borrower under this Agreement, the Note, the Financing Agreement, the Security Instrument or any other Transaction Document; or (b) the occurrence of any Event of Default under any Transaction Document other than this Agreement beyond any cure period set forth in that Transaction Document; or (c) fraud or material misrepresentation or material omission by Borrower, or any of its officers, directors, trustees, general partners or managers, Key Principal or any guarantor: (1) contained in this Agreement, the Certificate of Borrower or any other Borrower Document or any certificate delivered by the Borrower to Fannie Mae or to the Loan Servicer pursuant to this Agreement or any other Borrower Document; or (2) in connection with (i) the application for or creation of the Loan or the credit enhancement or liquidity for the Bonds provided by the Credit Enhancement Instrument, (ii) any financial statement, rent roll, or other report or information provided to Fannie Mae or the Loan Servicer during the term of this Agreement or the Loan, or (iii) any request for Fannie Mae's consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement or contained in this Agreement, the Certificate of Borrower or any other Borrower Document or any certificate delivered by the Borrower to Fannie Mae or to the Loan Servicer pursuant to this Agreement or any other Borrower Document; or (d) a Tax Event (as that term is defined in the Indenture) occurs; or (e) any failure by the Borrower to perform or observe any of its obligations under this Agreement (other than as set forth in subsections (a) through (d) above), as and when required, which continues for a period of 30 days after notice of such failure by Fannie Mae or the Loan Reimbursement Agreement 33 (Broadway LaNel Project) Servicer to the Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Fannie Mae's or the Loan Servicer's judgment, absent immediate exercise by Fannie Mae of a right or remedy under this Agreement, result in harm to Fannie Mae, impairment of the Note, this Agreement, the Security Instrument or any other security given under any other Transaction Document; or (f) (i) the Borrower fails to pay when due or within any applicable grace period any amount payable by the Borrower under any Hedging Arrangement, or (ii) the occurrence of any other default or event of default, however described, by the Borrower under any Hedging Arrangement. SECTION 12.2 Remedies; Waivers. (a) Remedies. Upon the occurrence of an Event of Default under this Agreement, the Obligations and all amounts owing under this Agreement may be declared by Fannie Mae to become immediately due and payable, without presentment, demand, protest or notice of any kind, including notice of default, notice of intent to accelerate or notice of acceleration. In addition, Fannie Mae shall have the right to take such action at law or in equity, without notice or demand, as it deems advisable to protect and enforce the rights of Fannie Mae against the Borrower and/or in and to the Mortgaged Property, including, but not limited to, any one or more or all of the following actions: (1) deliver to the Trustee written notice that an Event of Default has occurred under this Agreement and directing the Trustee to take such action pursuant to the Transaction Documents as Fannie Mae may determine, including a request that the Trustee declare the principal of all or a portion of the Bonds then outstanding and the interest accrued thereon to be immediately due and payable in accordance with the terms and conditions of the Indenture; (2) demand cash collateral or Permitted Investments in an amount equal to the maximum liability of Fannie Mae under the Credit Enhancement Instrument, whether or not then due and payable by Fannie Mae; and (3) exercise any rights and remedies available to Fannie Mae under the Transaction Documents. (b) Waivers. Fannie Mae shall have the right, in its discretion, to waive any Event of Default under this Agreement. Unless such waiver expressly provides to the contrary, any waiver so granted shall extend only to the specific event or occurrence which gave rise to the Event of Default so waived and not to any other similar event or occurrence which occurs subsequent to the date of such waiver. SECTION 12.3 No Remedy Exclusive. Unless otherwise expressly provided, no remedy conferred upon or reserved in this Agreement is intended to be exclusive of any other available remedy, but each remedy shall be cumulative and shall be in addition to other remedies given under the Transaction Documents or existing at law or in equity. No delay or omission to Reimbursement Agreement 34 (Broadway LaNel Project) exercise any right or power accruing under any Transaction Document upon the happening of any event set forth in Section 12.1 shall impair any such right or power or shall be construed to be a waiver of such event, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle Fannie Mae to exercise any remedy reserved to Fannie Mae in this Article, it shall not be necessary to give any notice, other than such notice as may be required under the applicable provisions of any of the other Transaction Documents. The rights and remedies of Fannie Mae specified in this Agreement are for the sole and exclusive benefit, use and protection of Fannie Mae, and Fannie Mae is entitled, but shall have no duty or obligation to the Borrower, the Trustee, the Bondholders or otherwise, (i) to exercise or to refrain from exercising any right or remedy reserved to Fannie Mae hereunder, or (ii) to cause the Trustee or any other party to exercise or to refrain from exercising any right or remedy available to it under any of the Transaction Documents. ARTICLE XIII MISCELLANEOUS PROVISIONS SECTION 13.1 Interpretation. Each of the parties acknowledges that it and its counsel have participated in the drafting and revision of this Agreement. Accordingly, the parties agree that any rule of construction which disfavors the drafting party shall not apply in the interpretation of this Agreement. SECTION 13.2 Counterparts. This Agreement may be executed in counterparts by Fannie Mae and the Borrower, and each counterpart shall be considered an original and all counterparts shall constitute one and the same instrument. SECTION 13.3 Amendments, Changes and Modifications. This Agreement may be amended, supplemented, restated or terminated only by a written instrument or written instruments signed by the parties to this Agreement. No course of dealing between the Borrower and Fannie Mae, nor any delay in exercising any rights hereunder, shall operate as a waiver of any rights of Fannie Mae hereunder. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. SECTION 13.4 Waivers and Consents. To the extent permitted by applicable law, the Borrower (i) waives and renounces any and all redemption and exemption rights and the benefit of all valuation and appraisal privileges against the indebtedness and obligations evidenced by this Agreement and the other Borrower Documents or by any extension or renewal of this Agreement and the other Borrower Documents; (ii) waives presentment and demand for payment, notices of nonpayment and of dishonor, protest of dishonor and notice of protest; (iii) waives all notices in connection with the delivery and acceptance of this Agreement and the other Borrower Documents and all other notices in connection with the performance, default or enforcement of the payment of any Obligations under this Agreement and the other Borrower Documents except as required by this Agreement or the other Borrower Documents; (iv) agrees that its liabilities under this Agreement and the other Borrower Documents shall be unconditional and without regard to the liability of any other person and (v) agrees that any Reimbursement Agreement 35 (Broadway LaNci Project) consent, waiver or forbearance under this Agreement and the other Borrower Documents with respect to an event shall operate only for such event and not for any subsequent event. SECTION 13.5 Governing Law. This Agreement shall be construed, and the obligations, rights and remedies of the parties hereunder shall be determined, in accordance with the laws of the District of Columbia without regard to conflicts of laws principles, except to the extent that the laws of the United States of America may prevail. SECTION 13.6 Notices. All notices, directions, certificates or other communications hereunder shall be sent by certified or registered mail, return receipt requested, or by overnight courier addressed to the appropriate notice address set forth below. Any such notice, certificate or communication shall be deemed to have been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this Section. Any of the parties hereto may, by such notice described above, designate any further or different address to which subsequent notices, certificates or other communications shall be sent without any requirement of execution of any amendment to this Agreement. Unless otherwise directed by Fannie Mae, all notices pursuant to this Agreement shall also be given to the Loan Servicer. The notice addresses are as follows: To Fannie Mae: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Director, Multifamily Asset Management Telephone: (202) 752-2854 Facsimile: (202) 752-3542 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003/Glaser Financial Group, Inc. with a copy to: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Vice President, Multifamily Services Telephone: (202) 752-7869 Facsimile: (202) 752-8369 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003/Glaser Financial Group, Inc. Reimbursement Agreement 36 (Broadway LaNel Project) [For courier to all Fannie Mae addresses use 4000 Wisconsin Avenue, N.W. and delete any reference to Drawer AM] To the Borrower: See address and other contact information in the attached Schedule A To the Loan Servicer: See address and other contact information in the attached Schedule A or at such other address, e-mail, fax number or telephone number as the addressee may hereafter specify for the purpose in a notice to the other party specifically captioned "Notice of Change of Address pursuant to Section 13.6 of the Reimbursement Agreement". SECTION 13.7 Further Assurances and Corrective Instruments. From time to time the Borrower will execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements to this Agreement and such further instruments as Fannie Mae or the Loan Servicer may request and as may be reasonably required in the opinion of Fannie Mae, the Loan Servicer or its respective counsel to effectuate the intention of or facilitate the performance of this Agreement or any other Borrower Document. SECTION 13.8 Term of this Agreement. The Term of this Agreement shall continue in full force and effect, and the Borrower shall not be released from liability under this Agreement, until the later of (i) the Termination Date, (ii) the date on which Fannie Mae has no further liability (accrued or contingent) under the Credit Enhancement Instrument and (iii) the date on which the Borrower pays or causes to be paid indefeasibly to Fannie Mae and/or the Bondholders all amounts to be paid by the Borrower under this Agreement, under the other Borrower Documents and otherwise with respect to the Obligations. Thereafter, except as otherwise expressly provided in this Agreement, this Agreement shall expire and all obligations of the parties hereunder shall cease, terminate and be void. SECTION 13.9 Assignments, Transfers: Third -Party Rights. The Borrower shall not assign this Agreement, or delegate any of its obligations hereunder, without the prior written consent of Fannie Mae. Nothing in this Agreement shall confer any right upon any Bondholder or any other Person other than the parties hereto and their successors and permitted assigns. SECTION 13.10 Limitation on Personal Liability. Notwithstanding any other provision in this Agreement to the contrary, the personal liability of the Borrower, any general partner of the Borrower (if the Borrower is a partnership), and any Key Principal to pay amounts due in connection with the Borrower's Obligations shall be limited as and to the extent provided in the Note. The foregoing limitation shall not limit or impair Fannie Mae's right or ability to proceed against any collateral that may be pledged to Fannie Mae or that may otherwise be available to Fannie Mae under any of the Borrower Documents. SECTION 13.11 Waiver of Claims. IN ORDER TO INDUCE FANNIE MAE TO EXECUTE AND DELIVER THE CREDIT ENHANCEMENT INSTRUMENT, THE BORROWER HEREBY REPRESENTS AND WARRANTS THAT IT HAS NO CLAIMS, Reimbursement Agreement 37 (Broadway LaNel Project) SET -OFFS OR DEFENSES AS OF THE CLOSING DATE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR IN CONNECTION WITH ANY OF THE OTHER BORROWER DOCUMENTS. TO THE EXTENT ANY SUCH CLAIMS, SET -OFFS OR DEFENSES MAY EXIST, WHETHER KNOWN OR UNKNOWN, THEY ARE EACH HEREBY WAIVED AND RELINQUISHED IN THEIR ENTIRETY. SECTION 13.12 Disclaimer; Acknowledgments. Approval by Fannie Mae or the Loan Servicer of the Borrower, the Loan, the Bonds or otherwise shall not constitute a warranty or representation by Fannie Mae or the Loan Servicer as to any matter. Nothing set forth in this Agreement, in any of the other Borrower Documents or in the subsequent conduct of the parties shall be deemed to constitute Fannie Mae or the Loan Servicer as the partner or joint venturer of any person for any purpose whatsoever. SECTION 13.13 Entire Agreement. This Agreement and the Borrower Documents constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the Borrower Documents. SECTION 13.14 Survival of Representation and Warranties. All statements contained in any Borrower Document, or in any certificate, financial statement or other instrument delivered by or on behalf of the Borrower pursuant to or in connection with this Agreement (including but not limited to any such statement made in or in connection with any amendment hereto or thereto) shall constitute representations and warranties made under this Agreement. All representations and warranties made under this Agreement (i) shall be made and shall be true at and as of the date of this Agreement, the Closing Date and the date of any Advance under the Credit Enhancement Instrument and (ii) shall survive the execution and delivery of this Agreement, regardless of any investigation made by Fannie Mae, the Loan Servicer or by anyone else on behalf of either. SECTION 13.15 Jurisdiction. Consent to Service. (a) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any District of Columbia court or Federal court of the United States of America sitting in the District of Columbia, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the Borrower Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such District of Columbia court or in such Federal court, including without limitation those controversies relating to the execution, interpretation, breach, enforcement, or compliance with this Agreement or any of the Loan Documents. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that Fannie Mae or any third party beneficiary may otherwise have to bring any action or proceeding relating to this Agreement, or the Borrower Documents, or the Borrower's properties in the courts of any jurisdiction. The Borrower agrees that such assets and properties shall be used to first satisfy all Reimbursement Agreement 38 (Broadway LaNel Project) claims of creditors organized or domiciled in the United States of America and that no assets or properties of the Borrower in the United States shall be considered part of any foreign bankruptcy estate. (b) The Borrower hereby irrevocably and unconditionally waives any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Borrower Documents in any District of Columbia or Federal court. Each of the parties hereto hereby irrevocably waives the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 13.6. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 13.16 WAIVER OF JURY TRIAL. THE BORROWER AND FANNIE MAE (A) COVENANT AND AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS TRIABLE BY A JURY AND (B) WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL BY THE BORROWER, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. THE BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF FANNIE MAE (INCLUDING, BUT NOT LIMITED TO, FANNIE MAE'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO THE BORROWER THAT FANNIE MAE WILL NOT SEEK TO ENFORCE THE PROVISIONS OF THIS SECTION 13.16. SECTION 13.17 Severability. Should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any jurisdiction, such provision shall be severable from the remainder as to such jurisdiction and the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired in any jurisdiction. (Balance of page left intentionally blank.) Reimbursement Agreement 39 (Broadway LaNel Project) IN WITNESS WHEREOF, the Borrower and Fannie Mae have executed this Agreement as of the day and year first above written. BROADWAY LaNEL, A LIMITED PARTNERSHIP fVame: Francis W. Lan Title: General Partner FANNIE MAE By: Na4Jnowell,r Titlident Reimbursement Agreement S-1 (Broadway LaNci Project) SCHEDULE A TRANSACTION INFORMATION A. General Information 1. Property Name: 2. Fannie Mae Loan Number: 3. Loan Type: 4. Principal Reserve Fund Type: B. Bond Information Broadway LaNel Refunding 20 Percent 1. Bond Description: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 2. Bond Closing Date: August 14, 2003 3. Regular Bond Payment Dates: 15th of month 4. First Bond Payment Date: September 15, 2003 5. Final Bond Maturity Date: July 15, 2033 C. Credit Enhancement Instrument 1. Payment Type: Direct Pay 2. Expiration Date of Credit Enhancement Instrument: July 20, 2033 3. Amount Available: $2,684,678, of which (i) up to $2,655,000 ("Principal Portion") may be drawn with respect to the unpaid principal of the Bonds or, as the case may be, the principal portion of the purchase price of the Bonds; and (ii) up to $29,678 ("Interest Portion"), or 34 days interest on the Bonds (calculated at an assumed rate on the Bonds of 12% per annum on the basis of a year of 365 days), may be drawn with respect to interest actually accrued on the Bonds or, as the case may be, the interest portion of the purchase price of the Bonds. Reimbursement Agreement A- I (Broadway LaNel Project) D. Facility Fee 1. Credit Enhancement Fee: The Credit Enhancement Rate is 46 basis points per annum, commencing on the Closing Date multiplied by the result of subtracting (i) the aggregate principal amount (without regard to earnings) on deposit in the Principal Reserve Fund (but not in excess of the amount then scheduled to be on deposit in the Principal Reserve Fund in accordance with the attached Schedule C), from (ii) the unpaid principal balance of the Loan. 2. Principal Reserve Fund Fee: The Principal Reserve Fund Rate is 15 basis points per annum multiplied by the aggregate principal amount (without regard to earnings) on deposit in the Principal Reserve Fund (but not in excess of the amount then scheduled to be on deposit in the Principal Reserve Fund in accordance with the attached Schedule Q. 3. Loan Servicer's Fee: The Loan Servicer's Rate is 44 basis points per annum multiplied by the result of subtracting (i) the aggregate principal amount (without regard to earnings) on deposit in the Principal Reserve Fund (but not in excess of the amount then scheduled to be on deposit in the Principal Reserve Fund in accordance with the attached Schedule C) from (ii) the unpaid principal balance of the Loan. 4. Liquidity Fee: The Liquidity Rate is 15 basis points per annum multiplied by the unpaid principal balance of the Loan if interest on the Bonds is a Reset Rate for a Reset Period with an original term of five years or less or the Weekly Variable Rate is in effect. 5. First Payment Date for Facility Fee: September 15, 2003 During the Weekly Variable Rate Period, the Facility Fee shall be computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as applicable. During any other period, the Facility Fee shall be computed on the basis of a 360 -day year comprised of twelve 30 -day months. E. Other Fees Issuer's Fee: one-time payment of $13,275 at closing 2. Remarketing Agent's Fee: the annual continuing fee of the Remarketing Agent for its remarketing services of 12.5 basis points per annum 3. Trustee's Annual Fee: the annual continuing trust administration fee of the Trustee equal to $3,500 payable by the Borrower as provided in the Financing Agreement. Reimbursement Agreement (Broadway LaNel Project) A-2 F. Loan Information 1. Underwriting Rate: 6.509 % per annum (all in) 2. Loan Term: The period commencing on the Closing Date and ending on July 15, 2033 3. Termination Fee Period: The period commencing on the Closing Date and ending on August 15, 2013 G. Taxable Tail 1. Execution Type: Fannie Mae 2"d (Cash) 2. Amount: $1,155,000 3. Maturity Date: June 15, 2018 4. Interest Rate: fixed H. Hedge Information 1. Provider: Bear Stearns Financial Products Inc. 2. Notional Amount: $2,655,000 3. Strike Rate: 6.00% 4. Maturity Date: August 15, 2008 I. Property Information 1. Property Name and Address: Broadway LaNel Apartments 6100 West Broadway New Hope, Minnesota 55428 2. Low -Income Units: 15 Units (20% of the Units) at 80% or less of area median gross income Reimbursement Agreement A-3 (Broadway LaNel Project) J. Contact Information 1. Borrower: name: Broadway LaNel, a Limited Partnership address: 4601 Excelsior Boulevard, Suite 601 Minneapolis, Minnesota 35416 contact person: Francis W. Lang telephone: (952) 920-5338 fax: (952) 920-5640 taxpayer ID number: 41-1545889 2. Bond Trustee: name: address: contact person: telephone: fax: 3. Issuer: name: address: contact person: telephone: fax: Reimbursement Agreement (Broadway LaNel Project) U.S. Bank National Association 60 Livingston Avenue Mail Code: EP-MN-WS3C St. Paul, Minnesota 55107-2292 Gloria Kessler (651) 495-3910 (651)495-8096 City of New Hope, Minnesota 4401 Xylon Avenue, North New Hope, Minnesota 55428 Daryl Sulander (763)531-5100 (763)531-5136 4. Loan Servicer: name: Glaser Financial Group, Inc. address: 2177 Youngman Avenue St. Paul, Minnesota 55116 contact person: David Williams telephone: (651) 644-5055 fax: (651)644-0923 5. Fannie Mae's Legal Counsel: name: Squire, Sanders & Dempsey L.L.P. address: 4900 Key Tower 127 Public Square contact person: Cleveland, Ohio 44114 contact person: Robert D. Labes, Esq. telephone: (216) 479-8601 fax: (216)479-8780 6. Remarketing Agent: name: U.S. Bancorp Piper Jaffray Inc. address: 800 Nicollett Mall, 13th Floor Minneapolis, Minnesota 55402 contact person: Dave Mullen telephone: (612) 303-5930 fax: (612)303-1704 K. Auaroved Subordinate Financing Fannie Mae Taxable Tail Reimbursement Agreement A-5 (Broadway LaNel Project) L. Required Reserves Replacement Reserves: Initial Deposit of $0 with deposits of $300/Unit or $1,825/month or $21,900/year thereafter, as adjusted from time to time by the Loan Servicer Interest Rate Cap Reserve: In accordance with Part XIV, Section 302.1 of the DUS Guide, if a Cap with a term of less than seven years will be in effect on the Closing Date, the Loan Servicer must require the Borrower to establish a replacement reserve for the Cap (the "Cap Reserve"), to be funded by monthly payments by the Borrower to the Loan Servicer in an amount equal to 100% of the cost of such Cap divided by the number of months remaining in the term of such cap. The Loan Servicer must obtain annual quotes for the cost of an interest rate cap with a term equal to the term of the initial Cap and Strike Rate equal to the initial Strike Rate. If the current interest rate cap cost quote is more than the original quote on which the current Cap Reserve payments were calculated, the Loan Servicer must adjust the required monthly Cap Reserve payment to reflect the current market quote. Any funds remaining in the Cap Reserve after purchase of the next Cap may be refunded to the Borrower or used to fund the next Cap Reserve, and the Cap Reserve cycle will begin again to match the term of the new Cap. M. Borrower, Managing Partner And Key Principals Name and Address: Taxpayer ID Number: Borrower: Broadway LaNel, a Limited Partnership 41-1545889 4601 Excelsior Boulevard, Suite 601 Minneapolis, Minnesota 55416 General Partners and Key Principals: Francis W. Lang 473-46-2193 4601 Excelsior Boulevard, Suite 601 Minneapolis, Minnesota 55416 Eugene M. Nelson 474-46-6702 4601 Excelsior Boulevard, Suite 601 Minneapolis, Minnesota 55416 Reimbursement Agreement A-6 (Broadway LaNel Project) Propertv Regional Office Fannie Mae Midwest Regional Office One South Wacker Drive, Suite 1300 Chicago, Illinois 60606-4667 ATTN: Vice President, Multifamily Lending and Investment Reimbursement Agreement A-7 (Broadway LaNel Project) SCHEDULE B TERMINATION FEE Any Termination Fee payable under Section 4.4 of the Agreement shall be equal to the following percentage of the unpaid principal balance of the Loan being prepaid, or, in the case of a substitution of an Alternate Credit Facility for the Credit Enhancement Instrument, the unpaid principal balance of the Loan: First Loan Year 8.50% Second Loan Year 8.00% Third Loan Year 7.00% Fourth Loan Year 6.50% Fifth Loan Year 6.00% Sixth Loan Year 5.00% Seventh Loan Year 4.00% Eighth Loan Year 3.00% Ninth Loan Year 2.00% Tenth Loan Year 1.00% SEE PARAGRAPH 11 OF THE NOTE FOR ALL TERMS AND CONDITIONS APPLICABLE TO PREPAYMENT OF THE LOAN. The Borrower may not have the right to prepay the Loan during certain periods. The Borrower may be required to pay more than the principal amount being prepaid, accrued interest and the Termination Fee. Special timing considerations may also apply. Each Loan Year is a 12 -month period ending on the day before an anniversary date of the Loan. Reimbursement Agreement B-1 (Broadway LaNel Project) SCHEDULE C SCHEDULE OF DEPOSITS TO PRINCIPAL RESERVE FUND Reimbursement Agreement C,_ 1 (Broadway LaNel Project) City of New Hope, Minnesota Multifamily Housing Revenue Refunding Bands FNMA Ann FLOATING RATE (Broadway Apartments Project) Series 2003 Tax Exempt Mortgage (Monthly) ing Date: I interest PMT: I Principal PMT: Exempt Final Maturity: Din Montla 09/15/03 - 2,655,000.00 10/15/03 - 2,655,000.00 11/15/03 - 2,655,000.00 12/15/03 - 2,655,000.00 01/15/04 - 2,655,000.00 02/15/04 - 2,655,000.00 03/15/04 - 2,655,000.00 04/15/04 - 2,655,000.00 05/15/04 - 2,655,000.00 06/15/04 - 2,655,000.00 07/15/04 - 2,655,000.00 08/15/04 - 2,655,000.00 09/15/04 - 2,655,000.00 10/15/04 - 2,655,000.00 11/15/04 - 2,655,000.00 12/15/04 - 2,655,000.00 01/15/05 - 2,655,000.00 02/15/05 - 2,655,000.00 03/15/05 - 2,655,000.00 04/15/05 - 2,655,000.00 05/15/05 - 2,655,000.00 06/15/05 - 2,655,0110.00 07/15/05 - 2,655,000.00 08/15/05 - 2,655,000.00 09/15/05 - 2,655,000.00 10/15/05 - 2,655,000.00 11/15/05 - 2,655,000.00 12/15/05 - 2,655,000.00 01/15/06 - 2,655,000.00 02/15/06 - 2,655,000.00 03/15/06 - 2,655,000.00 04/15/06 - 2,655,000.00 05/15/06 - 2,655,000.00 06/15/06 - 2,655,000.00 07/15/06 - 2,655,000.00 08/15/06 - 2,655,000.00 09/15/06 - 2,655,000.00 10/15/06 - 2,655,000.00 11/15/06 - 2,655,000.00 12/15/06 - 2,655,000.00 01/15/07 - 2,655,000.00 02/15/07 - 2,655,000.00 03/15/07 - 2,655,000.00 04/15/07 - 2,655,000.00 05/15/07 - 2,655,000.00 06/15/07 - 2,655,000.00 07/15/07 - 2,655.000.00 08/15/07 - 2,655,000.00 09/15/07 - 2.655,000.00 10/15/07 - 2,655,000.110 11/15/07 - 2,655,000.00 12/15/07 - 2,655,000.00 01/15/08 - 2,655,000.00 02/15/08 - 2,655,000.00 03/15/08 - 2,655,000.00 04/15/08 - 2,655,000.00 05/15/08 - 2,655,000.00 OW15108 - 2,655,000.00 07/15/08 - 2,655,000.00 08/15/08 - 2,655,000.00 09/15/08 - 2,655,000.00 10/15/08 - 2,655,000.00 11/15/08 - 2,655,000.00 12/15/08 - 2,655,000.00 01/15/09 - 2,655,000.00 02/15/09 - 2,655,000.00 03/15/09 - 2,655,000.00 04/15/09 - 2,655,000.00 05/15/09 - 2,655,000.00 06/15/09 - 2,655,000.00 07/15/09 - 2,655,000.00 08/15/09 - 2,655,000.00 09/15/09 - 2,655,000.00 City of New Hope, Minnesota Multifamily Housing Revenue Refunding Bonds FNMA Ann FLOATING RATE (Broadway Apartments Project) Series 2003 Tax Exempt Mortgage (Monthly) Tax Exempt Mortgage Amount 2,655,000 Closing Date: 8/14/2003 First Interest PMT: 9/15/2003 First Principal PMT: 7/15/2019 Tax Exempt Final Maturity: 7/152033 Term in Months 359 Outstanding Date Principal Princi 1 10/15/09 - 2,655,000.00 11/15/09 - 2,655,000.00 12/15/09 - 2,655,000.00 01/15/10 - 2,655,000.00 02/15/10 - 2,655,0011.00 03/15/10 - 2,655,000.00 04/15/10 - 2,655,000.00 05/15/10 - 2,655,000.00 06/15/10 - 2,655,000.00 07/15/10 - 2,655,000.00 08/15/10 - 2,655,000.00 09/15/10 - 2,655,000.00 10/15/10 - 2,655,000.00 11/15/10 - 2,655,000.00 12/15/10 - 2,655,000.00 01/15/11 - 2,655,000.00 02/15/11 - 2,655,000.00 03/15/11 - 2,655,000.00 04/15/11 - 2,655,000.00 05/15/11 - 2,655,000.00 06/15/11 - 2,655,000.00 07/15/11 - 2,655,000.00 08/15/11 - 2,655,000.00 09/15/11 - 2,655,000.00 10/15/11 - 2,655,000.00 11/15/11 - 2,655,000.00 12/15/11 - 2,655,000.00 01/15/12 - 2,655,000.00 02/15/12 - 21655,000.00 03/15/12 - 2,655,000.00 04/15/12 - 2,655,000.00 05/15/12 - 2,655,000.00 06/15/12 - 2,655,000.00 07/15/12 - 2,655,000.00 08/15/12 - 2,655,000.00 09/15/12 - 2,655,000.01 10/15/12 - 2,655,000.00 11/15/12 - 2,655,000.00 12/15/12 - 2,655,000.00 01/15/13 - 2,655,000.00 02/15/13 - 2,655,000.00 03/15/13 - 2,655,000.00 04/15/13 - 2,655,000.00 05/15/13 - 2,655,000.00 06/15/13 - 2,655,000.00 07/15/13 - 2,655,000.00 08/15/13 - 2,655,000.00 09/15/13 - 2,655,000.00 10/15/13 - 2,655,000.00 11/15/13 - 2,655,000.00 12/15/13 - 2,655,000.00 01/15/14 - 21655,000.00 02/15/14 - 2,655,000.00 03/15/14 - 2,655,000.00 04/15/14 - 2,655.000.00 05/15/14 - 2,655,000.00 06/15/14 - 2,655,000.00 07/15/14 - 2,655,000.00 08/15/14 - 2,655,000.00 09/15/14 - 2,655,000.00 10/15/14 - 2.655,000.00 11/15/14 - 2,655,000.00 12/15/14 - 2,655,000.00 01/15/15 - 2,655,000.00 02/15/15 - 2,655,000.00 03/15/15 - 2,655,000.00 04/15/15 - 2,655,000.00 05/15/15 - 2,655,000.00 06/15/15 - 2,655,000.00 07/15/15 - 2.655,000.00 08/15/15 - 2,655,000.00 09/15/15 - 2,655,000.00 10/15/15 - 2,655,000.00 11/15/15 - 2,655,000.00 City of New Hope, Minnesota Multifamily Housing Revenue Refunding Bonds FNMA Aaa FLOATING RATE (Broadway Apartments Project) Series 2003 Tax Exemot Mortgage fMonthiv) PMT: 1v15115 UI/15/16 - 2,655,000.00 02/15/16 - 2,655,000.00 03/15/16 - 2,655,000.00 04/15/16 - 2,655,000.00 05/15/16 - 2,655,000.00 06/15/16 - 2.655,000.00 07/15/16 - 2,655,000.00 06/15/16 - 2,655,000.00 09/15/16 - 2,65500.00 10/15/16 - 2,635,000.00 11/15/16 - 2,655,000.00 12/15/16 - 2,655,000.00 01/15/17 - 2,655,000.00 02/15/17 - 2,655,000.00 03/15/17 - 2,655,000.00 04/15/17 - 2,655,000.00 05/15/17 - 2,655,000.00 06/15/17 - 2,655,000.00 07/15/17 - 2,655,00.00 08/15/17 - 2,655,000.00 09/15/17 - 2,655,000.00 10/15/17 - 2,655,000.00 11/15/17 - 2,655,000.00 12/15/17 - 2,655,000.00 01/15/18 - 2,655,000.00 02/15/18 - 2,655,010.00 03/15/18 - 2,655,000.00 04/15/18 - 2,655,000.00 05/15/18 - 2,655,000.00 06/15/18 - 2,655,000.00 07/15/18 - 2,655,000.00 08/15/18 - 2,655,000.00 09/15/18 - 2,655,010.00 10/15/18 - 2,655,000.00 11/15/18 - 2.655,000.00 12/15/18 - 2,655,000.00 01/15/19 - 2,655,000.00 02/15/19 - 2,655,00.00 03/15/19 - 2,655,000.00 04/15/19 - 2,655,000.00 05/15/19 - 2,655,000.00 W15/19 - 205,000.00 07/15/19 9,610.28 2,645,389.72 08/15/19 9,662.66 2,635,727.05 09/15/19 9,715.32 2,626,011.73 10/15/19 9,768.27 2,616,243.46 11/15/19 9,821.51 2,606,421.95 12/15/19 9,875.03 2,596,546.92 01/15/20 9,928.85 2,586,618.07 02/15/20 9,982.97 2,576,635.10 03/15/20 10,037.37 2,566,597.73 04/15/20 10,092.08 2,556,505.65 05/15/20 10,147.08 2,546,358.57 06/15/20 10,202.38 2,536.156.19 07/15/20 10,257.98 2,525,898.21 08/15/20 10,313.89 2,515,584.32 09/15/20 10,370.10 2,505,214.22 10/15/20 10,426.62 2,494,787.60 11/15/20 10,483.44 2,484,304.16 12/15/20 10,540.58 2,473,763.58 01/15/21 10.598.02 2,463,165.56 02/15/21 10,655.78 2.452,509.78 03/15/21 10,713.86 2,441,795.92 04/15/21 10,772.25 2,431,023.67 05/15/21 10,830.96 2,420,192.72 06/15/21 10,889.98 2,409,302.73 07/15/21 10,949.33 2,398,353.40 08/15/21 11,009.01 2,387,344.39 09/15/21 11,069.01 2,376,275.38 10/15/21 11,129.33 2.365,146.05 11/15/21 11,189.99 2,353,956.06 12/15/21 11,250.97 2,342,705.09 01/15/22 11,312.29 2,331,392.79 City of New Hope, Minnesota Multifamily Housing Revenue Refunding Bonds FNMA Ann FLOATING RATE (Broadway Apartments Project) Series 2003 Tax Exempt Mortgage (Monthly) Tax Exempt Mortgage Amount: 2,655,000 Closing Date: 8/142003 First Interest PMT: 9/152003 First Principal PMT: 7/152019 Tax Exempt Final Maturity: 7/152033 Term in Months 359 07/15/22 Outstanding Date Principal Principal 02/15/22 11,373.94 2,320,018.85 U3/1522 11,435.93 2,308,582.92 04/15/22 11,498.26 2,297,084.66 05/15/22 11,560.92 2.285,523.74 06/15/22 11,623.93 2,273,899.81 07/15/22 11,687.28 2,262,212.53 08/15/22 11,750.98 2,250,461.55 09/15/22 11,815.02 2,238,646.53 10/15/22 11,879.41 2,226,767.12 11/15/22 11,944.15 2,214,822.97 12/15/22 12,009.25 2,202,813.72 01/15/23 12,074.70 2.190,739.02 02/15/23 12,140.51 2,178,598.51 03/15/23 12,206.67 2,166,391.84 - 04/15/23 12,273.20 2,154,118.64 05/15/23 12,340.09 2,141,778.55 06/15/23 12,407.34 2,129,371.21 07/1523 12,474.96 2,116,896.25 08/15/23 12,542.95 2,104,353.30 09/15/23 12,611.31 2,091,741.99 10/15/23 12,680.04 2,079,061.95 11/15/23 12,749.15 2,066,312.80 12/15/23 12,818.63 2,053,494.17 01/15/24 12,888.49 2,040,605.68 02/1524 12,958.73 2,027,646.95 03/15/24 13,029.36 2,014,617.59 04/15/24 13,100.37 2,001,517.22 05/15/74 13,171.77 1,988,345.45 06/15/24 13,243.55 1,975.101.90 07/15/24 13,315.73 1,961,786.17 08/15/24 13,388.30 1,948,397.87 09/15/24 13,461.27 1,934,936.60 10/1524 13,534.63 1,921,401.97 11/15/24 13,608.39 1,907,793.58 12/1524 13,682.56 1,894,111.02 01/15/25 13,757.13 1,880,353.89 02/15/25 13,832.11 - 1,866,52179 03/15/25 13,907.49 1,852,614.29 04/15/25 13,983.29 1,838,631.01 05/15/25 14,059.50 1,824,571.51 06/15/25 14,136.12 1,810,435.39 07/15/25 14,213.16 1,796,222.23 08/15/25 14,290.62 1,781,931.61 09/15/25 14,368.51 1,767,563.10 10/15/25 14,446.82 1,753,116.28 11/15/25 14,525.55 1,738,590.73 12/15/25 14,604.72 1,723,986.02 01/15/26 14,684.31 1,709,301.71 02/15/26 14,764.34 1,694,537.37 03/15/26 14,844.81 1,679,692.56 04/15/26 14,925.71 1,664,766.85 05/15/26 15,007.06 1,649,759.80 06/15/26 15,088.84 1,634,670.95 07/15/26 15,171.08 1,619,499.87 08/15/26 15,253.76 1.604,246.11 09/15/26 15,336.89 1,588,909.22 10/15/26 15,420.48 1,573,488.74 11/15/26 15,504.52 1,557,984.22 12/15/26 15,589.02 1,542,395.20 01/15/27 15,673.98 1,526,721.22 02/15/27 15,75940 1,510,961.82 03/15/27 15,845.29 1,495,116.52 04/15/27 15,931.65 1,479,184.87 05/15/27 16,018.48 1,463,166.40 06/15/27 16,105.78 1,447,060.62 07/15/27 16,193.55 1,430,867.06 08/15/27 16,281.81 1,414,585.26 09/1527 16,370.54 1,398,214.71 10/15/27 16,459.76 1.381,754.95 -- 11/15/27 16,549.47 1,365,205.48 12/15/27 16,639.66 1,348,565.81 01/15/28 16,730.35 1,331,835.46 02/15/28 16,821.53 1,315,013.93 03/15/28 16,913.21 1,298,100.72 City of New Hope, Minnesota Multifamily Housing Revenue Refunding Bonds FNMA Ann FLOATING RATE (Broadway Apartments Project) Series 2003 Tax Exempt Mortgage (MonthM1) t Principal PMT: Exempt Final Maturity: 17,005.39 U3/13128 17,098.07 1,263,997.27 06/15/28 17,191.25 1,246,806.02 07/15/28 17.284.94 1.229,521.08 08/15/28 17,379.14 1,212,141.93 09/15/28 17,473.86 1,194,668.07 10/15/28 17,569.09 1,177,098.98 11/15/28 17,664.85 1,159,434.13 12/15/28 17,761.12 1,141,673.02 01/15/29 17,857.92 1,123,815.10 02/15/29 17,955.24 1,105,859.86 03/15/29 18,053.10 1,087,806.76 04/15/29 18,151.49 1,069,655.27 05/15/29 18,250.41 1,051,404.86 06/15/29 18,349.88 1,033,054.98 07/15/29 18,449.88 1,014,605.09 08/15/29 18,550.44 996,054.66 09/15/29 18,651.54 977,403.12 10/15/29 18,753.19 958,649.93 11/15/29 18,855.39 939,794.54 12/15/29 18.958.15 920,836.39 01/15/30 19,061.48 901,774.91 02/15/30 19,165.36 882,609.55 03/15/30 19,269.81 863,339.74 04/15/30 19,374.83 843,966.90 05/15/30 19,480.43 824,484.48 06/15/30 19,586.59 804,897.88 07/15/30 19,693.34 785.204.54 08/15/30 19,800.67 765,403.87 09/15/30 19,908.58 745,495.29 10/15/30 20,017.09 725,478.20 11/15/30 20,126.18 705,352.02 17/15/30 20,235.87 685,116.16 01/15/31 20,346.15 664,770.01 02/15/31 20,457.04 644,312.97 03/15/31 20,568.53 623,744.44 04/15/31 20,680.63 603,063.81 05/15/31 20,793.34 582,270.48 O6/15/31 20,906.66 561,363.82 07/15/31 21,020.60 540,343.21 08/15/31 21,135.16 519,208.05 09/15/31 21,250.35 497,957.70 10/15/31 21,366.17 476.591.53 11/15/31 21,482.61 455,108.92 12/15/31 21,599.69 433,509.23 01/15/32 21,717.41 411,791.82 02/15/32 21,835.77 389,956.05 03/15/32 21,954.77 368,001.28 04/15/32 22,074.43 345,926.85 05/15/32 22,194.73 323,732.12 06/15/32 22,315.69 301.416.42 07/15/32 22,437.32 278,979.11 08/15/32 22,559.60 256,419.51 09/15/32 22,682.55 233,736.96 10/15/32 22.806.17 210,930.79 11/15/32 22,930.46 188,000.33 12/15/32 23,055.43 164,944.90 01/15/33 23,181.08 141,763.81 02/15/33 23,307.42 118,456.39 03/15/33 23,434.45 95,021.95 04/15/33 23,562.16 71,459.78 05/15/33 23,690.58 47,769.20 06/15/33 23,819.69 23,949.51 07/15/33 23,949.51 (0.00) Totals: 21655,000.00 EXECUTION COPY ASSIGNMENT AND INTERCREDITOR AGREEMENT THIS ASSIGNMENT AND INTERCREDITOR AGREEMENT ("Assignment") dated as of August 1, 2003 is among the CITY OF NEW HOPE, MINNESOTA ("Issuer"), a municipal corporation and political subdivision of the State of Minnesota, U.S. BANK NATIONAL ASSOCIATION ("Trustee"), not in its individual or corporate capacity, but solely as Trustee under the Indenture, a national banking association, and FANNIE MAE ("Fannie Mae"), a corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. § 1716, et sec., as amended and is acknowledged, accepted and agreed to by BROADWAY LaNEL, A LIMITED PARTNERSHIP ("Borrower"), a Minnesota limited partnership. RECITALS A. Borrower has requested Issuer to issue its $2,655,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 ("Bonds") and lend the proceeds of the Bonds to Borrower in the form of a mortgage loan ("Loan"). B. Issuer is issuing and selling the Bonds under the Indenture and depositing the proceeds of the Bonds with Bond Trustee to be used to fund the Loan. C. The Loan is (a) evidenced by the Note and (b) secured by the Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Financing Statement, dated as of August 1, 2003, recorded in the office of the Hennepin County Recorder's Office as Document No. and the office of the Hennepin County Registrar of Titles as Document No. (the "Security Instrument"). The purpose of the Loan is to refinance the development by the Borrower of a certain multifamily housing apartment building within the City of New Hope, Minnesota, as more particularly described on Exhibit A attached hereto and incorporated herein by reference ("Mortgaged Property"). ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Incorporation of Recitals. In addition to the recitals set out above, the Recitals to the Indenture are incorporated into and made a part of this Agreement. SECTION 1.2 Defined Terms. All capitalized terms used in this Assignment have the meanings given to those terms in the Indenture or elsewhere in this Assignment unless the context or use clearly indicates a different meaning. SECTION 1.3 Rules of Construction. The rules of construction set forth in Section 1.2 of the Indenture shall apply to this Assignment in their entirety, except that in applying such rules, the term "Assignment" shall be substituted for the term "Indenture". Assignment and Intercreditor Agreement (Broadway LaNel Project) SECTION 1.4 Interpretation. Each of the parties acknowledges that it and its counsel participated in the drafting and revision of this Assignment. Accordingly, the parties agree that any rule of construction which disfavors the drafting party shall not apply in the interpretation of this Assignment. SECTION 1.5 Effective Date. This Assignment shall be effective on the Closing Date, immediately upon the effectiveness of the Indenture. ARTICLE II TRANSFER OF ASSIGNED RIGHTS SECTION 2.1 Assignment of Assigned Rights to Fannie Mae and the Trustee. The Issuer irrevocably and absolutely assigns, transfers, conveys and delivers to Fannie Mae and the Trustee, but without recourse to the Issuer, all of the Issuer's right, title and interest in and to (i) the Note, the Security Instrument, each of the other Loan Documents and the Financing Agreement (collectively, "Assigned Documents"), (ii) all the real and personal property described in the Assigned Documents and (iii) all proceeds, products, substitutions, additions and replacements of any collateral now or hereafter mortgaged, assigned or pledged under any of the Assigned Documents; in all cases whether now existing or arising in the future; provided, however that the Reserved Rights of the Issuer are excepted from such assignment and transfer (collectively, "Assigned Rights"). Each Assignee acknowledges receipt of, and accepts, and shall hold, the Assigned Rights, as its interest may appear. SECTION 2.2 Acknowledgement of Exclusion from Assignment. The Borrower, the Issuer, Fannie Mae and the Trustee specifically agree that the Regulatory Agreement is not an Assigned Document; provided, however, that Fannie Mae, as a third party beneficiary, shall have the right to enforce the Regulatory Agreement in accordance with the provisions of the Regulatory Agreement. SECTION 2.3 Limitations on Issuer. From and after the effective date of this Assignment, the Issuer shall not have, except with respect to the Reserved Rights, any right, power or authority to exercise any of the Assigned Rights or take any other action with respect to the Assigned Documents or the Assigned Rights, including waiving or releasing the Borrower from any default under any of the Assigned Documents, consenting to any amendment, supplement to, or restatement of any Loan Document and accelerating or otherwise enforcing payment or seeking other remedies with respect to the Loan. SECTION 2.4 Power of Attorney. Subject to the Reserved Rights of the Issuer, the Issuer agrees that Fannie Mae and the Trustee, each acting alone, in its own name or in the name of the Issuer, may enforce all of the Assigned Rights and all obligations of the Borrower under the Assigned Documents, without regard to whether the Issuer is in default under the Assigned Documents or under this Assignment. In order to implement the foregoing, the Issuer appoints each of Fannie Mae and the Trustee, their respective successors and assigns, as the Issuer's true and lawful attorney-in-fact with power of substitution to do any or all of the foregoing in the Assignment and Intercreditor Agreement 2 (Broadway LaNel Project) r name, place and stead of the Issuer. This power of attorney, being coupled with an interest, is irrevocable as long as this Assignment remains in effect. SECTION 2.5 Disclaimer of Assumption of Obligations. Neither Fannie Mae nor the Trustee shall be obligated by reason of this Assignment or otherwise to perform or be responsible for the performance of any of the obligations of the Issuer under the Assigned Documents. SECTION 2.6 Confirmation of Assignment and Transfer. In order to confirm and evidence the assignment set out in Section 2. 1, the Issuer has delivered to Fannie Mae and the Trustee and Fannie Mae and the Trustee acknowledge receipt of, a signed counterpart of each of the Assigned Documents (other than the Note, which is a single original delivered to the custody of Fannie Mae as provided in Section 4.1) and has delivered to Fannie Mae and the Trustee UCC financing statements covering the Issuer's interest in the Assigned Rights in form sufficient for filing with the Minnesota Secretary of State's Office and the Hennepin County, Minnesota Recorder, naming Fannie Mae and the Trustee as secured parties. SECTION 2.7 Further Assurances. The Issuer agrees to cooperate with the Borrower, Fannie Mae and the Trustee in their defenses of Fannie Mae's and the Trustee's interests in the Assigned Rights against the claims and demands of all Persons. The Issuer will execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such additional and supplemental agreements, financing statements, continuation statements and other instruments and documents, do such further acts, and make such further transfers as the Trustee or Fannie Mae may reasonably request to effectuate the purpose and intent of this Assignment. ARTICLE III LOAN SERVICING SECTION 3.1 Servicing. So long as the Assigned Rights have not transferred to the Trustee pursuant to Section 5.1, Fannie Mae shall have the sole and exclusive right, without the consent of the Issuer, the Trustee or the Borrower, to (i) arrange for the servicing of the Assigned Rights, but excluding all other Reserved Rights (ii) appoint and reappoint the Loan Servicer and (iii) terminate the Loan Servicer (with or without cause), all on such terms and conditions as Fannie Mae may determine from time to time. Loan servicing shall include, but not be limited to, the power and authority to (a) take any action, make any decision, exercise any power or authority to act with respect to the Assigned Rights, (b) establish and maintain custodial and other accounts for the deposit of funds payable by the Borrower and (c) collect, apply and disburse payments of principal of, interest on and premium on the Loan and all other sums payable from time to time by the Borrower under any of the Loan Documents or the Financing Agreement, all in accordance with the applicable documents. None of the Issuer, the Trustee or the Borrower shall have any right under, or be a third party beneficiary of, the Servicing Agreement. Neither Fannie Mae, the Issuer nor the Trustee shall have any obligation to pay a servicing fee to the Loan Servicer. Assignment and Intercreditor Agreement 3 (Broadway LaNel Project) SECTION 3.2 Monitoring. The Borrower shall furnish to the Loan Servicer copies of all reports regarding the Mortgaged Property required to be filed by the Borrower pursuant to the Financing Agreement or the Regulatory Agreement. Neither the Trustee nor the Loan Servicer shall have any duty or obligation to analyze or review any such reports for determining whether or not the Borrower or the Mortgaged Property is in compliance, with the requirements of the Code for maintaining the excludability from gross income, for federal income tax purposes, of the interest payable on the Bonds. ARTICLE IV CONTROL OF ASSIGNED RIGHTS SECTION 4.1 Possession of Note and Securitv Instrument. Subject to the provisions of Section 5.1, Fannie Mae shall hold the original Note and the recorded Security Instrument. The originals (or, where recorded, executed copies) of all other Loan Documents, shall also be delivered to and held by Fannie Mae. Fannie Mae acknowledges receipt of the original executed Note, endorsed to the order of Fannie Mae and the Trustee, as their interests may appear. SECTION 4.2 Exclusive Exercise of Assigned Rights by Fannie Mae. Except only as provided in Section 5.1, Fannie Mae shall have and may exercise all of the Assigned Rights to the exclusion of the Trustee and in the same manner and with the same right, power and authority to act as Fannie Mae would have if Fannie Mae were the sole owner of the Loan and were the sole holder of the Note and the Security Instrument. In exercising the Assigned Rights, Fannie Mae shall not be an agent of the Issuer or the Trustee. Neither the Issuer nor the Trustee shall be liable for any action taken or not taken by Fannie Mae in the exercise of the Assigned Rights or the Loan Servicer in the servicing of the Assigned Rights. SECTION 4.3 Disposition of Loan. Unless the Assigned Rights are transferred to the Trustee pursuant to Section 5.1, the Trustee shall not, without the prior written consent of Fannie Mae, dispose of the Loan, transfer the Note or any other Loan Document or any interest in the Note or any Loan Document, other than to Fannie Mae as provided in Sections 4.4 and 4.5, a successor Trustee pursuant to the Indenture or to the Issuer pursuant to Section 10.11 of this Assignment. SECTION 4.4 Assignment of Loan Without Payment or Redemption of Bonds. Fannie Mae shall have the right, with respect to the Loan, without making an Advance under the Credit Enhancement Instrument, but only upon filing with the Trustee a certification reaffirming Fannie Mae's obligations under the Credit Enhancement Instrument, to instruct the Trustee in writing to assign the Note, the Security Instrument and the other Loan Documents to Fannie Mae, in which event the Trustee shall (i) endorse the Note to Fannie Mae and assign (in recordable form) the Security Instrument, (ii) assign (in recordable form) all other Loan Documents to Fannie Mae and (iii) execute all such documents as are necessary to legally and validly effectuate the assignments provided for in the preceding clauses (i) and (ii). The Trustee's assignments to Fannie Mae pursuant to this Section 4.4 shall be without recourse or warranty except that the Trustee shall represent and warrant in connection therewith (A) that the Trustee has not previously endorsed or assigned any such documents or instruments and (B) that Assignment and Intercreditor Agreement 4 (Broadway LaNel Project) the Trustee has authority to endorse and assign such documents and instruments and such endorsements and assignment have been duly authorized. Fannie Mae shall hold the Note and the Mortgage for the benefit of the Bondholders. If, following such assignments, the Assigned Rights are transferred to the Trustee pursuant to Section 5.1, all rights and interests assigned by the Trustee to Fannie Mae pursuant to this Section shall automatically without any further action on the part of the Trustee or Fannie Mae revert to the Trustee. Notwithstanding the foregoing, Fannie Mae agrees to take such action and to execute and deliver and to facilitate the recordation of such documents provided to Fannie Mae as may be reasonably necessary to evidence the reversion of all rights and interests originally assigned by the Trustee to Fannie Mae pursuant to this Section. No assignment pursuant to this Section shall affect Fannie Mae's obligations under the Credit Enhancement Instrument. SECTION 4.5 Assignment of Assigned Rights Upon Payment or Redemption of Bonds in Whole. In the event Fannie Mae makes an Advance under the Credit Enhancement Instrument with respect to the payment or redemption of the Bonds Outstanding in whole, unless otherwise determined by Fannie Mae: (a) all of the Trustee's right, title and interest in and to the Assigned Rights shall transfer to Fannie Mae automatically, without any further action on the part of the Trustee or Fannie Mae; and (b) the Trustee shall (i) endorse the Note to Fannie Mae and assign (in recordable form) and deliver the Security Instrument to Fannie Mae, (ii) assign (in recordable form) all other Loan Documents and the Financing Agreement to Fannie Mae and (iii) execute and deliver all such other documents as are necessary to legally and validly effectuate the assignments provided for in the preceding clauses (i) and (ii). The Trustee's assignments to Fannie Mae pursuant to this Section shall be without recourse or warranty except that the Trustee shall represent and warrant in connection therewith (A) that the Trustee has not previously endorsed or assigned any such documents or instruments and (B) that the Trustee has authority to endorse and assign such documents and instruments. SECTION 4.6 Consenuences of Foreclosure. In the event that, following a default under the Loan, the (i) Mortgaged Property is acquired by either or both of the Assignees, or their nominees, as a result of a foreclosure or the acceptance of a deed in lieu of foreclosure or comparable conversion of the Loan or other enforcement provisions of the Security Instrument, (ii) the Bonds are not redeemed with funds provided under the Credit Enhancement Instrument and (iii) Fannie Mae has any obligation under the Credit Enhancement Instrument and no Wrongful Dishonor exists, the Mortgaged Property shall be conveyed to Fannie Mae or its nominee, and all decisions thereafter with respect to the Mortgaged Property (including, without limitation, all decisions with respect to the management, operation, maintenance and sale of the Mortgaged Property — and the price and terms of such sale — the payment or contesting of real estate taxes, rebuilding or restoration after damage, destruction or taking, alterations, improvements, insurance coverage, litigation and conversion to a cooperative or condominium), shall be made solely by Fannie Mae. Assignment and Intercreditor Agreement 5 (Broadway LaNel Project) r— SECTION 4.7 Amendments to Loan Documents. Unless the Assigned Rights are transferred to the Trustee pursuant to Section 5.1, the provisions of this Section shall apply to any amendment, supplement to or restatement of the Loan Documents. (a) Right to Amend, Supplement or Restate Loan Documents. Fannie Mae shall have the right to amend, supplement or restate the Loan Documents with the Borrower and to exchange any of the Loan Documents for new Loan Documents relating to the Mortgaged Property (collectively, "Amended Loan Documents"). If the execution of any Amended Loan Documents would: (1) Result in an amendment of the Credit Facility, Fannie Mae may not proceed with such execution unless Fannie Mae provides to the Trustee an Opinion of Counsel to Fannie Mae, who may be an employee of Fannie Mae, to the effect that the modified Credit Facility is a valid and binding obligation of Fannie Mae, subject to any applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally, and general equitable principles and other customary exceptions. (2) Change the payment terms of the Loan, Fannie Mae must provide the Trustee a written confirmation from the Rating Agency that the rating to be in effect with respect to the Bonds from and after the execution of such Amended Loan Documents will not be lower than the rating then in effect for the Bonds. (3) Change the outstanding principal amount, the interest rate, the maturity date, the due date for the payment of interest, the terms of mandatory prepayment or governing law or jurisdiction provisions of the Note, Fannie Mae must obtain the Trustee's prior written consent to such change. (b) Trustee's Consent. Unless the Assigned Rights are transferred to the Trustee pursuant to Section 5.1: (1) unless directed to do so in writing by Fannie Mae, the Trustee shall not consent to any proposed amendment, supplement to or restatement of, any of the Loan Documents or waive any default by the Borrower under any of the Loan Documents; and (2) if directed to do so in writing by Fannie Mae, the Trustee shall amend, supplement or restate the Loan Documents, or waive any default by the Borrower under any of the Loan Documents; provided, however, that no such amendment, supplement or restatement shall change, without the Trustee's prior written consent, the outstanding principal amount, the interest rate, the maturity date, the due date for the payment of interest, the terms of mandatory prepayment or governing law or jurisdiction provisions of the Note. SECTION 4.8 New Borrower. In the event Fannie Mae forecloses the Security Instrument, or accepts a deed in lieu of foreclosure or comparable conversion of the Mortgaged Assignment and Intercreditor Agreement 6 (Broadway LaNel Project) Property, Fannie Mae shall have the right to enter into, or cause to be executed, Amended Loan r Documents or exchange the Loan Documents for Amended Loan Documents by a person other than the Borrower ("New Borrower"). Except in the event of a transfer of the Mortgaged Property to Fannie Mae, Fannie Mae shall not execute any Amended Loan Documents having the effect of substituting a New Borrower as the Borrower, unless Fannie Mae first provides each of the following to the Trustee: (a) written evidence that the New Borrower has executed and recorded, as applicable, documents, acceptable to the Issuer and Fannie Mae, substantially in the forms of the Financing Agreement and the Regulatory Agreement (or executed and recorded an assumption, acceptable to the Issuer and Fannie Mae, of all of the applicable Borrower's obligations under the Financing Agreement and the Regulatory Agreement) and that the Credit Facility Documents and the Credit Facility, if required, have been modified to be applicable to the new mortgage loan; (b) from the Rating Agency written confirmation that the rating to be in effect with respect to the Bonds from and after delivery to the Trustee of the new mortgage note and mortgage and the modified Credit Facility Documents and modified Credit Facility will not be lower than the rating then in effect for the Bonds; (c) an opinion of Bond Counsel to the effect that such exchange and modification, in and of itself, will not affect the excludability of the interest payable on the Bonds from gross income for federal income tax purposes; and (d) from the Issuer, the consent (if any) required by the Regulatory Agreement. SECTION 4.9 Fannie Mae Assignment. Fannie Mae shall have the right, in its sole discretion, to assign, sell or transfer its right, title and interest in, to and under the Loan Documents, the Assigned Rights and this Assignment to any Person. ARTICLE V TRANSFER OF ASSIGNED RIGHTS TO TRUSTEE SECTION 5.1 Transfer of Assigned Rights to Trustee. If either (i) Fannie Mae has no further obligation under the Credit Enhancement Instrument and all obligations of the Borrower to Fannie Mae under the Credit Facility Documents and the other Borrower Documents have been satisfied in full; or (ii) a Wrongful Dishonor occurs and continues for more than five Business Days after the Issuer or the Trustee gives written notice of such Wrongful Dishonor specifying such failure and requesting that it be remedied, the Assigned Rights shall transfer automatically to the Trustee, without any further action on the part of the Trustee or Fannie Mae. Fannie Mae shall promptly transfer possession of the original Note and the recorded Security Instrument and the other Assigned Documents to the Trustee. Fannie Mae shall also take such action and execute and deliver and facilitate the filing and recordation of such documents provided to Fannie Mae as may be reasonably necessary to evidence the transfer of the Assigned Rights to the Trustee and the assignment of the Assigned Documents to the Trustee. Fannie Mae's assignments to the Trustee pursuant to this Section shall be without recourse or warranty Assignment and Intercreditor Agreement 7 (Broadway LaNel Project) except that Fannie Mae shall represent and warrant in connection therewith (i) that Fannie Mae has not previously endorsed or assigned any such documents or instruments and (ii) that Fannie Mae has authority to endorse and assign such documents and instruments. SECTION 5.2 Exercise of Assigned Rights after Transfer to Trustee. If the Assigned Rights transfer to the Trustee pursuant to Section 5.1: (a) the Trustee (alone or, at its election, with the Issuer) may exercise the Assigned Rights and all other rights, powers, options, privileges and remedies provided to the Trustee under this Assignment, to the exclusion of Fannie Mae; (b) all obligations of the Borrower under the Credit Facility Documents shall continue to be secured by the Security Instrument on an equal and ratable basis with the obligations of the Borrower under the Loan Documents; and (c) if, at such time, Fannie Mae has a lien on any Bonds pursuant to the Pledge Agreement, the Trustee shall have, in its exercise of any of the rights, powers, options, privileges and remedies provided for in this Assignment pursuant to Section 5.1, the same fiduciary obligations to Fannie Mae, as secured party, as the Trustee has to the Bondholders. Notwithstanding the foregoing, nothing in this Assignment or in any Loan Document shall limit or control the exercise by Fannie Mae of the rights granted by the Borrower to Fannie Mae as "Lender" under the Security Instrument. Each of the Issuer, the Trustee and the Borrower recognizes and confirms the rights granted by the Borrower to Fannie Mae as "Lender" under the Security Instrument. If and for so long as Fannie Mae continues to have any further obligation under the Credit Enhancement Instrument, Fannie Mae shall be entitled to receive all notices pursuant to this Assignment, the Indenture and the Loan Documents. ARTICLE VI TRUSTEE SECTION 6.1 Certain Notices to Fannie Mae and Loan Servicer. The Trustee shall give the following notices in writing: (a) The Trustee shall give prompt written notice to Fannie Mae and the Loan Servicer of the occurrence of any Event of Default known to it under the Indenture, the Credit Enhancement Instrument, the Financing Agreement, the Note, the Security Instrument or any other Transaction Document, and of any event known to it which would become such an Event of Default upon the giving of notice, the lapse of time or both, specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with respect to such events. (b) During any Weekly Variable Rate Period, the Trustee shall give written notice to the Loan Servicer of the amount of each interest payment due on the Bonds. The Trustee shall give such notice as practicable but not later than the last Wednesday before the Interest Payment Assignment and Intercreditor Agreement 8 (Broadway LaNel Project) Date of each month, or in the event such Wednesday is not a Business Day, the next Business Day. SECTION 6.2 Power of Attorney. The Trustee, for itself and for any successor or replacement Trustee, irrevocably and unconditionally constitutes and appoints Fannie Mae as the Trustee's true and lawful attorney-in-fact, with full power of substitution, to execute, acknowledge and deliver any notice, document, certificate, paper, instrument or pleading and to do in the Trustee's name, place and stead, all such acts, things and deeds for and on behalf of the Trustee under this Assignment and/or any of the Assigned Documents which the Trustee could or might do or which may be necessary, desirable or convenient in Fannie Mae's sole discretion to effectuate the purposes of this Assignment and/or any Assigned Document. The power of attorney and the rights, remedies, power and authority granted by the Trustee to Fannie Mae in this Assignment are hereby declared by the Trustee to be coupled with an interest and irrevocable until the Reimbursement Agreement is no longer in full force and effect or until the Assigned Rights are transferred to the Trustee pursuant to Section 5. 1, and may be exercised by Fannie Mae in the name of Fannie Mae, in the name of the Trustee or in the names of Fannie Mae and the Trustee, as Fannie Mae may at any time or from time to time determine, and the Trustee hereby confirms and ratifies all acts and deeds taken or to be taken by Fannie Mae as attorney-in-fact. SECTION 6.3 Enforcement. Notwithstanding any other provision in this Assignment to the contrary, so long as no transfer of the Assigned Rights pursuant to Section 5.1 has occurred, the Trustee shall not exercise any remedy or direct any proceeding under the Indenture, the Loan Documents or the Financing Agreement . other than (i) to enforce rights under the Credit Enhancement Instrument, (ii) to enforce the tax covenants in the Indenture, the Tax Certificate and the Financing Agreement provided that the Trustee does not enforce any right it may have for monetary damages, and (iii) as otherwise permitted under the Indenture or the Financing Agreement. The Trustee shall provide written notice to Fannie Mae, the Issuer and the Loan Servicer immediately upon taking any action at law or in equity to exercise any remedy or direct any proceeding under the Indenture or the Financing Agreement. SECTION 6.4 Bailee: The Trustee agrees to act as bailee and agent on behalf of Fannie Mae in relation to the Borrower's pledge and grant of a security interest pursuant to Section 2.6 of the Reimbursement Agreement to the extent, if any, the Borrower retains an interest in all Funds, Accounts and Investments held by the Trustee under the Indenture. SECTION 6.5 Records and Books of Account. The Trustee shall keep, or cause to be kept, proper records and books of account in which complete and accurate entries shall be made of all of its transactions relating to the Loan and the Assigned Documents, including without limitation, payments made under the Loan and all funds and accounts established by or held pursuant to the Indenture with respect to the Loan. SECTION 6.6 Examination of Records and Books of Account. The Trustee agrees that all records and books of account in its possession relating to the Loan, the Assigned Documents and all records and books of account regarding the receipt and distribution of payments on the Loan and the Borrower's compliance with the terms and conditions of the Loan Assignment and Intercreditor Agreement 9 (Broadway LaNel Project) and the Assigned Documents, shall be open to inspection, examination and audit at any reasonable time by the Issuer, the Borrower, the Loan Servicer and Fannie Mae or by such accountants or other agents as the Issuer, the Borrower, the Loan Servicer or Fannie Mae may from time to time designate. In addition, the Issuer, the Borrower, the Loan Servicer and Fannie Mae shall have the right, at any time and from time to time, to require the Trustee to furnish such documents to the Issuer, the Borrower, the Loan Servicer and Fannie Mae, at the Borrower's expense, as the Issuer, the Borrower, the Loan Servicer or Fannie Mae, as the case may be, from time to time, deems reasonably necessary in order to determine that the provisions of the Loan have been complied with. ARTICLE VII INSURANCE AND CONDEMNATION SECTION 7.1 Insurance. So long as no transfer of the Assigned Rights pursuant to Section 5.1 has occurred, (i) Fannie Mae shall be named as the sole mortgagee on all fire, extended coverage and other hazard insurance policies required under the Loan Documents ("Insurance Policies"), (ii) all such proceeds shall be held and applied by Fannie Mae in accordance with the Security Instrument and the other Loan Documents, and (iii) the Borrower, as mortgagor, shall deal solely with Fannie Mae or the Loan Servicer, as Fannie Mae shall direct, under the Loan Documents with respect to all matters related to the Insurance Policies. If the Assigned Rights transfer to the Trustee pursuant to Section 5. 1, (1) the Trustee shall be named as the sole mortgagee on all Insurance Policies, (2) all such proceeds shall be held and applied by the Trustee in accordance with the Security Instrument and the other Loan Documents, and (3) the Borrower, as mortgagor, shall deal solely with the Trustee under the Loan Documents with respect to all matters related to the Insurance Policies. The Borrower agrees that Fannie Mae, the Trustee and the Issuer shall each be a named insured on all liability insurance policies required under the Loan Documents. Fannie Mae and the Trustee shall execute, acknowledge and deliver all such documents as shall be necessary to evidence or confirm the provisions of this Section. Neither Fannie Mae, the Loan Servicer, the Issuer nor the Trustee shall have any liability under this Assignment or otherwise for any application of insurance proceeds. SECTION 7.2 Condemnation. So long as no transfer of the Assigned Rights pursuant to Section 5.1 has occurred, (i) Fannie Mae shall be the sole payee with respect to all condemnation awards, (ii) all proceeds of any condemnation award shall be applied in any manner permitted by the Security Instrument, as directed by Fannie Mae, in its discretion, and (iii) the Borrower, as mortgagor, shall deal solely with Fannie Mae or the Loan Servicer, as Fannie Mae shall direct, under the Loan Documents. If the Assigned Rights transfer to the Trustee pursuant to Section 5.1, (1) the Trustee shall be the sole payee with respect to all condemnation awards, (2) all proceeds of any condemnation award shall be applied in any manner permitted by the Security Instrument, as directed by the Trustee, in its discretion, and (3) the Borrower, as mortgagor, shall deal solely with the Trustee under the Loan Documents. Fannie Mae and the Trustee shall execute, acknowledge and deliver all such documents as shall be necessary to evidence or confirm the provisions of this Section. Neither Fannie Mae, the Loan Servicer, the Issuer nor the Trustee shall have any liability under this Assignment or otherwise for any application of condemnation award proceeds. Assignment and Intercreditor Agreement 1 O (Broadway LaNel Project) ARTICLE VIII REGULATORY AGREEMENT SECTION 8.1 Monitoring of Regulator, Agreement. The Issuer shall have the sole obligation to monitor compliance with the Regulatory Agreement. SECTION 8.2 Termination of Regulatory Agreement. Upon expiration or termination of the Regulatory Agreement pursuant to its terms, the Issuer, in its capacity as the Issuer, shall promptly notify Fannie Mae of the termination of the Regulatory Agreement, SECTION 8.3 Right To Enforce Compliance. The Issuer, the Trustee, the Loan Servicer and Fannie Mae shall each have the right, but not the obligation, to enforce compliance by the Borrower and its successors as subsequent owners of the Mortgaged Property with the Regulatory Agreement. Notwithstanding the foregoing, the Trustee agrees that it will, subject to the provisions of the Indenture and Article IX, at the direction of the Issuer, take such action as may be required to achieve compliance by the Borrower with the Regulatory Agreement. SECTION 8.4 Notices of Violations of the Regulatory Agreement. Promptly upon determining that a violation of the Regulatory Agreement has occurred, the Issuer shall send written notice of such violation to Fannie Mae, the Loan Servicer and the Trustee. The Issuer's notice shall set out the nature of the violation and state whether the violation has been cured or has not been cured but is curable within a reasonable period of time, or is incurable and contain a copy of the Issuer's notice of violation to the Borrower. If the Borrower fails to cure the violation to the reasonable satisfaction of the Issuer within the time period set forth in the Issuer's notice of the violation to the Borrower (which period shall not be shorter than any applicable period set out in the Regulatory Agreement for the cure of such violation) and if, as a consequence of such failure, the Issuer declares an Event of Default under the Regulatory Agreement, the Issuer shall provide prompt written notice to Fannie Mae, the Loan Servicer and the Trustee of the Event of Default (together with a copy of any notice of the Event of Default provided to the Borrower). SECTION 8.5 Cure Rights. Each of Fannie Mae, the Loan Servicer and the Trustee shall have the right, but not the obligation, to cure any default by the Borrower under the Regulatory Agreement. Such cure may be made even after the Issuer's notice of declaration of an Event of Default under the Regulatory Agreement, provided, however, such cure right shall not affect any requirements of the Code and the Act. Fannie Mae shall have the additional right, but not the obligation, to cure any violation of the Regulatory Agreement by assumption of the management and operation of the Mortgaged Property, directly or through any Fannie Mae approved seller -servicer or a receiver under the Security Instrument. Any operation of the Mortgaged Property by Fannie Mae or its successors or assigns shall be in accordance with the Regulatory Agreement, but only so long as the Regulatory Agreement remains in effect. Assignment and [ntercreditor Agreement 11 (Broadway LaNel Project) r ARTICLE IX ISSUER'S COVENANTS SECTION 9.1 Limitations on Issuer. The Issuer shall not consent to any amendment, supplement to, or restatement of any Bond Document or the Regulatory Agreement, or any other document executed or delivered in connection with the Bonds without the prior written consent of Fannie Mae. SECTION 9.2 Enforcement. Notwithstanding any other provision in this Assignment to the contrary, so long as no transfer of the Assigned Rights pursuant to Section 5.1 has occurred, neither the Issuer nor any person under its control shall exercise any remedy or direct any proceeding under the Indenture, the Financing Agreement or the Regulatory Agreement other than as set out in this Section. (a) Enforcement of Certain Rights and Obligations. Subject to subsection (b), the Issuer may: (1) Tax Covenants. Seek specific performance of the tax covenants of the Indenture, the Tax Certificate and the Financing Agreement, injunctive relief against acts which may be in violation of any of the tax covenants, and enforce the Borrower's obligation to pay amounts for credit to the Rebate Fund; (2) Regulatory Agreement. Seek specific performance of the obligations of the Borrower or any other owner of the Property under the Regulatory Agreement and injunctive relief against acts which may be in violation of the Regulatory Agreement or otherwise unlawful; provided, however, that the Issuer may enforce any right it may have under the Regulatory Agreement for monetary damages only against Excess Revenues, if any, of the Borrower, unless Fannie Mae otherwise specifically consents in writing to the use of other funds; and (3) Reserved Rights. Take whatever action at law or in equity which appears necessary or desirable to enforce the Reserved Rights; provided, however, that the Issuer or any person under its control may only enforce any right it may have for monetary damages against Excess Revenues, if any, of the Borrower, unless Fannie Mae otherwise specifically consents in writing to the enforcement against other funds of the Borrower. (b) Overriding Limitations. In no event shall the Issuer: (1) prosecute its action to a lien on the Mortgaged Property; (2) take any action which may have the effect, directly or indirectly, of impairing the ability of the Borrower to timely pay the principal of, interest on, or other amounts due under, the Loan or of causing the Borrower to file a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Borrower under any applicable liquidation, insolvency, bankruptcy, rehabilitation, composition, reorganization, conservation or other similar law in effect now or in the future; or Assignment and Intercreditor Agreement 12 (Broadway LaNel Project) (3) interfere with the exercise by Fannie Mae of any of its rights under the Loan Documents or the Credit Facility Documents upon the occurrence of an event of default by the Borrower under the Loan Documents or the Credit Facility Documents; or (4) take any action to accelerate or otherwise enforce payment or seek other remedies with respect to the Loan or the Bonds. (c) Notice of Action. The Issuer shall provide written notice to Fannie Mae, the Trustee and the Loan Servicer immediately upon taking any action at law or in equity to exercise any remedy or direct any proceeding under the Indenture, the Financing Agreement or the Regulatory Agreement. (d) Definition of "Excess Revenues". As used in this Section, the term "Excess Revenues" means, for any period, the net cash flow of the Borrower available for distribution to shareholders, members or partners (as the case may be) for such period, after the payment of all interest expense, the amortization of all principal of all indebtedness coming due during such period (whether by maturity, mandatory sinking fund payment, acceleration or otherwise), the payment of all fees, costs and expenses on an occasional or recurring basis in connection with the Loan or the Bonds, the payment of all operating, overhead, ownership and other expenditures of the Borrower directly or indirectly in connection with the Mortgaged Property (whether any such expenditures are current, capital or extraordinary expenditures), and the setting aside of all reserves for taxes, insurance, water and sewer charges or other similar impositions, capital expenditures, repairs and replacements and all other amounts which the Borrower is required to set aside pursuant to agreement, but excluding depreciation and amortization of intangibles. SECTION 9.3 Specific Performance. The Borrower acknowledges and agrees that were money damages a remedy under the Regulatory Agreement or in connection with any of the tax covenants of the Indenture, the Tax Certificate and the Financing Agreement, money damages alone would not be an adequate remedy at law for a default by the Borrower arising from a failure to comply with the Regulatory Agreement or the tax covenants and therefore the Borrower agrees that the remedy of specific performance shall be available to the Issuer and/or the Trustee in any case. SECTION 9.4 Control on Right of Redemption. Notwithstanding any inconsistent provision of the Indenture or any of the Loan Documents and so long as no transfer of the Assigned Rights pursuant to Section 5.1 has occurred, the Issuer shall not exercise any right pursuant to Section 3.2 of the Indenture to redeem any or all of the Bonds without the prior written consent of Fannie Mae in each case and shall not, without the prior written consent of Fannie Mae, use the proceeds of any Advance under the Credit Enhancement Instrument to make any such redemption. SECTION 9.5 _Consents to Maturity and Sinking Fund Schedules. The Issuer will not establish any schedule of principal amounts of Bonds to mature or be subject to redemption through the application of Sinking Fund Payments as provided in Section 2.8(c)(5) of the Indenture without the prior written direction of the Borrower and, for so long as Fannie Mae has Assignment and tntercreditor Agreement 13 (Broadway LaNel Project) any obligation under the Credit Enhancement Instrument and no Wrongful Dishonor exists, without the prior written consent of Fannie Mae. SECTION 9.6 Remarketing Agreement; Tender Agent Agreement. The Issuer and the Borrower agree that they will not enter into any amendment, modification, supplement or other document effecting a change in the Remarketing Agreement or Tender Agent Agreement applicable to the Bonds or enter into any new or replacement remarketing agreement or tender agent agreement with respect to the Bonds without the prior written consent of Fannie Mae. SECTION 9.7 Further Assurances. The Issuer, to the extent permitted by law, shall execute, acknowledge and deliver such supplemental indentures and other instruments and documents, and perform such further acts, as the Trustee or the Credit Provider may reasonably require to perfect, and maintain perfected, the security interest in the Trust Estate or to better assure, transfer, convey, pledge, assign and confirm to the Trustee or the Credit Provider all of its respective interest in the property described in the Indenture and the revenues, receipts and other amounts pledged by the Indenture. The Issuer, at the sole expense of the Borrower, shall cooperate to the extent necessary with the Borrower, the Trustee and the Credit Provider in their defenses of the Assigned Rights and the Credit Facility against the claims and demands of all Persons. ARTICLE X MISCELLANEOUS SECTION 10.1 Exculpation. Notwithstanding any other provision of this Assignment, any of the Assigned Documents or any of the Issuer Documents to the contrary, Fannie Mae shall not be liable under this Assignment, any of the Assigned Documents, or any of the Issuer Documents to any party hereto or thereto or any Bondholder for any action taken or omitted by Fannie Mae in good faith in connection with the Loan, the Assigned Documents, the Issuer Documents or this Assignment. Fannie Mae shall be protected and shall incur no liability in relying upon the accuracy, acting in reliance upon the contents, and assuming the genuineness, of any notice, demand, certificate, signature, instrument or other document believed by Fannie Mae to be genuine and to have been duly executed by the appropriate signatory. In addition, Fannie Mae shall be protected and shall incur no liability in relying upon an opinion of counsel with respect to any action taken or not taken in good faith by Fannie Mae under this Assignment or any of the Assigned Documents. Fannie Mae shall be free, at all times, to establish independently to its satisfaction and in its discretion the existence or non-existence, as the case may be, of any fact the existence or non-existence of which shall be a condition to any term or provision of this Assignment or of any of the Assigned Documents. Fannie Mae's immunities and exemptions from liability shall extend to its directors, officers, employees and agents. SECTION 10.2 Disclaimers; Acknowledgments. Approval by Fannie Mae of the Borrower, the Loan, the Bonds or otherwise shall not constitute a warranty or representation by Fannie Mae as to any matter. Nothing set forth in this Assignment or in the subsequent conduct of the parties shall be deemed to constitute Fannie Mae as the partner of any person for any purpose whatsoever. Assignment and Intercreditor Agreement 14 (Broadway LaNel Project) SECTION 10.3 Liabilitv of Borrower. Notwithstanding anything to the contrary contained in this Assignment, the personal liability of the Borrower, any general partner of the Borrower (if the Borrower is a partnership), and any Key Principal (as defined in the Security Instrument) to pay amounts due in connection with the obligations of the Borrower under this Assignment shall be limited as and to the extent provided in the Note. The foregoing limitation shall not limit or impair any right to proceed against any collateral that may be pledged to the payment of the Borrower's obligations or that may otherwise be available under any Loan Document. SECTION 10.4 Notices. All notices, certificates, demands and other communications provided for in this Assignment shall be in writing and mailed (registered or certified mail, return receipt requested, and postage prepaid), hand -delivered, with signed receipt, or sent by nationally -recognized overnight courier: To the Issuer: City of New Hope, Minnesota 4401 Xylon Avenue North New Hope, MN 55428 Attention: Daryl Sulander Telephone: (763) 531-5100 Facsimile: (763) 531-5136 To the Trustee: U.S. Bank National Association Mail Code: EP -MN WS3C 60 Livingston Avenue St. Paul, MN 55107-2292 Attention: Corporate Trust Department Telephone: (651) 495-3910 Facsimile: (651) 495-8096 To the Borrower: Broadway LaNel, a Limited Partnership 4601 Excelsior Boulevard, Suite 601 Minneapolis, MN 55416 Attention: Francis W. Lang Telephone: (952) 920-5338 Facsimile: (952) 920-5640 with a copy to: Stephen J. Davis Law Firm 4601 Excelsior Boulevard, Suite 500 Minneapolis, MN 55416 Attention: Stephen J. Davis Telephone: (952) 285-9200 Facsimile: (952) 285-9985 Assignment and Intercreditor Agreement 15 (Broadway LaNel Project) To Fannie Mae: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Director, Multifamily Asset Management Telephone: (202) 752-2854 Facsimile: (202) 752-3542 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003/Glaser Financial Group, Inc. with a copy to: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Vice President, Multifamily Services Telephone: (202) 752-7869 Facsimile: (202) 752-8369 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway, LaNel Project), Series 2003/Glaser Financial Group, Inc. [For courier to all Fannie Mae addresses use 4000 Wisconsin Avenue, N.W. and delete any reference to Drawer AM] To the Loan Servicer: Glaser Financial Group, Inc. 2177 Youngman Avenue St. Paul, MN 55116 Attention: Vice President, Loan Servicing Telephone: (651) 644-7694 Facsimile: (651) 644-0923 with a copy to: Oppenheimer, Wolff & Donnelly LLP Suite 3400 Plaza VII Building 45 South Seventh Street Minneapolis, MN 55402 Attention: James J. Schwert Telephone: (612) 607-7308 Facsimile: (612) 607-9376 Assignment and Intercreditor Agreement 16 (Broadway LaNel Project) Each party named above may designate a change of address by written notice to all of the other parties 15 days prior to the date of such change of address is to become effective. All such notices, certificates, demands and other communications shall be effective when received at the address specified as aforesaid. SECTION 10.5 Waivers. By any act, delay, omission or otherwise, neither Fannie. Mae nor the Loan Servicer shall be deemed to have waived any of Fannie Mae's rights or remedies under this Assignment. No waiver whatever shall be valid, unless in writing signed by Fannie Mae and then only to the extent set forth in the waiver. A waiver by Fannie Mae of any default, right or remedy under this Assignment on any one occasion shall not be construed as a waiver of any other default or be a bar to any right or remedy Fannie Mae would otherwise have on any future occasion. SECTION 10.6 Amendments. No amendment to this Assignment shall be binding upon the parties to this Assignment until such amendment is reduced to writing and executed by Fannie Mae, the Issuer and the Trustee and acknowledged by the Borrower. SECTION 10.7 Severabilitv. Should one or more of the provisions of this Assignment be held to be invalid, illegal or unenforceable in any jurisdiction, such provision shall be severable from the remainder as to such jurisdiction and the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired in any jurisdiction. SECTION 10.8 Execution in Counterparts. This Assignment may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 10.9 Governing Law, This Assignment shall be construed, and the obligations, rights and remedies of the parties hereunder shall be determined, in accordance with the laws of the State without regard to conflicts of laws principles, except to the extent that the laws of the United States of America may prevail. SECTION 10.10 WAIVER OF JURY TRIAL. THE PARTIES HERETO (A) COVENANT AND AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER THIS ASSIGNMENT TRIABLE BY A JURY AND (B) WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL BY THE PARTIES, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. SECTION 10.11 Termination. This Assignment (a) shall terminate and be of no further force or effect as to Fannie Mae at such time as the Reimbursement Agreement is no longer in full force and effect and (b) shall terminate and be of no further force and effect as to the Trustee at the earlier of (i) such time as the Bonds have been paid in full or deemed paid in full as provided in Article IX of the Indenture or (ii) by mutual written agreement of the Issuer and the Assignment and Intercreditor Agreement 17 (Broadway LaNel Project) Trustee after this Assignment has so terminated as to Fannie Mae, in which event the Assigned Documents shall automatically revert to the Issuer without any further action on the part of the Trustee. SECTION 10.12 References. Whenever any party is referred to in this Assignment, such reference shall be deemed to include the successors and assigns of such party. If an Alternate Credit Facility (as defined in the Indenture) is issued in accordance with the provisions of the Indenture, and if Fannie Mae shall have assigned to the issuer of the Alternate Credit Facility all of its rights under this Assignment, all references in this Assignment to the "Credit Enhancement Instrument" shall mean the Alternate Credit Facility and all references in this Assignment to "Fannie Mae" shall mean the person, firm or entity which has issued the Alternate Credit Facility. SECTION 10.13 Additional Agreement. In the event that the Borrower is no longer the owner of the Mortgaged Property and a new mortgagor is substituted in its place, or if the Security Instrument is replaced by a new mortgage on the Mortgaged Property, the Issuer shall execute and deliver to Fannie Mae, and shall record, a new assignment, substantially the same as this Assignment, which shall refer to this Assignment. SECTION 10.14 No Merger of Interests. There shall be no merger of the interests of any of the Bondholders and of the holder of the Assigned Rights by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, such interests, unless and until such person, firm or entity and all others having an interest therein shall effect such merger in a written, duly recorded instrument. (The remainder of this page is intentionally blank.) Assignment and Intercreditor Agreement 18 (Broadway LaNel Project) The parties have duly executed this Assignment as of the day and year first above written. CITY OF NEW HOPE, MINNESOTA By: Its Mayor And by: A;WdW42� tty Manager Assignment and Intercreditor Agreement Sl (Broadway LaNel Project) FANNIE MAE Assignment and Intercreditor Agreement S-2 (Broadway LaNel Project) U.S. BANK NATIONAL ASSOCIATION, Trustee By: d&i2t� �-- — Name: G 5, /`YP 5 5 / Q Y– Title: Assignment and Intercreditor Agreement S-3 (Broadway LaNel Project) Acknowledged, Accepted and Agreed: BROADWAY LaNEL, A LIMITED PARTNERSHIP By: L e: Francis W. Lang Title: General Partner Assignment and Intercreditor Agreement S_4 (Broadway LaNel Project) STATE OF MINNESOTA ) ) ss.: COUNTY OFHENNEPtN ) On this 8th day of August, 2003, before me, the undersigned officer, personally appeared W. Peter Enck and Daniel Donahueand who acknowledged themselves to be the Mayor and the City Manager, respectively of the City of New Hope, Minnesota, a municipal corporation and political subdivision of the State of Minnesota, and that they, as such Mayor and City Manager, being authorized so to do, executed the foregoing instrument for the purposes therein contained by signing the name of the City, by themselves as the Mayor and the City Manger, respectively. (SEAL) Notary Public My commission expires 1-31-05 VALERIE J. LEONE NOTABYPUBLIC-MINNESOTA My Commission Expires Jan. 31, 2005 �R, D Assignment and Intercreditor Agreement N.1 (Broadway LaNel Project) STATE OF ILLINOIS ) ) ss.: COUNTY OF COOK ) This instrument was acknowledged before me, an officer duly State aforesaid and in the County aforesaid to take acknowledgements, on August, 2003, byJohn K. Powell, d. Vice President of Fannie Mae. (SEAL) OFFICLq SEAI._��' NYCRY PUBLICNA OIC gLIN01S �IS&ON EXPIRES 09.12 .06 Assignment and Intercreditor Agreement (Broadway LaNel Project) N-2 authorized in the the 1Hl� day of QN A AM-AAZLI- L�c Notary Public y commission expires STATE OF MINNESOTA ) ) ss.: COUNTY OF HENNEPIN On this lad' day of August, 2003, before me, the undersigned officer, personally appeared Francis W. Lang, who acknowledged himself to be a general partner of Broadway LaNel, a Limited Partnership, and that he, as the general partner, being authorized so to do, executed the foregoing instrument for the purposes therein contained by signing the name of the limited partnership, by himself and as such general partner. (SEAL) Notary Public / My commission expires Assignment and Intercreditor Agreement N-3 (Broadway LaNel Project) STATE OF MINNESOTA ) ) SS.: COUNTY OF HENNEPIN ) On this 13'' day of August, 2003, before me, the undersigned officer, personally appeared Gloria Kessler, who acknowledged herself to be the vice president of U.S. Bank National Association, a national banking association, and that she, as such vice president, being authorized so to do, executed the foregoing instrument for the purposes therein contained by signing the name of the corporation, by her as the vice president. (SEAL) Notary Public My commission expires 1-21-05 CATHERINE M. �� NUTZMANN NOTARY PUBIC -MINNESOTA VN C0MMissl0n Expires Jan. 31,2005 ._._ Assignment and Intercreditor Agreement N-4 (Broadway LaNel Project) EXHIBIT A Legal Description Lot 1, Block 1, Broadway LaNel Addition, Hennepin County, Minnesota A part of which is registered land described as: That part of Lot 1, Block 1, Broadway LaNel Addition embraced within Tract B, Registered Land Survey No. 840. Assignment and Intercreditor Agreement A-1 (Broadway LaNel Project) EXECUTION COPY HEDGE RESERVE ESCROW ACCOUNT SECURITY AGREEMENT THIS HEDGE RESERVE ESCROW ACCOUNT SECURITY AGREEMENT ("Agreement') dated August 1, 2003, is among BROADWAY LaNEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership (together with its permitted successors and assigns, "Borrower"), GLASER FINANCIAL GROUP, INC., a Minnesota corporation (together with its permitted successors and assigns, "Loan Servicer") and FANNIE MAE, a federally -chartered and stockholder -owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. § 1716, et SeMc . (together with its successors and assigns, "Fannie Mae"). RECITALS A. The Borrower and Fannie Mae are entering into a Reimbursement Agreement dated as of August 1, 2003 (as the same may be amended, supplemented or restated from time to time, "Reimbursement Agreement") pursuant to which Fannie Mae has agreed to execute and deliver its Credit Enhancement Instrument ("Credit Enhancement Instrument') in order to provide to U.S. Bank National Association (together with its permitted successors and assigns, "Trustee") credit enhancement and liquidity support for the $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 ("Bonds"). B. Pursuant to the Reimbursement Agreement, among other things: (1) The Borrower is required to acquire and maintain or replace, as appropriate, an interest rate cap ("Hedge") at all times during any period that the Weekly Variable Rate is in effect for the Bonds. If the Bonds bear interest at the Weekly Variable Rate on the Closing Date, the initial Hedge ("Initial Hedge") must be effective not later than the Closing Date. If the Hedge replaces an expiring Hedge ("Subsequent Hedge") the Subsequent Hedge must be effective not later than the day following the last day of the expiring Hedge. Each Hedge must be in effect for a period ("Hedge Period") ending not earlier than the fifth anniversary of the effective date of such Hedge. (2) The Borrower is required to make monthly deposits ("Monthly Deposits") with the Loan Servicer, to be held in the Hedge Reserve Subaccount established and maintained pursuant to this Agreement during any period in which a Hedge with an original term of less than seven years is in effect, to provide moneys for the purchase of a Subsequent Hedge. NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the Borrower, the Loan Servicer and Fannie Mae, the Borrower, the Loan Servicer and Fannie Mae agree as follows: Hedge Reserve Escrow Account Security Agreement (Broadway LaNel Project) ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION SECTION 1.1 Definitions. All capitalized terms used in this Agreement have the meanings given to those terms in the Reimbursement Agreement or elsewhere in this Agreement unless the context or use clearly indicates a different meaning. Unless otherwise defined in this Agreement, terms used in this Agreement that are defined in the UCC as adopted in the State shall have the meaning given those terms in the UCC. SECTION 1.2 Rules of Construction. The rules of construction set forth in Section 1.2 of the Indenture shall apply to this Agreement in their entirety, except that in applying such rules, the term "Agreement' shall be substituted for the term "Indenture". ARTICLE II DEPOSITS TO THE HEDGE RESERVE SUBACCOUNT SECTION 2.1 Custodial Securities Account; Hedge Reserve Subaccount. The Loan Servicer has opened and maintains a custodial securities account ("Custodial Securities Account'). Subject to the specific permitted investment requirements set out in Section 2.5, the Custodial Securities Account may only contain investments the interest on which is excluded from gross income for federal income tax purposes. The Custodial Securities Account is in the name of the Loan Servicer, is a special escrow fund and custodial account maintained separate and apart from the general assets and liabilities of the Loan Servicer and is held and administered by the Loan Servicer for the benefit of Fannie Mae. The Custodial Securities Account is not a commingled account and may not contain moneys unrelated to the transactions mentioned in the Recitals to this Agreement. In this Agreement, the Custodial Securities Account may be referred to as the "Hedge Reserve Subaccount." SECTION 2.2 Administration of the Custodial Securities Account and Hed e Reserve Subaccount. The Loan Servicer shall deposit all Monthly Deposits into the Hedge Reserve Subaccount in accordance with the requirements of this Agreement. The Loan Servicer agrees to keep accurate records regarding amounts on deposit in the Hedge Reserve Subaccount and each and every of the other subaccounts of the Custodial Securities Account and any interest earned on or profits realized from amounts on deposit in the Hedge Reserve Subaccount and to, upon request, share such records with the Rebate Analyst. The Loan Servicer acknowledges that yield reduction or arbitrage rebate payments may need to be made with respect to amounts held in the Hedge Reserve Subaccount in accordance with Treasury Regulation Section 1.148-3 and 1.148-5 and consequently, accurate records of earnings are necessary to ensure compliance with such tax laws. SECTION 2.3 Irrevocable Deposits in Escrow. All deposits into the Hedge Reserve Subaccount constitute irrevocable payments in escrow solely for use as described in this Agreement. The Borrower shall not have any control over the use of, or any right to withdraw any moneys from the Hedge Reserve Subaccount or any proceeds thereof except as provided in Hedge Reserve Escrow Account Security Agreement 2 (Broadway LaNel Project) Section 7.2 of this Agreement, nor shall the Borrower have any right, title or interest in the Hedge Reserve Subaccount. SECTION 2.4 Permitted Investments. The Loan Servicer shall invest and reinvest the funds in the Hedge Reserve Subaccount only in a tax exempt money market fund, which is an interest in a regulated investment company, as that term is defined in Section 67(c)(2)(B) of the Code, to the extent that at least 95 percent of the income to the holder thereof is interest excludable from gross income under Section 103 of the Code. Each such tax exempt money market fund must be rated in the Highest Rating Category (as that term is defined in the Indenture). Each such investment may be held as a common investment allocated between or among the Hedge Reserve Subaccount and one or more of the other subaccounts of the Custodial Securities Account or as an investment allocated only to the Hedge Reserve Subaccount. SECTION 2.5 Investment Income. All interest and other earnings received or accrued from time to time on the investments and other assets of the Custodial Securities Account shall be credited to the Custodial Securities Account. The interest and other earnings credited on any investment which is held in common between or among two or more of the subaccounts of the Custodial Securities Account shall be allocated among such subaccounts on a weighted pro rata basis taking into account all relevant facts and circumstances, including the relative dollar amounts, collected balances and periods of time, rates of interest and other rates of return regarding each such subaccount. The interest and other earnings credited on any investment which is allocated only to a single subaccount shall be only allocated to such subaccount. All interest and other earnings allocated to the Hedge Reserve Subaccount shall be invested and reinvested with the remainder of the Hedge Reserve Subaccount. Provided no Event of Default or Potential Event of Default exists under the Reimbursement Agreement, the Loan Servicer shall pay to the Borrower the interest earned on the Hedge Reserve Subaccount on January 1 of each year. Otherwise, all interest earnings shall remain in the Hedge Reserve Subaccount. The Loan Servicer shall not be responsible for any losses resulting from the investment of the Custodial Securities Account or the Hedge Reserve Subaccount or for obtaining any specific level or percentage of earnings on such investment. SECTION 2.5 Banker's Lien: Set -Off. The Loan Servicer agrees that it shall have no lien on or security interest in, or right of setoff in respect of, monies or investments in the Hedge Reserve Subaccount for the payment of fees and expenses or for any other purpose whatsoever. SECTION 2.6 Conflicts with DUS Guide. Should any of the requirements of this Agreement regarding the maintenance of the Custodial Securities Account and the Hedge Reserve Subaccount conflict with any requirement of the DUS Guide, this Agreement shall prevail. SECTION 2.7 Yield Restriction and Arbitrage Rebate. The Borrower acknowledges that yield reduction or arbitrage rebate payments may need to be made with respect to amounts held in the Hedge Reserve Subaccount in accordance with Treasury Regulation Section 1.148-3 and 1.148-5, and the Borrower covenants to make any such payments in accordance with the terns of the Borrower's Tax Certificate for the Bonds. Hedge Reserve Escrow Account Security Agreement 3 (Broadway r.aNel Project) ARTICLE III SECURITY INTEREST IN COLLATERAL SECTION 3.1 Grant of Security Interest. As security for the due, punctual, full and exact payment, performance or observance by the Borrower of: (i) all Obligations, whether at stated maturity, by acceleration or otherwise (including the payments of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code (as that term is defined in the Indenture), or any successor provision thereto), whether now outstanding or hereafter arising, (ii) all other obligations arising under the Reimbursement Agreement or any other Credit Facility Document, and (iii) all obligations which may be owing to Fannie Mae from time to time under the Borrower Documents and the other Transaction Documents, the Borrower grants to Fannie Mae a continuing security interest in and to the following property whether now owned or hereafter acquired (all of which is collectively called the "Collateral'): (a) any right, title or interest the Borrower may have in the Hedge Reserve Subaccount together with any residual right, title or interest the Borrower may have in the securities entitlements and other investment property held in the Hedge Reserve Subaccount; (b) all Monthly Deposits, whether credited to the Hedge Reserve Subaccount, held in the course of payment or collection by the Loan Servicer or otherwise; (c) all interest earned and profits realized on funds in the Hedge Reserve Subaccount; (d) all cash, funds, investments, securities, accounts, general intangibles and all other property held from time to time in the Hedge Reserve Subaccount and all certificates and instruments representing or evidencing any of the foregoing; (e) all rights of the Borrower under any of the foregoing, contract rights and general intangibles now existing or hereafter arising with respect to any or all of the foregoing; (f) all documents, writings, books, files, records and other documents arising from or relating to any of the foregoing, whether now existing or hereafter arising; (g) all extensions, renewals and replacements of the foregoing; and (h) all proceeds, products, rents and profits, now or hereafter arising, received or receivable, from or on account of any of the foregoing, including any proceeds of any insurance thereon. SECTION 3.2 Further Assurances. At any time and from time to time, at the expense of the Borrower, the Borrower shall promptly give, execute, deliver, file and record any notice, statement, instrument, document, agreement or other paper and do such other acts and things that may be necessary, or that Fannie Mae or the Loan Servicer may request, in order to perfect, continue and protect any security interest granted or purported to be granted by this Agreement or to enable Fannie Mae to exercise and enforce its rights and remedies under this Agreement. Hedge Reserve Escrow Account Security Agreement 4 (Broadway LaNel Project) The Borrower irrevocably authorizes each of the Loan Servicer and Fannie Mae to file from time to time one or more financing statements, amendments to financing statements and continuation statements describing the Collateral in any UCC jurisdiction. SECTION 3.3 Competing Security Arrangements. Fannie Mae does not authorize and the Borrower agrees not to: (a) execute, file, permit to be filed or suffer to remain on file in any jurisdiction any security agreement, financing statement or like agreement or instrument with respect to the Collateral, or any part of the Collateral, naming anyone other than Fannie Mae as the secured party; or (b) sell, exchange or transfer or otherwise dispose of any of the Collateral, or any interest in the Collateral, other than any security interest or other lien in favor of Fannie Mae. SECTION 3.4 No Change. (a) The Borrower will not voluntarily or involuntarily change its legal name without at least 30 days prior written notice to Fannie Mae and the Loan Servicer. (b) If the Borrower is a corporation, limited liability company or limited partnership, the Borrower will not voluntarily or involuntarily change the state of its incorporation or formation without at least 30 days prior written notice to Fannie Mae and the Loan Servicer. (c) If the Borrower is an individual, the Borrower will not change its principal residence without at least 30 days prior written notice to Fannie Mae and the Loan Servicer. (d) If the Borrower is a general partnership, estate, trust or any other form of association or entity other than as described in subsection (b), it agrees that: (1) It will not voluntarily or involuntarily change its place of business (if it has only one place of business) or its chief executive office (if the Borrower has more than one place of business) without at least 30 days prior written notice to Fannie Mae and the Loan Servicer. (2) If the Borrower has only one place of business, it will not create an additional place of business without at least 30 days prior written notice to Fannie Mae and the Loan Servicer of its new chief executive office, if the effect of that change is that its former sole place of business will not be its chief executive office. (3) If (i) the Borrower has more than one place of business, (ii) it desires to close all but one place of business and (iii) the remaining place of business will not be located at its former chief executive office, it will not do so without at least 30 days prior written notice to Fannie Mae and the Loan Servicer of its new sole place of business. Hedge Reserve Escrow Account Security Agreement 5 (Broadway LaNel Project) (e) If the Borrower is described in subsection (c) or (d), the Borrower may change its residence, principal place of business or chief executive office, as applicable, necessitated by fire, flood or other calamity, in which case the Borrower shall provide a written notice of such change as soon as practicable to Fannie Mae and the Loan Servicer. SECTION 3.5 Defense of Collateral. The Borrower will defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest in the Collateral. SECTION 3.6 Obligations Remain Absolute. Nothing contained in this Agreement shall relieve the Borrower of its primary obligation to pay all amounts due in respect of its obligations under the Transaction Documents. ARTICLE IV DISBURSEMENTS FROM HEDGE RESERVE SUBACCOUNT SECTION 4.1 Request For Disbursement. Whenever the Borrower is required by the Reimbursement Agreement to purchase a Subsequent Hedge and funds are available in the Hedge Reserve Subaccount, the Borrower shall request a withdrawal from the Hedge Reserve Subaccount to acquire the Subsequent Hedge. Each written request for disbursement from the Hedge Reserve Subaccount shall specify (i) the purchase price of the Subsequent Hedge ("Purchase Price"); (ii) the name, address, contact name, telephone number and wiring instructions of the Counterparty; (iii) the date by which the Counterparty requires payment of the Purchase Price ("Payment Date") and (iv) such other information as the Loan Servicer may require. The Loan Servicer shall disburse the Purchase Price from the Collateral to the Counterparty on the Payment Date. SECTION 4.2 Disbursement for Purchase of Subsequent Hedge. Upon receipt by the Loan Servicer of a written request from the Borrower, and the determination by the Loan Servicer that all applicable terms and conditions of this Agreement and the Reimbursement Agreement have been satisfied, the Loan Servicer shall disburse to the counterparty ("Counterparty") of the Subsequent Hedge to be acquired by the Borrower an amount from the Hedge Reserve Subaccount equal to the lesser of (i) the purchase price of such Subsequent Hedge or (ii) the amount then on deposit in the Hedge Reserve Subaccount. In no event shall the Loan Servicer be obligated to disburse funds from the Hedge Reserve Subaccount if an Event of Default has occurred. SECTION 4.3 Remaining Balance After Payment of Purchase Price. Any balance remaining in the Hedge Reserve Subaccount after payment of the Purchase Price shall, subject to the limitations in Article VI, be delivered to the Borrower on or promptly following the Payment Date. Hedge Reserve Escrow Account Security Agreement 6 (Broadway LaNel Project) ARTICLE V REPRESENTATIONS AND WARRANTIES SECTION 5.1 Representations and Warranties of the Borrower. The Borrower represents and warrants to Fannie Mae and the Loan Servicer on the Closing Date that: (a) No consent of any other person or entity and no authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required (i) for the pledge by the Borrower of the Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Borrower, (ii) for the perfection or maintenance of the security interest created hereby (including the first priority nature of such security interest) other than the filing of any financing statement as may be required by the UCC, or (iii) for the exercise by the Custodian of the rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement; there are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived. (b) Neither the execution nor delivery of this Agreement nor the performance by the Borrower of its obligations under this Agreement, nor the consummation of the transactions contemplated by this Agreement, will (i) conflict with any provision of the Partnership Agreement of Borrower or any other organizational document of the Borrower; (ii) conflict with, result in a breach of, or constitute a default (or an event which would, with the passage of time or the giving of notice or both, constitute a default) under, or give rise to a right to terminate, amend, modify, abandon or accelerate, any contract, agreement, promissory note, lease, indenture, instrument or license to which the Borrower is a party or by which the Borrower's assets or properties may be bound or affected; (iii) violate or conflict with any federal, state or local law, statute, ordinance, rule, regulation, order, judgment, decree or arbitration award which is either applicable to, binding upon or enforceable against the Borrower; (iv) result in or require the creation or imposition of any liens, security interests, options or other charges or encumbrances ("Liens") upon or with respect to the Collateral, other than Liens in favor of Fannie Mae; (v) violate any legally protected right of any individual or entity or give to any individual or entity a right or claim against the Borrower; or (vi) require the consent, approval, order or authorization of, or the registration, declaration or filing (except to the extent that the filing of Financing Statements may be applicable) with, any federal, state or local government entity. (c) The Borrower is the sole legal and beneficial owner of, and has good and marketable title to (and has full right and authority to pledge and assign), the Collateral, free and clear of all Liens (other than in favor of Fannie Mae), all fiduciary obligations of any kind and any adverse claim of title thereto and the Collateral is not subject to any offset, right of redemption, defense or counterclaim of a third party. (d) The security interest of Fannie Mae in the Collateral is, or when it attaches shall be, a fust, prior and perfected security interest. No financing statement covering the Collateral, or any part of the Collateral (other than any financing statement naming only Fannie Mae as the secured party), is outstanding or is on file in any public office. Hedge Reserve Escrow Account Security Agreement 7 (Broadway LaNel Project) (e) The Borrower's exact legal name is set forth in the first paragraph of this Agreement. The Borrower is a limited partnership and the state of its formation is Minnesota. The Borrower has only one place of business and it is located at the address of the Borrower set forth in Section 7.8. ARTICLE VI EVENTS OF DEFAULT: RIGHTS AND SECTION 6.1 Event of Default. The occurrence of any one or more of the following events shall constitute an Event of Default under this Agreement: (a) the Borrower fails to pay when due any amount payable by the Borrower under this Agreement; or (b) any failure by the Borrower to perform or observe any of its obligations under this Agreement (other than as set out in (a) above), as and when required, which continues for a period of 30 days after notice of such failure by the Loan Servicer or Fannie Mae to the Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Fannie Mae's or the Loan Servicer's judgment, absent immediate exercise by Fannie Mae of a right or remedy under this Agreement, result in harm to Fannie Mae, impairment of this Agreement or any of the Collateral; (c) any representation or warranty on the part of the Borrower contained in this Agreement or repeated and reaffirmed in this Agreement proves to be false, misleading or incorrect in any material respect when made or deemed made; or (d) the occurrence of an Event of Default under the Reimbursement Agreement. SECTION 6.2 Remedies on Default. If any Event of Default under this Agreement has occurred and is continuing: (a) At the direction of Fannie Mae or the Loan Servicer, the Borrower shall deliver all Collateral to Fannie Mae or its designee; (b) Fannie Mae may, without further notice, exercise all rights, privileges or options pertaining to the Collateral as if Fannie Mae were the absolute owner of such Collateral, upon such terms and conditions as Fannie Mae may determine, all without liability except to account for property actually received by Fannie Mae, and Fannie Mae shall have no duty to exercise any of those rights, privileges or options and shall not be responsible for any failure to do so or delay in so doing; and (c) Fannie Mae may exercise in respect of the Collateral, in addition to other rights and remedies provided for in this Agreement or otherwise available to it, all of the rights and remedies of a secured party under the UCC and also may, without notice except as specified below, sell the Collateral at public or private sale, at any of the offices of Fannie Mae or elsewhere, for cash, on credit or for future delivery, and upon such other terms as may be Hedge Reserve Escrow Account security Agreement 8 (Broadway LaNel Project) commercially reasonable. The Borrower agrees that, to the extent notice of sale shall be required by applicable law, at least ten days prior notice to the Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Fannie Mae shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Fannie Mae may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. In case of any sale by Fannie Mae of any of the Collateral, the Collateral so sold may be retained by Fannie Mae until the selling price is paid by the purchaser, but Fannie Mae shall not incur any liability in case of failure of the purchaser to take up and pay for the Collateral so sold. In case of any such failure, such Collateral so sold may be again similarly sold. After deducting all costs or expenses of every kind (including, without limitation, the reasonable attorneys' fees and legal expenses incurred by Fannie Mae and the Loan Servicer), the Loan Servicer shall apply the residue of the proceeds of any sale or sales in such manner as Fannie Mae may deem advisable. The foregoing rights and remedies (i) shall be cumulative and concurrent, (ii) may be pursued separately, successively or concurrently against the Borrower and any other party obligated under the Obligations, or against the Collateral, or any other security for the Obligations, at the sole discretion of Fannie Mae, (iii) may be exercised as often as occasion therefor shall arise, it being agreed by the Borrower that the exercise or failure to exercise any of same shall not in any event be construed as a waiver or release thereof or of any other right, remedy or recourse, and (iv) are intended to be and shall be non-exclusive. Nothing in this Agreement shall require or be construed to require Fannie Mae to accept tender of performance of any of the Borrower's obligations under this Agreement after the expiration of any time period set forth in this Agreement for the performance of such obligations and the expiration of any applicable cure periods, if any. SECTION 6.3 Anotication of Proceeds. Fannie Mae shall apply the Collateral or the cash proceeds actually received from any sale or other disposition of the Collateral in its sole and absolute discretion as follows: (a) to reimburse Fannie Mae for any amounts due to it pursuant to Section 6.2 of this Agreement including the expenses of preparing for sale, selling and the like and to reasonable attorneys' fees and legal expenses incurred by Fannie Mae in connection therewith; (b) to the repayment of all amounts then due and unpaid on the Obligations in such order of priority as Fannie Mae may determine; and (c) to purchase a Hedge which meets the requirements of the Reimbursement Agreement. If the proceeds of sale, collection or other realization of or upon the Collateral are insufficient to cover the costs and expenses of such realization and the payment in full of the Obligations, subject to Section 13.10 of the Reimbursement Agreement, the Borrower shall remain liable for the deficiency. Hedge Reserve Escrow Account Security Agreement 9 (Broadway LaNel Project) SECTION 6.4 No Additional Waiver Implied by One Waiver. If any agreement contained in this Agreement is breached by the Borrower and thereafter waived by Fannie Mae in writing, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach under this Agreement. SECTION 6.5 Fannie Mae Appointed Attorney -in -Fact. The Borrower hereby appoints Fannie Mae, through any duly authorized officer of Fannie Mae or the Loan Servicer, as the Borrower's attorney-in-fact, with full authority in the place and stead of the Borrower and in the name of the Borrower or otherwise, from time to time in Fannie Mae's discretion during the continuance of an Event of Default, to take any action and to execute any instrument which Fannie Mae may deem necessary or advisable to exercise the rights and remedies granted in this Agreement, including to receive, endorse and collect all instruments made payable to the Borrower representing any interest payment, dividend or other distribution in respect of the Collateral or any part of the Collateral and to give full discharge for the same. The Borrower agrees that the power of attorney established pursuant to this Section 6.5 shall be deemed coupled with an interest and shall be irrevocable. SECTION 6.6 Nature of Fannie Mae's Rights. The right of Fannie Mae to the Collateral held for its benefit under this Agreement shall not be subject to any right of redemption the Borrower might otherwise have and shall not be suspended, discontinued or reduced or terminated for any cause, including, without limiting the generality of the foregoing, any event constituting force majeure or any acts or circumstances that may constitute commercial frustration of purpose. ARTICLE VII MISCELLANEOUS PROVISIONS SECTION 7.1 Fees, Costs and Expenses: Indemnification. The Borrower agrees to reimburse Fannie Mae and the Loan Servicer, on demand, for all out-of-pocket costs and expenses incurred by Fannie Mae or the Loan Servicer in connection with the administration and enforcement of this Agreement and agrees to indemnify and hold harmless Fannie Mae and the Loan Servicer from and against any and all losses, costs, claims, damages, penalties, causes of action, suits, judgments, liabilities and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by Fannie Mae or the Loan Servicer under this Agreement or in connection with this Agreement, unless such liability shall be due to willful misconduct or gross negligence on the part of Fannie Mae or the Loan Servicer or its agents or employees. If the Borrower fails to do any act or thing which it has covenanted to do under this Agreement or any representation or warranty on the part of the Borrower contained in this Agreement or repeated and reaffirmed in this Agreement is breached, Fannie Mae or the Loan Servicer may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend its funds for such purpose. Any and all amounts so expended by Fannie Mae or the Loan Servicer shall be repayable to it by the Borrower upon Fannie Mae's or the Loan Servicer's demand. The obligations of the Borrower under this Section shall survive the termination of this Agreement and the discharge of the other obligations of the Borrower under this Agreement. Hedge Reserve Escrow Account Security Agreement 10 (Broadway LaNel Project) SECTION 7.2 Termination. This Agreement and the assignments, pledges and security interests created or granted by this Agreement shall create a continuing security interest in the Collateral and shall terminate upon the earlier to occur of (i) expiration of the Term of the Reimbursement Agreement (as provided and defined in the Reimbursement Agreement) or (ii) the adjustment of the interest rate on the Bonds to the Fixed Rate. Upon termination of this Agreement, Fannie Mae shall deliver to the Borrower all Collateral and documents then in the custody or possession of Fannie Mae and, if requested by the Borrower, shall execute and deliver to the Borrower for recording or filing in each office in which any assignment or financing statement relative to the Collateral or the agreements relating thereto or any part of the Collateral, shall have been filed or recorded, a termination statement or release under applicable law (including, if relevant, the UCC) releasing Fannie Mae's interest in the Collateral and such other documents and instruments as the Borrower may reasonably request, all without recourse to or any warranty whatsoever by Fannie Mae and at the cost and expense of the Borrower. SECTION 7.3 Substitution of Qualified DUS Lender as Loan Servicer. If at any time the Loan Servicer ceases to be a Fannie Mae seller/servicer of multifamily mortgage loans under the DUS Product Line, in good standing, Fannie Mae shall have the right, in its discretion, to designate a new Loan Servicer. SECTION 7.4 No Deemed Waiver. No failure on the part of Fannie Mae or the Loan Servicer to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Fannie Mae or the Loan Servicer of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law. SECTION 7.5 Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties to this Agreement with respect to the subject matter of this Agreement. SECTION 7.6 Successors and Assigns. This Agreement shall inure to the benefit of, and be enforceable by, the Borrower, the Loan Servicer and Fannie Mae and their respective successors and permitted assigns, and nothing herein expressed or implied shall be construed to give any other Person any legal or equitable rights under this Agreement. The Borrower shall not assign any of the rights, interests or obligations under this Agreement without the prior consent of Fannie Mae. SECTION 7.7 Amendment. Fannie Mae, the Loan Servicer and the Borrower agree that this Agreement may be amended, changed, waived or modified only by an instrument in writing executed by their duly authorized representatives. SECTION 7.8 Notices. All notices, directions, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when sent by certified or registered mail, return receipt requested, by overnight courier or by telecopy (to be confirmed with a copy thereof sent by regular mail within two Business Days), addressed to the appropriate notice address set forth below. Any of the parties hereto may, by such notice described above, Hedge Reserve Escrow Account Security Agreement 11 (Broadway LaNei Project) designate any further or different address to which subsequent notices, certificates or other communication shall be sent without any requirement of execution of any amendment to this Agreement. Any such notice, certificate or communication shall be deemed to have been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this Section. The notice addresses are as follows: To the Borrower: Broadway LaNel, a Limited Partnership 4601 Excelsior Boulevard, Suite 601 Minneapolis, MN 55416 Attention: Francis W. Lang Telephone: (952) 920-5338 Facsimile: (952) 920-5640 with a copy to: Stephen J. Davis Law Finn 4601 Excelsior Boulevard, Suite 500 Minneapolis, MN 55416 Attention: Stephen J. Davis Telephone: (952) 285-9200 Facsimile: (952) 285-9985 To Fannie Mae: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Director, Multifamily Asset Management Telephone: (202) 752-2854 Facsimile: (202) 752-3542 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003/Glaser Financial Group, Inc. with a copy to: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Vice President, Multifamily Services Telephone: (202)752-7869 Facsimile: (202) 752-8369 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003/Glaser Financial Group, Inc. Hedge Reserve Escrow Account Security Agreement 12 (Broadway LaNel Project) [For courier to all Fannie Mae addresses use 4000 Wisconsin Avenue, N.W. and delete any reference to Drawer AM] To the Loan Servicer: Glaser Financial Group, Inc. 2177 Youngman Avenue St. Paul, MN 55116 Attention: Vice President, Loan Servicing Telephone: (651) 644-7694 Facsimile: (651) 644-0923 with a copy to: Oppenheimer, Wolff & Donnelly LLP Suite 3400 Plaza VII Building 45 South Seventh Street Minneapolis, MN 55402 Attention: James J. Schwert Telephone: (612) 607-7308 Facsimile: (612) 607-9376 All notices to be given by the Borrower under this Agreement shall be given to Fannie Mae and the Loan Servicer. SECTION 7.9 Rights of Loan Servicer. The parties to this Agreement acknowledge and agree that, except as otherwise provided below, in connection with any provision of this Agreement under which Fannie Mae is granted the right to (i) request that the Borrower or another party take or refrain from taking certain action or deliver certain information, documents or instruments, (ii) give any instructions or directions or (iii) exercise remedies under Section 6.2 of this Agreement, the Loan Servicer is authorized to act on behalf of, and in the place and stead of, Fannie Mae, pursuant to the Servicing Agreement. Any rights of the Loan Servicer to act on behalf of Fannie Mae pursuant to the preceding sentence shall be terminated as and to the extent determined by Fannie Mae upon delivery by Fannie Mae to the parties to this Agreement of written notice of such termination. The Loan Servicer is neither affiliated with, nor acting as an agent for, the Borrower. SECTION 7.10 Governing Law. This Agreement shall be construed, and the obligations, rights and remedies of the parties under this Agreement shall be determined, in accordance with the laws of the State without regard to conflicts of laws principles, except to the extent that the laws of the United States of America may prevail. SECTION 7.11 WAIVER OF JURY TRIAL. THE PARTIES HERETO (I) COVENANT AND AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER THIS ASSIGNMENT TRIABLE BY A JURY AND (II) WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL BY THE PARTIES, AND THIS WAIVER IS INTENDED Hedge Reserve Escrow Account Security Agreement 13 (Broadway LaNel Project) TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. SECTION 7.12 Liability of Borrower. Notwithstanding anything to the contrary contained in this Agreement, the personal liability of the Borrower, any general partner of the Borrower (if the Borrower is a partnership) and any Key Principal (as defined in the Security Instrument) to pay amounts due in connection with the obligations of the Borrower under this Agreement shall be limited as and to the extent provided in the Note. The foregoing limitation shall not limit or impair any right to proceed against any collateral that may be pledged to the payment of the Borrower's obligations or that may otherwise be available under any Borrower Document. SECTION 7.13 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. SECTION 7.14 Multiple Counterparts. This Agreement may be simultaneously executed in multiple counterparts, all of which shall constitute one and the same instrument and each of which shall be, and shall be deemed to be, an original. (The remainder of this page is intentionally blank.) Hedge Reserve Escrow Account Security Agreement 14 (Broadway LaNel Project) IN WITNESS WHEREOF, the Borrower, the Loan Servicer and Fannie Mae have caused this Agreement to be signed, on the date first written above, by their respective officers duly authorized. FANNIE Name: John. Powe�ll�Jr. Title: ce reside t BROADWAY LaNEL, W. Lang, GLASER FINANCIAL GROUP, By: Name: Title: Hedge Reserve Escrow Account Security Agreement S-1 (Broadway LaNel Project) EXECUTION COPY i PLEDGED BONDS CUSTODY AND SECURITY AGREEMENT THIS PLEDGED BONDS CUSTODY AND SECURITY AGREEMENT ("Agreement"), dated as of August 1, 2003, is among BROADWAY LaNEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership, together with its permitted successors and assigns ("Borrower"), U.S. BANK NATIONAL ASSOCIATION ("Trustee"), a national banking association, together with its successors and assigns ("Custodian") not in its individual capacity but solely in its capacity as collateral agent for Fannie Mae, and FANNIE MAE, a federally -chartered and stockholder -owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. § 1716, et sem. (together with its successors and assigns, "Fannie Mae"). RECITALS A. The City of New Hope, Minnesota ("Issuer") and U.S. Bank National Association, in its capacity as trustee ("Trustee") are entering into the Trust Indenture ("Indenture"), dated as of the date hereof, pursuant to which the Issuer is issuing its $2,655,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 ("Bonds"). B. Fannie Mae has agreed to execute a Credit Enhancement Instrument for the account of the Borrower and for the benefit of the Trustee pursuant to which Fannie Mae will, subject to the terms and conditions of the Credit Enhancement Instrument, provide credit enhancement and liquidity support for the Bonds. C. It is a condition precedent to Fannie Mae's obligation to execute and deliver the Credit Enhancement Instrument that the Borrower makes the pledge and grants the security interest to the Custodian, in favor of Fannie Mae, as contemplated and effected by this Agreement. D. The Custodian has agreed to act as collateral agent for Fannie Mae upon the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the Borrower, the Custodian, and Fannie Mae, the Borrower, the Custodian and Fannie Mae agree as follows: ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION SECTION 1.1 Definitions. All capitalized terms used in this Agreement have the meanings given to those terms in the Reimbursement Agreement or elsewhere in this Agreement unless the context or use clearly indicates a different meaning. Unless otherwise defined in this Pledged Bonds Custody and Security Agreement (Broadway LaNel Project) Agreement, terms used in this Agreement that are defined in the UCC as adopted in the State shall have the meaning given those terms in the UCC. SECTION 1.2 Rules of Construction. The rules of construction set forth in Section 1.2 of the Indenture shall apply to this Agreement in their entirety, except that in applying such rules, the term "Agreement" shall be substituted for the term "Indenture". ARTICLE I APPOINTMENT OF CUSTODIAN AND PLEDGE OF COLLATERAL SECTION 2.1 Annointment of Custodian. Fannie Mae appoints and designates the Custodian as collateral agent for Fannie Mae under this Agreement, and authorizes and instructs the Custodian to perform such acts required of the collateral agent, on its behalf, under this Agreement, with such powers as set forth herein. The Custodian accepts such appointment and designation. The Borrower acknowledges Fannie Mae's appointment of the Custodian as collateral agent for Fannie Mae under this Agreement, and the powers granted therewith under this Agreement. SECTION 2.2 Grant of Security Interest. As security for the due, punctual, full and exact payment, performance or observance by the Borrower of: (i) all Obligations, whether at stated maturity, by acceleration or otherwise (including the payments of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, or any successor provision thereto), whether now outstanding or hereafter arising, (ii) all other obligations arising under the Reimbursement Agreement or any other Credit Facility Document, and (iii) all obligations which may be owing to Fannie Mae from time to time under the Borrower Documents and the other Transaction Documents, the Borrower grants to Fannie Mae a continuing security interest in and to the following property whether now owned or hereafter acquired (all of which is collectively called the "Collateral"): (a) all of the Borrower's right, title and interest in any and all Bonds purchased by the Trustee on behalf of and as agent for the Borrower pursuant to the Indenture during the period from and including the date each such Bond is so purchased with the proceeds of an Advance under the Credit Enhancement Instrument, to, but excluding, the date on which such Advance is reinstated under the Credit Enhancement Instrument ("Pledged Bonds"); (b) all interest and other amounts payable on, and all rights with respect to, all Pledged Bonds (including, without limitation, all payments of principal and interest thereon); (c) the Custody Account (as defined in Section 4.1 below) together with all of the Borrower's right, title and interest in the securities entitlements and other investment property held in the Custody Account or otherwise relating to any of the Pledged Bonds; and (d) all proceeds of any of the foregoing. Pledged Bonds Custody and Security Agreement (Broadway LaNel Project) SECTION 2.3 Perfection of Security Interest in Collateral. (a) With respect to any of the Pledged Bonds consisting of certificated securities not issued in global form to DTC or other Securities Depository, at such time as a Bond becomes a Pledged Bond in accordance with the Indenture, the Borrower shall deliver or cause to be delivered such Pledged Bond to the Custodian, but shall remain the owner of such Pledged Bond. All Pledged Bonds shall be held by the Custodian pursuant to this Agreement and shall be accompanied by duly executed instruments of transfer or assignment in blank. The Custodian shall have the right, at any time in its discretion and without notice to the Borrower, to transfer to or to register in the name of the Custodian or its nominee any or all of the Collateral, subject only to Section 2.4 of this Agreement. All Collateral so delivered shall be deposited in the Custody Account. (b) In the event Bonds are issued in global form to DTC or any other Securities Depository, the security interest granted by this Agreement in the Pledged Bonds shall be perfected by (i) delivery as set forth in section 2.3(a) above or (ii) if delivery is not possible, by a written entitlement order, delivered by the Borrower or the Trustee (as agent for the Borrower) to the applicable financial intermediaries on whose records ownership of such Pledged Bonds is reflected, directing such financial intermediaries (x) to credit all Pledged Bonds to an account in the name of the Custodian maintained with such financial intermediaries and (y) to deliver to the Custodian a written confirmation of each such credit simultaneously with each purchase of Pledged Bonds. To the extent a method other than those enumerated above of identifying such Collateral as belonging to the Custodian for the benefit of Fannie Mae is applicable in order to perfect the security interest granted in this Agreement, the Custodian and the Trustee will undertake all actions legally required to identify such Collateral as belonging to the Custodian for the benefit of Fannie Mae and perfecting the security interest granted in this Agreement to Fannie Mae. (c) With respect to any Pledged Bond described in subsection (b)(i) above, the Borrower shall hold in trust for the benefit of the Custodian, segregated from the other property or funds of the Borrower, any interest, purchase price, and redemption price received thereon, and shall immediately deliver to the Custodian all of such amounts received for deposit by the Custodian into the Custody Account. With respect to Pledged Bonds described in subsection (b)(ii) above, the Custodian shall deposit any interest, purchase price, and redemption price received thereon in the Custody Account. (d) The Custodian acknowledges that it will hold all Collateral for Fannie Mae's benefit. (e) Notwithstanding any action taken under this Section 2.3 to perfect the security interest of the Custodian for the benefit of Fannie Mae in the Collateral, for all purposes other than the perfection of a security interest in the Collateral, under the UCC or otherwise, the Borrower shall remain the owner of the Collateral. SECTION 2.4 Release of Collateral Following Remarketing. At such time as a Pledged Bond is remarketed by the Remarketing Agent pursuant to the Indenture, the Trustee Pledged Bonds Custody and Security Agreement 3 (Broadway LaNel Project) shall take such actions required by the Indenture. Upon written notice from Fannie Mae that such actions have been taken, the Custodian shall release and promptly deliver all remarketed Pledged Bonds to the Trustee, or in the case of Pledged Bonds issued in global form to DTC or any other Securities Depository, the Custodian shall promptly direct the Remarketing Agent, or such other applicable financial intermediary, to credit the Pledged Bonds to the account of the new purchaser, in either case free and clear of the security interest created by this Agreement. Upon notice from the Loan Servicer or Fannie Mae that the Borrower has fully paid the Advance and the Activity Fee owed under the Reimbursement Agreement, the Custodian shall release to the Borrower all interest, purchase price, and redemption price received on Pledged Bonds and held in the Custody Account. Upon notice from the Loan Servicer or Fannie Mae that the Borrower has not fully paid the Advance and the Activity Fee owed under the Reimbursement Agreement, the Custodian shall release to the Loan Servicer for remittance to Fannie Mae such interest, purchase price and redemption price received on Pledged Bonds and held in the Custody Account. SECTION 2.5 Reduction in Value of Collateral. The Custodian shall not be liable for any reduction in the value of any Collateral in its possession or credited to its account (except for any reduction in value resulting from the Custodian's willful misconduct or negligence), nor shall any such reduction in any way diminish the obligations of the Borrower (i) to pay when due and payable principal and interest and any other amounts on the Loan, (ii) to pay when due and payable all amounts, including fees, costs, charges and expenses payable under the Reimbursement Agreement and the other Borrower Documents and (iii) to observe and perform each of the terms, conditions and provisions of the Borrower Documents. SECTION 2.6 Further Assurances. At any time and from time to time, at the expense of the Borrower, the Borrower shall promptly give, execute, deliver, file and record any notice, statement, instrument, document, agreement or other paper and do such other acts and things that may be necessary, or that Fannie Mae or the Loan Servicer may request, in order to perfect, continue and protect any security interest granted or purported to be granted by this Agreement or to enable Fannie Mae to exercise and enforce its rights and remedies under this Agreement. The Borrower irrevocably authorizes each of the Custodian, the Loan Servicer and Fannie Mae to file from time to time one or more financing statements describing the Collateral in any UCC jurisdiction. SECTION 2.7 Comaetine Security Arraneements. Fannie Mae does not authorize and the Borrower agrees not to: (a) execute, file, permit to be filed or suffer to remain on file in any jurisdiction any security agreement, financing statement or like agreement or instrument with respect to the Collateral, or any part of the Collateral, naming anyone other than Fannie Mae as the secured parry; or (b) sell, exchange or transfer or otherwise dispose of any of the Collateral, or any interest in the Collateral, other than any security interest or other lien in favor of Fannie Mae. Pledged Bonds Custody and Security Agreement 4 (Broadway LaNel Project) SECTION 2.8 No Change. (a) The Borrower will not voluntarily or involuntarily change its legal name without at least 30 days prior written notice to Fannie Mae and the Loan Servicer. (b) If the Borrower is a corporation, limited liability company or limited partnership, the Borrower will not voluntarily or involuntarily change the state of its incorporation or formation without at least 30 days prior written notice to Fannie Mae and the Loan Servicer. (c) If the Borrower is an individual, the Borrower will not change its principal residence without at least 30 days prior written notice to Fannie Mae and the Loan Servicer. (d) If the Borrower is a general partnership, estate, trust or any other form of association or entity otherthan as described in subsection (b), it agrees that: (1) It will not voluntarily or involuntarily change its place of business (if it has only one place of business) or its chief executive office (if the Borrower has more than one place of business) without at least 30 days prior written notice to Fannie Mae and the Loan Servicer. (2) If the Borrower has only one place of business, it will not create an additional place of business without at least 30 days prior written notice to Fannie Mae and the Loan Servicer of its new chief executive office, if the effect of that change is that its former sole place of business will not be its chief executive office. (3) If (i) the Borrower has more than one place of business, (ii) it desires to close all but one place of business and (iii) the remaining place of business will not be located at its former chief executive office, it will not do so without at least 30 days prior written notice to Fannie Mae and the Loan Servicer of its new sole place of business. (e) If the Borrower is described in subsection (c) or (d), the Borrower may change its residence, principal place of business or chief executive office, as applicable, necessitated by fire, flood or other calamity, in which case the Borrower shall provide a written notice of such change as soon as practicable to Fannie Mae and the Loan Servicer. SECTION 2.9 Defense of Collateral. The Borrower will defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest in the Collateral. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1 Rearesentations and Warranties of the Borrower. The Borrower represents and warrants to the Custodian and Fannie Mae on the Closing Date and on each date that any Pledged Bond is delivered to the Custodian hereunder that: Pledged Bonds Custody and Security Agreement (Broadway LaNel Project) (a) No consent of any other person or entity and no authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required (i) for the pledge by the Borrower of the Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Borrower, (ii) for the perfection or maintenance of the security interest created hereby (including the first priority nature of such security interest), or (iii) for the exercise by the Custodian of the rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement (except as may be required in connection with any disposition of any portion of the Collateral by laws affecting the offering and sale of securities generally); there are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived. (b) Neither the execution nor delivery of this Agreement nor the performance by the Borrower of its obligations under this Agreement, nor the consummation of the transactions contemplated by this Agreement, will (i) conflict with any provision of the Partnership Agreement of Borrower and other organizational documents of the Borrower; (ii) conflict with, result in a breach of, or constitute a default (or an event which would, with the passage of time or the giving of notice or both, constitute a default) under, or give rise to a right to terminate, amend, modify, abandon or accelerate, any contract, agreement, promissory note, lease, indenture, instrument or license to which the Borrower is a party or by which the Borrower's assets or properties may be bound or affected; (iii) violate or conflict with any federal, state or local law, statute, ordinance, rule, regulation, order, judgment, decree or arbitration award which is either applicable to, binding upon or enforceable against the Borrower; (iv) result in or require the creation or imposition of any liens, security interests, options or other charges or encumbrances ("Liens") upon or with respect to the Collateral, other than Liens in favor of Fannie Mae or the Custodian; (v) violate any legally protected right of any individual or entity or give to any individual or entity a right or claim against the Borrower; or (vi) require the consent, approval, order or authorization of, or the registration, declaration or filing (except to the extent that the filing of UCC Financing Statements may be applicable) with, any federal, state or local government entity. (c) The Borrower is the sole legal and beneficial owner of, and has good and marketable title to (and has full right and authority to pledge and assign), the Collateral, free and clear of all Liens (other than in favor of Fannie Mae), all fiduciary obligations of any kind and any adverse claim of title thereto and the Collateral is not subject to any offset, right of redemption, defense or counterclaim of a third party. (d) The security interest in the Collateral of the Custodian for the benefit of Fannie Mae is, or when it attaches shall be, a first, prior and perfected security interest. No financing statement covering the Collateral, or any part thereof (other than any financing statement naming only the Lender as the secured parry) is outstanding or is on file in any public office. (e) The Borrower's exact legal name is set forth in the first paragraph of this Agreement. The Borrower is a limited partnership and the state of its incorporation or formation is Minnesota. The Borrower has only one place of business and it is located at the address of the Borrower set forth in Section 6.7. Pledged Bonds Custody and Security Agreement 6 (Broadway LaNel Project) SECTION 3.2 Representations and Warranties of the Custodian. The Custodian represents and warrants to the Borrower and Fannie Mae that: (a) The Custodian is a national banking association duly organized and validly existing under the laws of the United States, and is duly qualified to do business, and is in good standing, in the State of Minnesota. (b) The Custodian has the power and authority to execute, deliver, and perform its obligations under, this Agreement. (c) All corporate or other action required to authorize the acceptance of its appointment as Custodian hereunder and the execution, delivery and performance of this Agreement and the effectuation of the transactions provided for in this Agreement has been duly taken. ARTICLE IV CUSTODY ACCOUNT AND CUSTODIAN SECTION 4.1 Custody Account. On or prior to the Closing Date, the Custodian shall open and maintain on its books and in its records a separate, segregated account as collateral agent for Fannie Mae ("Custody Account"). The Custody Account shall be in the name of the Custodian and shall be titled: "(Name of Custodian), as escrow agent and trustee for Fannie Mae regarding (Name of Property) (Custody Account)." The Custody Account shall be a special, segregated escrow fund and custodial account maintained separate and apart from the general assets and liabilities of the Custodian and held and administered by the Custodian for the benefit of Fannie Mae in accordance with this Agreement. The Custodian shall maintain the Custody Account until the termination of this Agreement. At no time shall the Custody Account be maintained on behalf of, or be payable to, any person other than Fannie Mae, except that Pledged Bonds and any interest earned thereon shall be released from the Custody Account and remitted to the Borrower or paid to the Loan Servicer for remittance to Fannie Mae in accordance with Section 2.4 of this Agreement. The Borrower shall have no right of withdrawal from the Custody Account. No property other than Collateral shall be deposited by the Custodian in the Custody Account. Segregation of the Collateral in the Custody Account from other property and accounts maintained with the Custodian shall be accomplished by appropriate identification on the Custodian's books and records. The Custodian shall, at all times prior to the termination of this Agreement, (i) maintain a record of all Collateral in the Custody Account, and (ii) identify such Collateral as being subject to the security interest granted to the Custodian on behalf of Fannie Mae by this Agreement. So long as the internal procedures set forth in this Section are met by the Custodian, the Custodian may hold the Collateral in its vaults or in a commingled account (whether book -entry or otherwise), as agent for its customers, with any bank, central depository or clearing organization acting as the Custodian's subcustodian, in nominee name or otherwise. Pledged Bonds Custody and Security Agreement 7 (Broadway LaNel Project) SECTION 4.2 Powers of the Custodian. (a) Fannie Mae authorizes the Custodian, and the Borrower acknowledges such power and right, to (i) take such action on behalf of Fannie Mae and to exercise such rights, remedies, powers and privileges under this Agreement as are specifically authorized to be exercised by the Custodian by the terms of this Agreement, together with such rights, remedies, powers and privileges as are reasonably incidental thereto; (ii) execute any of its duties as collateral agent under this Agreement by or through agents or employees; and (iii) retain experts (including counsel) and to act in reliance upon the advice of such experts concerning all matters pertaining to the agencies created by this Agreement and its duties under this Agreement, free from any liability for any action taken or omitted to be taken by it in good faith in accordance with the advice of such experts. (b) The Custodian agrees to perform only those duties specifically set forth in this Agreement and no implied duties or obligations shall be read into this Agreement. The Custodian shall have no duty to exercise any discretionary right, remedy, power or privilege granted to it by this Agreement, or to take any affirmative action under this Agreement, unless directed to do so by Fannie Mae in writing, and shall not, without the prior written approval of Fannie Mae, consent to any departure by the Borrower from the terms of this Agreement, waive any default by the Borrower under this Agreement or amend, modify, supplement or terminate, or agree to any surrender of, this Agreement or the Collateral; provided, however, that the Custodian shall not be required to take any action which exposes the Custodian to personal liability or which is contrary to this Agreement, or any other agreement or instrument relating to the Collateral or applicable law. (c) Neither the Custodian nor any of its directors, officers, employees or agents shall be liable for any action taken or omitted to be taken by it or them under this Agreement, or in connection with this Agreement, except for its or their own negligence or willful misconduct; nor shall the Custodian be responsible for the validity, effectiveness, value, sufficiency or enforceability against the Borrower of this Agreement or any other document furnished pursuant to this Agreement or in connection with this Agreement, or of the Collateral (or any part thereof), or for the perfection or priority of any security interest purported to be granted under this Agreement. (d) The Custodian shall be entitled to rely on any communication, instrument, paper or other document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons. The Custodian shall be entitled to assume that no Event of Default (as defined in Section 5.1 of this Agreement) has occurred and is continuing, unless the Custodian has received written notice from the Loan Servicer or Fannie Mae that such an Event of Default has occurred and is continuing. The Custodian may accept deposits from, lend money to, and generally engage in any kind of business with, the Borrower and its affiliates as if it were not the agent of Fannie Mae. SECTION 4.3 Banker's Lien, Set -Off. The Custodian agrees that it shall have no lien on or security interest, or right of setoff in respect of, monies or investments in the Custody Account for the payment of fees and expenses or for any other purpose whatsoever. Pledged Bonds Custody and Security Agreement 8 (Broadway LaNel Project) SECTION 4.4 Custodian Avvointed Attorney -in -Fact. The Borrower appoints the Custodian the Borrower's attorney-in-fact, with full authority in the place and stead of the Borrower and in the name of the Borrower or otherwise, from time to time in the Custodian's discretion to take any action and to execute any instrument which the Custodian may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to receive, indorse and collect all instruments made payable to the Borrower representing any interest payment or other payment in respect of the Collateral or any part thereof and to give full discharge for the same. The power of appointment granted herein is coupled with an interest and is irrevocable by the Borrower so long as any of the Bonds remain outstanding or any obligations remain owing by the Borrower to Fannie Mae. SECTION 4.5 Successor Custodian. (a) The Custodian may at any time resign and be discharged of the duties and obligations created by this Agreement by giving notice to Fannie Mae and the Borrower by an instrument in writing addressed and delivered to Fannie Mae and the Borrower. Such resignation shall take effect upon the date specified in such notice, unless a successor has not been appointed, in which event such resignation shall take place upon Fannie Mae's appointment of a successor. The Custodian may be removed at any time with or without cause by an instrument in writing duly executed by or on behalf of Fannie Mae. (b) Fannie Mae shall, concurrently with any such resignation or removal, appoint a successor Custodian by a written instrument of substitution which complies with any requirements of applicable law. Upon the making and acceptance of such appointment, the execution and delivery by such successor Custodian of a ratifying instrument pursuant to which such successor Custodian agrees to assume the duties and obligations imposed on the Custodian by the terms of this Agreement, and the delivery to such successor Custodian of the Collateral and documents and instruments then held by the retiring Custodian, such successor Custodian shall thereupon succeed to and become vested with all the estate, rights, powers, remedies, privileges, immunities, indemnities, duties and obligations by this Agreement granted to or conferred or imposed upon the predecessor Custodian. No Custodian shall be discharged from its duties or obligations under this Agreement until the Collateral and documents and instruments then held by such Custodian are transferred or delivered to the successor Custodian and until such retiring Custodian shall have executed and delivered to the successor Custodian appropriate instruments assigning the retiring Custodian's security or other interest in the Collateral to the successor Custodian. The retiring Custodian shall not be required to make any representation or warranty in connection with any such transfer or assignment. ARTICLE V EVENTS OF DEFAULT; RIGHTS AND REMEDIES SECTION 5.1 Event of Default. The occurrence of any one or more of the following events shall constitute an Event of Default under this Agreement: Pledged Bonds Custody and Security Agreement 9 (Broadway LaNel Project) (a) the Borrower fails to pay when due any amount payable by the Borrower under this Agreement; or (b) any failure by the Borrower to perform or observe any of its obligations under this Agreement (other than as set out in (a) above), as and when required, which continues for a period of 30 days after notice of such failure by the Custodian, the Loan Servicer or Fannie Mae to the Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Fannie Mae's or the Loan Servicer's judgment, absent immediate exercise by the Custodian or Fannie Mae of a right or remedy under this Agreement, result in harm to Fannie Mae, impairment of this Agreement or any of the Collateral; or (c) any representation or warranty on the part of the Borrower contained in this Agreement or repeated and reaffirmed in this Agreement proves to be false, misleading or incorrect in any material respect when made or deemed made; or (d) the occurrence of an Event of Default under the Reimbursement Agreement. SECTION 5.2 Remedies Upon Borrower's Default. If any Event of Default has occurred and is continuing and written notice of the Event of Default has been provided by either the General Counsel or the Controller of Fannie Mae (each, a "Fannie Mae Authorized Officer") to the Custodian: (a) at the direction of a Fannie Mae Authorized Officer, the Custodian shall deliver all Collateral to Fannie Mae; (b) Fannie Mae may, or the Custodian acting at the written direction of a Fannie Mae Authorized Officer, shall, without further notice, exercise all rights, privileges or options pertaining to the Collateral as if Fannie Mae were the absolute owner of such Collateral, upon such terms and conditions as Fannie Mae may determine, all without liability except to account for property actually received by Fannie Mae or the Custodian and neither Fannie Mae nor the Custodian shall have any duty to exercise any of those rights, privileges or options and shall not be responsible for any failure to do so or delay in so doing; and (c) Fannie Mae may, or the Custodian acting at the written direction of a Fannie Mae Authorized Officer shall, exercise in respect of the Collateral, in addition to other rights and remedies provided for in this Agreement or otherwise available to it, all of the rights and remedies of a secured party under the UCC and also may, without notice except as specified below, sell the Collateral at public or private sale, at any of the offices of Fannie Mae or the Custodian or elsewhere, for cash, on credit or for future delivery, and upon such other terms as may be commercially reasonable. The Borrower agrees that, to the extent notice of sale shall be required by the UCC, ten days prior notice to the Borrower of the time and place of any public or private sale shall constitute reasonable notification. Neither Fannie Mae nor the Custodian shall be obligated to make any sale of Collateral notwithstanding notice of sale having been previously given. Fannie Mae may, or the Custodian acting at the direction of a Fannie Mae Authorized Officer shall, adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place Pledged Bonds Custody and Security Agreement 10 (Broadway LaNel Project) to which it was so adjourned. In case of any sale by Fannie Mae or the Custodian of any of the Collateral, the Collateral so sold may be retained by Fannie Mae or the Custodian until the selling price is paid by the purchaser, but neither Fannie Mae nor the Custodian shall incur any liability in case of failure of the purchaser to take up and pay for the Collateral so sold. The foregoing rights and remedies (i) shall be cumulative and concurrent, (ii) may be pursued separately, successively or concurrently against the Borrower and any other party obligated under the Obligations, or against the Collateral, or any other security for the Obligations, at the sole discretion of Fannie Mae, (iii) may be exercised as often as occasion therefore shall arise, it being agreed by Borrower that the exercise or failure to exercise any of same shall not in any event be construed as a waiver or release thereof or of any other right, remedy or recourse and (iv) are intended to be and shall be non-exclusive. Nothing in this Agreement shall require or be construed to require Fannie Mae to accept tender of performance of any of the Borrower's obligations under this Agreement after the expiration of any time period set forth in this Agreement for the performance of such obligations and the expiration of any applicable cure periods, if any. Upon the occurrence of an Event of Default described in Section 5.1(b), the Custodian may (but shall not be obligated to) perform, or cause to be performed, such duty, obligation or covenant, or remedy any such failure, and may expend its funds for such purpose; provided, however, that, in accordance with Section 6.1 of this Agreement, the Borrower shall reimburse the Custodian for any funds so expended. Notwithstanding anything contained in this Section to the contrary, following an Event of Default the Borrower shall continue to be the owner of all Pledged Bonds and other Collateral until written notice to the contrary is provided by a Fannie Mae Authorized Officer under this Section. It is hereby acknowledged that in connection with any public or private sale of the Bonds under this Section 5.2, other than through the Remarketing Agent, prospective purchasers shall be notified that such Bonds may not have a rating from a Rating Agency until such Bonds are secured by the Credit Facility. SECTION 5.3 Application of Proceeds. The Custodian shall apply the cash proceeds actually received from any sale or other disposition of the Collateral as follows: (a) first, to reimburse the Custodian for reasonable expenses actually incurred in preparing for sale, selling and the like and for reasonable attorneys' fees and expenses actually incurred by the Custodian in connection therewith; (b) second, to the repayment of all amounts then due and unpaid on the Obligations; and (c) third, to remit the balance, if any, to the Borrower as required by law. Pledged Bonds Custody and security Agreement 1 1 (Broadway LaNel Project) Subject to Section 13.10 of the Reimbursement Agreement, the Borrower shall be liable for any deficiency if the proceeds of any sale or other disposition of the Collateral is insufficient to pay the Obligations. SECTION 5.4 No Additional Waiver Implied by One Waiver. If the Borrower shall fail to perform any obligation it is required to perform under this Agreement, and such failure is thereafter waived by Fannie Mae, such waiver shall be limited to the particular failure so waived and shall not be deemed to waive any other failure to perform as required under this Agreement. Any forbearance by Fannie Mae to demand payment of any amounts payable under this Agreement shall be limited to the particular payment for which Fannie Mae forbears demand for payment and shall not be deemed a forbearance to demand any other amount payable under this Agreement. SECTION 5.5 Nature of Fannie Mae's and Custodian's Rights. The rights of Fannie Mae and the Custodian to the Collateral held for their benefit under this Agreement shall not be subject to any right of redemption the Borrower might otherwise have and shall not be suspended, discontinued or reduced or terminated for any cause, including, without limiting the generality of the foregoing, any event constituting force majeure or any acts or circumstances that may constitute commercial frustration of purpose. ARTICLE VI MISCELLANEOUS PROVISIONS SECTION 6.1 Fees. Costs and Expenses; Indemnification. The Borrower agrees to reimburse Fannie Mae and the Custodian on demand, for all out-of-pocket costs and expenses incurred by Fannie Mae or the Custodian in connection with the administration and enforcement of this Agreement and agrees to indemnify and hold harmless Fannie Mae and the Custodian from and against any and all losses, costs, claims, damages, penalties, causes of action, suits, judgments, liabilities and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by Fannie Mae or the Custodian under this Agreement or in connection with this Agreement, unless such liability shall be due to willful misconduct or gross negligence on the part of Fannie Mae or the Custodian or its agents or employees. If the Borrower fails to do any act or thing which it has covenanted to do under this Agreement or any representation or warranty on the part of the Borrower contained in this Agreement or repeated and reaffirmed in this Agreement is breached, Fannie Mae or the Custodian may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend its funds for such purpose. Any and all amounts so expended by Fannie Mae or the Custodian shall be repayable to it by the Borrower upon Fannie Mae's or the Custodian's demand. The obligations of the Borrower under this Section shall survive the termination of this Agreement and the discharge of the other obligations of the Borrower under this Agreement. SECTION 6.2 Termination. This Agreement and the assignments, pledges and security interests created or granted by this Agreement shall create a continuing security interest in the Collateral and shall terminate upon the expiration of the Term of the Reimbursement Agreement (as provided and defined in the Reimbursement Agreement). Upon written notice of such Pledged Bonds Custody and Security Agreement 12 (Broadway LaNel Project) termination from Fannie Mae, the Custodian shall reassign and deliver to the Borrower all Collateral and documents then in its custody or possession, and if requested by the Borrower, shall, at the cost and expense of the Borrower, execute and deliver to the Borrower for recording or filing in each office in which any assignment or financing statement relative to the Collateral or the agreements relating thereto or any part of the Collateral, shall have been filed or recorded, a termination statement or release under applicable law (including, if relevant, the UCC) releasing the Custodian's interest therein, and such other documents and instruments as the Borrower may reasonably request all without recourse to or warranty whatsoever by Custodian or Fannie Mae and at the cost and expense of the Borrower. SECTION 6.3 No Deemed Waiver. No failure on the part of Fannie Mae or any of its agents to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by Fannie Mae or any of its agents of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law. SECTION 6.4 Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties to this Agreement with respect to the subject matter of this Agreement. SECTION 6.5 Successors and Assigns. This Agreement shall inure to the benefit of, and be enforceable by, the Borrower, the Custodian and Fannie Mae and their respective successors and permitted assigns, and nothing herein expressed or implied shall be construed to give any other Person any legal or equitable rights under this Agreement. SECTION 6.6 Amendment. The Borrower, the Custodian and Fannie Mae agree that this Agreement may be amended, changed, waived or modified only by an instrument in writing executed by their duly authorized representatives. SECTION 6.7 Notices. All notices, directions, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when sent by certified or registered mail, return receipt requested, by overnight courier or by telecopy (to be confirmed with a copy thereof sent by regular mail within two Business Days), addressed to the appropriate notice address set forth below. Any of the parties hereto may, by such notice described above, designate any further or different address to which subsequent notices, certificates or other communication shall be sent without any requirement of execution of any amendment to this Agreement. Any such notice, certificate or communication shall be deemed to have been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this Section. The notice addresses are as follows: Pledged Bonds Custody and Security Agreement 13 (Broadway LaNel Project) To the Borrower: Broadway LaNel, a Limited Partnership 4601 Excelsior Boulevard, Suite 601 Minneapolis, Minnesota 55416 Attention: Francis W. Lang Telephone: (952) 920-5338 Facsimile: (952) 920-5640 with a copy to: Stephen J. Davis Law Firm 4601 Excelsior Boulevard, Suite 500 St. Louis Park, MN 55416 Attention: Stephen J. Davis Telephone: (952) 285-9200 Facsimile: (952) 285-9985 To Fannie Mae: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Director, Multifamily Asset Management Telephone: (202) 752-2854 Facsimile: (202) 752-3542 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway, LaNel Project) Series 2003/Glaser Financial Group, Inc. with a copy to: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Vice President, Multifamily Services Telephone: (202) 752-7869 Facsimile: (202) 752-8369 RE: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway, LaNel Project) Series 2003/Glaser Financial Group, Inc. [For courier to all Fannie Mae addresses use 4000 Wisconsin Avenue, N.W. and delete any reference to Drawer AM] Pledged Bonds Custody and security Agreement 14 (Broadway LaNel Project) To the Loan Servicer: Glaser Financial Group, Inc. 2177 Youngman Avenue St. Paul, MN 55116 Attention: Vice President, Loan Servicing Telephone: (651)644-7694 Facsimile: (651) 644-0923 with a copy to: Oppenheimer, Wolff & Donnelly LLP Suite 3400 Plaza VII Building 45 South Seventh Street Minneapolis, MN 55402 Attention: James J. Schwert Telephone: (612) 607-7308 Facsimile: (612) 607-9376 To the Custodian: U.S. Bank National Association Mail Code: EP-MN-WS3C 60 Livingston Avenue St. Paul, MN 55107-2202 Attention: Corporate Trust Department Telephone: (651) 495-3910 Facsimile: (651) 495-8096 All notices to be given by the Borrower under this Agreement shall be given to Fannie Mae and the Custodian. SECTION 6.8 Liability of Borrower. Notwithstanding anything to the contrary contained in this Agreement, the personal liability of the Borrower, any general partner of the Borrower (if the Borrower is a partnership), and any Key Principal (as defined in the Security Instrument) to pay amounts due in connection with the obligations of the Borrower under this Agreement shall be limited as and to the extent provided in the Note. The foregoing limitation shall not limit or impair any right to proceed against any collateral that may be pledged to the payment of the Borrower's obligations or that may otherwise be available under any Loan Document. SECTION 6.9 Governing Law. This Agreement shall be construed, and the obligations, rights and remedies of the parties under this Agreement shall be determined, in accordance with the laws of the State without regard to conflicts of laws principles, except to the extent that the laws of the United States of America may prevail. SECTION 6.10 WAIVER OF JURY TRIAL. THE PARTIES HERETO (I) COVENANT AND AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER THIS ASSIGNMENT TRIABLE BY A JURY AND (II) WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF Pledged Bonds Custody and Security Agreement 15 (Broadway LaNel Project) i COMPETENT LEGAL COUNSEL BY THE PARTIES, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. SECTION 6.11 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. SECTION 6.12 Multiple Counterparts. This Agreement may be simultaneously executed in multiple counterparts, all of which shall constitute one and the same instrument and each of which shall be, and shall be deemed to be, an original. The remainder of this page is intentionally blank. Pledged Bonds Custody and Security Agreement 16 (Broadway LaNel Project) The Borrower, the Custodian and Fannie Mae have caused this Agreement to be signed, on the date first written above, by their respective officers or representatives duly authorized. BROADWAY LaNEL, A LIMITED PARTNERSHIP By Anthony Thomas, Inc., General Partner W. U.S. BANK NATIONAL ASSOCIATION B Name: S o r Title: ✓ e s t Ao n --t, FANNIE MAE By: awa Name: John"K. Powell Title: V resident Pledged Bonds Custody and Security Agreement S-1 (Broadway LaNel Project) S(lT i L1lL LEGAL S bkY`lDJ 1E� COUNSEL WORLDWIDE August 14, 2003 U.S. Bancorp Piper Jaffray, Inc. 800 Nicollet Mall, 13s' Floor Minneapolis, MN 55402 SQUIRE, SANDERS & DEMPSEY L.L.P. 4900 Key Tower 127 Public Square Cleveland, Ohio 44114-1304 Office: +1.216.479.8500 Fax: +1.216.479.8780 Re: $2,655,000 City of New Hope, Minnesota, Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 Ladies and Gentlemen: The document attached to this letter is a true and correct copy of the Credit Enhancement Instrument to be executed by Fannie Mae in connection with the captioned issue. No material changes have been made or will be made prior to Fannie Mae's execution and delivery of the Credit Enhancement Instrument. The attached document is substantially identical in all material respects to the form of Credit Enhancement Instrument delivered via e-mail to Gray, Plant, Mooty, Mooty & Bennett for inclusion in the Offering Circular for the captioned issue. Respectfully submitted, Attachment CINCINNATI . CLEVELAND • COLUMBUS . HOUSTON . LOS ANGELES • MIAMI . NEW YORK . PALO ALTO . PHOENIX . SAN FRANCISCO TAMPA . TYSONS CORNER • WASHINGTON DC . RIO DE JANEIRO I BRATISLAVA . BRUSSELS . BUDAPEST . KYIV . LONDON . MADRID MILAN .MOSCOW • PRAGUE. I BEIJING . HONG KONG . TAIPEI . TOKYO I ASSOCIATED OFFICES: BUCHAREST • DUBLIN www.ssd.com EXECUTION COPY HEDGE SECURITY AGREEMENT THIS HEDGE SECURITY AGREEMENT ("Agreement"), dated as of August 1, 2003, is among BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership (together with its permitted successors and assigns, "Borrower"), GLASER FINANCIAL GROUP, INC., a Minnesota corporation (together with its permitted successors and assigns, "Loan Servicer") and FANNIE MAE, a federally -chartered and stockholder - owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. § 1716, et SeMc . (together with its successors and assigns, "Fannie Mae"). RECITALS A. The Borrower and Fannie Mae are entering into a Reimbursement Agreement dated as of August 1, 2003 (as the same may be amended, supplemented or restated from time to time, "Reimbursement Agreement") pursuant to which Fannie Mae has agreed to execute and deliver its Credit Enhancement Instrument ("Credit Enhancement Instrument") in order to provide to U.S. Bank National Association (together with its permitted successors and assigns, "Trustee") credit enhancement and liquidity support for the $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 ("Bonds"). B. The Reimbursement Agreement requires the Borrower to acquire and maintain or replace, as appropriate, interest rate caps (each a "Hedge") at all times during each Weekly Variable Rate Period to protect against fluctuations in the interest rate on the Loan. Each Hedge will be represented by one or more documents ("Hedge Documents"). C. The Borrower has made arrangements for the acquisition of the initial Hedge ("Initial Hedge"). The Hedge Documents representing the Initial Hedge are attached to this Agreement as Exhibit A. D. So long as the Bonds remain in the Weekly Variable Rate Period or adjust to a Weekly Variable Rate Period the Borrower is obligated to acquire and maintain or replace a new interest rate cap for each expiring or terminating Hedge (each a "Subsequent Hedge"). E. Whenever the Borrower enters into a Subsequent Hedge, the Borrower will enter into and deliver to the Loan Servicer a supplement to this Agreement ("Supplemental Agreement") confirming the grant of a security interest in the Subsequent Hedge to Fannie Mae pursuant to this Agreement and confirming certain other agreements. F. As security for the Borrower's obligations under the Reimbursement Agreement and the other Credit Facility Documents and as security for the obligations of the Borrower to Fannie Mae pursuant to the Borrower Documents and the other Transaction Documents, the Borrower, Fannie Mae and the Loan Servicer are entering into this Agreement. Hedge Security Agreement (Broadway LaNel Project) NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the Borrower, the Loan Servicer and Fannie Mae, the Borrower, the Loan Servicer and Fannie Mae agree as follows: ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION SECTION 1.1 Definitions. All capitalized terms used in this Agreement and not defined in this Agreement have the meanings given to those terms in the Reimbursement Agreement unless the context or use clearly indicates a different meaning. Unless otherwise defined in this Agreement, terms used in this Agreement that are defined in the Uniform Commercial Code as adopted in the State ("UCC") shall have the meaning given those terms in the UCC. SECTION 1.2 Rules of Construction. The rules of construction set forth in Section 1.2 of the Indenture shall apply to this Agreement in their entirety, except that in applying such rules, the term "Agreement' shall be substituted for the term "Indenture". ARTICLE II HEDGESUBACCOUNT SECTION 2.1 Custodial Securities Account, Hedee Subaccount. The Loan Servicer has opened and maintains a custodial securities account ("Custodial Securities Account'). Subject to the specific permitted investment requirements set out in Section 2.5, the Custodial Securities Account may only contain investments the interest on which is excluded from gross income for federal income tax purposes. The Custodial Securities Account is in the name of the Loan Servicer, is a special escrow fund and custodial account maintained separate and apart from the general assets and liabilities of the Loan Servicer and is held and administered by the Loan Servicer for the benefit of Fannie Mae. The Custodial Securities Account is not a commingled account and may not contain moneys unrelated to the transactions mentioned in the Recitals to this Agreement. In this Agreement, the Custodial Securities Account may be referred to as the "Hedge Subaccount." SECTION 2.2 _Deposits to the Hedge Subaccount. The Loan Servicer shall deposit into the Hedge Subaccount all moneys (collectively, "Payments") payable to the Borrower from time to time pursuant to the Hedge Documents as received. All interest earned on or profits realized from amounts on deposit in the Hedge Subaccount shall also be deposited into the Hedge Subaccount. The Loan Servicer agrees to keep accurate records regarding amounts on deposit in the Hedge Subaccount and any interest earned on or profits realized from amounts on deposit in the Hedge Subaccount and, upon request, share such records with the Rebate Analyst. Hedge Security Agreement 2 (Broadway LaNel Project) The Loan Servicer acknowledges that yield reduction or arbitrage rebate payments may / need to be made with respect to amounts held in the Hedge Subaccount in accordance with Treasury Regulation Section 1.148-3 and 1.148-5 and consequently, accurate records of earnings are necessary to ensure compliance with such tax laws. SECTION 2.3 Irrevocable Deposits in Escrow. All deposits into the Hedge Subaccount constitute irrevocable payments in escrow solely for use as described in this Agreement. The Borrower shall not have any control over the use of, or any right to withdraw any moneys from the Hedge Subaccount or any proceeds thereof except as provided in Section 6.2 of this Agreement, nor shall the Borrower have any right, title or interest in the Hedge Subaccount. SECTION 2.4 Permitted Investments. The Loan Servicer shall invest and reinvest the funds in the Hedge Subaccount only in a tax exempt money market fund, which is an interest in'a regulated investment company, as that term is defined in Section 67(c)(2)(B) of the Code, to the extent that at least 95 percent of the income to the holder thereof is interest excludable from gross income under Section 103 of the Code. Each such tax exempt money market fund must be rated in the Highest Rating Category (as that term is defined in the Indenture). Each such investment may be held as a common investment allocated between or among the Hedge Subaccount and one or more of the other subaccounts of the Custodial Securities Account or as an investment allocated only to the Hedge Subaccount. SECTION 2.5 Investment Income. All interest and other earnings received or accrued from time to time on the investments and other assets of the Custodial Securities Account shall be credited to the Custodial Securities Account. The interest and other earnings credited on any investment which is held in common between or among two or more of the subaccounts of the Custodial Securities Account shall be allocated among such subaccounts on a weighted pro rata basis taking into account all relevant facts and circumstances, including the relative dollar amounts, collected balances and periods of time, rates of interest and other rates of return regarding each such subaccount. The interest and other earnings credited on any investment which is allocated only to a single subaccount shall be only allocated to such subaccount. All interest and other earnings allocated to the Hedge Subaccount shall be invested and reinvested with the remainder of the Hedge Subaccount. The Loan Servicer shall not be responsible for any losses resulting from the investment of the Custodial Securities Account or the Hedge Subaccount or for obtaining any specific level or percentage of earnings on such investment. SECTION 2.6 Disbursements from the Hedge Subaccount. On the Business Day after each Interest Payment Date on the Bonds, the Loan Servicer shall determine whether any of the following has occurred: (a) the Borrower has failed to pay to the Loan Servicer any or all of the moneys due and payable under the Borrower Documents on or before the immediately preceding Servicing Payment Date, including, without limitation, (i) principal of and interest on the Loan (whether regularly scheduled payments, an optional prepayment or otherwise) due under the Note, (ii) any Principal Reserve Fund payment due under the Reimbursement Agreement, (iii) any Monthly Deposit Amount due under the Reimbursement Agreement for deposit into the Hedge Reserve Hedge security Agreement 3 (Broadway LaNel Project) Subaccount under the Hedge Reserve and Security Agreement and (iv) fees, costs and expenses set out in any of the Borrower Documents; or (b) an "Event of Default" as defined in the Reimbursement Agreement or in any Bond Document or a default under any Loan Document has occurred and is continuing. If neither of the events set out in subsections (a) or (b) has occurred, the Loan Servicer shall pay all amounts then on deposit in the Hedge Subaccount to the Borrower on such date. If, however, any of the events set out in subsections (a) or (b) has occurred, the Loan Servicer shall pay such amount to the order of the Credit Provider, unless the Credit Provider instructs the Loan Servicer to retain such amount in the Hedge Subaccount. SECTION 2.7 Banker's Lien: Set -Off. The Loan Servicer agrees that it shall have no lien on or security interest in, or right of setoff in respect of, monies or investments in the Hedge Subaccount for the payment of fees and expenses or for any other purpose whatsoever. SECTION 2.8 Conflicts with DUS Guide. Should any of the requirements of this Agreement regarding the maintenance of the Custodial Securities Account and the Hedge Subaccount conflict with any requirement of the DUS Guide, this Agreement shall prevail. SECTION 2.9 Yield Restriction and Arbitrage Rebate. The Borrower acknowledges that yield reduction or arbitrage rebate payments may need to be made with respect to amounts held in the Hedge Subaccount in accordance with Treasury Regulation Section 1.148-3 and 1.148-5, and the Borrower covenants to make any such payments in accordance with the terms of the Borrower's Tax Certificate for the Bonds. ARTICLE III SECURITY INTEREST IN COLLATERAL SECTION 3.1 Grant of Security Interest. As security for the due, punctual, full and exact payment, performance or observance by the Borrower of: (i) all Obligations, whether at stated maturity, by acceleration or otherwise (including the payments of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code (as that term is defined in the Indenture), or any successor provision thereto), whether now outstanding or hereafter arising, (ii) all other obligations arising under the Reimbursement Agreement or any other Credit Facility Document, and (iii) all obligations which may be owing to Fannie Mae from time to time under the Borrower Documents and the other Transaction Documents, the Borrower grants to Fannie Mae a continuing security interest in and to the following property whether now owned or hereafter acquired (all of which is collectively called the "Collateral"): (a) the Initial Hedge and the Hedge Documents representing the Initial Hedge; (b) each Subsequent Hedge and all Hedge Documents representing each Subsequent Hedge; Hedge Security Agreement 4 (Broadway LaNel Project) (c) any residual right, title or interest the Borrower may have in the Hedge Subaccount together with any residual right, title or interest the Borrower may have in the securities entitlements and other investment property held in the Hedge Subaccount; (d) any and all Payments payable from time to time pursuant to any of the Hedge Documents, whether credited to the Hedge Subaccount, held in the course of payment or collection by the Loan Servicer or otherwise; (e) all rights, liens and security interests or guarantees and all other supporting obligations now existing or hereafter granted by the Counterparty or any other person to secure or guaranty payment of the Payments due pursuant to any of the Hedge Documents; (f) all cash, funds, investments, securities, accounts, general intangibles and all other property held from time to time in the Hedge Subaccount and all certificates and instruments representing or evidencing any of the foregoing; (g) all rights of the Borrower under any of the foregoing, including all rights of the Borrower to the Payments, contract rights and general intangibles now existing or hereafter arising with respect to any or all of the foregoing; (h) all documents, writings, books, files, records and other documents arising from or relating to any of the foregoing, whether now existing or hereafter arising; (i) all extensions, renewals and replacements of the foregoing; and 0) all proceeds, products, rents and profits, now or hereafter arising, received or receivable, from or on account of any of the foregoing, including any proceeds of any insurance thereon. SECTION 3.2 Subsequent Hedges. The Borrower agrees to execute and deliver to the Loan Servicer a Supplemental Agreement substantially in the form of the attached Exhibit B on each occasion on which the Borrower acquires a Subsequent Hedge. The Borrower shall, on or before the date any Subsequent Hedge is to become effective, execute and deliver the Hedge Documents representing the Subsequent Hedge to the Counterparty and deliver to the Loan Servicer for the benefit of Fannie Mae fully executed originals of such Hedge Documents to be held under this Agreement as a part of the Collateral. SECTION 3.3 Acquisition of Hedge; Delivery of Hedge Documents. On or before the effective date of a Hedge, the Borrower shall execute and deliver the related Hedge Documents to the Counterparty and deliver fully executed originals of the Hedge Documents to the Loan Servicer for the benefit of Fannie Mae to be held under this Agreement as a part of the Collateral. The documents attached to this Agreement as Exhibit A are true, complete and correct copies of the Hedge Documents and all amendments thereto, representing the Initial Hedge, fully executed by all parties. There is no and shall be no additional security for or any other arrangements or agreements relating to the Initial Hedge or the Hedge Documents. Hedge Security Agreement 5 (Broadway LaNel Project) SECTION 3.4 Further Assurances. At any time and from time to time, at the expense of the Borrower, the Borrower shall promptly give, execute, deliver, file and record any notice, statement, instrument, document, agreement or other paper and do such other acts and things that may be necessary, or that Fannie Mae or the Loan Servicer may request, in order to perfect, continue and protect any security interest granted or purported to be granted by this Agreement or any Supplemental Agreement or to enable Fannie Mae to exercise and enforce its rights and remedies under this Agreement or the Supplemental Agreement. The Borrower irrevocably authorizes each of the Loan Servicer and Fannie Mae to file from time to time one or more financing statements, amendments to financing statements and continuation statements describing the Collateral in any UCC jurisdiction. SECTION 3.5 Competing Security Arrangements. Fannie Mae does not authorize and the Borrower agrees not to: (a) execute, file, permit to be filed or suffer to remain on file in any jurisdiction any security agreement, financing statement or like agreement or instrument with respect to the Collateral, or any part of the Collateral, naming anyone other than Fannie Mae as the secured party; or (b) sell, assign, exchange or transfer or otherwise dispose of any of the Collateral, or any interest in the Collateral, other than any security interest or other lien in favor of Fannie Mae. SECTION 3.6 No Change (a) The Borrower will not voluntarily or involuntarily change its legal name without at least 30 days prior written notice to Fannie Mae and the Loan Servicer. (b) If the Borrower is a corporation, limited liability company or limited partnership, the Borrower will not voluntarily or involuntarily change the state of its incorporation or formation without at least 30 days prior written notice to Fannie Mae and the Loan Servicer. (c) If the Borrower is an individual, the Borrower will not change its principal residence without at least 30 days prior written notice to Fannie Mae and the Loan Servicer. (d) If the Borrower is a general partnership, estate, trust or any other form of association or entity other than as described in subsection (b), it agrees that: (1) It will not voluntarily or involuntarily change its place of business (if it has only one place of business) or its chief executive office (if the Borrower has more than one place of business) without at least 30 days prior written notice to Fannie Mae and the Loan Servicer. (2) If the Borrower has only one place of business, it will not create an additional place of business without at least 30 days prior written notice to Fannie Mae Hedge Security Agreement 6 (Broadway LaNel Project) and the Loan Servicer of its new chief executive office, if the effect of that change is that its former sole place of business will not be its chief executive office. (3) If (i) the Borrower has more than one place of business, (ii) it desires to close all but one place of business and (iii) the remaining place of business will not be located at its former chief executive office, it will not do so without at least 30 days prior written notice to Fannie Mae and the Loan Servicer of its new sole place of business. (e) If the Borrower is described in subsection (c) or (d), the Borrower may change its residence, principal place of business or chief executive office, as applicable, necessitated by fire, flood or other calamity, in which case the Borrower shall provide a written notice of such change as soon as practicable to Fannie Mae and the Loan Servicer. SECTION 3.7 Defense of Collateral. The Borrower will defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest in the Collateral. SECTION 3.8 Oblieations Remain Absolute. Nothing contained in this Agreement shall relieve the Borrower of its primary obligation to pay all amounts due in respect of its obligations under the Transaction Documents. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.1 _Representations and Warranties of the Borrower. The Borrower represents and warrants to Fannie Mae and the Loan Servicer on the Closing Date and on each date on which a Supplement is delivered under this Agreement that: (a) No consent of any other person or entity and no authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required or will be required (i) for the pledge by the Borrower of the Collateral pursuant to this Agreement or any Supplemental Agreement or for the execution, delivery or performance of this Agreement or any Supplemental Agreement by the Borrower, (ii) for the perfection or maintenance of the security interest created hereby or by any Supplemental Agreement (including the first priority nature of such security interest) other than the filing of any financing statement as may be required by the UCC, or (iii) for the exercise by the Loan Servicer of the rights provided for in this Agreement or any Supplemental Agreement or the remedies in respect of the Collateral pursuant to this Agreement or any Supplemental Agreement; there are no conditions precedent to the effectiveness of this Agreement or any Supplemental Agreement that have not been satisfied or waived. (b) Neither the execution nor delivery of this Agreement or any Supplemental Agreement nor the performance by the Borrower of its obligations under this Agreement or any Supplemental Agreement, nor the consummation of the transactions contemplated by this Agreement or any Supplemental Agreement, will (i) conflict with any provision of the Hedge Security Agreement (Broadway LaNel Project) Partnership Agreement of the Borrower or any other organizational document of the Borrower; (ii) conflict with, result in a breach of, or constitute a default (or an event which would, with the passage of time or the giving of notice or both, constitute a default) under, or give rise to a right to terminate, amend, modify, abandon or accelerate, any contract, agreement, promissory note, lease, indenture, instrument or license to which the Borrower is a party or by which the Borrower's assets or properties may be bound or affected; (iii) violate or conflict with any federal, state or local law, statute, ordinance, rule, regulation, order, judgment, decree or arbitration award which is either applicable to, binding upon or enforceable against the Borrower; (iv) result in or require the creation or imposition of any lien, security interest, option or other charge or encumbrance ("Liens") upon or with respect to the Collateral, other than Liens in favor of Fannie Mae; (v) violate any legally protected right of any Person or give to any Person a right or claim against the Borrower; or (vi) require the consent, approval, order or authorization of, or the registration, declaration or filing (except to the extent that the filing of Financing Statements may be applicable) with, any federal, state or local government entity. (c) The Borrower is and shall be the sole legal and beneficial owner of, and has and will have good and marketable title to (and has full right and authority to pledge and assign), the Collateral, free and clear of all Liens (other than in favor of Fannie Mae), all fiduciary obligations of any kind and any adverse claim of title thereto and the Collateral is not subject to any offset, right of redemption, defense or counterclaim of a third party. There is no additional security for or any other arrangements or agreements relating to the Hedge Documents. (d) The security interest of Fannie Mae in the Collateral is, or when it attaches shall be, a first, prior and perfected security interest. No financing statement covering the Collateral, or any part of the Collateral (other than any financing statement naming only Fannie Mae as the secured party), is outstanding or is on file in any public office. (e) The Borrower's exact legal name is set forth in the first paragraph of this Agreement. The Borrower is a limited partnership and the state of its formation is Minnesota. The Borrower has only one place of business and it is located at the address of the Borrower set forth in Section 6.8. ARTICLE V EVENTS OF DEFAULT: RIGHTS AND REMEDIES SECTION 5.1 Event of Default. The occurrence of any one or more of the following events shall constitute an Event of Default under this Agreement: (a) the Borrower fails to pay when due any amount payable by the Borrower under this Agreement; or (b) any failure by the Borrower to perform or observe any of its obligations under this Agreement (other than as set out in (a) above), as and when required, which continues for a period of 30 days after notice of such failure by the Loan Servicer or Fannie Mae to the Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Fannie Mae's Hedge Security Agreement 8 (Broadway LaNel Project) or the Loan Servicer's judgment, absent immediate exercise by Fannie Mae of a right or remedy under this Agreement, result in harm to Fannie Mae, impairment of this Agreement or any of the Collateral; or (c) any representation or warranty on the part of the Borrower contained in this Agreement or repeated and reaffirmed in this Agreement proves to be false, misleading or incorrect in any material respect when made or deemed made; or (d) the occurrence of an Event of Default under the Reimbursement Agreement. SECTION 5.2 Remedies on Default. If any Event of Default under this Agreement has occurred and is continuing: (a) At the direction of Fannie Mae or the Loan Servicer, the Borrower shall deliver all Collateral to Fannie Mae or its designee; (b) Fannie Mae may, without further notice, exercise all rights, privileges or options pertaining to the Collateral as if Fannie Mae were the absolute owner of such Collateral, upon such terms and conditions as Fannie Mae may determine, all without liability except to account for property actually received by Fannie Mae, and Fannie Mae shall have no duty to exercise any of those rights, privileges or options and shall not be responsible for any failure to do so or delay in so doing; and (c) Fannie Mae may exercise in respect of the Collateral, in addition to other rights and remedies provided for in this Agreement or otherwise available to it, all of the rights and remedies of a secured party under the UCC and also may, without notice except as specified below, sell the Collateral at public or private sale, at any of the offices of Fannie Mae or elsewhere, for cash, on credit or for future delivery, and upon such other terms as may be commercially reasonable. The Borrower agrees that, to the extent notice of sale shall be required by applicable law, at least ten days prior notice to the Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Fannie Mae shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Fannie Mae may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. In case of any sale by Fannie Mae of any of the Collateral, the Collateral so sold may be retained by Fannie Mae until the selling price is paid by the purchaser, but Fannie Mae shall not incur any liability in case of failure of the purchaser to take up and pay for the Collateral so sold. In case of any such failure, such Collateral so sold may be again similarly sold. After deducting all costs or expenses of every kind (including, without limitation, the reasonable attorneys' fees and legal expenses incurred by Fannie Mae and the Loan Servicer), the Loan Servicer shall apply the residue of the proceeds of any sale or sales in such manner as Fannie Mae may deem advisable. The foregoing rights and remedies (i) shall be cumulative and concurrent, (ii) may be pursued separately, successively or concurrently against the Borrower and any other party obligated under the Obligations, or against the Collateral, or any other security for the Obligations, at the Hedge Security Agreement 9 (Broadway LaNci Project) sole discretion of Fannie Mae, (iii) may be exercised as often as occasion therefor shall arise, it being agreed by the Borrower that the exercise or failure to exercise any of same shall not in any event be construed as a waiver or release thereof or of any other right, remedy or recourse, and (iv) are intended to be and shall be non-exclusive. Nothing in this Agreement shall require or be construed to require Fannie Mae to accept tender of performance of any of the Borrower's obligations under this Agreement after the expiration of any time period set forth in this Agreement for the performance of such obligations and the expiration of any applicable cure periods, if any. SECTION 5.3 Application of Proceeds. Fannie Mae shall apply the Collateral or the cash proceeds actually received from any sale or other disposition of the Collateral in its sole and absolute discretion as follows: (a) to reimburse Fannie Mae for any amounts due to it pursuant to Section 5.2 of this Agreement including the expenses of preparing for sale, selling and the like and to reasonable attorneys' fees and legal expenses incurred by Fannie Mae in connection therewith; and (b) to the repayment of all amounts then due and unpaid on the Obligations in such order of priority as Fannie Mae may determine. If the proceeds of sale, collection or other realization of or upon the Collateral are insufficient to cover the costs and expenses of such realization and the payment in full of the Obligations, subject to Section 13.10 of the Reimbursement Agreement, the Borrower shall remain liable for the deficiency. SECTION 5.4 No Additional Waiver Implied by One Waiver. If any agreement contained in this Agreement is breached by the Borrower and thereafter waived by Fannie Mae in writing, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach under this Agreement. SECTION 5.5 Fannie Mae Appointed Attorney -in -Fact. The Borrower hereby appoints Fannie Mae, through any duly authorized officer of Fannie Mae or the Loan Servicer, as the Borrower's attorney-in-fact, with full authority in the place and stead of the Borrower and in the name of the Borrower or otherwise, from time to time in Fannie Mae's discretion during the continuance of an Event of Default, to take any action and to execute any instrument which Fannie Mae may deem necessary or advisable to exercise the rights and remedies granted in this Agreement, including to receive, endorse and collect all instruments made payable to the Borrower representing any interest payment, dividend or other distribution in respect of the Collateral or any part of the Collateral and to give full discharge for the same. The Borrower agrees that the power of attorney established pursuant to this Section shall be deemed coupled with an interest and shall be irrevocable. SECTION 5.6 Nature of Fannie Mae's Rights. The right of Fannie Mae to the Collateral held for its benefit under this Agreement shall not be subject to any right of redemption the Borrower might otherwise have and shall not be suspended, discontinued or reduced or terminated for any cause, including, without limiting the generality of the foregoing, Hedge Security Agreement 10 (Broadway LaNel Project) any event constituting force majeure or any acts or circumstances that may constitute commercial frustration of purpose. ARTICLE VI MISCELLANEOUS PROVISIONS SECTION 6.1 Fees, Costs and Expenses: Indemnification. The Borrower agrees to reimburse Fannie Mae and the Loan Servicer, on demand, for all out-of-pocket costs and expenses incurred by Fannie Mae or the Loan Servicer in connection with the administration and enforcement of this Agreement or any Supplemental Agreement and agrees to indemnify and hold harmless Fannie Mae and the Loan Servicer from and against any and all losses, costs, claims, damages, penalties, causes of action, suits, judgments, liabilities and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by Fannie Mae or the Loan Servicer under this Agreement or any Supplemental Agreement or in connection with this Agreement or any Supplemental Agreement, unless such liability shall be due to willful misconduct or gross negligence on the part of Fannie Mae or the Loan Servicer or its agents or employees. If the Borrower fails to do any act or thing which it has covenanted to do under this Agreement or any Supplemental Agreement or any representation or warranty on the part of the Borrower contained in this Agreement or any Supplemental Agreement or repeated and reaffirmed in this Agreement or any Supplemental Agreement is breached, Fannie Mae or the Loan Servicer may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend its funds for such purpose. Any and all amounts so expended by Fannie Mae or the Loan Servicer shall be repayable to it by the Borrower upon Fannie Mae's or the Loan Servicer's demand. The obligations of the Borrower under this Section shall survive the termination of this Agreement or any Supplemental Agreement and the discharge of the other obligations of the Borrower under this Agreement or any Supplemental Agreement. SECTION 6.2 Termination. This Agreement and each Supplemental Agreement and the assignments, pledges and security interests created or granted by this Agreement and each Supplemental Agreement shall create a continuing security interest in the Collateral and shall terminate upon the earlier to occur of (i) expiration of the Term of the Reimbursement Agreement (as provided and defined in the Reimbursement Agreement) or (ii) the adjustment of the interest rate on the Bonds to the Fixed Rate. Upon termination of this Agreement, Fannie Mae shall deliver to the Borrower all Collateral and documents then in the custody or possession of Fannie Mae and, if requested by the Borrower, shall execute and deliver to the Borrower for recording or filing in each office in which any assignment or financing statement relative to the Collateral or the agreements relating thereto or any part of the Collateral, shall have been filed or recorded, a termination statement or release under applicable law (including, if relevant, the UCC) releasing Fannie Mae's interest in the Collateral and such other documents and instruments as the Borrower may reasonably request, all without recourse to or any warranty whatsoever by Fannie Mae and at the cost and expense of the Borrower. SECTION 6.3 Substitution of Oualified DUS Lender as Loan Servicer. If at any time the Loan Servicer ceases to be a Fannie Mae seller/servicer of multifamily mortgage loans under Hedge Security Agreement 11 (Broadway LaNel Project) the DUS Product Line, in good standing, Fannie Mae shall have the right, in its discretion, to designate a new Loan Servicer. SECTION 6.4 No Deemed Waiver. No failure on the part of Fannie Mae or any of its agents to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by Fannie Mae or any of its agents of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law. SECTION 6.5 Entire Agreement. This Agreement and all Supplemental Agreements created from time to time constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties to this Agreement with respect to the subject matter of this Agreement. SECTION 6.6 Successors and Assigns. This Agreement and each of the Supplemental Agreements shall inure to the benefit of, and be enforceable by, the Borrower, the Loan Servicer and Fannie Mae and their respective successors and permitted assigns, and nothing herein expressed or implied shall be construed to give any other Person any legal or equitable rights under this Agreement or any Supplemental Agreement. The Borrower shall not assign any of the rights, interests or obligations under this Agreement without the prior consent of Fannie Mae. SECTION 6.7 Amendment. Except for the execution of any Supplemental Agreement, the Borrower, the Loan Servicer and Fannie Mae agree that this Agreement may be amended, changed, waived or modified only by an instrument in writing executed by their duly authorized representatives. SECTION 6.8 Notices. All notices, directions, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when sent by certified or registered mail, return receipt requested, by overnight courier or by telecopy (to be confirmed with a copy thereof sent by regular mail within two Business Days), addressed to the appropriate notice address set forth below. Any of the parties hereto may, by such notice described above, designate any further or different address to which subsequent notices, certificates or other communication shall be sent without any requirement of execution of any amendment to this Agreement. Any such notice, certificate or communication shall be deemed to have been given as of the date of actual delivery or the date of failure to deliver by reason of refusal to accept delivery or changed address of which no notice was given pursuant to this Section. The notice addresses are as follows: To the Borrower: Broadway LaNel, a Limited Partnership 4601 Excelsior Boulevard, Suite 601 Minneapolis, MN 55416 Attention: Francis W. Lang Telephone: (952) 920-5338 Facsimile: (952) 920-5640 Hedge Security Agreement 12 (Broadway LaNel Project) with a copy to: Stephen J. Davis Law Firm 4601 Excelsior Boulevard, Suite 500 St. Louis Park, MN 55416 Attention: Stephen J. Davis Telephone: (952) 285-9200 Facsimile: (952) 285-9985 To Fannie Mae: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Director, Multifamily Asset Management Telephone: (202) 752-2854 Facsimile: (202) 752-3542 RE: $2,655,000 City of New Hope, Minnesota, Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003/Glaser Financial Group, Inc. with a copy to: Fannie Mae 3900 Wisconsin Avenue, NW Drawer AM Washington, DC 20016-2899 Attention: Vice President, Multifamily Services Telephone: (202) 752-7869 Facsimile: (202) 752-8369 RE: $2,655,000 City of New Hope, Minnesota, Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003/Glaser Financial Group, Inc. [For courier to all Fannie Mae addresses use 4000 Wisconsin Avenue, N.W. and delete any reference to Drawer AM] To the Loan Servicer: Glaser Financial Group, Inc. 2177 Youngman Avenue St. Paul, MN 55116 Attention: Vice President, Loan Servicing Telephone: (651) 644-7694 Facsimile: (651) 644-0923 Hedge Security Agreement 13 (Broadway LoNel Project) with a copy to: Oppenheimer, Wolff & Donnelly LLP Suite 3400 Plaza VII Building 45 South Seventh Street Minneapolis, MN 55402 Attention: James J. Schwert Telephone: (612) 607-7308 Facsimile: (612) 607-9376 All notices to be given by the Borrower under this Agreement shall be given to Fannie Mae and the Loan Servicer. SECTION 6.9 Rights of Loan Servicer. The parties to this Agreement acknowledge and agree that, except as otherwise provided below, in connection with any provision of this Agreement under which Fannie Mae is granted the right to (i) request that the Borrower or another party take or refrain from taking certain action or deliver certain information, documents or instruments, (ii) give any instructions or directions or (iii) exercise remedies under Section 5.2 of this Agreement, the Loan Servicer is authorized to act on behalf of, and in the place and stead of, Fannie Mae, pursuant to the Servicing Agreement. Any rights of the Loan Servicer to act on behalf of Fannie Mae pursuant to the preceding sentence shall be terminated as and to the extent determined by Fannie Mae upon delivery by Fannie Mae to the parties to this Agreement of written notice of such termination. The Loan Servicer is neither affiliated with, nor acting as an agent for, the Borrower. SECTION 6.10 Governing Law. This Agreement shall be construed, and the obligations, rights and remedies of the parties under this Agreement shall be determined, in accordance with the laws of the State without regard to conflicts of laws principles, except to the extent that the laws of the United States of America may prevail. SECTION 6.11 WAIVER OF JURY TRIAL. THE PARTIES HERETO (I) COVENANT AND AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING UNDER THIS ASSIGNMENT TRIABLE BY A JURY AND (II) WAIVE ANY RIGHT TO TRIAL BY JURY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL BY THE PARTIES, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. SECTION 6.12 Liability of Borrower. Notwithstanding anything to the contrary contained in this Agreement, the personal liability of the Borrower, any general partner of the Borrower (if the Borrower is a partnership) and any Key Principal (as defined in the Security Instrument) to pay amounts due in connection with the obligations of the Borrower under this Agreement shall be limited as and to the extent provided in the Note. The foregoing limitation shall not limit or impair any right to proceed against any collateral that may be pledged to the payment of the Borrower's obligations or that may otherwise be available under any Borrower Document. Hedge Security Agreement 14 (Broadway LaNel Project) SECTION 6.13 Severability. If any term or other provision of this Agreement or any Supplemental Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement and the Supplemental Agreements shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. SECTION 6.14 Multiple Counterparts. This Agreement may be simultaneously executed in multiple counterparts, all of which shall constitute one and the same instrument and each of which shall be, and shall be deemed to be, an original. (The remainder of this page is intentionally blank.) Hedge security Agreement 15 (Broadway LaNel Project) The Borrower, the Loan Servicer and Fannie Mae have caused this Agreement to be signed, on the date first written above, by their respective officers or representatives duly authorized. BROADWAY LaNEL, A LIMITED PARTNERSHIP GLASER FINANCIAL GROUP, INC. By: �'fil�l�lrs- Name: FANNIP MAP Hedge Security Agreement S-1 (Broadway LaNel Project) EXHIBIT A Hedge Documents [TO BE SUPPLIED] Hedge Security Agreement (Broadway LaNel Project) A -I EXHIBIT B FORM OF SUPPLEMENTAL HEDGE SECURITY AGREEMENT SUPPLEMENTAL HEDGE SECURITY AGREEMENT THIS SUPPLEMENTAL HEDGE SECURITY AGREEMENT ("Supplement"), dated as of [DATE], is made by BROADWAY LaNEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership, together with its permitted successors and assigns ("Borrower"), for the benefit of GLASER FINANCIAL GROUP, INC., a Minnesota corporation, together with its permitted successors and assigns ("Loan Servicer") and FANNIE MAE, a federally - chartered and stockholder -owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. § 1716, et sec. (together with its successors and assigns, "Fannie Mae"). This Supplement supplements the Hedge Security Agreement dated as of [DATE], among the Borrower, the Loan Servicer and Fannie Mae ("Agreement"). lax AR M A. The Borrower and Fannie Mae entered into the Reimbursement Agreement pursuant to which Fannie Mae executed and delivered its Credit Enhancement Instrument in order to provide to the Trustee credit enhancement and liquidity support for the Bonds. B. The Reimbursement Agreement requires the Borrower to acquire and maintain or replace, as appropriate, a Hedge at all times during each Weekly Variable Rate Period to protect against fluctuations in the interest rate on the Loan. Each Hedge will be represented by one or more Hedge Documents. C. The Borrower is entering into a Subsequent Hedge D. As security for the Borrower's obligations under the Reimbursement Agreement and the other Credit Facility Documents and as security for the obligations of the Borrower to Fannie Mae pursuant to the Borrower Documents and the other Transaction Documents, the Borrower is entering into this Supplemental Agreement. NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth in this Supplemental Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the Borrower agree as follows: SECTION 1 Definitions. All capitalized terms used in this Supplement have the meanings given to those terms in the Agreement or elsewhere in this Supplement unless the context or use clearly indicates a different meaning. Hedge Security Agreement B-1 (Broadway LaNel Project) SECTION 2 Rules of Construction. The rules of construction set forth in Section 1.2 of the Indenture shall apply to this Supplement in their entirety, except that in applying such rules, the term "Supplement' shall be substituted for the term "Indenture". SECTION 3 Grant of Security Interest. As security for the due, punctual, full and exact payment, performance or observance by the Borrower of. (i) all Obligations, whether at stated maturity, by acceleration or otherwise (including the payments of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code (as that term is defined in the Indenture), or any successor provision thereto), whether now outstanding or hereafter arising, (ii) all other obligations arising under the Reimbursement Agreement or any other Credit Facility Document, and (iii) all obligations which may be owing to Fannie Mae from time to time under the Borrower Documents and the other Transaction Documents, the Borrower confirms and grants to Fannie Mae a continuing security interest in and to the Subsequent Hedge described in the attached Hedge Documents and all such Hedge Documents, whether now owned or hereafter acquired ("Subsequent Hedge Collateral'). SECTION 4 Acquisition of Hedge: Delivery of Hedge Documents. The Borrower has, on or before the date of this Supplement, executed and delivered the Hedge Documents representing the Subsequent Hedge to the Counterparty and has delivered to the Loan Servicer for the benefit of Fannie Mae fully executed originals of such Hedge Documents to be held under the Agreement as a part of the Collateral. The documents attached to this Supplement as Attachment I are true, complete and correct copies of the Hedge Documents and all amendments thereto, representing the Subsequent Hedge, fully executed by all parties. There is no and shall be no additional security for or any other arrangements or agreements relating to the Hedge or the Hedge Documents. SECTION 5 Representations and Warranties. As of the date of this Supplement, the Borrower repeats and confirms all representations and warranties made by the Borrower in the Agreement. SECTION 6 Agreement Confirmed. Except as supplemented by this Supplement, the Borrower confirms the original Agreement as previously supplemented and amended from time to time. SECTION 7 Obligations Remain Absolute. Nothing contained in this Supplement shall relieve the Borrower of its primary obligation to pay all amounts due in respect of its obligations under the Transaction Documents. SECTION 8 Governing Law. This Supplement shall be construed, and the obligations, rights and remedies of the parties under this Agreement shall be determined, in accordance with the laws of the State without regard to conflicts of laws principles, except to the extent that the laws of the United States of America may prevail. Hedge Security Agreement B-2 (Broadway LaNel Project) The Borrower has caused this Supplemental Hedge Security Agreement to be signed, on the date first written above, by its officers or representatives duly authorized. BROADWAY LaNEL, A LIMITED PARTNERSHIP By: Anthony Thomas, Inc., its General Partner By: Francis W. Lang, President GLASER FINANCIAL GROUP, INC. Name: FANNIE MAE By: Hedge Security Agreement B-3 (Broadway LaNel Project) ATTACHMENT Hedge Documents [TO BE SUPPLIED] Hedge Security Agreement B-4 (Broadway LaNel Project) EXECUTION COPY Reference Number: FXNCC5364 RATE CAP AGREEMENT THIS RATE CAP AGREEMENT dated as of August 5, 2003 between BEAR STEARNS FINANCIAL PRODUCTS INC., a Delaware corporation (the "Seller"), and BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership (the "Buyer"), whereby the parties agree as follows. 1. Definitions and Incorporated Terms. For purposes of this Agreement, the terms set forth below in the Cap Transaction Profile or in Exhibit A shall have the meanings there indicated and capitalized terms that are used and not otherwise defined herein shall have the meanings given to them (as completed herein, where applicable) in the 2000 ISDA Definitions, as supplemented by the Annex to the 2000 ISDA Definitions, and the 1992 ISDA U.S. Municipal Counterparty Definitions (to the extent any term is defined in the 1992 ISDA U.S. Municipal Counterparty Definitions such definition shall apply instead of any definition of the same term in the 2000 ISDA Definitions, as supplemented by the Annex to the 2000 ISDA Definitions), each as published by the International Swap and Derivatives Association, Inc. In addition, the provisions in the bookl t of 1992 ISDA U.S. Municipal Counterparty Definitions are incorporated by reference herkin and shall apply hereto except as otherwise expressly provided herein. Cap Transaction Profile Notional Amount: $2,655,000 Trade Date: August 5, 2003 Effective Date: August 14, 2003 Termination Date: August 15, 2008 Fixed Amount: Fixed Rate Payer: Buyer Buyer's Payment Date: August 14, 2003 Fixed Amount: USD $36.000 Floating Amounts: Floating Rate Payer: Seller Cap Rate: 6.00% per annum Payment Dates: The fifteenth calendar day of each month, commencing on September 15, 2003, and ending on the Termination Date, subject to adjustment in Rate Cap Agreement (Broadway LaNel Project) accordance with the Following Business Day Convention. No Adjustment of Period End Dates: Applicable Floating Rate Option: The Bond Market Association Municipal Swap IndexTM, provided, however, that if the Bond Market Association Municipal Swap IndexTM is not published on any Reset Date during the Term, the J.J. Kenny IndexTM published by Kenny Information Systems, provided, however, if the J.J. Kenny IndexTM also ceases to be published on any Reset Date during the Term, the Calculation Agent will determine an appropriate index as a substitute on such Reset Date. The index so determined shall equal the prevailing rate for bonds that are rated in the highest short-term rating category by Moody's and S&P in respect of issuers of not less than five "high grade" component issues selected by the Calculation Agent which shall include, without limitation, issuers of general obligation bonds, and that are subject to tender by holders thereof for purchase on not more than seven (7) days notice and the interest on which is (a) variable, determined on a weekly basis, (b) excludable from gross income for federal income tax purposes, and (c) not subject to a "minimum tax" or similar tax unless all tax-exempt bonds are subject to such tax. Floating Rate Day Count Fraction: Actual/Actual Reset Dates: Effective Date and thereafter Weekly on Thursday, provided that the Floating Rate shall be determined on Wednesday of each Week, subject to the Following Business Day Convention, and the Floating Rate will be effective for the seven (7) day period from and including the following Thursday (or if Thursday is the day the Floating Rate is determined, from and including such Thursday) to and including the following Wednesday, subject to the Following Business Day Convention. Compounding: Inapplicable Rate Cap Agreement 2 (Broadway LaNel Project) Weighted Average Method: Applicable Business Days: A day other than (a) a Saturday or a Sunday, (b) any day on which banking institutions located in the City of New York, New York, or the city or cities in which the principal office of Glaser Financial Group, Inc. as servicer (the "Servicer"), or its successor, is located are required or authorized by law to close, or (c) in the event payments are made directly to Fannie Mae, that certain federally chartered and stockholder -owned corporation duly organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. § 1716 et seq., as amended from time to time ("Fannie Mae"), any day on which Fannie Mae is closed. Business Day Convention: Following Business Rounding Convention: The simple arithmetic mean of rates expressed as a percentage rounded to five decimal places. Calculation Agent: The Seller Additional Defined Terms "Credit Support Document" means each document (if any) identified as such in Part 2 of Exhibit A. "Credit Support Provider" means the Person (if any) identified as such in Part 3 of Exhibit A. "Damages" means an amount determined as provided in Section I I(b). "Early Termination Date" has the meaning given to that term in Section 10(b). "Local Business Day" in relation to a party means a Business Day in the city indicated in that party's address for notices hereunder. "Market Quotation" means an amount determined as provided in Section 12. "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, and its successors and assigns, if such successors and assigns shall continue to perform the functions of a securities rating agency. "Person" means an individual, an estate, a trust, a corporation, a partnership, a limited liability company, or any other organization or entity, whether governmental or private. "Reference Market-maker" has the meaning given to that term in Section 12. Rate Cap Agreement (Broadway LaNel Project) "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. a New York corporation, and its successors and assigns, if such successors and assigns shall continue to perform the functions of a securities rating agency. "Taxes", with respect to payments hereunder by the Seller, means any present or future taxes, levies, imposts, duties or charges of any nature whatsoever that are collectible by withholding except for any such tax, levy, impost, duty or charge that would not have been imposed but for the existence of a connection between the Buyer and the jurisdiction where the Tax is imposed. "Termination Event" has the meaning given to that term in Section 9. 2. Payments. On the Payment Date for the Buyer, the Buyer shall pay the Fixed Amount and, on each Payment Date for the Seller, the Seller shall pay the Floating Amount for the Calculation Period ending on that Payment Date. The Seller's obligation to make any payment hereunder shall be subject to the condition precedent that the Buyer have paid the Fixed Amount. If the Buyer fails to pay the Fixed Amount to the Seller as and when due hereunder and does not remedy the failure on or before the third Local Business Day after notice from the Seller, the Seller may, by notice to the Buyer (with a copy to the Servicer and Fannie Mae) given not later than the fifth Business Day after the end of the Buyer's cure period, declare this Agreement to be terminated, whereupon neither party shall have any further obligation hereunder, except for the Buyer's obligation to pay interest pursuant to Section 4. 3. Making of Payments. All payments hereunder shall be made to the account of the intended payee specified in Exhibit A, or to such other account in New York City as that party may have last specified by notice to the party required to make the payment. All such payments shall be made in funds settled through the New York Clearing House Interbank Payments System or such other same-day funds as are customary at the time for the settlement in New York City of banking transactions denominated in Dollars. 4. Interest on Overdue Amounts. If any amount due hereunder is not paid when due, interest shall accrue on that amount to the extent permitted by applicable law at a rate per annum equal for each day that amount remains unpaid to the sum of I% and the rate per annum equal to the cost (without proof or evidence of any actual cost) to the intended payee (as certified by it) if it were to fund or of funding the relevant amount for that day. 5. Supervening Illegality. If it becomes unlawful for either party to make any payment to be made by it hereunder, as a result of the adoption of, or any change in, or change in the interpretation of, any law, regulation or treaty, that party shall give notice to that effect to the other party and shall use reasonable efforts (i) to assign or transfer its rights and obligations under this Agreement, subject to Section 14, to another of its branches, offices or affiliates, or to any leading participant in the interest rate cap market, that may make those payments lawfully and without withholding for or on account of Taxes or (ii) to agree with that other party to modify this Agreement or change the method of payment hereunder so that the payment will not be unlawful. If an assignment or agreement is not made as provided herein on or before the tenth day after that notice becomes effective, either party may give notice of termination as provided in Section 11. Rate Cap Agreement 4 (Broadway LaNel Project) 6. Taxes. (a) For the purpose of this Agreement, each of the Buyer and Seller hereby represent, respectively, that it is a "United States person" as such term is defined in Section 7701 of the Internal Revenue Code of 1986, as amended. Except as otherwise required by law, each payment hereunder shall be made without withholding for or on account of Taxes. If a party is required to make any withholding from any payment under this Agreement for or on account of Taxes, it shall (i) make that withholding; (ii) make timely payment of the amount withheld to the appropriate governmental authority; (iii) forthwith pay the other party such additional amount as may be necessary to ensure that the net amount actually received by it free and clear of Taxes (including any Taxes on the additional amount) is equal to the amount that it would have received had no Taxes been withheld; and (iv) on or before the thirtieth day after payment, send the payee the original or a certified copy of an official tax receipt evidencing that payment; provided, however, that if the representation and warranty made by a party in Section 7(c) proves not to have been true when made or, if repeated on each Payment Date, would not then be true, or if a party fails to perform or observe any of its covenants set forth in Section 7 or Section 8, the other party shall be under no obligation to pay any additional amount hereunder to the extent that the withholding would not have been required if the representation and warranty had been true when made, or would have been true if so repeated, or if the failure had not occurred. (b) If a party would be required to make any withholding for or on account of Taxes and pay any additional amount as provided in Section 6(a) with respect to any payment to be made by it in accordance with Section 2, it shall give notice to that effect to the other party and shall use reasonable efforts (i) to assign or transfer its rights and obligations under this Agreement, subject to Section 14, to another of its branches, offices or affiliates, or to any leading participant in the interest rate cap market, that may make the payments to be made by it hereunder lawfully and without withholding for or on account of Taxes, or (ii) to agree with that other party to modify this Agreement or change the method of payment hereunder so that those payments will not be subject to the withholding. If an assignment or agreement is not made as provided herein on or before the tenth day after that notice becomes effective, the party that would be required to make the withholding may give notice of termination as provided in Section 10. 7. Representations and Warranties. (a) Each of the parties makes the representations and warranties set forth below to the other as of the date hereof: Rate Cap Agreement 5 (Broadway LaNel Project) Buyer: (i) It is duly organized and validly existing and has the corporate, partnership or other power as a company and the authority to execute and deliver this Agreement and to perform its obligations hereunder. (ii) It has taken all necessary action to authorize its execution and delivery of this Agreement and the performance of its obligations hereunder. (iii) All governmental authorizations and actions necessary in connection with its execution and delivery of this Agreement and the performance of its obligations hereunder have been obtained or performed and remain valid and in full force and effect. (iv) This Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with the terms of this Agreement, subject to all applicable bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights generally. (b) The Seller makes the following additional representations and warranties to the (i) No event or condition that constitutes (or that with the giving of notice or the lapse of time or both would constitute) a Termination Event with respect to it has occurred and is continuing or will occur by reason of its entering into or performing its obligations under this Agreement. (ii) There are no actions, proceedings or claims pending or, to its knowledge, threatened, the adverse determination of which might have a materially adverse effect on its ability to perform its obligations under, or affect the validity or enforceability against it of, this Agreement. (iii) Each of the documents delivered by the Seller hereunder is, as of the date stated in such document, true, accurate and complete in every material respect or, in the case of financial statements, fairly presents the condition of the Person indicated therein. (c) In addition, if an Exhibit B on Tax Representations and Covenants is made a part of this Agreement, each of the Buyer and the Seller makes the representations and warranties set forth therein to the other and covenants as set forth therein with the other with respect to certain matters relating to Taxes. 8. Documents. At or before the time of execution of this Agreement by the Buyer, the Seller shall deliver to the Buyer evidence of the truth and accuracy of the Seller's representations in subsections (ii) and (iii) of Section 7(a) as well as evidence of the authority, incumbency and specimen signature of each Person authorized to execute and deliver this Agreement or any other document to be delivered by the Seller under this Agreement on behalf of the Seller. In addition, the Seller shall deliver to the Buyer at the times specified in Part 2 of Exhibit A, each of the documents there specified. 9. Termination Events. (a) For purposes of this Agreement, "Termination Event" means each of the events and circumstances listed below: Rate Cap Agreement (Broadway LaNel Project) (i) The Seller fails to pay any amount payable by it hereunder as and when that amount becomes payable and does not remedy that failure on or before the third Local Business Day after notice from the Buyer of the failure. (ii) Any representation or warranty made by the Seller in this Agreement, other than in Section 7(c), or made by any Credit Support Provider in any Credit Support Document (or document related thereto) delivered hereunder proves to have been incorrect, incomplete or misleading in any material respect at the time it was made, or the Seller fails to deliver any document it is required to deliver as provided in Part 2 of Exhibit A and does not remedy that failure on or before the thirtieth day after notice from the Buyer of the failure or, in the case of failure to deliver a Credit Support Document, does not remedy that failure immediately. (iii) The Seller or any Credit Support Provider becomes the subject of any action or proceeding for relief under any bankruptcy or insolvency law or any law affecting creditors' rights that is similar to a bankruptcy or insolvency law or law relating to the composition of debts or seeks or becomes subject to the appointment of a receiver, custodian or similar official for it or any of its property or fails or is unable to pay its debts generally as they fall due. (iv) The Seller or any Credit Support Provider fails to pay any amount payable by it to the Buyer under any other agreement or under any instrument of the Seller or any Credit Support Provider held by the Buyer and does not remedy that failure during any applicable cure period. (v) (1) There occurs a default, an event of default or another similar condition or event (however described) in respect of the Seller or any Credit Support Provider for the Seller under one or more agreements or instruments relating to Specified Indebtedness in an aggregate amount of not less than the Threshold Amount and as a result such Specified Indebtedness has been or may be declared due and payable before it would otherwise have been due and payable or (2) there occurs a default by the Seller or any such Credit Support Provider in making one or more payments on the due date thereof in an aggregate amount of not less than the Threshold Amount under any such agreements or instruments or under any Specified Transaction (after giving effect to any applicable notice requirement or grace period) or (3) the combined amounts of Specified Indebtedness covered by clauses (1) and (2) at least equal the Threshold Amount. For this purpose, "Specified Indebtedness", with respect to any Person, means all obligations of that Person (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money; "Specified Transaction" means any rate swap, currency swap, cross -currency swap, commodity -price swap, equity, equity - index, debt -linked or debt -index-linked swap, rate cap, floor or collar, forward rate agreement, forward or spot foreign exchange transaction, interest rate, currency or commodity -price option, any cash -settled option on a security or index or group of securities, any combination of any of the foregoing and any similar transaction; and "Threshold Amount" means U.S. $10,000,000 (or the equivalent in any other currency or currencies) . Rate Cap Agreement 7 (Broadway LaNel Project) (vi) Any Credit Support Provider fails to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document to which it is a party if the failure is not remedied during any applicable cure period; or any Credit Support Document expires or terminates or fails or ceases to be in full force and effect (in either case, other than in accordance with its terms) prior to the satisfaction of all obligations of the Seller under this Agreement; or any Credit Support Provider or any Person purporting to act on its behalf disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, any Credit Support Document to which it is a party. (vii) The Seller or any Credit Support Provider consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity, and the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of the Seller or such Credit Support Provider for the Seller (as the case may be) immediately prior to such action. (viii) If at any time the unsecured, unsubordinated long term obligations of the Seller are at any time rated below AA minus by S&P or below Aa3 by Moody's. 10. Early Termination. (a) At any time while a Termination Event is continuing, the Buyer may, in its absolute discretion, give notice of termination in accordance with this Section. If a party gives notice of supervening illegality, either party may give notice of termination in accordance with this Section in the circumstances described in Section 5. If a party is required to pay any additional amount pursuant to Section 6, it may give notice of termination in accordance with this Section in the circumstances described in Section 6. (b) Any notice of termination hereunder (i) shall state the grounds for termination, (ii) shall specify a date that is not before, nor more than ten days after, the date the notice of early termination is given on which the payments required by Section 11 shall be made as provided therein (the "Early Termination Date"), and (iii) shall declare the obligations of the Seller to make the payments required by Section 2 that are scheduled to be made after the Early Termination Date to be terminated as of that date, and those obligations shall so terminate and be replaced by the parties' obligations to make the payments specified in Section 11. 11. Payments upon Early Termination. (a) If notice of termination is given pursuant to Section 10, the Seller shall pay the Buyer its Damages. (b) The Buyer's Damages in the event of early termination shall be the Market Quotation, if it can be determined. If it cannot be determined, the Buyer's Damages shall be an amount in Dollars equal to the sum of the losses (including loss of bargain) that it may incur as a result of the early termination or as a result of the event that served as the ground for early termination. Rate Cap Agreement 8 (Broadway LaNel Project) (c) Payments to be made in accordance with this Section shall be made on the Early Termination Date. If the Buyer is entitled to be paid any amount in respect of its Damages in accordance with this Section, it shall submit to the Seller a statement in reasonable detail of those Damages. 12. Market Quotation. (a) For the purpose of determining the Market Quotation, the Buyer shall select four leading participants in the interest rate cap market (each a "Reference Market-maker"), in its sole discretion and in good faith, with a view to minimizing the Market Quotation (to the extent required by law); provided, however, that in doing so the Buyer shall be entitled to select market participants that are of the highest credit standing and that otherwise satisfy all the criteria that the Buyer applies generally at the time in deciding whether to enter into an interest rate protection transaction. (b) The Buyer shall request from each of the Reference Market -makers it has selected a quotation of the amount in Dollars which that Reference Market-maker would charge on the Early Termination Date as a flat amount for entering into an agreement, effective on the Early Termination Date, pursuant to which it would make all the payments scheduled to be made by the Seller under Section 2 of this Agreement after the Early Termination Date. (c) The Market Quotation shall be the arithmetic mean (rounded up, if necessary, to the nearest cent) of the amounts described in Section 12(b) that are quoted to the Buyer by the Reference Market -makers it has selected or, if only one Reference Market-maker will quote such a fee, the Market Quotation Value shall be the amount quoted by that Reference Market-maker. 13. Costs and Expenses. (a) Each of the parties shall pay, or reimburse the other on demand for, all stamp, registration, documentation or similar taxes or duties, and any penalties or interest that may be due with respect thereto, that may be imposed by any jurisdiction in respect of its execution or delivery of this Agreement. If any such tax or duty is imposed by any jurisdiction as the result of the conduct or status of both parties, each party shall pay one half of the amount of the tax or duty. (b) The Seller shall pay, or reimburse the Buyer on demand for, all reasonable costs and expenses incurred by the Buyer in connection with enforcement of its rights under this Agreement or as a consequence of a Termination Event, including, without limitation, fees and expenses of legal counsel. 14. Non -Assignment. Neither party shall assign or otherwise transfer its rights or obligations hereunder or any interest herein to any other Person or any of its other branches or offices without the prior written consent of the other party to this Agreement, unless the assignment or transfer by the Seller is pursuant to Section 5 or Section 6 and provided that: (i) the Seller gives the Buyer ten Business Days' prior written notice of the assignment or transfer; (ii) the assignee or transferee meets the criteria set forth in Section 5(i) or Section 6(b), as the case may be and the rating of the unsecured, unsubordinated long term obligations of any assignee or transferee of the Seller is rated AA minus or higher by S&P or Aa3 or higher by Moody's; Rate Cap Agreement 9 (Broadway LaNel Project) (iii) the credit policies of the Buyer at the time would permit it to purchase an interest rate cap from the assignee or transferee after taking into account any credit support that is being provided; (iv) a Termination Event does not occur as a result of such transfer; (v) on or prior to the effective date of the transfer, this Agreement (including, without limitation, any Tax covenants (if any) in Exhibit B to this Agreement) and all other related documents shall have been amended to reflect the transfer in a manner reasonably satisfactory to Buyer; (vi) Buyer will not, after such assignment or transfer, be in violation of any law or regulation of a governmental authority that was not violated prior to such transfer; (vii) in the case of an assignment or transfer to an affiliate or other branch or office of Seller, no Termination Event shall have occurred and be continuing with respect to the Seller; (viii) no Early Termination Date shall have been designated; and (ix) on or prior to the effective date of the transfer, Seller shall have agreed in writing to indemnify and hold harmless Buyer in a manner reasonably satisfactory to Buyer from and against any adverse tax consequences and any related fees, expenses and other losses resulting from the transfer, subject to the following conditions: (a) notwithstanding Seller's duty to indemnify Buyer, Buyer shall at all times retain sole control and decision making authority with regard to any tax issues affecting Buyer or related litigation arising from or in connection with said transfer; and (b) such indemnification shall be made as such expenses are incurred by Buyer and at such time as Buyer is required to pay any such tax liability, provided that Seller shall not be required to make such indemnification until five Business Days after it has received written notice from Buyer of expenses or liabilities for which Buyer seeks reimbursement. Any purported transfer in violation of this Section shall be void. The parties are acting for purposes of this Agreement through their respective branches or offices specified in Exhibit A. The Seller shall not withhold its consent to an assignment or transfer proposed by the Buyer, or by any subsequent assignee or transferee of the Buyer, if the Seller would be entitled to make the payments it is required to make pursuant to Section 2 to the proposed assignee or transferee lawfully and without withholding for or on account of Taxes and the proposed assignee or transferee assumes the obligations of the Buyer under the Tax covenants (if any) of the Buyer in Exhibit B to this Agreement to the satisfaction of the Seller. Notwithstanding the provisions of this Section 15 to the contrary, the Seller consents to the assignment by the Buyer of its interest herein to Fannie Mae, pursuant to the Hedge Assignment and Security Agreement dated as of August 1, 2003, among the Buyer, the Servicer and Fannie Mae. Accordingly, all payments hereunder shall be made in accordance with Section 3 hereof and to the account of the Servicer as specified in Exhibit A hereto. The Seller agrees that Fannie Mae may exercise the rights of the Buyer hereunder at any time and from time to time. Rate Cap Agreement 10 (Broadway LaNel Project) �- 15. Waivers: Rights Not Exclusive. No failure or delay by a party in exercising any right hereunder shall operate as a waiver of, or impair, any such right. No single or partial exercise of any such right shall preclude any other or further exercise thereof or the exercise of any other right. No waiver of any such right shall be effective unless given in writing. No waiver of any such right shall be deemed a waiver of any other right hereunder. The right to terminate provided for herein is in addition to, and not exclusive of, any other rights, powers, privileges or remedies provided by law. 16. Interpretation. The section headings in this Agreement are for convenience of reference only and shall not affect the meaning or construction of any provision hereof. 17. Notices. All notices in connection with this Agreement shall be given by telex or cable or by notice in writing hand -delivered or sent by facsimile transmission or by airmail, postage prepaid. All such notices shall be sent to the telex or telecopier number or address (as the case may be) specified for the intended recipient in Exhibit A (or to such other number or address as that recipient may have last specified by notice to the other party). All such notices shall be effective upon receipt, and confirmation by answerback of any notice sent by telex as provided herein shall be sufficient evidence of receipt thereof, and telephone confirmation of receipt of any facsimile transmission in accordance with Exhibit A shall be sufficient evidence of receipt thereof. 18. Amendments. This Agreement may be amended only by an instrument in writing executed by the parties hereto and only with the prior written consent of Fannie Mae. 19. Survival. The obligations of the parties under Section 6, Section 11 and Section 13 shall survive payment of the obligations of the parties under Section 2 and Section 4 and the termination of their other obligations hereunder. 20. Jurisdiction: Governing Law; Immunity. (a) Any action or proceeding relating in any way to this Agreement may be brought and enforced in the federal courts of the State of New York or of the United States for the Southern District of New York, and each of the parties irrevocably submits to the nonexclusive jurisdiction of each such court in connection with any such action or proceeding. (b) This Agreement shall be governed by, and construed in accordance with, the law of the State of New York without reference to choice of law doctrine. 21. Independence of this Agreement. It is the parties' intention that no other agreements or arrangements between them or any of their affiliates affect the transaction provided for herein except as expressly provided herein. Therefore, except as expressly provided herein, the Seller's obligation to make payments to the Buyer hereunder shall not be subject to early termination or to any condition precedent, no such payment obligation shall be netted against any payment due from the Buyer or any third party under any other agreement or instrument, and neither the Seller nor any third party shall have any right to set off any such payment due from the Seller to the Buyer or withhold any such payment, in whole or in part, pending payment of any amount payable by the Buyer or any third party to the Seller or any third party. In addition, the terms set forth in this provision may not be modified except in a written Rate Cap Agreement 1 1 (Broadway LaNel Project) amendment to this Agreement executed by both parties hereto that (i) is expressly identified in capital letters as modifying this provision (identified by its title) and (ii) deals only with such modification. 22. WAIVER OF JURY TRIAL. EACH OF THE BUYER AND THE SELLER, RESPECTIVELY, HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY CREDIT SUPPORT DOCUMENT. EACH OF THE BUYER AND THE SELLER (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY OR ANY CREDIT SUPPORT PROVIDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND PROVIDE FOR ANY CREDIT SUPPORT DOCUMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 23. Set-off. The Seller agrees that all payments required to be made by it under this Agreement shall be made without setoff or counterclaim and that it shall not withhold payment or delivery under this Agreement in respect of any default by the Buyer under any other agreement between the Buyer and the Seller. 24. Counterparts: Integration of Terms. This Agreement may be executed in counterparts, and the counterparts taken together shall be deemed to constitute one and the same agreement. This Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto. 25. Contractual Currency. The provision on Contractual Currency set forth in Part 4 of Exhibit A will apply if the Seller or any Credit Support Provider for the Seller is not organized in the United States or is acting through any office outside the United States. 26. Liability of Buyer. Notwithstanding anything to the contrary contained in this Agreement, the liability of the Buyer to pay amounts due in connection with the obligations of the Buyer under this Agreement shall be without recourse to any general partner or limited partner of the Buyer. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] Rate Cap Agreement 12 (Broadway LaNel Project) IN WITNESS WHEREOF the parties have caused this Agreement to be duly executed and delivered as of the day and year first written above. BROADWAY LANEL, A LIMITED PARTNERSHIP BEAR STEARNS FINANCIAL PRODUCTS INC. By:_ Name: Rate Cap Agreement S -j (Broadway LaNel Project) IN WITNESS WHEREOF the parties have caused this Agreement to be duly executed and delivered as of the day and year first written above. BROADWAY LANEL, A LIMITED PARTNERSHIP Francis W. Lang, General Partner BEAR STEARNS FINANCIAL PRODUCTS INC. By: / Name: F. Sc erman Title: DPC Manager Rate Cap Agreement S-1 (Broadway LaNel Project) EXHIBIT A Part 1: Addresses for Notices and Accounts for Payments The Seller: Bear Stearns Financial Products, Inc. Address: 383 Madison Avenue, Suite 2700 New York, New York 10179 Attention: DPC Manager Telephone: (212) 272-4007 Facsimile: (212) 272-5823 Seller's Account for Payments: Citibank, N.A., New York ABA # 021-0000-89 A/C # 0925-3186, for further credit to Bear Stearns Financial Products Inc. ATTN Derivatives Department The Buyer: Broadway LaNel, a Limited Partnership Address: 4601 Excelsior Boulevard, Suite 601 Minneapolis, MN 55416 Attention: Francis W. Lang Telecopier No.: (952) 920-5338 Telephone No.: (952) 920-5640 with a copy to: Rate Cap Agreement (Broadway LaNel Project) Glaser Financial Group, Inc. 2177 Youngman Avenue St. Paul, MN 55116 Attention: Servicing Department Telecopier No.: (651) 644-7694 Telephone No.: (651) 603-5056 A-1 (a) Credit Support Document to be delivered by the Seller: None I (b) Other: Legal opinion of counsel to Seller in favor of the Buyer and Fannie Mae and evidence of the authority incumbency and specimen signature of the party executing this Rate Cap Agreement. Part 3: Credit Support Provider for the Seller: None. Part 4: Each reference in this Agreement to Dollars (the "Contractual Currency") is of the essence. The obligation of each party in respect of any amount due under this Agreement in the Contractual Currency is, notwithstanding any payment in any other currency (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in the Contractual Currency that the intended payee may, in accordance with normal banking procedures, purchase with the sum paid in that other currency (after any premium and costs of exchange) on the Business Day in New York City immediately following the day on which that payee receives the payment. If the amount in the Contractual Currency that may be so purchased for any reason falls short of the amount originally due, the parry owing that amount shall pay such additional amount, in the Contractual Currency, as is necessary to compensate for the shortfall. Any obligation of that party not discharged by that payment shall, to the fullest extent permitted by applicable law, be due as a separate and independent obligation and, until discharged as provided herein, shall continue in full force and effect. Rate Cap Agreement A-3 (Broadway LaNel Project) EXHIBIT B Tax Representations and Covenants Representations of each of the Seller and the Buyer It is not required by any applicable law, as modified by the practice of any relevant governmental authority, to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 4 to be made by it to the other party under this Agreement). In making this representation, it may rely on (i) the accuracy of any representation made by the other party below in this Exhibit and (ii) the satisfaction of the covenant of that other party contained below in this Exhibit and the accuracy and effectiveness of any document provided by that other party pursuant to any such covenant. Payee Tax Representations Of the Seller: It is a corporation organized under the laws of the State of Delaware and is not a foreign corporation within the meaning of Section 7701(a)(5) of the United States Internal Revenue Code and its United States taxpayer identification number is 91-1956770. Of the Buyer: It is a limited partnership organized under the laws of and domiciled in the State of Minnesota and its United States taxpayer identification number is 41-1545889. Covenants Of Each Party: If a party is required at any time to execute any form or document in order for payments to it hereunder to qualify for exemption from withholding for or on account of Taxes or to qualify for such withholding at a reduced rate, that party shall, as soon as practicable after request from the other party, execute the required form or document and deliver it to that other ply. Of the Seller: Not applicable. Of the Buyer: Not applicable. Rate Cap Agreement B-1 (Broadway LaNel Project) BEAR STEA RNS HEAR STFARNS FINANCIAL PRODUCTS INC. 383 Madison Avenue Suite 2700 New Yor14 New York 10179 August 11, 2003 Broadway LaNel, a Limited Partnership 4601 Excelsior Boulevad, Suite 601 Minneapolis, MN 55416 Attention: Francis W. Lang Fannie Mae 3900 Wisconsin Avenue, N.W. Drawer AM Washington, D.C. 20016-2899 Re: Rate Cap Agreement dated as of August 5, 2003 (the "Agreement'D between Bear Stearns Financial Products Inc ("SSFP") and Broadway LaNel�Limited Parmershio Ladies and Gentlemen: This opinion is furnished to you pursuant to the Agreement. Terms defined in the Agreement and used but not defined herein have the meanings given to them in the Agreement. I or members of my staff have acted as counsel to SSFP in connection with the preparation, execution and delivery of the AgreemenL In that connection, I or my staff working under my supervision have examined such documents, as we have deemed necessary or appropriate for the opinions expressed herein. The opinions set forth herein are limited to the laws of the State of New York and the federal laws of the United States. Based on the foregoing and upon such investigations as we have deemed necessary, we are of the opinion that, subject, in the case of the opinions set forth in paragraph 4 below, to the qualifications set forth in the last paragraph of this opinion: (1) BSFP is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation and has the corporate power and authority to execute and deliver, and to perform its obligations under, the Agreement (2) The execution and delivery of the Agreement by BSFP, and any other agreement which BSFP has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been and remain duly authorized by all necessary action and do not contravene any provision of its certificate of incorporation or by-laws (or equivalent constitutional documents) or any law, regulation or contractual restriction binding on or affecting it or its property. (3) 411 commNs. atif5amations anh approvals ttigttited`tat im itecuhau and delivery by BSFP of do Agremnent, and any other agreeMM which' BWF has 'executed and delivered pursuant thereto, and the performance of its obligations thereunder have been obtained and remain in full force and effect, all conditions thereof have been duly complied with, and no other action by, and no notice to or filing with any governmental authority or regulatory body is required for such execution, delivery or performance. (4) The Agreement, and any other agreement which BSFP has executed and delivered Pursuant thereto, has been duly executed and delivered by BSFP and constitutes the legal, valid and binding obligation of BSFP, enforceable against BSFP in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). This opinion is being delivered to you in connection with the Agreement and may not be relied upon for any other purposes or by any other person without my express written consent. Very truly yours, Barbara W. Bishop TOTAL P.05 TOTAL P.05 This Instrument was drafted by, and after recording return to: James J. Schwert, Esq. Oppenheimer Wolff & Donnelly LLP Plaza VII, Suite 3300 45 S. Seventh Street Minneapolis, MN 55402 (MINNESOTA) THIS MORTGAGE IS EXEMPT FROM MORTGAGE REGISTRATION TAX IMPOSED BY MINNESOTA STATUTE §287.035 PURSUANT TO MINNESOTA STATUTES §287.04 BECAUSE THE PRINCIPAL AMOUNT OF THE ORIGINAL MORTGAGE LOAN REFERRED TO HEREIN IS MADE UNDER A LOW AND MODERATE INCOME OR OTHER AFFORDABLE HOUSING PROGRAM AND THE MORTGAGEE IS THE CITY OF ST, ANTHONY, MINNESOTA, A MUNICIPAL CORPORATION AND POLITICAL SUBDIVISION OF THE STATE OF MINNESOTA. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 MINNESOTA 0 1997-2001 Fannie Mae TABLE OF CONTENTS 1. DEFINITIONS..... ................................................................................................................ PAGE 2 2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.....................................8 3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION......................................................................................................................9 4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.......................................................................................................................11 5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM..................................................................13 6. EXCULPATION................................................................................................................13 7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES..............................14 8. COLLATERAL AGREEMENTS......................................................................................15 9. APPLICATION OF PAYMENTS.....................................................................................15 10. COMPLIANCE WITH LAWS..........................................................................................15 11. USE OF PROPERTY........................................................................................................15 12. PROTECTION OF LENDER'S SECURITY.....................................................................16 13. INSPECTION....................................................................................................................16 FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page i MINNESOTA 0 1997-2001 Fannie Mae 14. BOOKS AND RECORDS; FINANCIAL REPORTING... .....................16 15. TAXES; OPERATING EXPENSES.................................................................................18 16. LIENS; ENCUMBRANCES.............................................................................................19 17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGEDPROPERTY.............................................................................................19 18. ENVIRONMENTAL HAZARDS.....................................................................................20 19. PROPERTY AND LIABILITY INSURANCE. 20. CONDEMNATION..................................................... ..........................25 ..........................27 21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.....................................................................................................................27 22. EVENTS OF DEFAULT...................................................................................................31 23. REMEDIES CUMULATIVE ...................................... 24. FORBEARANCE................................................................... 25. LOAN CHARGES........................................................ 26. WAIVER OF STATUTE OF LIMITATIONS............ 27. WAIVER OF MARSHALLING ........................ 28. FURTHER ASSURANCES .............................. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - MINNESOTA ...........................32 ...........................32 ...........................3 3 ...........................33 ...........................33 ............................33 Form 4024 11/01 Paged • C 1997-2001 Fannie Mae 29. ESTOPPEL CERTIFICATE..............................................................................................34 30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE ...........................34 31. NOTICE.............................................................................................................................34 32. SALE OF NOTE; CHANGE IN SERVICER....................................................................35 33. SINGLE ASSET BORROWER.........................................................................................35 34. SUCCESSORS AND ASSIGNS BOUND........................................................................35 35. JOINT AND SEVERAL LIABILITY................................................................................35 36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY ..........................35 37. SEVERABILITY; AMENDMENTS.................................................................................36 38. CONSTRUCTION.............................................................................................................36 39. LOAN SERVICING..........................................................................................................36 40. DISCLOSURE OF INFORMATION................................................................................36 41. NO CHANGE IN FACTS OR CIRCUMSTANCES........................................................36 42. SUBROGATION...............................................................................................................37 43. ACCELERATION; REMEDIES.......................................................................................37 44. RELEASE..........................................................................................................................37 FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page iii MINNESOTA © 1997-2001 Fannie Mae 45. WAIVER OF HOMESTEAD ..................... 46. INTEREST UPON REDEMPTION........... 47. DEFINITION OF INDEBTEDNESS......... 48. FINANCING STATEMENT ...................... 49. APPLICATION OF RENTS ....................... 50. NON-AGRICULTURAL USE ................... 51. FUTURE ADVANCES .............................. 52. WAIVER OF TRIAL BY JURY ................ 53. BOND EXPENSES..... ............................... 54. VARIABLE RATE NOTE ......................... 55. PRINCIPAL RESERVE FUND ................. 56. INTEGRATED TRANSACTION .............. ..................................................................3 7 ..................................................................37 ..................................................................3 7 ..................................................................38 ..................................................................3 8 ..................................................................3 9 ..................................................................3 9 ..................................................................40 ..................................................................40 ..................................................................40 ..................................................................40 ..................................................................40 FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page iv MINNESOTA 0 1997-2001 Fannie Mae MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT THIS MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT (the "Instrument") is dated as of the 151 day of August, 2003, between BROADWAY LANEL, A LIMITED PARTNERSHIP, a limited partnership organized and existing under the laws of Minnesota, whose address is c/o LaNel Financial Group, Inc. 4601 Excelsior Boulevard, Suite 601, Minneapolis, MN 55416, as mortgagor ("Borrower"), and (i) CITY OF NEW HOPE, MINNESOTA, a municipal corporation and political subdivision of the State of Minnesota whose address is 4401 Xylon Avenue North, New Hope, Minnesota 55428, Attn: City Manager, New Hope, Minnesota 55428 ("Issuer") and (ii) FANNIE MAE, a federally -chartered and stockholder -owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §1716, et seq., whose address is 3900 Wisconsin Avenue Northwest, Drawer AM, Washington, DC 20016-2899, Attention: Director, Multifamily Asset Management ("Fannie Mae"), (Issuer and Fannie Mae being sometimes hereinafter collectively referred to as "Lender"). RECITALS A. At the request of the Borrower the Issuer has issued its $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNeI Project) Series 2003 ("Bonds") and lent the proceeds of the Bonds to Borrower in the form of a mortgage loan ("Loan") as evidenced by Borrower's Multifamily Note dated of even date herewith executed by Borrower to Issuer maturing on July 15, 2033, and endorsed to the Bond Trustee and Fannie Mae, as their interests may appear. B. Issuer is issuing and selling the Bonds under the Indenture and depositing the proceeds of the Bonds with Bond Trustee to be used to fund the Loan. C. The Loan is (a) evidenced by the Note maturing on July 15, 2033 and (b) secured by this Instrument. D. Immediately following the origination of the Loan, Issuer will assign and deliver all of its right, title and interest. in and to the Loan, including the Note, this Instrument and the other Loan Documents, to the Trustee and Fannie Mae, as their interests may appear. E. Borrower has requested Fannie Mae to provide credit enhancement and liquidity support for the Bonds ("Credit Enhancement') and Fannie Mae has agreed to provide the Credit Enhancement subject to, among other things, Borrower entering into the Reimbursement Agreement. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page / MINNESOTA © 1997-2001 Fannie Mae F. The obligations of Borrower under the Reimbursement Agreement are secured by this Instrument. TO SECURE TO ISSUER and its successors and assigns, and any subsequent holder of the Note (i) the payment, performance and observance of all obligations, covenants and agreements of Borrower under the Note and all renewals, extensions and modifications of the Note and (ii) the payment, performance and observance of all obligations, covenants and agreements of Borrower to the Issuer contained in this Instrument, including, but not limited to, the payment of all sums advanced by or on behalf of Issuer to protect the security of this Instrument under Section 12; and TO SECURE TO FANNIE MAE and its successors and assigns (i) the payment of all amounts which become due and payable by Borrower under the Reimbursement Agreement, (ii) the payment, performance and observance of all other obligations, covenants and agreements of Borrower contained in the Reimbursement Agreement (iii) the payment, performance and observance of all obligations, covenants and agreements of Borrower contained in this Instrument including, but not limited to, the payment of all sums advanced by or on behalf of Lender to protect the security of this Instrument under Section 12, and (iv) the payment, performance and observance of all obligations, covenants and agreements of Borrower in each Collateral Agreement. Borrower grants, conveys and assigns to Lender, with power of sale, the Mortgaged Property, including the land located in Hennepin County, State of Minnesota, and described in Exhibit A attached to this Instrument. Borrower represents and warrants that Borrower is lawfully seized of the Mortgaged Property and has the right, power and authority to mortgage, grant, convey and assign the Mortgaged Property, and that the Mortgaged Property is unencumbered. Borrower covenants that Borrower will warrant and defend generally the title to the Mortgaged Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy issued to Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender's interest in the Mortgaged Property. Covenants. Borrower and Lender covenant and agree as follows: 1. DEFINITIONS. The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings: (a) "Assignment" means the Assignment and Intercreditor Agreement, dated as of August 1, 2003, among Issuer, Fannie Mae and Bond Trustee and acknowledged, accepted and agreed to by Borrower and as it may be amended, supplemented or restated from time to time. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 2 MINNESOTA © 1997-2001 Fannie Mae (b) "Bond Documents" means the Assignment, the Bonds, the Bond Purchase Agreement, the Credit Facility, the Disclosure Agreement, the Financing Agreement, the Indenture, the Regulatory Agreement (and any other agreement relating to rental restrictions on the Mortgaged Property), the Remarking Agreement, the Tax Certificate, any Tender Agent Agreement, and all other documents, instruments and agreements executed and delivered in connection with the issuance, sale, delivery and/or remarketing of the Bonds, as each such agreement or instrument may be amended, supplemented or restated from time to time. (c) 'Bond Trustee" means U.S. Bank National Association, a national banking association, not in its individual or corporate capacity but solely in its capacity as trustee, as the trustee under the Indenture. (d) "Borrower" means all persons or entities identified as 'Borrower" in the first paragraph of this Instrument, together with their successors and assigns. (e) "Collateral Agreement' means any separate agreement between Borrower and Fannie Mae for the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to assure completion of repairs or improvements specified in that agreement, or assuring reduction of the outstanding principal balance of the Note if the occupancy of or income from the Mortgaged Property does not increase to a level specified in that agreement, or any other agreement or agreements between Borrower and Fannie Mae which provide for the establishment of any other fund, reserve or account. (f) "Environmental Permit' means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property. (g) "Event of Default' means the occurrence of any event listed in Section 22. (h) "Financing Agreement" means the Financing Agreement dated as of August 1, 2003, between the Borrower, the Trustee and the Issuer as the same may be amended, supplemented or restated from time to time. (i) "Fixtures" means all property which is so attached to the Land or the Improvements as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators, installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention, or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm windows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 3 MINNESOTA ® 1997-2001 Fannie Mae 0) "Governmental Authority" means any board, commission, department or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property. (k) "Hazardous Materials" means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs") and compounds containing them; lead and lead-based paint; asbestos or asbestos -containing materials in any form that is or could become friable; underground or above -ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a "hazardous substance," "hazardous material," "hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or "pollutant' within the meaning of any Hazardous Materials Law. (1) "Hazardous Materials Laws" means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future and including all amendments, that relate to Hazardous Materials and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seg., and their state analogs. (m) "Impositions" and "Imposition Deposits" are defined in Section 7(a). (n) "Improvements" means the buildings, structures, improvements, and alterations now constructed or at any time in the future constructed or placed upon the Land, including any future replacements and additions. (o) "Indebtedness" means (a) the obligations of Borrower to (i) pay, perform and observe all obligations, covenants and agreements of Borrower under the Note and all renewals, extensions and modifications of the Note and (ii) pay, perform and observe all obligations, covenants and agreements of Borrower to the Issuer and its successors and assigns contained in this Instrument, including the payment of all sums advanced by or on behalf of Issuer as provided in Section 12 to protect the security of this Instrument; and (b) the obligations of Borrower to (i) pay all amounts which become due and payable by Borrower under the Reimbursement Agreement, (ii) perform and observe all FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 4 MINNESOTA C 1997-2001 Fannie Mae other obligations, covenants and agreements of Borrower contained in the Reimbursement Agreement (iii) pay, perform and observe all obligations, covenants and agreements of Borrower contained in this Instrument, including the payment of all sums advanced by or on behalf of Fannie Mae and its successors and assigns under Section 12 to protect the security of this Instrument, and (iv) pay, perform and observe all obligations, covenants and agreements of Borrower in the Collateral Agreements. (p) "Indenture" means the Trust Indenture, dated as of August 1, 2003, between Issuer and Bond Trustee, as it may be amended, supplemented or restated from time to time. (q) "Key Principal' means the natural person(s) or entity identified as such at the foot of this Instrument, and any person or entity who becomes a Key Principal after the date of this Instrument and is identified as such in an amendment or supplement to this Instrument. (r) "Land" means the land described in Exhibit A. (s) "Leases" means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals. (t) "Lender" means both (i) Issuer, and its successors and assigns, or any subsequent holder of the Note and (ii) Fannie Mae and its successors and assigns, as the interests of Issuer and Fannie Mae may appear. The Assignment governs the relative rights and obligations of Lender under this Instrument between Issuer and its successors and assigns, on one hand, and Fannie Mae, on the other hand.. (u) "Loan Documents" means (i) collectively, the Note, the Security histrument and all other documents, agreements and instruments evidencing, securing or otherwise relating to the Loan, and (ii) with respect to the Credit Enhancement, the Reimbursement Agreement, this Instrument, the Collateral Agreements, all guaranties, O&M Programs, and any other documents now or in the future executed by Borrower, Key Principal, any guarantor or any other person in connection with the obligations of the Borrower with respect to the Credit Enhancement, in all cases as such documents may be amended, supplemented or restated from time to time. Notwithstanding anything else in this Instrument to the contrary, neither the Financing Agreement nor the Regulatory Agreement is a Loan Document and neither document is secured by this Instrument. (v) "Loan Servicer" means the entity that from time to time is designated by Fannie Mae to collect payments and deposits and receive notices under the Note, this Instrument and any other Loan Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page S MINNESOTA 0 1997-2001 Fannie Mae (w) "Mortgaged Property" means all of Borrower's present and future right, title and interest in and to all of the following: (1) the Land; (2) the Improvements; (3) the Fixtures; (4) the Personalty; (5) all current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, easements, tenements, rights-of-way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses, and appurtenances related to or benefitting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated; (6) all proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the insurance pursuant to Lender's requirement; (7) all awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from condemnation proceedings or the total or partial taking of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof, (8) all contracts, options and other agreements for the sale of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations; (9) all proceeds from the conversion, voluntary or involuntary, of any of the above into cash or liquidated claims, and the right to collect such proceeds; (10) all Rents and Leases; (11) all earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 6 MINNESOTA C 1997-2001 Fannie Mae undisbursed proceeds of the loan secured by this Instrument and, if Borrower is a cooperative housing corporation, maintenance charges or assessments payable by shareholders or residents; (12) all Imposition Deposits; (13) all refunds or rebates of Impositions by any municipal, state or federal authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Instrument is dated); (14) all tenant security deposits which have not been forfeited by any tenant under any Lease; and (15) all names under or by which any of the above Mortgaged Property may be operated or known, and all trademarks, trade names, and goodwill relating to any of the Mortgaged Property. (x) "Note" means the Multifamily Note described on page 1 of this Instrument, including the Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non -Recourse Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may be amended from time to time. (y) "O&M Program" is defined in Section 18(a). (z) 'Personalty" means all equipment, inventory, general intangibles which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, including furniture, furnishings, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights relating to the operation of, or used in connection with, the Land or the Improvements, including all governmental permits relating to any activities on the Land. (aa) 'Property Jurisdiction" is defined in Section 30(a). (bb) "Regulatory Agreement' means the Deed and Covenants Running with the Land dated as of December 1, 1985 and filed in the office of the Hennepin County Recorder, as Document No. 5099932 and in the office of the Hennepin County Registrar of Titles, as Document No. 1717489, as amended by First Amendment to Deed and Covenants Running with the Land, dated as of September 1, 1993 and filed in the office of the Hennepin County Recorder as Document No. 6147858 and in the office of the Hennepin County Registrar of Titles, as Document FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 7 MINNESOTA 0 1997-2001 Fannie Mae No. 2513476, and by that certain Corrective First Amendment to Deed and Covenants Running with the Land, dated September 1, 1993 and filed in the office of the Hennepin County Recorder as Document No. 6285009, as further amended by Second Amendment to Deed and Covenants Running with the Land, dated of even date herewith, between the Issuer and the Borrower, regulating or restricting the use or manner of operation of the Mortgaged Property as the same may be amended, supplemented or restated from time to time. (cc) "Reimbursement Agreement" means the Reimbursement Agreement dated as of August 1, 2003, between Fannie Mae and Borrower, as it may be amended, supplemented or restated from time to time. (dd) "Rents" means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including subsidy payments received from any sources (including, but not limited to payments under any Housing Assistance Payments Contract), parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due, or to become due, and deposits forfeited by tenants. (cc) "Taxes" means all taxes, assessments, vault rentals and other charges, if any, general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi - public authority, and which, if not paid, will become a lien, on the Land or the Improvements. (ff) "Transfer" means (A) a sale, assignment, transfer or other disposition (whether voluntary, involuntary or by operation of law); (B) the granting, creating or attachment of a lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law); (C) the issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock; (D) the withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or manager in a limited liability company; or (E) the merger, dissolution, liquidation, or consolidation of a legal entity. "Transfer" does not include (i) a conveyance of the Mortgaged Property at a judicial or non judicial foreclosure sale under this Instrument or (ii) the Mortgaged Property becoming part of a bankruptcy estate by operation of law under the United States Bankruptcy Code. For purposes of defining the term "Transfer," the term "partnership" shall mean a general partnership, a limited partnership, a joint venture and a limited liability partnership, and the term "partner" shall mean a general partner, a limited partner and a joint venturer. 2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subject to a security interest under the Uniform Commercial Code, whether acquired now or in the future, and all products and cash and non-cash proceeds thereof (collectively, "UCC Collateral'), and Borrower hereby grants to Lender a security interest in the UCC Collateral. Borrower hereby authorizes Lender to file financing statements, continuation statements and financing statement amendments in such form as FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 8 MINNESOTA 0 1997-2001 Fannie Mae Lender may require to perfect or continue the perfection of this security interest and Borrower agrees, if Lender so requests, to execute and deliver to Lender such financing statements, continuation statements and amendments. Borrower shall pay all filing costs and all costs and expenses of any record searches for financing statements that Lender may require. Without the prior written consent of Lender, Borrower shall not create or permit to exist any other lien or security interest in any of the UCC Collateral. If an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured party under the Uniform Commercial Code, in addition to all remedies provided by this Instrument or existing under applicable law. In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order, without in any way affecting the availability of Lender's other remedies. This Instrument constitutes a financing statement with respect to any part of the Mortgaged Property which is or may become a Fixture. 3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION. (a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all Rents. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action on the part of Borrower. Promptly upon request by Lender, Borrower agrees to execute and deliver such further assignments as Lender may from time to time require. Borrower and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only. For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the "Mortgaged Property," as that term is defined in Section 1(w). However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Instrument. (b) After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender, and Borrower shall, upon Borrower's receipt of any Rents from any sources (including, but not limited to subsidy payments under any Housing Assistance Payments Contract), pay the total amount of such receipts to the Lender. However, until the occurrence of an Event of Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other amounts then due and payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs and expenses of managing, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums (to the extent not included in Imposition Deposits), tenant improvements and other capital expenditures. So long as no Event of Default has occurred and is continuing, the Rents remaining after application pursuant to the preceding sentence may be retained by Borrower free and clear of, and released from, Lender's rights with respect to FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Farm 4024 11/01 Page 9 MINNESOTA C 1997-2001 Fannie Mae Rents under this Instrument. From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, or by a receiver, Borrower's license to collect Rents shall automatically terminate and Lender shall without notice be entitled to all Rents as they become due and payable, including Rents then due and unpaid. Borrower shall pay to Lender upon demand all Rents to which Lender is entitled. At any time on or after the date of Lender's demand for Rents, Lender may give, and Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of the Mortgaged Property instructing them to pay all Rents to Lender, no tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and no tenant shall be obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a notice. Any such notice by Lender shall be delivered to each tenant personally, by mail or by delivering such demand to each rental unit. Borrower shall not interfere with and shall cooperate with Lender's collection of such Rents. (c) Borrower represents and warrants to Lender that Borrower has not executed any prior assignment of Rents (other than an assignment of Rents securing indebtedness that will be paid off and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not performed, and Borrower covenants and agrees that it will not perform, any acts and has not executed, and shall not execute, any instrument which would prevent Lender from exercising its rights under this Section 3, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents. Borrower shall not collect or accept payment of any Rents more than two months prior to the due dates of such Rents. (d) If an Event of Default has occurred and is continuing, Lender may, regardless of the adequacy of Lender's security or the solvency of Borrower and even in the absence of waste, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property, including the execution, cancellation or modification of Leases, the collection of all Rents, the making of repairs to the Mortgaged Property and the execution or termination of contracts providing for the management, operation or maintenance of the Mortgaged Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as Lender in its discretion may deem necessary or desirable. Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy of Lender's security, without regard to Borrower's solvency and without the necessity of giving prior notice (oral or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all of the actions set forth in the preceding sentence. If Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Borrower, by its execution of this Instrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law. Lender or the receiver, as the case may be, shall be entitled to receive a reasonable fee for managing the Mortgaged Property. Immediately upon appointment of a receiver or immediately upon the Lender's entering upon and taking possession and control of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged Property to Lender or the receiver, FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 10 MINNESOTA 0 1997-2001 Fannie Mae as the case may be, and shall deliver to Lender or the receiver, as the case may be, all documents, records (including records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents. In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude Borrower and its representatives from the Mortgaged Property. Borrower acknowledges and agrees that the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed to make Lender a mortgagee -in -possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements. (e) If Lender enters the Mortgaged Property, Lender shall be liable to account only to Borrower and only for those Rents actually received. Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by reason of any act or omission of Lender under this Section 3, and Borrower hereby releases and discharges Lender from any such liability to the fullest extent permitted by law. (f) If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall become an additional part of the Indebtedness as provided in Section 12. (g) Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as the case may be, and any application of Rents as provided in this Instrument shall not cure or waive any Event of Default or invalidate any other right or remedy of Lender under applicable law or provided for in this Instrument. 4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY. (a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all of Borrower's right, title and interest in, to and under the Leases, including Borrower's right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Borrower's right, title and interest in, to and under the Leases. Borrower and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only. For purposes of giving effect to this absolute assignment of the Leases, and for no other purpose, the Leases shall not be deemed to be a part of the "Mortgaged Property," as that term is defined in Section 1(w). However, if this present, absolute and unconditional assignment of the Leases is not enforceable by its terms under the laws of the Property Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on the Leases in favor of Lender, which lien shall be effective as of the date of this Instrument. (b) Until Lender gives notice to Borrower of Lender's exercise of its rights under this Section 4, Borrower shall have all rights, power and authority granted to Borrower under any Lease (except as otherwise limited by this Section or any other provision of this Instrument), including the FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page II MINNESOTA 0 1997-2001 Fannie Mae right, power and authority to modify the terms of any Lease or extend or terminate any Lease. Upon the occurrence of an Event of Default, the permission given to Borrower pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall automatically terminate. Borrower shall comply with and observe Borrower's obligations under all Leases, including Borrower's obligations pertaining to the maintenance and disposition of tenant security deposits. (c) Borrower acknowledges and agrees that the exercise by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender a mortgagee -in -possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and the Improvements. The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take any action under this Instrument or to expend any money or to incur any expenses. Lender shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Mortgaged Property. Prior to Lender's actual entry into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform any of the terms, covenants and conditions contained in any Lease (or otherwise have any obligation with respect to any Lease); (ii) be obligated to appear in or defend any action or proceeding relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation, control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged Property. The execution of this Instrument by Borrower shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and shall be that of Borrower, prior to such actual entry and taking of possession. (d) Upon delivery of notice by Lender to Borrower of Lender's exercise of Lender's rights under this Section 4 at any time after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver, or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender immediately shall have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease. (e) Borrower shall, promptly upon Lender's request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least six months and not more than two years, and shall not include options to purchase. If customary in the applicable market, residential Leases with terms of less than six months may be permitted with Lender's prior written consent. (I) Borrower shall not lease any portion of the Mortgaged Property for non-residential use except with the prior written consent of Lender and Lender's prior written approval of the Lease agreement. Borrower shall not modify the terms of, or extend or terminate, any Lease for non- residential use (including any Lease in existence on the date of this Instrument) without the prior written consent of Lender. Borrower shall, without request by Lender, deliver an executed copy of each non-residential Lease to Lender promptly after such Lease is signed. All non-residential Leases, including renewals or extensions of existing Leases, shall specifically provide that (1) such FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 12 MINNESOTA C 1997-2001 Fannie Mae Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender); (2) the tenant shall attom to Lender and any purchaser at a foreclosure sale, such attornment to be self- executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner; (3) the tenant agrees to execute such further evidences of attomment as Lender or any purchaser at a foreclosure sale may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property, (5) after a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at such foreclosure sale may, at Lender's or such purchaser's option, accept or terminate such Lease; and (6) the tenant shall, upon receipt after the occurrence of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender. (g) Borrower shall not receive or accept Rent under any Lease (whether residential or non-residential) for more than two months in advance. 5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM. Borrower shall pay the Indebtedness when due in accordance with the terms of the Note and the other Loan Documents and shall perform, observe and comply with all other provisions of the Note and the other Loan Documents. Borrower shall pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender's exercise of any right of acceleration of the Indebtedness, as provided in the Note. 6. EXCULPATION. Borrower's personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Instrument is limited in the manner, and to the extent, provided in the Note. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 13 MINNESOTA e 1997-2001 Fannie Mae 7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES. (a) Borrower shall deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due (1) any water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under Section 19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender's interests, all as reasonably estimated from time to time by Lender. The amounts deposited under the preceding sentence are collectively referred to in this Instrument as the "Imposition Deposits". The obligations of Borrower for which the Imposition Deposits are required are collectively referred to in this Instrument as "Impositions". The amount of the Imposition Deposits shall be sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty or interest charge being added. Lender shall maintain records indicating how much of the monthly Imposition Deposits and how much of the aggregate Imposition Deposits held by Lender are held for the purpose of paying Taxes, insurance premiums and each other obligation of Borrower for which Imposition Deposits are required. Any waiver by Lender of the requirement that Borrower remit Imposition Deposits to Lender may be revoked by Lender, in Lender's discretion, at any time upon notice to Borrower. (b) Imposition Deposits shall be held in an institution (which may be Lender, if Lender is such an institution) whose deposits or accounts are insured or guaranteed by a federal agency. Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of the federal deposit insurance or guaranty. Lender shall apply the Imposition Deposits to pay Impositions so long as no Event of Default has occurred and is continuing. Unless applicable law requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the Imposition Deposits. Borrower hereby pledges and grants to Lender a security interest in the Imposition Deposits as additional security for all of Borrower's obligations under this Instrument and the other Loan Documents. Any amounts deposited with Lender under this Section 7 shall not be trust funds, nor shall they operate to reduce the Indebtedness, unless applied by Lender for that purpose under Section 7(e). (c) If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition from the Imposition Deposits held by Lender. Lender shall have no obligation to pay any Imposition to the extent it exceeds Imposition Deposits then held by Lender. Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition. (d) If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be credited against future installments of Imposition Deposits. If at any time the amount of the FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page l4 MINNESOTA © 1997-2001 Fannie Mae Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the deficiency within 15 days after notice from Lender. (e) If an Event of Default has occurred and is continuing, Lender may apply any Imposition Deposits, in any amounts and in any order as Lender determines, in Lender's discretion, to pay any Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to Borrower any Imposition Deposits held by Lender. 8. COLLATERAL AGREEMENTS. Borrower shall deposit with Lender such amounts as may be required by any Collateral Agreement and shall perform all other obligations of Borrower under each Collateral Agreement. 9. APPLICATION OF PAYMENTS. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion. Neither Lender's acceptance of an amount which is less than all amounts then due and payable nor Lender's application of such payment in the manner authorized shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction. Notwithstanding the application of any such amount to the Indebtedness, Borrower's obligations under this Instr unent and the Note shall remain unchanged. 10. COMPLIANCE WITH LAWS. Borrower shall comply with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, zoning and land use, and Leases. Borrower also shall comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits. Borrower shall at all times maintain records sufficient to demonstrate compliance with the provisions of this Section 10. Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property. Borrower represents and warrants to Lender that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity. 11. USE OF PROPERTY. Unless required by applicable law, Borrower shall not (a) except for any change in use approved by Lender, allow changes in the use for which all or any part of the Mortgaged Property is FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 15 MINNESOTA 1997-2001 Fannie Mae being used at the time this Instrument was executed, (b) convert any individual dwelling units or common areas to commercial use, (c) initiate or acquiesce in a change in the zoning classification of the Mortgaged Property, or (d) establish any condominium or cooperative regime with respect to the Mortgaged Property. 12. PROTECTION OF LENDER'S SECURITY. (a) If Borrower fails to perform any of its obligations under this Instrument or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender's interest, including (1) payment of fees and out-of-pocket expenses of attorneys, accountants, inspectors and consultants, (2) entry upon the Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement of the insurance required by Section 19, and (4) payment of amounts which Borrower has failed to pay under Sections 15 and 17. (b) Any amounts disbursed by Lender under this Section 12, or under any other provision of this Instrument that treats such disbursement as being made under this Section 12, shall be added to, and become part of, the principal component of the Indebtedness, shall be immediately due and payable and shall bear interest from the date of disbursement until paid at the "Default Rate", as defined in the Note. (c) Nothing in this Section 12 shall require Lender to incur any expense or take any action. 13. INSPECTION. Lender, its agents, representatives, and designees may make or cause to be made entries upon and inspections of the Mortgaged Property (including environmental inspections and tests) during normal business hours, or at any other reasonable time. 14. BOOKS AND RECORDS; FINANCIAL REPORTING. (a) Borrower shall keep and maintain at all times at the Mortgaged Property or the management agent's offices, and upon Lender's request shall make available at the Mortgaged Property, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property. The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender. (b) Borrower shall famish to Lender all of the following: FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 16 MINNESOTA © 1997-2001 Fannie Mae (1) within 120 days after the end of each fiscal year of Borrower, a statement of income and expenses for Borrower's operation of the Mortgaged Property for that fiscal year, a statement of changes in financial position of Borrower relating to the Mortgaged Property for that fiscal year and, when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year; (2) within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a rent schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender; (3) within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts; (4) within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members; (5) upon Lender's request, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender; (6) upon Lender's request, a balance sheet, a statement of income and expenses for Borrower and a statement of changes in financial position of Borrower for Borrower's most recent fiscal year; and (7) if required by Lender, a statement of income and expense for the Mortgaged Property for the prior month or quarter. (c) Each of the statements, schedules and reports required by Section 14(b) shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require. Lender also may require FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 17 MINNESOTA 1997-2001 Fannie Mae that any statements, schedules or reports be audited at Borrower's expense by independent certified public accountants acceptable to Lender. (d) If Borrower fails to provide in a timely manner the statements, schedules and reports required by Section 14(b), Lender shall have the right to have Borrower's books and records audited, at Borrower's expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12. (e) If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation. (f) Borrower authorizes Lender to obtain a credit report on Borrower at any time. (g) If an Event of Default has occurred and Lender has not previously required Borrower to furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require Borrower to furnish such a statement within 45 days after the end of each fiscal quarter of Borrower following such Event of Default. 15. TAXES; OPERATING EXPENSES. (a) Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay, or cause to be paid, all Taxes when due and before the addition of any interest, fine, penalty or cost for nonpayment. (b) Subject to the provisions of Section 15(c), Borrower shall pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including insurance premiums, utilities, repairs and replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added. (c) As long as no Event of Default exists and Borrower has timely delivered to Lender any bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes, insurance premiums or any other individual Imposition to the extent that sufficient Imposition Deposits are held by Lender for the purpose of paying that specific Imposition. If an Event of Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits without regard to whether Impositions are then due and payable. Lender shall have no liability to Borrower for failing to pay any Impositions to the extent that any Event of Default has occurred and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition becomes due and payable or Borrower has failed to provide Lender with bills and premium notices as provided above. (d) Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 18 MINNESOTA 0 1997-2001 Fannie Mae insurance premiums, if (1) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (4) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of the reserves established by Borrower to pay the contested Imposition. (e) Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for, Impositions, and if Borrower pays any Imposition directly, Borrower shall promptly furnish to Lender receipts evidencing such payments. 16. LIENS; ENCUMBRANCES. Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a "Lien") on the Mortgaged Property (other than the lien of this Instrument) or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the lien of this Instrument, is a "Transfer" which constitutes an Event of Default. 17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY. (a) Borrower (1) shall not commit waste or permit impairment or deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged Property, (3) shall restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not insurance proceeds or condemnation awards are available to cover any costs of such restoration or repair, (4) shall keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality, (5) shall provide for professional management of the Mortgaged Property by a residential rental property manager satisfactory to Lender under a contract approved by Lender in writing, and (6) shall give notice to Lender of and, unless otherwise directed in writing by Lender, shall appear in and defend any action or proceeding purporting to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument. Borrower shall not (and shall not permit any tenant or other person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property except in connection with the replacement of tangible Personalty. (b) If, in connection with the making of the loan evidenced by the Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a written contract for management of the Mortgaged Property and if, after the date of this Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have the right to approve such new property manager and the written contract for the management of the Mortgaged Property and require that Borrower and such new property manager enter into an Assignment of Management Agreement on a form approved by Lender. If required by Lender FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page /9 MINNESOTA © 1997-2001 Fannie Mae (whether before or after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable for the management of the Mortgaged Property to enter into an agreement with Lender, in a form approved by Lender, providing for subordination of those fees and such other provisions as Lender may require. "Affiliate of Borrower" means any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control with, or which controls Borrower (the term 'control' for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests). 18. ENVIRONMENTAL HAZARDS. (a) Except for matters covered by a written program of operations and maintenance approved in writing by Lender (an "O&M Program") or matters described in Section 18(b), Borrower shall not cause or permit any of the following: (1) the presence, use, generation, release, treatment, processing, storage (including storage in above ground and underground storage tanks), handling, or disposal of any Hazardous Materials on or under the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property; (2) the transportation of any Hazardous Materials to, from, or across the Mortgaged Property; (3) any occurrence or condition on the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws; or (4) any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged Property. The matters described in clauses (1) through (4) above are referred to collectively in this Section 18 as "Prohibited Activities or Conditions". (b) Prohibited Activities and Conditions shall not include the safe and lawful use and storage of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (2) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 20 MINNESOTA C 1997-2001 Fannie Mae Property; and (3) petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Mortgaged Property's parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws. (c) Borrower shall take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Instrument) to prevent its employees, agents, and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions. Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition. (d) If an O&M Program has been established with respect to Hazardous Materials, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Mortgaged Property to comply with the O&M Program. All costs of performance of Borrower's obligations under any O&M Program shall be paid by Borrower, and Lender's out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance shall be paid by Borrower upon demand by Lender. Any such out-of-pocket costs of Lender which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12. (e) Borrower represents and warrants to Lender that, except as previously disclosed by Borrower to Lender in writing: (1) Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions; (2) to the best of Borrower's knowledge after reasonable and diligent inquiry, no Prohibited Activities or Conditions exist or have existed; (3) except to the extent previously disclosed by Borrower to Lender in writing, the Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower's knowledge after reasonable and diligent inquiry, the Mortgaged Property has not contained any underground storage tanks in the past. If there is an underground storage tank located on the Property which has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws; (4) Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials. Without limiting the generality of the foregoing, Borrower has obtained all Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect and all such Environmental Permits are in full force and effect; FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 2l MINNESOTA C 1997-2001 Fannie Mae (5) no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would constitute, noncompliance with the terms of any Environmental Permit; (6) there are no actions, suits, claims or proceedings pending or, to the best of Borrower's knowledge after reasonable and diligent inquiry, threatened that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition; and (7) Borrower has not received any complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property. The representations and warranties in this Section 18 shall be continuing representations and warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced by the Note, until the Indebtedness has been paid in full. (f) Borrower shall promptly notify Lender in writing upon the occurrence of any of the following events: (1) Borrowers discovery of any Prohibited Activity or Condition; (2) Borrower's receipt of or knowledge of any complaint, order, notice of violation or other communication from any Governmental Authority or other person with regard to present or future alleged Prohibited Activities or Conditions or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property, and (3) any representation or warranty in this Section 18 becomes untrue after the date of this Agreement. Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any obligation under this Instrument, the Note, or any other Loan Document. (g) Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender's consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist. Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 22 MINNESOTA C 1997-2001 Fannie Mae administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12. The results of all Environmental Inspections made by Lender shall at all times remain the property of Lender and Lender shall have no obligation to disclose or otherwise make available to Borrower or any other party such results or any other information obtained by Lender in connection with its Environmental Inspections. Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property. Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections. Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale. Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections. (h) If any investigation, site monitoring, containment, clean-up, restoration or other remedial work ("Remedial Work") is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law, Borrower shall, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 30 days after notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and shall in any event complete the work by the time required by applicable Hazardous Materials Law. If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower shall reimburse Lender on demand for the cost of doing so. Any reimbursement due from Borrower to Lender shall become part of the Indebtedness as provided in Section 12. (i) Borrower shall cooperate with any inquiry by any Governmental Authority and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activity or Condition. 0) Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers, directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the "Indemnitees") from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including fees and out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following: FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 13 MINNESOTA © 1997-2001 Fannie Mae (1) any breach of any representation or warranty of Borrower in this Section 18; (2) any failure by Borrower to perform any of its obligations under this Section 18; (3) the existence or alleged existence of any Prohibited Activity or Condition; (4) the presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged Property; and (5) the actual or alleged violation of any Hazardous Materials Law. (k) Counsel selected by Borrower to defend Indemnitees shall be subject to the approval of those Indemnitees. However, any Indemnitee may elect to defend any claim or legal or administrative proceeding at the Borrower's expense. (1) Borrower shall not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (a "Claim"), settle or compromise the Claim if the settlement (1) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender; or (2) may materially and adversely affect Lender, as determined by Lender in its discretion. (m) Lender agrees that the indemnity under this Section 18 shall be limited to the assets of Borrower and Lender shall not seek to recover any deficiency from any natural persons who are general partners of Borrower. (n) Borrower shall, at its own cost and expense, do all of the following: (1) pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Section 18; (2) reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Section 18; and (3) reimburse Indemnitees for any and all expenses, including fees and out-of- pocket expenses of attorneys and expert witnesses, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Section 18, or in monitoring and participating in any legal or administrative proceeding. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 14 MINNESOTA ® 1997-2001 Fannie Mae (o) h1 any circumstances in which the indemnity under this Section 18 applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which shall not be unreasonably withheld, delayed or conditioned), may settle or compromise any action or legal or administrative proceeding. Borrower shall reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, and the fees and out-of-pocket expenses of such attorneys and consultants. (p) The provisions of this Section 18 shall be in addition to any and all other obligations and liabilities that Borrower may have under applicable law or under other Loan Documents, and each Indemnitee shall be entitled to indemnification under this Section 18 without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one person or entity, the obligation of those persons or entities to indemnify the Indemnitees under this Section 18 shall be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Section 18 shall survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the lien of this Instrument. 19. PROPERTY AND LIABILITY INSURANCE. (a) Borrower shall keep the Improvements insured at all times against such hazards as Lender may from time to time require, which insurance shall include but not be limited to coverage against loss by fire and allied perils, general boiler and machinery coverage, and business income coverage. Lender's insurance requirements may change from time to time throughout the term of the Indebtedness. If Lender so requires, such insurance shall also include sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to applicable zoning or land use laws, building ordinance or law coverage. If any of the Improvements is located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as an area having special flood hazards, and if flood insurance is available in that area, Borrower shall insure such Improvements against loss by flood. (b) All premiums on insurance policies required under Section 19(a) shall be paid in the manner provided in Section 7, unless Lender has designated in writing another method of payment. All such policies shall also be in a form approved by Lender. All policies of property damage insurance shall include a non-contributing, non -reporting mortgage clause in favor of, and in a form approved by, Lender. Lender shall have the right to hold the original policies or duplicate original policies of all insurance required by Section 19(a). Borrower shall promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies and all receipts for paid premiums. At least 30 days prior to the expiration date of a policy, Borrower shall deliver to Lender the original (or a duplicate original) of a renewal policy in form satisfactory to Lender. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 25 MINNESOTA C 1997-2001 Fannie Mae (c) Borrower shall maintain at all times commercial general liability insurance, workers' compensation insurance and such other liability, errors and omissions and fidelity insurance coverages as Lender may from time to time require. (d) All insurance policies and renewals of insurance policies required by this Section 19 shall be in such amounts and for such periods as Lender may from time to time require, and shall be issued by insurance companies satisfactory to Lender. (e) Borrower shall comply with all insurance requirements and shall not permit any condition to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that this Instrument requires Borrower to maintain. (f) hi the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender. Borrower hereby authorizes and appoints Lender as attomey-in-fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of property damage insurance, to appear in and prosecute any action arising from such property damage insurance policies, to collect and receive the proceeds of property damage insurance, and to deduct from such proceeds Lender's expenses incurred in the collection of such proceeds. This power of attorney is coupled with an interest and therefore is irrevocable. However, nothing contained in this Section 19 shall require Lender to incur any expense or take any action. Lender may, at Lender's option, (1) hold the balance of such proceeds to be used to reimburse Borrower for the cost of restoring and repairing the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (the "Restoration"), or (2) apply the balance of such proceeds to the payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply insurance proceeds to Restoration, Lender shall do so in accordance with Lender's then -current policies relating to the restoration of casualty damage on similar multifamily properties. (g) Lender shall not exercise its option to apply insurance proceeds to the payment of the Indebtedness if all of the following conditions are met: (1) no Event of Default (or any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing; (2) Lender determines, in its discretion, that there will be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the rental income from the Mortgaged Property after completion of the Restoration will be sufficient to meet all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan repayment obligations relating to the Mortgaged Property; (4) Lender determines, in its discretion, that the Restoration will be completed before the earlier of (A) one year before the maturity date of the Note or (B) one year after the date of the loss or casualty; (5) upon Lender's request, Borrower provides Lender evidence of the availability during and after the Restoration of the insurance required to be maintained by Borrower pursuant to this Section 19; and (6) no "Potential Default" or "Event of Default" has occurred and is continuing under the Reimbursement Agreement (as such terms are defined in the Reimbursement Agreement). (h) If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender shall automatically succeed to all rights of Borrower in and to any FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 26 MINNESOTA 0 1997-2001 Fannie Mae insurance policies and unearned insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition. 20. CONDEMNATION. (a) Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (a "Condemnation"). Borrower shall appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing. Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender's or Borrower's name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation. This power of attorney is coupled with an interest and therefore is irrevocable. However, nothing contained in this Section 20 shall require Lender to incur any expense or take any action. Borrower hereby transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation. (b) Lender may apply such awards or proceeds, after the deduction of Lender's expenses incurred in the collection of such amounts, at Lender's option, to the restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower. Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness shall not extend or postpone the due date of any monthly installments referred to in the Note, Section 7 of this Instrument or any Collateral Agreement. Borrower agrees to execute such further evidence of assignment of any awards or proceeds as Lender may require. 21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER. (a) The occurrence of any of the following events shall constitute an Event of Default under this Instrument: (1) a Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property; (2) a Transfer of a Controlling Interest in Borrower; (3) a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Borrower; (4) a Transfer of all or any part of Key Principal's ownership interests (other than limited partnership interests) in Borrower, or in any other entity which FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 17 MINNESOTA C 1997-2001 Fannie Mae owns, directly or indirectly through one or more intermediate entities, an ownership interest in Borrower; (5) if Key Principal is an entity, (A) a transfer of a Controlling Interest in Key Principal, or (B) a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Key Principal; (6) if Borrower or Key Principal is a trust, the termination or revocation of such trust; and (7) a conversion of Borrower from one type of legal entity into another type of legal entity, whether or not there is a Transfer. Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default in order to exercise any of its remedies with respect to an Event of Default under this Section 21. (b) The occurrence of any of the following events shall not constitute an Event of Default under this Instrument, notwithstanding any provision of Section 21(a) to the contrary: (1) a Transfer to which Lender has consented; (2) a Transfer that occurs by devise, descent, or by operation of law upon the death of a natural person; (3) the grant of a leasehold interest in an individual dwelling unit for a term of two years or less not containing an option to purchase; (4) a Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender; (5) the grant of an easement, if before the grant Lender determines that the easement will not materially affect the operation or value of the Mortgaged Property or Lender's interest in the Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and expenses incurred by Lender in connection with reviewing Borrower's request; and (6) the creation of a tax lien or a mechanic's, materiahnan's or judgment lien against the Mortgaged Property which is bonded off, released of record or otherwise remedied to Lender's satisfaction within 30 days of the date of creation. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 28 MINNESOTA C 1997-2001 Fannie Mae (c) Lender shall consent, without any adjustment to the rate at which the Indebtedness secured by this Instrument bears interest or to any other economic terms of the Indebtedness, to a Transfer that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each of the following requirements: (1) the submission to Lender of all information required by Lender to make the determination required by this Section 21(c); (2) the absence of any Event of Default; (3) the transferee meets all of the eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers in connection with the origination or purchase of similar mortgages, deeds of trust or deeds to secure debt on multifamily properties; (4) the Mortgaged Property, at the time of the proposed Transfer, meets all standards as to its physical condition that are customarily applied by Lender at the time of the proposed Transfer to the approval of properties in connection with the origination or purchase of similar mortgages on multifamily properties; (5) in the case of a Transfer of all or any part of the Mortgaged Property, or direct or indirect ownership interests in Borrower or Key Principal (if an entity), if transferor or any other person has obligations under any Loan Document, the execution by the transferee or one or more individuals or entities acceptable to Lender of an assumption agreement (including, if applicable, an Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non -Recourse Liability) that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Instrument or any other Loan Document which previously may have been waived by Lender; (6) if a guaranty has been executed and delivered in connection with the Note, this Instrument or any of the other Loan Documents, the Borrower causes one or more individuals or entities acceptable to Lender to execute and deliver to Lender a guaranty in a form acceptable to Lender; and (7) Lender's receipt of all of the following: FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 19 MINNESOTA C 1997-2001 Fannie Mae (A) a non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1 percent of the outstanding Indebtedness immediately prior to the Transfer. (B) In addition, Borrower shall be required to reimburse Lender for all of Lender's out-of-pocket costs (including reasonable attorneys' fees) incurred in reviewing the Transfer request, to the extent such expenses exceed $3,000. (d) For purposes of this Section, the following terms shall have the meanings set forth below: (1) "Initial Owners" means, with respect to Borrower or any other entity, the persons or entities who on the date of the Note own in the aggregate 100% of the ownership interests in Borrower or that entity. (2) A Transfer of a "Controlling Interest" shall mean, with respect to any entity, the following: (i) if such entity is a general partnership or a joint venture, a Transfer of any general partnership interest or joint venture interest which would cause the Initial Owners to own less than 51% of all general partnership or joint venture interests in such entity; (ii) if such entity is a limited partnership, a Transfer of any general partnership interest; (iii) if such entity is a limited liability company or a limited liability partnership, a Transfer of any membership or other ownership interest which would cause the Initial Owners to own less than 51% of all membership or other ownership interests in such entity; (iv) if such entity is a corporation (other than a Publicly -Held Corporation) with only one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than 51 % of voting stock in such corporation; (v) if such entity is a corporation (other than a Publicly -Held Corporation) with more than one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than a sufficient number of shares of voting stock having the power to elect the majority of directors of such corporation; and (vi) if such entity is a trust, the removal, appointment or substitution of a trustee of such trust other than (A) in the case of a land trust, or (B) if FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 30 MINNESOTA 0 1997.2001 Fannie Mae the trustee of such trust after such removal, appointment or substitution is a trustee identified in the trust agreement approved by Lender. (3) "Publicly -Held Corporation" shall mean a corporation the outstanding voting stock of which is registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934, as amended. 22. EVENTS OF DEFAULT. The occurrence of any one or more of the following shall constitute an Event of Default under this Instrument: (a) any failure by Borrower to pay or deposit when due any amount required by the Note, this Instrument or any other Loan Document; (b) any failure by Borrower to maintain the insurance coverage required by Section 19; (c) any failure by Borrower to comply with the provisions of Section 33; (d) fraud or material misrepresentation or material omission by Borrower, or any of its officers, directors, trustees, general partners or managers, Key Principal or any guarantor in connection with (A) the application for or creation of the Indebtedness, (B) any financial statement, rent roll, or other report or information provided to Lender during the term of the Indebtedness, or (C) any request for Lender's consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement; (e) any Event of Default under Section 21; (f) the commencement of a forfeiture action or proceeding, whether civil or criminal, which, in Lender's reasonable judgment, could result in a forfeiture of the Mortgaged Property or otherwise materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property; (g) any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (f)), as and when required, which continues for a period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Lender's judgment, absent immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender, impairment of the Note or this Instrument or any other security given under any other Loan Document; (h) any failure by Borrower to perform any of its obligations as and when required under any Loan Document other than this Instrument which continues beyond the applicable cure period, if any, specified in that Loan Document; FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 3/ MINNESOTA 0 1997-2001 Fannie Mae W any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under that debt instrument immediately due and payable; and 0) at Lender's option, in its discretion, but subject to the terms and conditions of the Financing Agreement and the Reimbursement Agreement, any failure by the Borrower to perform any of its obligations as and when required under the following documents, which continues beyond the applicable cure period, if any, (i) any of the Bond Documents, (ii) the Reimbursement Agreement, (iii) the Regulatory Agreement, or (iv) any agreement or instrument governing or representing any form of public, quasi -public, public/private or private debt and/or equity infusion, grant, subsidy, tax relief or abatement, plan, program or other form of assistance. 23. REMEDIES CUMULATIVE. Each right and remedy provided in this Instrument is distinct from all other rights or remedies under this Instrument or any other Loan Document or afforded by applicable law, and each shall be cumulative and may be exercised concurrently, independently, or successively, in any order. 24. FORBEARANCE. (a) Lender may (but shall not be obligated to) agree with Borrower, from time to time, and without giving notice to, or obtaining the consent of, or having any effect upon the obligations of, any guarantor or other third party obligor, to take any of the following actions: extend the time for payment of all or any part of the Indebtedness; reduce the payments due under this Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note; modify the terms and time of payment of the Indebtedness; join in any extension or subordination agreement; release any Mortgaged Property; take or release other or additional security; modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable under the Note; and otherwise modify this Instrument, the Note, or any other Loan Document. (b) Any forbearance by Lender in exercising any right or remedy under the Note, this Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any other right or remedy. The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender's right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender. Lender's receipt of any awards or proceeds under Sections 19 and 20 shall not operate to cure or waive any Event of Default. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 31 MINNESOTA C 1997-2001 Fannie Mae 25. LOAN CHARGES. If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in any Loan Document, whether considered separately or together with other charges levied in connection with any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that charge is hereby reduced to the extent necessary to eliminate that violation. The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the principal of the Indebtedness. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness which constitutes interest, as well as all other charges levied in connection with the Indebtedness which constitute interest, shall be deemed to be allocated and spread over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note. 26. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce any Loan Document. 27. WAIVER OF MARSHALLING. Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Mortgaged Property shall be subjected to the remedies provided in this Instrument, the Note, any other Loan Document or applicable law. Lender shall have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies. Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of this Instrument waives any and all right to require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Instrument. 28. FURTHER ASSURANCES. Borrower shall execute, acknowledge, and deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements, transfers and assurances as Lender may require from time to time in order to better assure, grant, and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Instrument and the Loan Documents. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 33 MINNESOTA m 1997-2001 Fannie Mae 29. ESTOPPEL CERTIFICATE. Within 10 days after a request from Lender, Borrower shall deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any person designated by Lender, as of the date of such statement, (i) that the Loan Documents are unmodified and in full force and effect (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications); (ii) the unpaid principal balance of the Note; (iii) the date to which interest under the Note has been paid; (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Instrument or any of the other Loan Documents (or, if the Borrower is in default, describing such default in reasonable detail); (v) whether or not there are then existing any setoffs or defenses known to Borrower against the enforcement of any right or remedy of Lender under the Loan Documents; and (vi) any additional facts requested by Lender. 30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. (a) This Instrument, and any Loan Document which does not itself expressly identify the law that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is located (the "Property Jurisdiction"). (b) Borrower agrees that any controversy arising under or in relation to the Note, this Instrument, or any other Loan Document shall be litigated exclusively in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Note, any security for the Indebtedness, or any other Loan Document. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. 31. NOTICE. (a) All notices, demands and other communications ("notice") under or concerning this Instrument shall be in writing. Each notice shall be addressed to the intended recipient at its address set forth in this Instrument, and shall be deemed given on the earliest to occur of (1) the date when the notice is received by the addressee; (2) the first Business Day after the notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery; or (3) the third Business Day after the notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested. As used in this Section 31, the term 'Business Day" means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business. (b) Any party to this Instrument may change the address to which notices intended for it are to be directed by means of notice given to the other party in accordance with this Section 31. Each party agrees that it will not refuse or reject delivery of any notice given in accordance with this Section 31, that it will acknowledge, in writing, the receipt of any notice upon request by the other party and that any notice rejected or refused by it shall be deemed for purposes of this Section 31 to FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 34 MINNESOTA 1997-2001 Fannie Mae have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service. (c) Any notice under the Note and any other Loan Document which does not specify how notices are to be given shall be given in accordance with this Section 31. 32. SALE OF NOTE; CHANGE IN SERVICER. The Note or a partial interest in the Note (together with this Instrument and the other Loan Documents) may be sold one or more times without prior notice to Borrower. A sale may result in a change of the Loan Servicer. There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note. If there is a change of the Loan Servicer, Borrower will be given notice of the change. 33. SINGLE ASSET BORROWER. Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than the Mortgaged Property and personal property related to the operation and maintenance of the Mortgaged Property; (b) shall not operate any business other than the management and operation of the Mortgaged Property; and (c) shall not maintain its assets in a way difficult to segregate and identify. 34. SUCCESSORS AND ASSIGNS BOUND. This Instrument shall bind, and the rights granted by this Instrument shall inure to, the respective successors and assigns of Lender and Borrower. However, a Transfer not permitted by Section 21 shall be an Event of Default. 35. JOINT AND SEVERAL LIABILITY. If more than one person or entity signs this Instrument as Borrower, the obligations of such persons and entities shall be joint and several. 36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY. (a) The relationship between Lender and Borrower shall be solely that of creditor and debtor, respectively, and nothing contained in this Instrument shall create any other relationship between Lender and Borrower. (b) No creditor of any party to this Instrument and no other person shall be a third party beneficiary of this Instrument or any other Loan Document. Without limiting the generality of the preceding sentence, (1) any arrangement (a "Servicing Arrangement") between the Lender and any Loan Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third party beneficiary of any Servicing FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 35 MINNESOTA © 1997-2001 Fannie Mae Arrangement, and (3) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness. 37. SEVERABILITY; AMENDMENTS. The invalidity or unenforceability of any provision of this Instrument shall not affect the validity or enforceability of any other provision, and all other provisions shall remain in full force and effect. This Instrument contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Instrument. This Instrument may not be amended or modified except by a writing signed by the party against whom enforcement is sought. 38. CONSTRUCTION. The captions and headings of the sections of this Instrument are for convenience only and shall be disregarded in construing this Instrument. Any reference in this Instrument to an "Exhibit" or a "Section" shall, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Instrument or to a Section of this Instrument. All Exhibits attached to or referred to in this Instrument are incorporated by reference into this Instrument. Any reference in this Instrument to a statute or regulation shall be construed as referring to that statute or regulation as amended from time to time. Use of the singular in this Agreement includes the plural and use of the plural includes the singular. As used in this Instrument, the term "including" means "including, but not limited to." 39. LOAN SERVICING. All actions regarding the servicing of the loan evidenced by the Note, including the collection of payments, the giving and receipt of notice, inspections of the Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives notice to the contrary. If Borrower receives conflicting notices regarding the identity of the Loan Servicer or any other subject, any such notice from Lender shall govern. 40. DISCLOSURE OF INFORMATION. Lender may furnish information regarding Borrower or the Mortgaged Property to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, purchase or securitization of the Indebtedness, including trustees, master servicers, special servicers, rating agencies, and organizations maintaining databases on the underwriting and performance of multifamily mortgage loans. Borrower irrevocably waives any and all rights it may have under applicable law to prohibit such disclosure, including any right of privacy. 41. NO CHANGE IN FACTS OR CIRCUMSTANCES. All information in the application for the loan submitted to Lender (the "Loan Application") and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan Application are complete and accurate in all material FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 36 MINNESOTA 1997-2001 Fannie Mae respects. There has been no material adverse change in any fact or circumstance that would make any such information incomplete or inaccurate. 42. SUBROGATION. If, and to the extent that, the proceeds of the loan evidenced by the Note are used to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a pre- existing mortgage, deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"), such loan proceeds shall be deemed to have been advanced by Lender at Borrower's request, and Lender shall automatically, and without further action on its part, be subrogated to the rights, including lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released. 43. ACCELERATION; REMEDIES. At any time during the existence of an Event of Default, Lender, at Lender's option, may declare the Indebtedness to be immediately due and payable without further demand, and may foreclose this Instrument, judicially or by advertisement in accordance with Minnesota law, the power of sale being hereby specifically granted, and may exercise any other remedies permitted by applicable law or provided in this Instrument or in any other Loan Document. Borrower acknowledges that the power of sale granted in this Instrument may be exercised by Lender without prior judicial hearing. Lender shall be entitled to collect all costs and expenses incurred in connection with any Event of Default, including attorneys' fees, costs of documentary evidence, abstracts and title reports. 44. RELEASE. Upon payment of the Indebtedness, Lender shall discharge this Instrument. Borrower shall pay Lender's reasonable costs incurred in discharging this Instrument. 45. WAIVER OF HOMESTEAD. Borrower waives all right of homestead exemption in the Mortgaged Property. 46. INTEREST UPON REDEMPTION. In the event the Mortgaged Property is redeemed in accordance with applicable law, Lender shall be entitled to collect from the redeeming party, at the time of redemption, interest during the redemption period at the maximum amount and rate permitted by Minnesota law, together with all other amounts permitted to be collected under applicable law. 47. DEFINITION OF INDEBTEDNESS. Except for principal of, and interest on, the Note, the term "Indebtedness," as defined in Section 1(1), does not include any amount which is not exempt from the mortgage registry tax FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 37 MINNESOTA 1997-2001 Fannie Mae pursuant to Minnesota Statutes § 287.05, Subd. 4, or otherwise, and does not include accrued interest which, in accordance with the Note, is added to and becomes a part of the unpaid principal balance. 48. FINANCING STATEMENT. As provided in Section 2, this Instrument constitutes a financing statement with respect to any part of the Mortgaged Property which is or may become a Fixture and for the purposes of such financing statement: (i) Borrower shall be deemed the "Debtor" with the address set forth in the first paragraph on page 1, (ii) Lender shall be deemed the "Secured Party" with the address set forth in the first paragraph on page 1, (iii) this document covers goods which are or are to become Fixtures; (iv) the name of the record owner of the Land is the Debtor, and (v) the taxpayer identification number of the Debtor is 41-1545889. If notice to Borrower of intended disposition of such Fixtures is required by law in a particular instance, such notice shall be deemed commercially reasonable if given to Borrower at least ten (10) calendar days before the date of intended disposition. Borrower shall pay on demand all costs and expenses incurred by Lender in exercising such rights and remedies, including attorneys' fees and legal expenses. 49. APPLICATION OF RENTS. Notwithstanding anything apparently to the contrary in Section 3, all rents and revenues collected by Lender or any receiver of the Mortgaged Property subsequent to the occurrence of an Event of Default shall be applied as follows: (i) to the payment of all reasonable fees of any receiver approved by court; (ii) to the payment of all tenant security deposits then owing to any tenant under any Lease pursuant to the provisions of Minnesota Statutes § 504.20; (iii) to the payment of all prior real estate taxes and special assessments with respect to the Mortgaged Property, or if this Instrument requires periodic escrow payments for such taxes and assessments, to the escrow payments then due; (iv) to the payment of all premiums then due for the insurance required by the provisions of this Instrument, or if this Instrument requires periodic escrow payments for such premiums, to the escrow payments then due; (v) to the payment of costs incurred in normal maintenance and operation of the Mortgaged Property; (vi) if received prior to any foreclosure sale of the Mortgaged Property, to Lender for the payment of the secured obligations secured by this Instrument, but no such FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 38 MINNESOTA © 1997-2001 Fannie Mae payment made after the acceleration of all or any of the secured obligations secured by this Instrument shall affect such acceleration; and (vii) if received during or with respect to the period of redemption after a foreclosure sale of the Mortgaged Property; (A) if the purchaser at the foreclosure sale is not Lender, first to Lender to the extent of any deficiency of the sale proceeds to repay the secured obligations secured by this Instrument, second to the purchaser as a credit to the redemption price, but if the Mortgaged Property is not redeemed, then to the purchaser of the Mortgaged Property; and (B) if the purchaser at the foreclosure sale is Lender, to Lender to the extent of any deficiency of the sale proceeds to repay the secured obligations secured by this Mortgage and the balance to be retained by Lender as a credit to the redemption price, but if the Mortgaged Property is not redeemed, then to Lender, whether or not such deficiency exists. The rights and powers of Lender under this Instrument and the application of rents and revenues shall continue until the expiration of the redemption period from any foreclosure sale, whether or not any deficiency remains after a foreclosure. 50. NON-AGRICULTURAL USE. Borrower represents and warrants that as of the date of this Instrument the Mortgaged Property is not in agricultural use as defined in Minnesota Statutes § 40A.02, Subd. 3, and is not used for agricultural purposes. 51. FUTURE ADVANCES. (a) To the extent that this Instrument secures future advances, the amount of such advances is not currently known. The acceptance of this Instrument by Lender, however, constitutes an acknowledgement that Lender is aware of the provisions of Minnesota Statutes Section 287.05. Subd. 5, and intends to comply with the requirements contained therein. (b) The maximum principal amount of indebtedness secured by this Instrument at any one time, excluding any amounts constituting an "indeterminate amount" under Minnesota Statutes Section 287.05, Subd. 5, and excluding advances made by Lender in protection of the Mortgaged Property or the lien of this Instrument, shall be the amount set forth in the second paragraph on page 1 of this Instrument. (c) The representations contained in this Section are made solely for the benefit of county recording authorities in determining the mortgage registry tax payable as a prerequisite to the recording of this Instrument. Borrower acknowledges that such representations do not constitute or imply an agreement by Lender to make any future advances to Borrower. FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 39 MINNESOTA 0 1997-2001 Fannie Mae 52. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL. 53. BOND EXPENSES. Any fees or expenses paid by Fannie Mae, the Loan Servicer or the Trustee on behalf of Borrower to Bond Trustee, Issuer, any rebate analyst or remarketing agent for the Bonds, any interest rate cap or other hedge fees or any other amounts relating to the Bond Documents or the Hedge Documents (as defined in the Reimbursement Agreement), shall become immediately due and payable by Borrower and shall become an additional part of the Indebtedness as provided in Section 12. 54. VARIABLE RATE NOTE. The Note is subject to interest rate adjustment from time to time as provided therein. 55. PRINCIPAL RESERVE FUND. Borrower shall pay such amounts for deposit into the Principal Reserve Fund as and when required by the Reimbursement Agreement. The amounts on deposit in the Principal Reserve Fund shall be used and applied by the Trustee in any manner directed by the Credit Provider pursuant to the Indenture. 56. INTEGRATED TRANSACTION. This Instrument, the Note, the Indenture, the Reimbursement Agreement and the other agreements, documents and instruments which comprise the "Transaction Documents" (as defined below), represent an integrated transaction. This Instrument secures some, but not all, of the several obligations of Borrower to Issuer and Fannie Mae in the component parts of a single financing of the Mortgaged Property with credit enhancement and related liquidity support for the Bonds. Only those obligations of Borrower which are specifically described in this Instrument as being secured by this Instrument are so secured. Any obligation of the Borrower which is specifically described in another Transaction Document as unsecured is not secured by this Instrument. The Transaction Documents are the Bond Documents, the Loan Documents and the Credit Facility Documents (as that term is defined in the Indenture). FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 40 MINNESOTA © 1997-2001 Fannie Mae ATTACHED EXHIBITS. The following Exhibits are attached to this Instrument: NJ Exhibit A Description of the Land (required). JXJ Exhibit B Modifications to Instrument (First Lien) JXJ Exhibit C Modifications to Instrument IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this Instrument to be signed and delivered by its duly authorized representative. BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited 3d'ame: Francis W. Lang Title: General Partner STATE OF MINNESOTA ) )SS. COUNTY OF �Pl The foregoing instrument was acknowledged before me this 1;6�Iday of August, 2003, by Francis W. Lang, the General Partner of BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership, on behalf of the limited partnership. 6'2�414411 jy-) I g 't'jut, Not P blic "A ftAAVLAAAAAAAAAAAAAAAAAMA� ARGARET M. BOISVEPT; .- NOTARYPUSUC— MINNESOTA MY Omm. EOW Jan. 31, 2005 FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 4l MINNESOTA 0 1997-2001 Fannie Mae KEY PRINCIPAL Key Principal Name: Francis W. Lang Address: c/o LaNel Financial Group, Inc. 4601 Excelsior Boulevard, Suite 601 Minneapolis, MN 55416 Key Principal Name: Eugene M. Nelson Address: c/o LaNel Financial Group, Inc. 4601 Excelsior Boulevard, Suite 601 Minneapolis, MN 55416 FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page 42 MINNESOTA C 1997-2001 Fannie Mae EXHIBIT A [DESCRIPTION OF THE LAND] The Land referred to is situated in the State of Minnesota, County of Hennepin, and is described as follows: Lot 1, Block 1, Broadway Lanel Addition FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page A-/ MINNESOTA C 1997-2001 Fannie Mae EXHIBIT B MODIFICATIONS TO INSTRUMENT (First Lien) 1. The following new Sections are added to the end of the Instrument after the last numbered Section: "[57.] CONSENT TO SUBORDINATE MORTGAGE. Notwithstanding any provisions of this Instrument or any other Loan Document to the contrary, it is understood and agreed that Lender has consented to additional financing on the Mortgaged Property as evidenced by a Multifamily Note dated August 14, 2003, in the original principal amount of $1,155,000.00 (as the same may be modified or amended with the approval of noteholder, the "Subordinate Note") made by the Borrower and payable to the order of Loan Servicer and secured by a Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Financing Statement dated the same date as the Subordinate Note (the "Subordinate Instrument"). [58.] CROSS -DEFAULT. If Borrower is in default under any promissory note evidencing a subordinate loan, including without limitation, the Subordinate Note, the Subordinate Instrument, or any other loan document executed in connection with the indebtedness evidenced, by the Subordinate Note ("Subordinate Loan Default'), which Subordinate Loan Default remains uncured after the applicable cure period, if any, such default shall constitute an Event of Default under the Note and this Instrument, provided that if such Subordinate Loan Default is cured and such Subordinate Loan is reinstated in accordance with Minnesota law, the Event of Default under the Note and this Instrument arising solely from the Subordinate Loan Default shall be deemed cured and, provided no other Event of Default exists under the Note or this Instrument, the Note and this Instrument will be reinstated in accordance with Minnesota law. The occurrence of an Event of Default under the Note or this Instrument ("Senior Loan Default') shall constitute an Event of Default under the Subordinate Note and the Subordinate Instrument, provided that if such Senior Loan Default is cured and the Indebtedness is reinstated in accordance with Minnesota law, the Event of Default under the Subordinate Note and Subordinate Instrument arising solely from the Senior Loan Default shall be deemed cured and, provided no other Event of Default exists under the Subordinate Note or the Subordinate Instrument, the Subordinate Note and the Subordinate Instrument will be reinstated in accordance with Minnesota law. [59.] PARTIES INTENT REGARDING MERGER. Borrower waives the application of the doctrine of merger as applied to any foreclosure affecting the Property (or other manner of obtaining title to the Property) and agrees that such doctrine shall not First Mortgage Modifications to Instrument Form 4080 11101 Page B - ( (with Second Lien Financing) Cep 1998-2001 Fannie Mae affect the enforceability of any obligation described in this Instrument. It is the intent of the parties hereto that (i) in the event that Lender or any of Lender's successors, assigns or transferee, obtains title to the Mortgaged Property pursuant to the Instrument (by virtue of a foreclosure sale, a deed in lieu of foreclosure or otherwise) and such party is also or subsequently becomes the holder of the Subordinate Note and Subordinate Instrument, such party's title interest and lien interest SHALL NOT merge so as to effect an extinguishment of any indebtedness secured by the Subordinate Instrument or evidenced by the Subordinate Note, and (ii) in the event that the holder of the Subordinate Note and Subordinate Instrument obtains title to the Mortgaged Property pursuant to the Subordinate Instrument (by virtue of a foreclosure sale, a deed in lieu of foreclosure or otherwise) and such party is also or subsequently becomes the holder of the Note and this Instrument, such party's title interest and lien interest SHALL NOT merge so as to effect an extinguishment of this Instrument or any indebtedness secured by this Instrument or evidenced by the Note. Borrower further acknowledges and agrees that no course of conduct by Borrower, Lender or holder of the Subordinate Note, or any of their successors, assigns or transferees subsequent to the date hereof shall be used to demonstrate any intent contrary to the express intent stated herein. 160.1 REPLACEMENT RESERVE. Borrower hereby assigns to Lender all amounts in the "Replacement Reserve" (as defined in the Replacement Reserve Agreement executed in connection with the Note and this Instrument) as additional security for all of the Borrower's obligations under the Subordinate Note and Subordinate Instrument." [61.1 INSURANCE PROCEEDS AND CONDEMNATION AWARDS. Notwithstanding anything herein to the contrary, the proceeds of property damage insurance and the award or proceeds of Condemnation shall be applied in accordance with the terms of the Subordinate Instrument prior to application in accordance with the terms hereof. 2. All capitalized terms used in this Exhibit not specifically defined herein shall have the meanings set forth in the text of the Instrument that precedes this Exhibit. INITLALS First Mortgage Modifications to Instrument Form 4080 11/01 Page B-2 (with Second Lien Financing) 0 1998-2001 Fannie Mae EXHIBIT C MODIFICATIONS TO INSTRUMENT The following modifications are made to the text of the Instrument that precedes this Exhibit: The first sentence of the fourth complete paragraph on page 1 is amended to delete the period at the end thereof and to add at the end thereof after the words, "is unencumbered" the words "except as set forth in Section 57 hereof." 2. Section 7 entitled "Deposits for Taxes Tnsnrsnee. and Other Charges", subsection (a) provision (1) is deleted in its entirety and amended to read as follows: "(1) any water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, provided that such deposits for water and sewer charges shall not be required as long as water and sewer charges are paid when due and prior to any lien attaching to the Mortgaged Property and the Lender is provided evidence satisfactory to it of such payment and provided further that no Event of Default has occurred under this Instrument," 3. Section 7 entitled "Deposits for Taxes. Imuranne. and Other Charges", subsection (a) provision (2) is deleted in its entirety and amended to read as follows: "(2) the premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under Section 19, provided that such deposits for fire and other hazard insurance, rent loss insurance and such other insurance shall not be required as long as all premiums and costs for such insurance are paid when due and prior to any delinquency and the Lender is provided evidence satisfactory to it of such payment of premiums and costs within fifteen (15) days of such payment and provided further that no Event of Default has occurred under this Instrument," 4. Section 14 entitled "Rooks and Records- Financial Reporting", subsection (e) is deleted in its entirety and amended to read as follows: "(e) If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand, legible copies of all books and records relating to the Mortgaged Property or its operation." 5. Section 14 entitled "Rooks and Records; Financial RP np rting", subsection (c), the first sentence thereof is deleted in its entirety and amended to read as follows: "(c) Each of the statements, schedules and reports required by Section 14(b) shall be certified to be complete and accurate by an individual having authority to bind Borrower FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page B-1 MINNESOTA 0 1997-2001 Fannie Mae and shall be in such form and contain such detail as the form and detail of the statements submitted to Lender in connection with the underwriting of the Indebtedness." 6. Section 19 entitled "Property and Liability Insurance", subsection (a), the third sentence thereof is deleted in its entirety and amended to read as follows: "If the Mortgaged Property does not conform to applicable zoning or land use laws, such insurance shall also include building ordinance or law coverage." 7. Section 19 entitled "PPrr tl eerrty and LiabilityTnc�", subsection (f) is amended to insert after the third sentence and prior to the fourth sentence thereof, the following sentences: "Unless and until an Event of Default shall occur under this histrument, Lender's adjustment and compromise of any claims under policies of property damage insurance and Lender's appearance and prosecution of any action arising from such property damage insurance policies but not the right to collect and receive the proceeds thereof shall be conducted jointly with Borrower. Upon the occurrence of an Event of Default Lender's right to adjust and compromise any claims and to appear in and prosecute any action shall be without any participation by Borrower." 8. Section 19 entitled "Property and Liability Tnsnranee", subsection (f), is amended to add at the after the last sentence of the subsection the following: "Should Lender apply the balance of such proceeds to the payment of the Indebtedness without payment in full thereof, the Indebtedness shall be re -amortized by Lender at the per annum rate of interest currently in effect on the Indebtedness over a term equal to the original amortization period for the Indebtedness, less the number of months that have expired during the term of the Indebtedness." 9. Section 20 entitled "Condemnation", subsection (a) is amended to add after the fourth sentence thereof and prior to the fifth sentence thereof the following sentences: "Lender's right to appear in and prosecute in Lender's or Borrower's name any action or proceeding relating to any Condemnation and to settle or compromise any claim, if any, in connection with Condemnation shall be conducted jointly with Borrower unless and until an Event of Default occurs. Upon the occurrence of an Event of Default, Lender's right to appear in, prosecute and settle or compromise any action shall be conducted without participation by Borrower." 10. Section 21 entitled "Transfers of the Mortgaged Property or interests in Rormwer", subsection (b), provision 6 is amended to delete the period at the end thereof and to add at the end of the sentence the following: "including but not limited to the provision to Lender of reasonably satisfactory security therefore while the Borrower contests the same in good faith, provided that the FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Form 4024 11/01 Page B-2 MINNESOTA 1997-2001 Fannie Mae Mortgaged Property and the Lender's lien thereon is not in jeopardy or subject to impairment in any manner." 11. Section 21 entitled "Transfers of the Mortgaged Property or interests in Borrnwer", subsection (b) is modified to delete the period at the end of Section 21(b)(6) and substitute ";" therefor and to add a new Section 21(b)(7): "(7) a Transfer of ownership interests held by the Key Principal in Borrower, or in any other entity which owns, directly or indirectly through one or more intermediate entities, an ownership interest in Borrower, to (i) other Key Principals; (ii) non -minor immediate family members; or (iii) trusts established for the benefit of the transferor and/or immediate family members; provided, however, that (A) such Transfer of ownership interests will not cause a change in the management and control of Borrower (or other intermediate entity), and after which Transfer, Key Principal shall maintain the same right and ability to manage and control Borrower (or other intermediate entity) as existed prior to the Transfer and (B) Lender shall be provided with written notice of all such Transfers permitted under this Section 21(b)(7) no later than 5 days after the date of the Transfer." 12. Section 21 entitled "Transfers of the Mortgaged Property or Interests in Borrower", subsection (b) is modified to delete the period at the end of Section 21(b)(7) and substitute `; and" therefor and to add a new Section 21(b)(8): "(8) The imposition of the lien of real estate taxes and special assessments, not yet delinquent." 13. Section 49 entitled "Application of Rents", subsection (ii) is amended to delete the reference to Minnesota Statutes § 504.20 and insert in its place the reference to Minnesota Statutes § 504B.178. 14. All capitalized terms used in this Exhibit not specifically defined herein shall have the meanings set forth in the text of the Instrument that precedes this Exhibit. BORROWER'S FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - Farm 4024 11/01 Page B-3 MINNESOTA C 1997-2001 Fannie Mae OPPENHEIMER: 1389019 v04 08/06/2003 CERTIFICATE OF BORROWER All Capitalized Terms used in this Certificate of Borrower have the meanings given to those terms in the Reimbursement Agreement or elsewhere in this Certificate of Borrower unless the context or use clearly indicates a different meaning. In addition to all other representations, warranties and covenants made by BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership ("Borrower") in connection with: (a) the issuance by the City of New Hope, Minnesota, a municipal corporation and political subdivision of the State of Minnesota (the "Issuer") of its $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003 (the "Bonds"); (b) the funding of the loan to the Borrower with the proceeds of the Bonds in the amount of $2,655,000.00 (the "Loan"); (c) the provision of credit enhancement for the Bonds ("Credit Enhancement") by Fannie Mae pursuant to a certain Reimbursement Agreement dated of even date herewith entered into between Fannie Mae and the Borrower (the "Reimbursement Agreement") (d) the securing of the Loan and the obligations of the Borrower to Fannie Mae pursuant to the Reimbursement Agreement and certain other agreements by the Security Instrument; and (e) the execution and delivery of all of the other Transaction Documents and the performance of the various obligations therein by the parties thereto; Borrower does hereby represent, warrant and covenant to Fannie Mae, its successors, transferees and assigns, as of the 14th day of August, 2003, as follows: 1. Review of Documents. Borrower has reviewed (a) the Multifamily Note (together with any addenda or schedules, the "Note"), dated the date hereof, made by Borrower and evidencing the Loan, the Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Financing Statement (together with any riders or exhibits, the "Security Instrument"), dated the date hereof, granting to the Issuer and Fannie Mae a first lien on a 73 unit multifamily residential facility known as Anthony James Apartments and located in New Hope, Hennepin County, Minnesota (the "Property") and all other documents executed by Borrower, and Francis W. Lang and Eugene M. Nelson (the "Key Principals") or guarantor, if Certificate of Borrower (Page 1) Credit Enhancement LAI :887547.2 any, in connection with the Loan (the Note, the Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non -Recourse Liability (if any), the Mortgage Note, the Security Instrument, and other documents, including this Certificate, executed in connection with the Loan are collectively referred to as the "Loan Documents"); and (b) the commitment letter dated August _, 2003, from Loan Servicer to Borrower (as accepted on August _, 2003, and as it may have thereafter been modified, amended or extended, the "Commitment Letter"). 2. Purpose of Certificate. This Certificate is delivered to Fannie Mae in order to induce Fannie Mae to enter into the Reimbursement Agreement and the other Credit Facility Documents and to issue the Credit Enhancement Instrument for the benefit of Bondholders. 3. No Default. The execution, delivery and performance of the obligations imposed on Borrower under the Loan Documents will not cause Borrower to be in default under the provisions of any agreement, judgment or order to which Borrower is a party or by which Borrower is bound. 4. Items Due and Payable. No defaults exist under the Loan, and all of the following items regarding the Property which have become due and payable have been paid: taxes; government assessments; insurance premiums; water, sewer and municipal charges; leasehold payments; ground rents; and any other charges affecting the Property. 5. Compliance with Applicable Laws and Regulations. All improvements to the Property and the use of the Property comply with all applicable statutes, rules and regulations, including all applicable statutes, rules and regulations pertaining to requirements for equal opportunity, anti -discrimination, fair housing, environmental protection, zoning and land use. Improvements on the Property comply with applicable health, fire, and building codes. There is no evidence of any illegal activities relating to controlled substances on the Property. All required permits, licenses and certificates for the lawful use and operation of the Property, including, but limited to, certificates of occupancy, apartment licenses, or the equivalent, have been obtained and are current and in full force and effect. 6. Condition of Property. The Property has not been damaged by fire, water, wind or other cause of loss or any previous damage to the Property has been fully restored. 7. Insurance Policies. Borrower has furnished to Fannie Mae all insurance policies and certificates required pursuant to the Loan Documents. 8. No Insolvency or Judgment. Neither Borrower, nor any general partner of Borrower, nor any Key Principal is currently (a) the subject of or a party to any completed or pending bankruptcy, reorganization or insolvency proceeding; or (b) the subject of any judgment unsatisfied of record or docketed in any court of the state in which the Property is located or in any court located in the United States. Certificate of Borrower (Page 2) Credit Enhancement LAI :887547.2 9. No Condemnation. No part of the Property has been taken in condemnation or other like proceeding, nor is any proceeding pending, threatened or known to be contemplated for the partial or total condemnation or taking of the Property. 10. No Subordinate Financing. Except as otherwise expressly approved by Fannie Mae in writing, no part of the Property is, or will become, subject to a second mortgage, deed of trust or other type of subordinate lien. 11. No Labor or Materialmen Claims. All parties furnishing labor and materials have been paid in full and, except for such liens or claims insured against by the policy of title insurance to be issued in connection with the Loan, there are no mechanics', laborers' or materialmen's liens or claims outstanding for work, labor or materials affecting the Property, whether prior to, equal with or subordinate to the lien of the Security Instrument. 12. No Other Interests. No person, party, firm or corporation has (a) any possessory interest in the Property or right to occupy the same except under and pursuant to the provisions of existing leases by and between tenant and Borrower, the material terms of all such leases having been previously disclosed to Fannie Mae, or (b) an option to purchase the Property or an interest therein. 13. Single Asset Status. Except as otherwise expressly approved by Fannie Mae in writing, Borrower does not own any real property or assets other than the Property and does not operate any business other than the management and operation of the Property. 14. Taxes Paid. Borrower has filed all federal, state, county and municipal tax returns required to have been filed by Borrower, and has paid all taxes which have become due pursuant to such returns or to any notice of assessment received by Borrower, and Borrower has no knowledge of any basis for additional assessment with respect to such taxes. To the best of Borrower's knowledge, there are not presently pending any special assessments against the Property or any part thereof. 15. Property Characteristics. The Property contains not less than 99,968 square feet of land. There are not less than 31 parking spaces located on the Property. No part of the Property is included or assessed under or as part of another tax lot or parcel, and no part of any other property is included or assessed under or as part of the tax lot or parcels for the Property. 16. Financial Condition. No material adverse change in the financial condition of Borrower, any general partner of Borrower (if Borrower is a partnership) or its controlling shareholder (if Borrower is a corporation), or any Key Principal has occurred between the respective dates of the financial statements which were furnished to Fannie Mae relating to such entities or persons and the date hereof. Certificate of Borrower (PQ$e 3) Credit Enhancement LA1:887547.2 17. Financial Statements. The financial statements of Borrower, any general partner of Borrower (if Borrower is a partnership), and any Key Principal furnished to the Issuer, Fannie Mae or Loan Servicer, reflect in each case a positive net worth as of the date thereof. 18. Insolvency. Borrower is not presently insolvent, and the proposed Loan will not render Borrower insolvent. As used in this Certificate, the term "insolvent" means that the sum total of all of an entity's liabilities (whether secured or unsecured, contingent or fixed, or liquidated or unliquidated) is in excess of the value of all such entity's non-exempt assets, i.e., all of the assets of the entity that are available to satisfy claims of creditors. 19. Working Capital. After the Loan is made, Borrower will have sufficient working capital, including cash flow from the Property or other assets, not only to adequately maintain the Property, but also to pay all of Borrower's outstanding debts as they come due. 20. No Material Change. There has been no material change in the occupancy of the Property or the business, financial condition or results of operations of Borrower, the Property or to the best of Borrower's knowledge, any tenant of the Property, from the date of the Commitment Letter. 21. No Other Defaults. The Borrower has no knowledge of any Event of Default or Potential Default under any of the Transaction Documents, 22. Preliminary Official Statement and Official Statement. The statements and information set forth in the Preliminary Official Statement and in the Official Statement (other than the information under the subheadings "Fannie Mae", the "Issuer" and the "Loan Servicer" are each true, complete and correct as of its date and, as of its date, do not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. 23. Representations and Warranties True. Each and every representation and warranty contained herein will remain true and correct at all times from the date hereof until the Loan is repaid in full in accordance with its terms. In the event that any representation or warranty contained herein becomes untrue, in whole or in part, after the date hereof, Borrower will so advise Fannie Mae in writing immediately. 24. Ratification. Borrower covenants that it shall, promptly upon the request of Fannie Mae, ratify and affirm this Certificate of Borrower in writing, as of such date or dates as Fannie Mae shall specify. 25. Survival. The representations, warranties and covenants set forth in this Certificate of Borrower, and in the Commitment Letter, shall survive the assignment and Certificate of Borrower (Pa$e 4) Credit Enhancement LAI:887547.2 delivery of the Loan to Fannie Mae. IN WITNESS WHEREOF, Borrower has executed this Certificate of Borrower as of the day and year first above written. 1,1411 Zi]i i�l it BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership NTme: Francis W. Lang Its: General Partner Certificate of Borrower (Page 5) Credit Enhancement IA1:887547.2 OPPENHEIMER: 1388996 v02 09/06/2003 ASSIGNMENT OF MANAGEMENT AGREEMENT THIS ASSIGNMENT OF MANAGEMENT AGREEMENT (this "Assignment') is made and entered into as of this 1st day of August, 2003, by and among (i) BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership (the "Borrower"), (ii) FANNIE MAE, a corporation duly organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. § 1716 et seq., its successors, transferees and assigns ("Credit Enhancer"), and (iii) LANG -NELSON ASSOCIATES, INC., a Minnesota corporation (the "Manager"). RECITALS A. Borrower is the owner of a 73 -unit apartment project known as Anthony James Apartments (the "Mortgaged Property"). B. Manager is the managing agent of the Mortgaged Property pursuant to a Management Agreement dated August , 2003 between Borrower and Manager, as amended by Amendment to Management Agreement dated August _, 2003 (the "Management Agreement'). C. This Assignment is being executed in connection with a mortgage loan to the Borrower in the original principal amount of $2,655,000.00 (the "Loan") made by the City of New Hope, Minnesota, a municipal corporation and political subdivision of the State of Minnesota ("Issuer") from the proceeds of certain $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003 (the "Bonds"). The proceeds of the Loan have been used to finance the Property. D. The Loan is evidenced by a Multifamily Note (including any addenda, the "Note"), dated the date of this Agreement, made by Borrower and is secured by, among other things, a Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Financing Agreement (including any Riders, the "Security Instrument'), dated the date of this Agreement, granting a first lien on the Property. The Note, Security Instrument, this Agreement and all other documents executed in connection with the Loan are collectively referred to as the "Loan Documents". E. Borrower has requested Credit Enhancer to provide credit enhancement for the Loan and liquidity support for the Bonds ("Credit Enhancement") and Credit Enhancer has agreed to provide Credit Enhancement subject to, among other things, Borrower executing and delivering this Assignment. F. Borrower and Credit Enhancer have entered into that certain Reimbursement Agreement dated as of the date hereof (such agreement, as the same may be amended, Fannie Mae Assignment of Management Agreement Form 4508 4/98 (Page 1) LAI :866997.3 supplemented or otherwise modified or amended and restated from time to time in accordance with its terms, the "Reimbursement Agreement'), pursuant to which (i) Credit Enhancer has agreed to provide the Credit Enhancement pursuant to and in accordance with the terms of that certain Credit Enhancement Instrument described in the Reimbursement Agreement (the "Credit Facility") and (ii) Borrower has agreed, among other things, to reimburse Credit Enhancer for amounts advanced under the terms of the Credit Facility and the Reimbursement Agreement. G. In order to induce Credit Enhancer to enter into the Credit Facility, Borrower has agreed to secure the payment and performance of its Obligations under the Reimbursement Agreement by granting a lien on the Property pursuant to the Security Instrument. H. The Issuer's interest in the Security Instrument is being assigned to U.S. Bank National Association, a national banking association, as Trustee, and Fannie Mae, as their interests may appear pursuant to that Assignment and Intercreditor Agreement dated as of the date hereof. I. It is a condition precedent to Credit Enhancer's obligation to enter into the Credit Facility that Borrower and Manager enter into this Assignment. J. Borrower is willing to assign its rights under the Management Agreement to Credit Enhancer as additional security for the Borrower's Obligations under the Reimbursement Agreement. K. Manager is willing to consent to this Assignment and to attorn to Credit Enhancer upon an Event of Default by Borrower under the Reimbursement Agreement, or any other Loan Document, and perform its obligations under the Management Agreement for Credit Enhancer, or its successors in interest, or to permit Credit Enhancer to terminate the Management Agreement without liability. L. Any capitalized terms used in this Agreement and not specifically defined herein, shall have the meanings set forth in the Reimbursement Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, Borrower, Credit Enhancer and Manager agree as follows: 1. Borrower hereby transfers, assigns and sets over to Credit Enhancer, its successors and assigns, all right, title and interest of Borrower in and to the Management Agreement. Manager hereby consents to the foregoing assignment. The foregoing assignment is being made by Borrower to Credit Enhancer as collateral security for the full payment and performance by Borrower of all of its Obligations under the Reimbursement Agreement. However, until the occurrence of an Event of Default under the Reimbursement Agreement, the Security Instrument or any other Loan Document, Borrower may exercise all rights as owner of the Mortgaged Property under the Management Agreement, except as otherwise provided in this Assignment. The foregoing assignment shall remain in effect until all of the Borrower's Obligations under the Reimbursement Agreement have been paid and performed in full, but shall Fannie Mae Assignment of Management Agreement Form 4508 4/98 (Page 2) LA1:866997.3 automatically terminate upon the release of the Security Instrument as a lien on the Mortgaged Property. 2. Borrower and Manager represent and warrant to Credit Enhancer that (i) the Management Agreement is unmodified and is in full force and effect, (ii) the Management Agreement is a valid and binding agreement enforceable against the parties in accordance with its terms and (iii) neither party is in default in performing any of its obligations under the Management Agreement. 3. Borrower hereby covenants with Credit Enhancer that during the term of this Assignment: (a) Borrower shall not transfer the responsibility for management of the Mortgaged Property from Manager to any other person or entity without the prior written consent of Credit Enhancer; (b) Borrower shall not terminate or amend any of the terms or provisions of the Management Agreement without the prior written consent of Credit Enhancer; and (c) Borrower shall give Credit Enhancer written notice of any notice or information that Borrower receives which indicates that Manager is terminating the Management Agreement or that Manager is otherwise discontinuing its management of the Mortgaged Property. 4. Upon receipt by Manager of written notice from Credit Enhancer that an Event of Default has occurred and is continuing under the Reimbursement Agreement or any other Borrower Document, Credit Enhancer shall have the right to exercise all rights as owner of the Mortgaged Property under the Management Agreement. 5. After the occurrence of an Event of Default under the Reimbursement Agreement or any other Borrower Document, Credit Enhancer (or its nominee) shall have the right any time thereafter to terminate the Management Agreement, without cause and without liability, by giving written notice to Manager of its election to do so. Credit Enhancer's notice shall specify the date of termination, which shall not be less than 30 days after the date of such notice. 6. On the effective date of termination of the Management Agreement, Manager shall turn over to Credit Enhancer all books and records relating to the Mortgaged Property (copies of which may be retained by Manager, at Manager's expense), together with such authorizations and letters of direction addressed to tenants, suppliers, employees, banks and other parties as Credit Enhancer may reasonably require. Manager shall cooperate with Credit Enhancer in the transfer of management responsibilities to Credit Enhancer or its designee. A final accounting of unpaid fees ( if any) due to Manager under the Management Agreement shall be made within 60 days after the effective date of termination, but Credit Enhancer shall not have any liability or obligation to Manager for unpaid fees or other amounts payable under the Management Agreement which accrue before Credit Enhancer (or its nominee) acquires title to the Mortgaged Property, or Credit Enhancer becomes a mortgagee in possession. 7. Manager's address for notice is 4601 Excelsior Boulevard, Suite 601, New Hope, Minnesota 55428. All notices to be given by Credit Enhancer to Manager shall be given in the same manner as notices to Borrower pursuant to the notice provisions contained in the Security Instrument. Fannie Mae Assignment of Management Agreement Form 4508 4/98 (Page 3) LA 1:866997.3 8. Modifications (if any) to this Assignment are attached on Exhibit A to this Assignment. 9. This Assignment may be executed in any number of counterparts, each of which shall be considered an original for all purposes; provided, however, that all such counterparts shall constitute one and the same instrument. IN WITNESS WHEREOF, Borrower, Credit Enhancer, and Manager have executed this Assignment as of the day and year first above written. BROADWAY LANEL, PARTNERSHIP, a Minnesota 1)ifine: Francis W. Land Its: General Partner Fannie Mae Assignment of Management Agreement Form 4508 LA1:W997.3 A LIMUED 'ed partnership 4/98 (Page 4) CREDIT ENHANCER: FANNIE MAE By: Name: Its: Fannie Mae Assignment of Management Agreement - Form 4508 4/98 (Page s) LA 1:866997.3 OPPENHEIMER: 1475523 v01 08/06/2003 MANAGER: LANG -NELSON ASSOCIATES, INC., a Minnesota corporation Fannie Mae Assignment of Management Agreement Form 4508 4/98 (Page 6) LAI :866997.3 OPPENHEIMER, 1388962 v02 08/062003 MULTIFAMILY NOTE U.S. $2,655,000 Dated as of August 1, 2003 FOR VALUE RECEIVED, undersigned, BROADWAY LaNEL, A LIMITED PARTNERSHIP ("Borrower"), a Minnesota limited partnership, promises to pay to the order of CITY OF NEW HOPE, MINNESOTA ("Issuer"), a municipal corporation and political subdivision of the State of Minnesota, the principal sum of Two Million Six Hundred Fifty-five Thousand Dollars (US $2,655,000), with interest as set forth below. 1. Defined Terms. All capitalized terms used in this Note have the meanings given to those terms in Schedule A of this Note or as elsewhere defined in this Note, unless the context or use clearly indicates a different meaning. 2. Payment. All payments due under this Note shall be made in lawful money of the United States of America by wire transfer of immediately available funds to such bank and account as may be designated from time to time by written notice to the Borrower from or on behalf of the Issuer. 3. Note Interest. Except as provided in Paragraphs 9 and 15, interest ("Note Interest") shall accrue on the unpaid principal of this Note from, and including, the Closing Date until paid in full at an annual rate as follows: (a) Weekly Variable Rate. if the interest rate on the Bonds is a Weekly Variable Rate, a variable rate of interest which floats and changes with, and is equal to, the Weekly Variable Rate; or (b) Reset Rate. if the interest rate on the Bonds is a Reset Rate, the Reset Rate; or (c) Fixed Rate. if the interest rate on the Bonds is the Fixed Rate, the Fixed Rate adjusted to include additional interest, if any, necessary to ensure that monthly payments of Note Interest are sufficient to provide for payment of regularly scheduled interest on the Bonds. Note Interest shall automatically and simultaneously change with each corresponding change in the interest rate on the Bonds under the Indenture. Notwithstanding any other provision of this Note to the contrary, Note Interest shall not exceed the Maximum Rate, as the Maximum Rate may change in accordance with the Indenture. During the Weekly Variable Rate Period, Note Interest shall be computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as applicable. During any other period, Note Interest shall be computed on the basis of a 360 -day year comprised of twelve 30 -day months. 4. Payment of Principal and Interest. The Borrower agrees to pay the principal of and interest on this Note as follows: (a) Primary Payment Obligation. The primary obligation of the Borrower under this Note is to pay principal of, premium, if any, and interest on this Note at the times and in the Multifamily Note Page 1 (Broadway LaNel Project) amounts necessary to pay all principal of, premium, if any, and interest on, the Bonds as they become due, whether at maturity, by acceleration, by optional, mandatory or mandatory sinking fund redemption or otherwise. The Borrower shall make its payments under this Note in Available Moneys if and to the extent that the Indenture, the Financing Agreement or this Note requires such amount to be available to the Trustee in Available Moneys. In the event of any deficiency in the funds available under the Indenture for payment of the principal of, premium, if any, or interest on the Bonds when due, the Borrower shall immediately pay the amount of the deficiency to the Trustee upon notice of the deficiency from the Issuer, the Loan Servicer or the Trustee. The Borrower shall be obligated to pay the deficiency regardless of the reason for the deficiency, including any deficiency resulting from any shortfall in payments made or to be made by the Borrower under this Note, any loss due to a default under any Investment, a change in value of any Investment or otherwise. (b) Note Interest. Subject to subparagraph (a), the Borrower shall pay Note Interest in arrears, beginning with the first Note Interest Payment Date. (c) Payment at Maturity Date. Subject to subparagraph (a), the Borrower shall pay all unpaid principal of and interest on this Note on the earlier of July 15, 2033 or the date on which the unpaid principal balance of this Note becomes due, whether by acceleration or otherwise ("Maturity Date"). Any principal of this Note not paid on the Maturity Date shall continue to bear interest at the Default Rate from and including the Maturity Date to, but excluding, the date on which such amounts are paid in full. (d) Amendment of Note After Adjustment to Fixed Rate Mode. Upon the adjustment of the Bonds to a Fixed Rate, this Note shall be amended to provide for monthly payments of principal to provide sufficient funds to pay the corresponding principal maturities of the Bonds, including any Sinking Fund Payments. (e) Receipt Date. For the purpose of calculating the amount of Note Interest due under this Note, any regularly scheduled installment of principal of or Note Interest on this Note that is received by the Issuer before the date it is due shall be deemed to have been received on the due date. Nothing in this subparagraph shall apply to a prepayment of this Note pursuant to Paragraph 11. (f) Payments by Credit Provider under Credit Facility. No Advance by the Credit Provider under the Credit Facility shall be treated as a credit against, or otherwise relieve the Borrower from its obligation to pay, the principal of and interest on this Note when due. (g) Obligations of the Borrower Unconditional. The obligations of the Borrower to make the payments required by and perform its other obligations under this Note shall be absolute and unconditional and shall not be subject to diminution by set-off, recoupment, counterclaim, abatement or otherwise. (h) Insurance Casualty or Condemnation. If prior to full payment of the Bonds (or provision for the full payment of the Bonds in accordance with the provisions of the Indenture) the Mortgaged Property or any portion thereof is destroyed (in whole or in part) or is damaged Multifamily Note Page 2 (Broadway LaNel Project) by fire or other casualty, or title to, or the temporary use of, all or any portion of the Mortgaged Property shall be taken under the exercise of the power of eminent domain by any governmental body or by any person, firm or corporation acting under governmental authority, the Borrower shall nevertheless be obligated to continue to pay the amounts specified in this Note to the extent the principal of this Note is not prepaid. 5. Principal Reserve Fund. The Reimbursement Agreement requires the Borrower to make monthly payments for deposit into the Principal Reserve Fund, to be applied by the Trustee in any manner directed by the Credit Provider pursuant to the Indenture. The Loan shall not be, and shall not be deemed to be, paid or prepaid by reason of any deposit into the Principal Reserve Fund and the amount on deposit in the Principal Reserve Fund shall not be a credit against the principal amount of this Note. However, if any amount in the Principal Reserve Fund is withdrawn from the Principal Reserve Fund and applied to the payment of the principal of any of the Bonds, the principal component of the redemption price of any of the Bonds or the principal component of the defeasance of any of the Bonds, all as provided in the Indenture, the amount so applied shall be simultaneously credited to the principal amount of this Note. To the extent that any amount is withdrawn from the Principal Reserve Fund to make a payment of interest due on the Bonds (excluding the interest component of the purchase price of any Pledged Bond unless such purchase occurs on an Interest Payment Date for the Bonds), the amount so withdrawn shall be a payment of interest on the Loan. No application of any amount in the Principal Reserve Fund for any other purpose (including any withdrawal relating to the principal component of the purchase price of any Pledged Bonds) shall be credited against the unpaid principal of or interest on this Note. 6. Application of Payments. If at any time the Issuer receives, from the Borrower or otherwise, any amount applicable to this Note which is less than all amounts due and payable at such time, the Issuer may apply that payment to amounts then due and payable in any manner and in any order determined by the Issuer, in the Issuer's discretion. The Borrower agrees that neither the Issuer's acceptance of a payment from the Borrower in an amount that is less than all amounts then due and payable nor the Issuer's application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction. 7. Security This Note is secured, among other things, by the Security Instrument, and reference is made to the Security Instrument for other rights of the Issuer concerning the collateral for this Note. 8. Acceleration. If an Event of Default under the Security Instrument has occurred and is continuing, the entire unpaid principal balance, all accrued Note Interest, the prepayment premium payable under Paragraph 11, if any, and all other amounts payable under this Note or under any other Loan Document shall at once become due and payable, at the option of the Issuer, without any prior notice to the Borrower. The Issuer may exercise this option to accelerate regardless of any prior forbearance. 9. Default Rate. The term "Default Rate" is defined in the attached Schedule A. Multifamily Note Page 3 (Broadway LaNel Project) 10. Limits on Personal Liability. (a) Except as otherwise provided in this Paragraph 10 or in any of the other Loan Documents, the Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of this Note or for the performance of any other obligations of the Borrower under the Loan Documents, and the Issuer's only recourse for the satisfaction of this Note and the performance of such obligations shall be the Issuer's exercise of its rights and remedies with respect to the Mortgaged Property and any other collateral held by the Issuer as security for this Note. This limitation on the Borrower's liability shall not limit or impair the Issuer's enforcement of its rights against any guarantor of this Note or any guarantor of any other obligations of the Borrower. (b) The Borrower shall be personally liable to the Issuer for the repayment of a portion of this Note equal to any loss or damage suffered by the Issuer as a result of (1) failure of the Borrower to pay to the Issuer upon demand after an Event of Default under the Security Instrument, all Rents to which the Issuer is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by the Borrower from tenants then in residence; (2) failure of the Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; (3) failure of the Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports; (4) fraud or written material misrepresentation by the Borrower, Key Principal or any officer, director, partner, member or employee of the Borrower in connection with the application for or creation of the Loan or any request for any action or consent by the Issuer; or (5) failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with the Issuer executed in connection with the Loan) and then to amounts ("Debt Service Amounts") payable under this Note, the Security Instrument or any other Loan Document (except that the Borrower will not be personally liable (i) to the extent that the Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any calendar year if the Borrower has paid all operating expenses and Debt Service Amounts for that calendar year). (c) The Borrower shall become personally liable to the Issuer for the repayment of all of the principal of and interest on this Note and for the payment, performance and observation of all obligations, covenants and agreements of the Borrower contained in the Security Instrument, including the payment of all sums advanced by or on behalf of Issuer to protect the security of the Security Instrument under Section 12 of the Security Instrument, upon the occurrence of any of the following: (1) the Borrower's acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; or (2) a Transfer (as that term is defined in the Security Instrument) that is an Event of Default under Section 21 of the Security Instrument; or (3) a Bankruptcy Event. As used in this subparagraph, the term "Bankruptcy Event" means any one or more of the following events which occurs during any time that a Hedging Arrangement (other than a Hedge) is outstanding: Multifamily Note Page 4 (Broadway LeNel Project) (1) The Borrower (i) commences a voluntary case (or, if applicable, a joint case) under any Chapter of the Bankruptcy Code, (ii) institutes (by petition, application, answer, consent or otherwise) any other bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, (iii) makes a general assignment for the benefit of creditors, (iv) applies for, consents to or acquiesces in the appointment of any receiver, liquidator, custodian, sequestrator, trustee or similar officer for it or for all or any substantial part of the Mortgaged Property or (v) admits in writing its inability to pay its debts generally as they mature. (2) Any Key Principal or any Affiliate of a Key Principal files an involuntary petition against the Borrower under any Chapter of the Bankruptcy Code or under any other bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to the Borrower under the laws of any jurisdiction. (3) Both (i) an involuntary petition under any Chapter of the Bankruptcy Code is filed against the Borrower or the Borrower directly or indirectly becomes the subject of any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction, or in equity, and (ii) the Borrower or any Affiliate of the Borrower has acted in concert or conspired with such creditors of the Borrower (other than the Lender) to cause the filing thereof with the intent to interfere with enforcement rights of the Lender after the occurrence of an Event of Default. (d) To the extent that the Borrower has personal liability under this Paragraph 10, the Issuer may exercise its rights against the Borrower personally without regard to whether the Issuer has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to the Issuer under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 10, the term "Mortgaged Property" shall not include any funds that (1) have been applied by the Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default under the Security Instrument, or (2) the Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding. 11. Voluntary and Mandatory Prepayments. ALTHOUGH THE BORROWER MAY HAVE THE RIGHT TO PREPAY THE LOAN IN ACCORDANCE WITH THIS NOTE, THE REIMBURSEMENT AGREEMENT MAY LIMIT THE BORROWER'S EXERCISE OF THESE RIGHTS WITHOUT THE WRITTEN CONSENT OF THE CREDIT PROVIDER OR DURING CERTAIN PERIODS. THE BORROWER MAY BE REQUIRED TO PAY A TERMINATION FEE TO THE CREDIT PROVIDER. PREPAYMENTS ARE SUBJECT TO LOAN SERVICING UNDER THE REIMBURSEMENT AGREEMENT. SEE THE REIMBURSEMENT AGREEMENT FOR ALL DETAILS. Multifamily Note Page 5 (Broadway LaNel Project) (a) Prepayment Premium. Any prepayment of the principal of this Note will result in a redemption of a corresponding amount of the Bonds. A redemption premium may be payable to Bondholders in connection with such redemption of Bonds. In order to provide funds to pay any redemption premium due on the Bonds, the Borrower shall pay such amount as a prepayment premium under this Note. Such redemption premium shall be paid in addition to any other amounts due under this Note. The Borrower shall pay any such prepayment premium with Available Moneys. The Borrower acknowledges that the Credit Provider is not credit enhancing the payment of any prepayment premium under this Note or redemption premium payable to Bondholders. The Borrower also understands that the prepayment premium provided for in this subsection is separate and apart from any Termination Fee payable to the Credit Provider under the Reimbursement Agreement. (b) Timing of Credit of Payments as Prepayments. No payment to be applied as a prepayment (whether voluntary or mandatory) of principal of this Note shall be credited against the unpaid principal of this Note until the date on which Bonds in a like amount are redeemed or defeased pursuant to the Indenture. Until the Borrower's payment is credited as a prepayment, the amount of the intended prepayment shall continue to be unpaid principal of this Note and shall continue to bear interest to the date of prepayment. (c) Voluntary Prepayments. The Borrower may voluntarily prepay this Note only during the periods or on the dates, as appropriate, as provided in the following clauses of this subparagraph (c): (1) During Weekly Variable Rate Period. On any Interest Payment Date for the Bonds within a Weekly Variable Rate Period, the Borrower may voluntarily prepay the principal balance of this Note, in whole or in part. (2) On Adjustment Date. On any Adjustment Date, the Borrower may voluntarily prepay the principal balance of this Note, in whole or in part. (3) During Reset Period or Fixed Rate Periods. On any date within a Reset Period or Fixed Rate Period when the Bonds may be optionally redeemed, the Borrower may voluntarily prepay the principal balance of this Note, in whole or in part. Any partial voluntary prepayment must be in an amount corresponding to the then applicable Authorized Denomination of the Bonds. (d) Conditions Precedent to Voluntary Prepayments. The right of Borrower to voluntarily prepay the principal of this Note, in whole or in part, as permitted by subparagraph (c) is subject to the satisfaction of the following conditions precedent: (1) the Borrower has given written notice of such prepayment to the Issuer, the Trustee, the Credit Provider, the Loan Servicer and the Remarketing Agent at least 30 days prior to the effective date of prepayment in accordance with subparagraph (b), Multifamily Note Page 6 (Broadway LaNel Project) which notice shall state the date of such prepayment and the amount of principal to be prepaid; (2) the Borrower has paid the amounts specified in subparagraph (f) not later than one Business Day prior to the date under the Indenture the Trustee must have received such funds for such redemption; and (3) the Issuer, the Credit Provider, the Loan Servicer and the Remarketing Agent are provided a certificate of the Trustee to the effect that the Trustee holds on deposit Available Moneys which are both sufficient and available under the terms of the Indenture for a payment of any bond redemption premium, and the Trustee holds on deposit moneys which are both sufficient and available under the terms of the Indenture to pay the costs and expenses required to be paid in connection with the redemption of the Bonds to be redeemed as a result of the prepayment under this Note. (e) Mandatory Prepayments. Each of the following shall be or require a mandatory prepayment of the principal of this Note: (1) Any reduction and, therefore, amortization of the Loan by reason of the withdrawal of any amount from the Principal Reserve Fund and the application of such amount to the payment of, or the reimbursement to the Credit Provider for an Advance made for, the principal of any of the Bonds, the principal component of the redemption price of any of the Bonds or the principal component of the defeasance of any of the Bonds, all as provided in the Indenture, except for the payment of the principal of any Bond as such principal is scheduled to be paid. (2) Any application by the Issuer of any collateral or other security to the repayment of any principal of this Note to the extent of the principal amount of such repayment. (3) The Issuer's exercise of the right of acceleration of this Note to the extent of the outstanding principal amount of this Note. (4) Any acceleration or mandatory redemption of the Bonds to the extent of the principal amount of such Bonds. (5) Any reduction and, therefore, amortization of the Loan by reason of the withdrawal of any amount from any Fund or Account under the Indenture, not described in clauses (1), (2), (3) or (4), resulting in a payment, redemption or defeasance of any of the Bonds, except to the extent that such funds are applied to: (A) a Sinking Fund Payment required by the Indenture for the redemption of any of the Bonds; (B) the payment of the principal of any Bond as such principal is scheduled to be paid; or Multifamily Note Page 7 (Broadway LaNel Project) (C) a voluntary prepayment of this Note which causes a voluntary redemption of Bonds. (f) Borrower's Payment Obligation in Connection with a Prepayment. The Borrower shall pay, or cause to be paid, all of the following amounts in connection with any prepayment of this Note (whether voluntary or mandatory): (1) the principal of the Loan being prepaid; (2) interest on the principal of the Loan being prepaid to the effective date of prepayment as provided in subparagraph (b); (3) to the extent not covered by the amount required in clause (2), interest payable on the Bonds to the Redemption Date; (4) the prepayment premium, if any, payable with respect to the prepayment of the Loan (the premium to be paid with Available Moneys); and (5) to the extent not covered by the amount required in clause (4), the redemption premium, if any, payable with respect to the redemption of the Bonds (the premium to be paid with Available Moneys). (g) Application of Partial Prepayment. Any partial prepayment of the principal of this Note shall not extend or postpone the due date of any subsequent monthly installments, if any, or change the amount of such installments, except as provided in this subparagraph. The amount of subsequent monthly installments, if any, shall be reamortized with the consent of Issuer as necessary to correspond to the remaining payments due on the Bonds; provided, however, that the unpaid principal of and interest on this Note, all other obligations of the Borrower for the payment of money under this Note and all obligations of the Borrower for the payment of money under the Security Instrument shall be due and payable on the Maturity Date, if not sooner paid. 12. Costs and Expenses. The Borrower shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by the Issuer as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non judicial foreclosure proceeding. 13. Forbearance. Any forbearance by the Issuer in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy. The acceptance by the Issuer of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of the Issuer's right to Multifamily Note Page 8 (Broadway LaNel Project) require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment. Enforcement by the Issuer of any security for the Borrower's obligations under this Note shall not constitute an election by the Issuer of remedies so as to preclude the exercise of any other right or remedy available to the Issuer. 14. Waivers. Presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting this Note are waived by the Borrower, Key Principal, and all endorsers and guarantors of this Note and all other third party obligors. 15. Loan Charges. If any applicable law limiting the amount of interest or other charges permitted to be collected from the Borrower in connection with the Loan is interpreted so that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and the Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation. The amounts, if any, previously paid to the Issuer in excess of the permitted amounts shall be applied by the Issuer to reduce the unpaid principal balance of this Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from the Borrower has been violated, all interest, as well as all other charges made in connection with the Loan that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of this Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of this Note. 16. Commercial Purpose. The Borrower represents that the Loan is being incurred by the Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes. 17. Counting of Days. Except where otherwise specifically provided, any reference in this Note to a period of "days" means calendar days, not Business Days. 18. Governing Law. This Note shall be governed by the law of the jurisdiction in which the Land is located. 19. Captions. The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note. 20. Notices. All notices, demands and other communications required or permitted to be given by the Issuer to the Borrower pursuant to this Note shall be given in accordance with Section 31 of the Security Instrument. 21. Consent to Jurisdiction and Venue. The Borrower and Key Principal each agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in the jurisdiction in which the Land is located (the "Property Jurisdiction"). The state and Multifamily Note Page 9 (Broadway LaNel Project) federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note. The Borrower and Key Principal each irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. 22. WAIVER OF TRIAL BY JURY. THE BORROWER, KEY PRINCIPAL AND ISSUER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES, AS ISSUER, KEY PRINCIPAL AND THE BORROWER, THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL. ATTACHED SCHEDULES. The following Schedules are attached to this Note: X I Schedule A Definitions [The Remainder of This Page Has Intentionally Been Left Blank] Multifamily Note Page 10 (Broadway LaNel Project) IN WITNESS WHEREOF, the Borrower has signed and delivered this Note or has caused this Note to be signed and delivered by its duly authorized representative. BROADWAY LaNEL, A LIMITED PARTNERSHIP Title: General Partner 41-1545889 Borrower's Social Security Number Multifamily Note S_1 (Broadway LaNel Project) ACKNOWLEDGMENT AND AGREEMENT OF KEY PRINCIPAL TO PERSONAL LIABILITY FOR EXCEPTIONS TO NON-RECOURSE LIABILITY Key Principal, who has an economic interest in the Borrower or who will otherwise obtain a material financial benefit from the Loan, absolutely, unconditionally and irrevocably agrees to pay to the Issuer, or its assigns, on demand, all amounts for which the Borrower is personally liable under Paragraph 10 of the Multifamily Note to which this Acknowledgment is attached (the "Note"). If an event occurs which is an event described in Paragraph 10 of the Note for which the Borrower becomes personally liable to pay an amount under the Note, but by the application of bankruptcy, insolvency or similar law the Borrower does not actually or effectively become so personally liable, this Acknowledgment shall nevertheless be binding on the Key Principal to the same extent as if the Borrower had actually become personally liable under Paragraph 10 of the Note upon such event. The obligations of Key Principal shall survive any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the Security Instrument. The Issuer may pursue its remedies against Key Principal without first exhausting its remedies against the Borrower or the Mortgaged Property. All capitalized terns used but not defined in this Acknowledgment shall have the meanings given to such terns in the Security Instrument. As used in this Acknowledgment, the term "Key Principal" (each if more than one) shall mean only those individuals or entities that execute this Acknowledgment. The obligations of Key Principal shall be performed without demand by the Issuer and shall be unconditional irrespective of the genuineness, validity, or enforceability of the Note, or any other Loan Document, and without regard to any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Key Principal hereby waives the benefit of all principles or provisions of law, which are or might be in conflict with the terms of this Acknowledgment, and agrees that Key Principal's obligations shall not be affected by any circumstances which might otherwise constitute a legal or equitable discharge of a surety or a guarantor. Key Principal hereby waives the benefits of any right of discharge and all other rights under any and all statutes or other laws relating to guarantors or sureties, to the fullest extent permitted by law, diligence in collecting the principal of and interest on the Note, presentment, demand for payment, protest, all notices with respect to the Note including this Acknowledgment, which may be required by statute, rule of law or otherwise to preserve the Issuer's rights against Key Principal under this Acknowledgment, including notice of acceptance, notice of any amendment of the Loan Documents, notice of the occurrence of any default or Event of Default under the Security Instrument, notice of intent to accelerate, notice of acceleration, notice of dishonor, notice of foreclosure, notice of protest, notice of the incurring by the Borrower of any obligation or indebtedness and all rights to require the Issuer to (a) proceed against the Borrower, (b) proceed against any general partner of the Borrower, (c) proceed against or exhaust any collateral held by the Issuer to secure the repayment of this Note, or (d) if the Borrower is a partnership, pursue any other remedy it may have against the Borrower, or any general partner of the Borrower. At any time without notice to Key Principal, and without affecting the liability of Key Principal under this Acknowledgment, (a) the time for payment of the principal of or interest on the Loan may be extended or the Note may be renewed in whole or in part; (b) the time for the Multifamily Note Ack-I (Broadway LaNel Project) Borrower's performance of or compliance with any covenant or agreement contained in the Note, or any other Loan Document, whether presently existing or hereinafter entered into, may be extended or such performance or compliance may be waived; (c) the maturity of the Note may be accelerated as provided in the Note or any other Loan Document; (d) the Note or any other Loan Document may be modified or amended by the Issuer and the Borrower in any respect, including an increase in the principal amount; and (e) any security for the Note may be modified, exchanged, surrendered or otherwise dealt with or additional security may be pledged or mortgaged for the Note. Key Principal acknowledges that Key Principal has received a copy of the Note and all other Loan Documents. Neither this Acknowledgment nor any of its provisions may be waived, modified, amended, discharged, or terminated except by an agreement in writing signed by the parry against which the enforcement of the waiver, modification, amendment, discharge, or termination is sought, and then only to the extent set forth in that agreement. Key Principal agrees to notify the Issuer (in the manner for giving notices provided in Section 31 of the Security Instrument) of any change of Key Principal's address within 10 Business Days after such change of address occurs. Any notices to Key Principal shall be given in the manner provided in Section 31 of the Security Instrument. Key Principal agrees to be bound by Paragraphs 21 and 22 of the Note. THIS ACKNOWLEDGMENT IS AN INSTRUMENT SEPARATE FROM, AND NOT A PART OF, THE NOTE. BY SIGNING THIS ACKNOWLEDGMENT, KEY PRINCIPAL DOES NOT INTEND TO BECOME AN ACCOMMODATION PARTY TO, OR AN ENDORSER OF, THE NOTE. [Signatures begin on next page] Multifamily Note Ack-2 (Broadway LaNel Project) IN WITNESS WHEREOF, Key Principal has signed and delivered this Acknowledgment or has caused this Acknowledgment to be signed and delivered by its duly authorized representative. KEY Name: Francis W. Lang Address: 4601 Excelsior Bouleard, Suite 601 Minneapolis, MN 55416 Key Principal's Tax ID No.: 473-46-2193 By: Name: CXugene M. Nelson Address: 4601 Excelsior Boulevard, Suite 601 Minneapolis, MN 55416 Key Principal's Tax ID No.: 474-46-6702 Multifamily Note Ack 1 (Broadway LaNel Project) SCHEDULE A DEFINITIONS The following terms when used in this Note shall have the respective meanings indicated below: "Adjustment Date" means any Interest Payment Date for the Bonds on which the interest rate on the Bonds is adjusted to a different Mode or to a different Reset Rate, including any Reset Date. An Adjustment Date may occur on any Interest Payment Date for the Bonds during the Weekly Variable Rate Period or any Reset Period or if such date is not a Business Day, the next Business Day. "Advance" has the meaning given to that term in the Credit Enhancement Instrument. "Alternate Credit Facility" means a letter of credit (whether or not so named), surety bond, insurance policy, standby bond purchase agreement, credit enhancement instrument, collateral purchase agreement, mortgage backed security or similar agreement, instrument or facility (other than the initial Credit Facility) provided in accordance with the Financing Agreement. "Authorized Denomination" means, (i) during any Weekly Variable Rate Period, $100,000 or any integral multiple of $5,000 in excess of $100,000, and (ii) during any Reset Period or the Fixed Rate Period, $5,000 or any integral multiple of $5,000. "Available Moneys" has the meaning given to that term in the Indenture. "Bond Counsel" means (a) on the Closing Date, the law firm or law firms delivering the approving opinion(s) with respect to the Bonds or (b) after the Closing Date, any law firm selected by the Issuer and acceptable to the Credit Provider, of nationally recognized standing in matters pertaining to the exclusion from gross income for federal income tax purposes of the interest payable on bonds issued by states and political subdivisions. "Bond Documents" means the Assignment, the Bonds, the Bond Purchase Agreement, the Credit Facility, the Financing Agreement, the Indenture, the Regulatory Agreement (and any other agreement relating to rental restrictions on the Mortgaged Property), the Remarketing Agreement, the Tax Certificate, any Tender Agent Agreement, and all other documents, instruments and agreements executed and delivered in connection with the issuance, sale, delivery and/or remarketing of the Bonds, as each such agreement or instrument may be amended, supplemented or restated from time to time. Each of the capitalized terms not defined in this Note and used in this definition is used as defined in the Indenture. "Bond" or "Bonds" means the Issuer's Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003, in the outstanding aggregate principal amount of $2,655,000. "Business Day" means any day other than (i) a Saturday or a Sunday, (ii) any day on which banking institutions located in the City of New York, New York are required or authorized by law Multifamily Note A-1 (Broadway LaNel Project) or executive order to close, (iii) any day on which banking institutions located in the city or cities in which the Designated Office of the Trustee, the Remarketing Agent or the Loan Servicer is located are required or authorized by law or executive order to close, (iv) prior to the Fixed Rate Adjustment Date, a day on which the New York Stock Exchange is closed or (v) so long as a Credit Facility is in effect, any day on which the Credit Provider is closed. "Closing Date" means the date on which the Bonds are issued and delivered to or upon the order of the Underwriter to fund the Loan. "Credit Enhancement Instrument" means the Credit Enhancement Instrument dated as of the Closing Date issued and delivered by Fannie Mae to the Trustee, as it may be amended, supplemented or restated from time to time. "Credit Facility" means the Credit Enhancement Instrument, or any Alternate Credit Facility in effect at the time, as any such facility may be amended, supplemented or restated from time to time. "Credit Facility Documents" means the Reimbursement Agreement, the Certificate of Borrower, all Collateral Agreements, the Hedge Documents, the Hedge Reserve Escrow Security Agreement, the Hedge Security Agreement, the Pledge Agreement and all other agreements and documents securing the Credit Provider or otherwise relating to the provision of the Credit Facility, as any such agreement may be amended, supplemented or restated from time to time. "Credit Provider" means, so long as the initial Credit Facility is in effect, Fannie Mae, or so long as any Alternate Credit Facility is in effect, the Alternate Credit Provider then obligated under the Alternate Credit Facility. "Default Rate" means an annual rate equal to the sum of (a) the prime rate of interest as reported from day to day in The Wall Street Journal (notwithstanding that such publication shows the prime rate of interest for the preceding Business Day) as the base rate on corporate loans posted by at least 75 percent of the nation's 30 largest banks, or, if such rate is no longer available, then the base rate or prime rate of interest of any "Money Center" bank designated from time to time by the Credit Provider, in its discretion; and (b) two percentage points. "Fannie Mae" means Fannie Mae, a corporation duly organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. §§ 1716 et seq. and its successors and assigns. "Financing Agreement" means the Financing Agreement dated as of August 1, 2003 among the Issuer, the Trustee and the Borrower, as amended, supplemented or restated from time to time. "Fixed Rate" means the rate of interest borne by the Bonds during the Fixed Rate Period as determined in accordance with the Indenture. "Fixed Rate Period" means the period beginning on the date on which the interest rate on the Bonds adjusts from the Weekly Variable Rate or a Reset Rate to the Fixed Rate and ending on the Maturity Date. Multifamily Note A-2 (Broadway LoNcl Project) "Hedge" has the meaning given to that term in the Reimbursement Agreement. "Hedging Arrangement" means any interest rate swap, interest rate cap or other arrangement, contractual or otherwise, which has the effect of an interest rate swap or interest rate cap or which otherwise (directly or indirectly, derivatively or synthetically) hedges interest rate risk associated with being a debtor of variable rate debt or any agreement or other arrangement to enter into any of the above on a future date or after the occurrence of one or more events in the future. "Indenture" means the Trust Indenture, dated as of August 1, 2003, between the Issuer and the Trustee, as amended, supplemented or restated from time to time. "Interest Requirement" has the meaning given to that term in the Indenture. "Issuer" means the City of New Hope, Minnesota, a municipal corporation and political subdivision, and its successors and assigns. "Key Principal" means, the individual whose names is set forth at the foot of this Note. "Land" has the meaning given to that term in the Security Instrument. "Loan" means the loan made by the Issuer to the Borrower pursuant to the Financing Agreement for the purpose of providing funds to the Borrower to repay the Prior Loan and cause the refunding of the Prior Bonds. "Loan Documents" means, collectively, the Note, the Security Instrument and all other documents, agreements and instruments evidencing, securing or otherwise relating to the Loan, as each such document, agreement or instrument may be amended, supplemented or restated from time to time. Neither the Financing Agreement nor the Regulatory Agreement is a Loan Document and neither document is secured by the Security Instrument. "Loan Servicer" means the multifamily mortgage loan servicer designated from time to time by the Credit Provider. "Maturity Date" means July 15, 2033. "Maximum Rate" means 12 percent per annum; provided, however, that the Maximum Rate may be increased if the Trustee receives (i) the written consent of the Credit Provider to a specified higher Maximum Rate not to exceed the lesser of the maximum rate permitted by law to be paid on the Bonds and the maximum rate chargeable on the Loan, (ii) an opinion of Bond Counsel to the effect that such higher Maximum Rate is permitted by law and will not adversely affect either the validity of the Bonds or the exclusion of the interest payable on the Bonds from gross income for federal income tax purposes, and (iii) a new or amended Credit Facility in an amount equal to the sum of (A) the then outstanding principal amount of the Bonds and (B) the new Interest Requirement calculated using the new Maximum Rate. "Mode" means any of the Weekly Variable Rate, the Reset Rate and the Fixed Rate. Multifamily Note A_3 (Broadway LaNel Project) "Mortgaged Property" has the meaning given to that term in the Security Instrument. "Note Interest" has the meaning given to that term in Paragraph 3 of this Note. "Note Interest Payment Date" means (i) during any Weekly Variable Rate Period, the 15th day of each calendar month commencing September 15, 2003; (ii) during any Reset Period the 15th of each calendar month following the Adjustment Date, provided that the first Note Interest Payment Date may only occur on a date which is at least 30 days after the Adjustment Date; (iii) during the Fixed Rate Period, the 15th of each calendar month following the Adjustment Date, provided that the first Note Interest Payment Date at the Fixed Rate may not be the Adjustment Date; (iv) each Adjustment Date; and (v) the Maturity Date. "Note Interest Period" means, with respect to the Loan, the period from, and including, the Closing Date, or as the case may be, a Note Interest Payment Date to, but excluding, the next Note Interest Payment Date, or, as the case may be, the Maturity Date. "Principal Reserve Fund" means the Principal Reserve Fund created pursuant to the Indenture, deposits to which are required by the Reimbursement Agreement. "Pledged Bonds" has the meaning given to that term in the Indenture. "Reimbursement Agreement" means the Reimbursement Agreement, dated as of August 1, 2003, by the Credit Provider and the Borrower, as amended, supplemented or restated from time to time. "Remarketing Agent" has the meaning given to that term in the Indenture. "Reset Date" means any date upon which the Bonds begin to bear interest at a Reset Rate for the Reset Period then beginning. "Reset Period" means each period of ten years or more selected by the Borrower, or such shorter period as may be selected by the Borrower with the prior written consent of the Credit Provider, during which Bonds bear interest at a Reset Rate. "Reset Rate" means the rate of interest borne by the Bonds as determined in accordance with the Indenture. "Security Instrument" means the Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of August 1, 2003, together with all riders and exhibits, securing this Note, executed by the Borrower with respect to the Mortgaged Property, as may be amended, supplemented or restated from time to time. "Sinking Fund Payment" has the meaning given to that term in the Indenture. "Trustee" has the meaning given to that term in the Indenture. Multifamily Note A-4 (Broadway LaNel Project) "Weekly Variable Rate" means the variable rate of interest per annum for the Bonds determined, for each Weekly Variable Rate Period, in accordance with the Indenture. "Weekly Variable Rate Period" means the period commencing on the Closing Date or an Adjustment Date on which the interest rate on the Bonds is adjusted from the Reset Rate to the Weekly Variable Rate and ending on the day preceding the following Adjustment Date or the Maturity Date. Multifamily Note A-5 (Broadway LaNel Project) Pay to the order of: Fannie Mae and U.S. Bank National Association, as Trustee, as their interests may appear, without recourse. CITY OF NEW- HOPE, MINNESOTA By: Name: W. Peter Enck Title: Mayor By: Name: Daniel Donahue Title: City Manager Dated as of August 1, 2003 Multifamily Note End (Broadway LaNel Project) $2,655,000 CITY OF NEW HOPE, MINNESOTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT), SERIES 2003 CLOSING CERTIFICATE AND RECEIPT OF THE TRUSTEE The undersigned, an authorized officer of U.S. Bank National Association, as trustee (the "Trustee") under that certain Trust Indenture, dated as of August 1, 2003 (the "Indenture"), by and between the City of New Hope, Minnesota (the "Issuer") and the Trustee, relating to the issuance by the Issuer of its $2,655,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 (the "Bonds"), hereby certifies on behalf of the Trustee as follows: 1. The officer executing this certificate is an officer of the Trustee duly authorized to make the representations contained herein and the signature of such officer below is the genuine signature of such officer. 2. The Trustee has taken all action necessary for the acceptance of, and has duly accepted the office of Trustee and the duties and obligations of the Trustee under the Trust Indenture. 3. The Trustee is a national banking association authorized to conduct trustee business, duly organized, validly existing and in good standing under the laws of the United States, is duly qualified to act as Trustee under the Indenture, and has the corporate power to take all action required or permitted of it under the Indenture, the Financing Agreement and the Pledge Agreement, and such other of the Transaction Documents required to be executed by the Trustee (collectively, the "Trustee Documents"). The Trustee further acknowledges that it is a third -party beneficiary pursuant to the terms of the Deed and has the corporate power to take all action required or permitted pursuant to the terms thereof. 4. The Trustee is duly authorized to authenticate and deliver the Bonds as directed by U.S. Bancorp Piper Jaffray Inc., as Underwriter, upon instruction by the Issuer pursuant to the terms of the Indenture, and the Bonds have been duly authenticated and registered in the names of the owners thereof as designated by the Underwriter by the undersigned or other duly authorized signatories of the Trustee, who at the time of affixing their signatures were authorized signatories of the Trustee and were duly authorized to authenticate the Bonds on behalf of the Trustee. 5. The Trustee Documents have been duly entered into, executed and delivered by the Trustee. The officers of the Trustee who executed and delivered the Trustee Documents were, on the dates of such execution and delivery, duly qualified and acting officers authorized to perform such acts, and the signatures of such officers appearing on the Trustee Documents are their genuine signatures. 6. The execution, delivery and performance by the Trustee of the Trustee Documents have been duly authorized by all necessary corporate action on the part of the Trustee and presently do not contravene the Articles or Bylaws of the Trustee or, to the reasonable knowledge of the Trustee, conflict with or constitute a breach of or default under any law, administrative regulation, consent decree or any agreement or instrument to which the Trustee is subject. 7. All approval, consents and orders of any governmental authority or agency having jurisdiction in the matter which, to the reasonable knowledge of the Trustee, would constitute a condition precedent to the performance by the Trustee of its duties and obligations under the Trustee Documents have been obtained and are in full force and effect. 8. To the reasonable knowledge of the Trustee, no litigation is pending or threatened in any way contesting or affecting the existence of powers (including trust powers) of the Trustee or the Trustee's ability to fulfill its duties and obligations under the Trustee Documents. 9. The execution and delivery of the Trustee Documents and compliance with the provisions thereof, will not conflict with, or constitute a breach of or default under, the Trustee's duties under said documents or the charter, bylaws or any resolutions of the Trustee or any instrument, document, agreement, commitment, indenture, security agreement, mortgage, lease or other writing, any law, administrative regulation or court decree, to which the Trustee is subject or by which it is bound. 10. Attached hereto is a true and correct copy of an extract from the Bylaws of the Trustee, authorizing certain officers thereof to, among other things, execute the Trustee Documents and authenticate the Bonds, all of which are in full force and effect on the date hereof. 11. The Trustee has received the Credit Enhancement Facility (Direct Pay), dated August 14, 2003, from Fannie Mae. 12. The Trustee has received from the Underwriter, as the purchase price for the Bonds, the sum of $2,655,000 (being the principal amount thereof). The Trustee has deposited the foregoing amount as required by Section 5.2 of the Indenture to the Loan Fund. Capitalized terms not defined herein shall have the same meaning as is set forth in the Indenture. 2 Dated: August 14, 2003. U.S. BANK NATIONAL ASSOCIATION, as Trustee Its: Vice President [Signature Page to the Trustee Closing Certificate and Receipt] AUTHORIZED SIGNER(S) I hereby certify that the following is a true and exact extract of Article VI of the Bylaws presently in effect for U.S. Bank National Association, an association organized and existing under the laws of the United States: ARTICLE VI. CONVEYANCES, CONTRACTS, ETC. All transfers and conveyances of real estate, mortgages, and transfers, endorsements or assignments of stock, bonds, notes, debentures or other negotiable instruments, securities or personal property shall be signed by any elected or appointed officer. All checks, drafts, certificates of deposit and all funds of the Association held in its own or in a fiduciary capacity may be paid out by an order, draft or check bearing the manual or facsimile signature of any elected or appointed officer of the Association. All mortgage satisfactions, releases, all types of loan agreements, all routine transactional documents of the Association, and all other instruments not specifically provided for, whether to be executed in a fiduciary capacity or otherwise, may be signed on behalf of the Association by any elected or appointed officer thereof. The Secretary or any Assistant Secretary of the Association or other proper officer may execute and certify that required action or authority has been given or has taken place by resolution of the Board under this Bylaw without the necessity of further action by the Board. I further certify that Gloriann S. Kessler of U.S. Bank National Association, has been duly elected and qualified and now holds the office listed herein, and that the signature of such officer is authentic: GloVice Preann i Kessler Vice President WILL SIGN: IN WITNESS WHEREOF, I have hereunto set my hand to be affixed hereto this 146 day of August, 2003. U.S. Bank National Association By: Joel J. Geist Vice Pr i ent $2,655,000 CITY OF NEW HOPE, MINNESOTA VARIABLE RATE DEMAND MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (BROADWAY LANEL PROJECT), SERIES 2003 CERTIFICATE OF PRIOR BONDS TRUSTEE I, G.S. Kessler, do hereby certify and declare that I am an Vice President, duly elected or appointed, qualified and acting as such, as of the date hereof, of U.S. Bank National Association (the "Trustee'), and, on behalf of the Trustee, certify that: 1. The Trustee is the trustee under that certain Indenture of Trust, dated as of September 1, 1993 (the "Indenture"), between the City of New Hope, Minnesota (the "City") and First Trust National Association, the predecessor in interest to the Trustee. Terms used with initial capital letters but undefined herein shall have the meanings assigned to such terms in the Indenture. 2. Pursuant to the Indenture, the City has issued its Multifamily Housing Revenue Refunding Bonds, Series 1993 (Broadway LaNel Project) (the "Bonds"), in the original principal amount of $3,300,000. As of the date hereof, $2,810,000 in principal amount of the Bonds are Outstanding. 3. On the date hereof was received $2,655,000 of the proceeds of the City's Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 of the City (the "Refunding Bonds") and there are the following funds on hand in the Bond Fund, Reserve Fund and Repair and Replacement Fund established under the Indenture: Bond Fund $145,608.07 Reserve Fund $230,735.77 Repair & Replacement Fund $0.78 4. The Trustee has received instructions from the Partnership to call all Outstanding Bonds for redemption on September 15, 2003, pursuant to Section 2-5(a) of the Indenture, at a redemption price equal to the 102% principal amount thereof plus accrued interest. 5. The total amount to be paid with respect to principal and interest on the Bonds on September 1, 2003 is $196,787.50 and the total amount to be paid with respect to principal, redemption premium, and interest on the Bonds on September 15, 2003 is $2,787,938.41. Funds for such payment will be provided by the proceeds of the Refunding Bonds ($2,655,000) paid to the Trustee, $145,608.07 of the amount on hand in the Bond Fund and $184,117.84 of the amount on hand in the Reserve Fund. The remaining amounts in the Reserve Fund ($46,617.93) and in the Repair and Replacement Fund ($0.78), will be paid to the Partnership and applied to pay a portion of the costs of issuance of the Refunding Bonds. IN WITNESS WHEREOF, I have hereunto set my hand on behalf of the Trustee as of this 14th day of August, 2003. U.S. BANK NATIONAL ASSOCIATION By Title: Vice President -2- DORSEY & WHITNEY LLP MINNEAPOLIS SEATTLE NEW YORK WA WNGTON, D.C. DENVER LONDON SOUTHERN CAUPORNIA DES MOINES SAN FRANCISCO ANCHORAGE U.S. Bank National Association St. Paul, Minnesota Ladies and Gentlemen: SUITE 1500 TOKYO 50 SOUTH SIXTH STREET PALO ALTO MINNEAPOLIS, MINNESOTA 55402-1498 FARCO TELEPHoNE: (612) 340-2600 s.vr a C.r FAT:(612) 340-2868 GREAT FA W W W.aOf4CYI]W.COtD HONG HONG MISSOULA TORONTO SHANGHAI VANCOUVER This opinion is provided you in your capacity as Trustee under the Indenture of Trust, dated as of September 1, 1993 (the "Indenture"), between the City of New Hope, Minnesota (the "Issuer"), and you, as Trustee (the "Trustee"), pursuant to which the Issuer has issued its Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 1993 (the "Bonds"). Capitalized terms used herein and not otherwise defined herein shall have the meaning given to them in the Indenture. There has been deposited with you on the date hereof proceeds of the Issuer's Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 in the amount of $2,655,000, which is to be applied together with funds held by you in the Reserve Fund and Bond Fund, as set forth in the Certificate executed by you attached hereto (the "Trustee's Certificate"). At your request we have reviewed Section 10.01 of the Indenture and the definitions in the Indenture relating thereto. On the basis of such review, assuming the authenticity of the documents reviewed by us and the accuracy of the facts stated in the Trustee's Certificate, it is our opinion that within the meaning of Section 10.01 of the Indenture, provision has been made for the payment of the Bonds maturing on and after September 1, 2007 (the "Defeased Bonds") on September 15, 2003. As provided in Section 10.01 of the Indenture the Holders of the Defeased Bonds are entitled to payment only from the funds deposited in trust for the payment of the Bonds on September 15, 2003. On the basis of laws, regulations, rulings and decision in effect on the date hereof, the defeasance of the Defeased Bonds does not have an adverse effect on the exclusion of the interest on the Bonds from federal income taxation. This opinion is provided solely for your benefit and is not to be relied upon by any other person without our written consent. Dated: August 14, 2003. Very truly yours, 7�(A-Lo SATISFACTION OF MORTGAGE By Corporation or Partnership Satisfaction Of Mortgage Date: Augusd-'_ 2003 That certain COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT owned by the undersigned, a national banking association tinder the laws of the United States, dated as of September 1, 1993, executed by Broadway LaNel, A Limited Partnership, as Mortgagor, to U.S. Bank National Association, formerly known as First Trust National Associati as Mortgagee and Trustee, and filed for record September 9, 1993, as Document Nos. 6147859 (A) 241960 in the Office of the County Recorder, Hennepin County, Minnesota, is, with the indebtedness thereby secured, fully paid and satisfied. U.S. BANK NATIONAL ASSOCIATION, formerly known as First Trust National Association By zi �' - — I Vice President STATE OF MINNESOTA ) ) as. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this 1?J*L day of August, 2003, by G.S. Kessler, the Vice President of U.S. Bank National Association, a national banking association under the laws of the United States, on behalf of the banking association. THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS): Dorsey & Whitney LLP Suite 1500 50 South Sixth Street Minneapolis, MN 55402-1498 51 gTIIRE OF PERSON TAKING ACI ]I WLEDCEMENT ■ CATHERINE M.NUTZMANN NOTARYPUBLIC-MINNESOTA i M7 rsmmissioo Eons Jut a1, Ma4 x K Z 0 M n MM " -4z M q G7 -n V1 N 0 -n �-�-Im � mm A C r 0 OZN44 t7 T w z n o M � o s (reserved for recording data) That certain COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT owned by the undersigned, a national banking association tinder the laws of the United States, dated as of September 1, 1993, executed by Broadway LaNel, A Limited Partnership, as Mortgagor, to U.S. Bank National Association, formerly known as First Trust National Associati as Mortgagee and Trustee, and filed for record September 9, 1993, as Document Nos. 6147859 (A) 241960 in the Office of the County Recorder, Hennepin County, Minnesota, is, with the indebtedness thereby secured, fully paid and satisfied. U.S. BANK NATIONAL ASSOCIATION, formerly known as First Trust National Association By zi �' - — I Vice President STATE OF MINNESOTA ) ) as. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this 1?J*L day of August, 2003, by G.S. Kessler, the Vice President of U.S. Bank National Association, a national banking association under the laws of the United States, on behalf of the banking association. THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS): Dorsey & Whitney LLP Suite 1500 50 South Sixth Street Minneapolis, MN 55402-1498 51 gTIIRE OF PERSON TAKING ACI ]I WLEDCEMENT ■ CATHERINE M.NUTZMANN NOTARYPUBLIC-MINNESOTA i M7 rsmmissioo Eons Jut a1, Ma4 SATISFACTION OF MORTGAGE BY Corporation or Partnership Satisfaction Of Mortgage Date: August 3, 2003 8136217 ,. 4 2093 AUG f 8`'; PH 1. 47 (reserved for recording data) That certain COMBINATION MORTGAGE, SECURITY AGREEMENT AND FDtTURE FINANCING STATEMENT owned by the undersigned, a national banking association under the laws of the United States, dated as of September 1, 1993, executed by Broadway LaNel, A Limited Partnership, as Mortgagor, to U.S. Bank National Association, formerly (sown as First Trust National Association, as Mortgagee and Trustee, and filed for record September 9, 1993, as Document Nos. 6147859 (A) and 2419607 (T) in the Office of the County Recorder, Hennepin County, Minnesota, is, with the indebtedness thereby secured, fully paid and satisfied U.S. BANK NATIONAL ASSOCIATION, formerly known as First Trust National Association By .�Csi Its Vice President STATE OF MINNESOTA ) ) aa. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this Jam" day of August, 2003, by G.S. Kessler, the Vice President of U.S. Bank National Association, a national banking association under the laws of the United States, on behalf of the banking association. THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS): Dorsey & Whitney LLP Suite 1500 50 South Sixth Street Minneapolis, MN 55402-1498 CATHERINE M. NUTZMANN NOTARY PUBLIC -MINNESOTA My Commission &pa Jm. 31.2005 zl� c-DuI•; TERMINATION OF ASSIGNMENT By Corporation or Partnership Termination Of Assignment Data AugustL�, 2002 �y. 8134218 2003 AUG 18 P13 I; L fk I x (reserved for recording data) That certain ASSIGNMENT OF RENTS AND LEASES owned by the undersigned, a national banking association under the laws of the United States, dated as of September 1, 1993, executed by Broadway LaNel, A Limited Partnership, as Assignor, to U.S. Bank National Association, formerly known as Fust Trust National Association, as Assignee and Trustee, and filed for record September 9, 1993, as Document Nos. 6147860 (A) and 2419608 (T), in the Office of the County Recorder, Hennepin County, Minnesota, is, with the indebtedness thereby secured, fully paid and satisfied. U.S. BANK NATIONAL ASSOCIATION, formerly known as First Trust National Association By zaet� Its Vice President STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this 1 3fl day of August, 2003 by G.S. Kessler, the Vice President of U.S. Bank National Association, a national banking association under the laws of the United States, on behalf of the banking association. THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS): Dorsey & Whitney LLP Suite 1500 50 South Sixth Street Minneapolis, MN 55402-1498 SIO TORE OF FEMON TAKIN AC WLEDGEMENT • CATHERINE M. NVTZMANN NOTARY PUBLIC MINNESOTA My cmMisdoa 6.presJam nt, 2W5 At 1& vuT: J� TERMINATION OF ASSIGNMENT By Corporation or Partnership Termination Of Assignment Date: August 3, 2002 3SI5429 sc� Fo M m Fn0m W�m� za� C3 rn M 23 0i m H (reserved for recording data) That certain ASSIGNMENT OF RENTS AND LEASES owned by the undersigned, a national banking association under the laws of the United States, dated as of September 1, 1993, executed by Broadway LaNel, A Limited Partnership, as Assignor, to U.S. Bank National Association, fomterly known as First Trust National p' 'on, as Assignee and Trustee, and filed for record September 9, 1993, as Document Nos. 6147860 (A) and 2419608 , in the Office of the County Recorder, Hennepin County, Minnesota, is, with the indebtedness thereby secured, fully paid and satisfied. U.S. BANK NATIONAL ASSOCIATION, formerly known as First Trust National Association By Its Vice President STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this J day of August, 2003 by G.S. Kessler, the Vice President of U.S. Bank National Association, a national banking association under the laws of the United States, on behalf of the banking association THUS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS): Dorsey & Whitney LLP Suite 1500 50 South Sixth Street Minneapolis, MN 55402-1498 �. SIGNATURE OF PERSON TA1QNG A WIEDGEMENT ■ CATHERINE M.N(1T2MANN ■ NOTAgYPUBUC-MINNESOTA My Cutoulan Erpins Jan 31,2" r M VA' - DEC -17-2003 15:51 DORSEY & WHITNEY LLP DEC. 17.2003 3:OOPM LAND AMERICA UCC FINANCING STATEMENTAMENDMENT r I -Z -S 7//- i-2 Return to: Commercial Recording COMMONWEALTH LAND TITLE 400 Sibley Street, Suite 255 St. Paul, MN 55101 MN Secretary of State No. 1613982, dated 9!3)93 wwAM(a) 6123402868 P.06/09 N0. 2901 P. 6 Filing NO: 2003846507 Filing Date: 2003/08/19 Filing Time: 5:00 PM State of Minnesota Processing Office: Secretary of State Filed by: macva0l MID191Rw w.Nnurvr.onl I'nn.....VNnV4NVl'II; II..AaNaaa.rAlR. ua.Mar KUS..WPy OIM1 . Ol.0 Wd P➢dM.MI.a .. AN 4119111110 ddw hIMANI0 wnN Mxn lad POW161 AWOP t.Wo dm 11 km 6 7. w 0..v!. wl.wni �a41.w0 d ❑.bF4 91 pwanWe�I.auyd v�1.Ira anmpum, r amb. n1ueM �wslpa.d. iWIE OF*hUP to MMIC IT DF RECORD AUTHORIZING THIS AMENDMENT Oun d.Wpntr, a WAlit an AW,w , YwaMw Am911g1.Fr6rWhggnpq>WNM .0a.coPa wr NautwftM Dablv,n/U.I..T..m.11m.yTvrge or.a.bwnp latIwln M1dxlNrn.aY.al DEBTOR w9wblle wY AM.namaM. U.S, bank National Association, formerly known as Pint TTuvt National Association Secretary ofStatwinnesota FILING OFFICECOPY--NATIONAL UCC RNANCINO STATEMENT AMENDMENT (FORM UCC3) (119Y.07/29M) NAT:VX.uwlctsr Onitw DIST NAME 7 1WWE MpOLEfWAE SUFFM T. CKANGED (NEM oR ADDED INFORMATION; OR 71 WOVIDVAL'9 LASTNAH FIRSTNWE MI00LE NAME SMFFIR ]L MAIUND ApoRE11B On STATE POSTAL coon -CW-MW 4TAsiCw 55,10RIEN AODLWFORE..TYPE OF YI. RIBDIo ON OFO N ia. RAN T Nµ ORUWAYM ,NFnr QTDII MONd 0..v!. wl.wni �a41.w0 d ❑.bF4 91 pwanWe�I.auyd v�1.Ira anmpum, r amb. n1ueM �wslpa.d. iWIE OF*hUP to MMIC IT DF RECORD AUTHORIZING THIS AMENDMENT Oun d.Wpntr, a WAlit an AW,w , YwaMw Am911g1.Fr6rWhggnpq>WNM .0a.coPa wr NautwftM Dablv,n/U.I..T..m.11m.yTvrge or.a.bwnp latIwln M1dxlNrn.aY.al DEBTOR w9wblle wY AM.namaM. U.S, bank National Association, formerly known as Pint TTuvt National Association Secretary ofStatwinnesota FILING OFFICECOPY--NATIONAL UCC RNANCINO STATEMENT AMENDMENT (FORM UCC3) (119Y.07/29M) NAT:VX.uwlctsr Onitw DEC -17-2003 15:51 DORSEY & WHITNEY LLP DEC. 17.2003 3:OOPM LAND AMERICA Uniform Commercial Code I so state Office Building (9�� 100 Rev, Dr. Martin Luther King Ir. BlvdSaint Paul, MN 55155 Minnesota Central Filing System UCC Amendment Acknowledgement DA Commonwealth Land Title 255 Park Square Court 400 Sibley Street SAINT PAUL MN 55101 6123402868 P.07i09 N0. 2901 P. 7 Mary Kiffineyer Secretary of State August 20, 2003 Page 1 of I The Minnesota Central Filing System has received and filed your document The informatiotl below reflects the data that was indexed in our system Please review the information for accuracy. If you find a potential error, please notify the appropriate filing office. Client Account Number. 13116183 Document Number: 6030130011 Amendment Type: Termination Amendment Number. 2003846507 Filing Type: UCC Financing Stmt Original Filing Numben 1613982 File Date: 08/19/2003 File Time: 5:00 p.m Lapse Date. 09/03/2008 Party Type Party Name and Address Debtor City of New Hope New Hope MN Secured Party US BANK NATIONAL ASSOCIATION AS TRUSTEE SAINT PAUL MN Secured Party US Bk Trust NA Saint Paul MN Filing by the Minnesota Central Filing System is not conclusive proof that all conditions for securing priority have been met, Ensuring that accurate information is on the document to be filed is the responsibility of the filing party. If the filing is challenged, the filing office does not guarantee that the filing is legally sufficient to secure priority under UCC Article 9 and expressly disclaim; any liability for failure of the filing party to secure priority resulting fromthe information contained in the filed document, or the lack of information on the filed docurvent, User ID: macvaol Come visit us on the inrernet at kip-://www.sos.state.mn.us/ (651) 296-2803 FAX (65 1) 215-1009 County ID: 88 TTY (800) 627-3529 DEC -17-2003 15:51 DORSEY & WHITNEY LLP DEC. 17. 2003 3; OOPM LAND AMERICA UCC FINANCING STATEMENTAMENDMENT 340.2963 r Return to: Commercial Recording COMMONWEALTH LAND TITLE 400 Sibley Street, Suite 255 St. Paul, MN 55101 MN Secretary of State No. 1613983, dated 9/3193 —P�W s w 6123402868 P.08i09 N0 2901 r. 3 Filing NO: 2003846508 Filing bate: 2003/08/19 Filing Time: 5:00 PM State of Minnesota Processing Office: Secretary of State Filed by: macvaOl a,rr.��n�Mmllr'nlr inr{�I{yNTION): Th4AMMmwildgp uppW ¢ U pip PV0 0 1 ChIftO V=aI WW W posy A4pdy(1{ m d9} b1441y Ivy laxM app PoMur ppppp4Y 4Wmp W11 h Xpme I wdbr 7. W" ff"' ITa, ATNdmpMa&V pppl W~ mi 61YYtl w WaaM wPVMnp DMIw, wY W� M A iypylyyl pW,y,¢p pr p O�Etr, tl,p�M l" I w.Mr •pm�d DEBTOR pyypyy pyv,y,v„yoyp U.S. Bank National Association (formerly known as First Tm>st National On_................ ..-- Secretary _. Secretary of State ianesora RUNE OFFICE COPY—NATIONAL UCC FINANCING STATEMENTAMENDMENTIFORM UCC6I (REV. W29=) NAnJCCl �1.Vp1 CTSyMON4� DEC -17-2003 15:51 DORSEY 8 WHITNEY LLP DEC. 17.2003 3:01PM LAND AMERICA Uniform Commercial Code 180 State Office Building 100 Rev. IN. Martin Luther King Jr. Blvd Saint Paul, MN 55155 0 Minnesota Central Filing System UCC Amendment Acknowledgement DA Commonwealth Land Title 255 Park Square Court 400 Sibley Street SAINT PAUL MN 55101 6123402868 P.09i09 N0. 290, P. 9 Mary Kiffxneyer Secretary of State August 20, 2003 Page I of 1 The Minnesota Central Filing System lis received and filed your docu=nL The information below reflects the data that was indexed in our system Please review the information for accuracy. If you find a potential error, please notify the appropriate filing office. Client Account Number. 13116183 Amendment Type: Termination Document Number. 6030130012 Amendment Number. 2003846508 Fling Type: UCC Financing Stmt Original Filing Number: 1613983 File Date: 08/19/2003 File Time: 5:00 p.m Lapse Date: 09/03/2008 Party Type Party Name and Address Debtor Broadway LaNel a Limited Partnership Minneapolis MN Secured Party US BANK NATIONAL ASSOCIATION AS TRUSTEE SAINT PAUL MN Secured Party US Bk Trust NA Saint Paul MN Filing by the Minnesota Central Filing System is not conclusive proof that all conditions for securing priority have been met. &nauring that accurate information is on the document to be filed is the responsibility of the filing party. If the filing is challenged, the Sling office does not guarantee that the filing is legally sufficient to secure priority under UCC Article 9 and expressly disclaims any liability for failure of the filing putty to secure priority resulting from the information eontaincd in the filed document, or the lack of information on the filed document. User ID: macva0l Come visit us on the interret at A1tp;//www.sos.state.mn.usl (651) 296-2803 FAX (651) 215-1009 CountyID: 88 nT(SOO) 627-3529 TOTAL P.09 DORSEY & WHITNEY LLP MINNEAPOLIS NEWYORK SEATTLE DENVER WASHINGTON, D.C. NORTHERN VIRGINIA DES MOINES LONDON ANCHORAGE SALT LAKE CITY BRUSSELS City of New Hope New Hope, Minnesota SUITE 1500 50 SOUTH SIXTH STREET MINNEAPOLIS, MINNESOTA 55402-1498 TELEPHONE: (612) 340-2600 FAX: (612) 340-2868 www.dorseylaw.com Broadway Lanel, a Limited Partnership Minneapolis, Minnesota U.S. Bancorp Piper Jaffray Inc. Minneapolis, Minnesota Fannie Mae Washington, D.C. Re: $2,655,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 City of New Hope, Minnesota Ladies and Gentlemen: COSTA MESA BILLINGS FARGO HONG KONG GREAT FALLS ROCHESTER TOKYO MISSOULA VANCOUVER TORONTO SHANGHAI We have acted as Bond Counsel in connection with the authorization, issuance and sale by the City of New Hope, Minnesota (the "City"), of its Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003, in the aggregate principal amount of $2,655,000, dated, as originally issued, as of the date hereof (the "Series 2003 Bonds"). For the purpose of rendering this opinion, we have examined: (1) a Trust Indenture, dated as of August 1, 2003 (the "Indenture"), between the City and U.S. Bank National Association, of Saint Paul, Minnesota, as trustee (the "Trustee"); (2) a Financing Agreement, dated as of August 1, 2003 (the "Financing Agreement'), between the City, Broadway LaNel, a Limited Partnership, a Minnesota limited partnership (the "Borrower"), and the Trustee; (3) a Regulatory Agreement, dated as of August 1, 1985, as amended and supplemented by an Amendment Number One to Regulatory Agreement, dated as of August 1, 1995, and an Amendment Number Two to Regulatory Agreement, dated as of August 1, 2003 (as so amended and supplemented, the "Regulatory Agreement'), between the Borrower, the Trustee and the Issuer; (4) certified copies of certain resolutions of the governing body of the City authorizing the execution and delivery of the Indenture, the Financing Agreement, the Regulatory Agreement, the Bonds and other documents; (5) the form of the Bonds; and (6) such DORSEY & WHITNEY LLP City of New Hope Broadway Lanel, A Limited Partnership U.S. Bancorp Piper Jaffray Inc. Fannie Mae Page -2- other proceedings, certificates, affidavits and other documents as we consider necessary in order to render this opinion. 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. From such examination and on the basis of existing law, it is our opinion that: (1) The City is a municipal corporation and political subdivision validly existing under the Constitution and laws of the State of Minnesota and is authorized by Minnesota Statutes, Chapters 462C and 462A to issue the Bonds, to loan the proceeds thereof to the Borrower to refund certain outstanding multifamily housing development revenue refunding bonds of the City and to pledge the loan repayments to be received pursuant to, and certain of its interests in, the Financing Agreement as security for the payment of the principal of, premium, if any, and interest on the Bonds. (2) The Financing Agreement, the Indenture and the Regulatory Agreement have each been duly and validly authorized, executed and delivered by the City and, assuming the due and valid authorization, execution and delivery by the other parties thereto, are valid and binding special, limited obligations of the City enforceable in accordance with their terms. (3) The Bonds have been duly and validly authorized and executed by the City and are valid and binding special, limited obligations of the City, enforceable in accordance with their terms and the terms of the Indenture. The Bonds are equally and ratably secured by and entitled to the benefits provided by the Indenture. The Bonds are not general obligations or indebtedness of the City within the meaning of any constitutional or statutory limitation, and do not constitute or give rise to a charge against the general credit or taxing power of the City, but are payable solely from revenues derived from the sources described in the granting clauses of the Indenture. The Bonds are also secured, equally and ratably, by the Credit Enhancement Instrument delivered by Fannie Mae, but we express no opinion as to the validity or enforceability of the Credit Enhancement Instrument. (4) Interest on the Bonds is not includable in gross income of the recipient for federal income tax purposes or in taxable net income of individuals, trusts or estates for Minnesota income tax purposes; provided that (a) no opinion is expressed as to the exemption from federal or Minnesota income taxation for any period during which any Bond is held by a person who is a "substantial user" of the Mortgaged Property (as defined in the Indenture) or a "related person" within the meaning of Section 103(b)(13) of the Internal Revenue Code of 1954, as amended (the DORSEY & WHITNEY LLP City of New Hope Broadway Lanel, A Limited Partnership U.S. Bancorp Piper Jaffray Inc. Fannie Mae Page -3- "1954 Code' ); and (b) use of the Mortgaged Property in a manner inconsistent with the provisions of Section 103(b)(4)(A) of the 1954 Code or noncompliance with certain covenants contained in the Regulatory Agreement, the Indenture or the Financing Agreement could cause the interest on the Bonds to become includable in gross income for federal income tax purposes and in taxable net income for Minnesota income tax purposes. Interest on the Bonds is subject to the Minnesota franchise tax imposed on corporations and financial institutions. Interest on the Bonds is not an item of tax preference which is included in alternative minimum taxable income for purposes of the federal alternative minimum tax applicable to all taxpayers or to the Minnesota alternative minimum tax applicable to individuals, estates and trusts, but such interest is includable in adjusted current earnings for purposes of determining the alternative minimum taxable income of corporations for purposes of federal and Minnesota alternative minimum taxes. As a condition to converting the interest on the Bonds under the Indenture to a Reset Rate or a Fixed Rate (each as defined in the Indenture), the Borrower must deliver to the Trustee an opinion of bond counsel stating in effect that such conversion to the Reset Rate or Fixed Rate is authorized and permitted by the Indenture and will not impair the validity or the tax-exempt status of interest on the Bonds. We express no opinion with respect to the tax-exempt status of interest on the Bonds from and after the first Adjustment Date, if any. The opinions expressed in paragraph (4) above are subject to the condition of compliance by the City, the Borrower and the Trustee with all requirements of the 1954 Code and the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon may be, and continue to be, excluded from gross income for federal income tax purposes. Noncompliance with such requirements could result in the inclusion of interest on the Bonds in gross income for federal and Minnesota income tax purposes, retroactive to the date of issuance of the Bonds. Except as stated in this opinion, we express no opinion regarding federal, state or other tax consequences to owners of the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds, the Indenture, the Financing Agreement, and the Regulatory Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and may also be subject to principles of equity, whether considered at law or in equity. In rendering these opinions we have relied upon representations of the City, the Borrower and others, including representations as to (i) the nature, use, cost and economic life of the facilities refinanced by the Bonds, (ii) the application of the proceeds of the multifamily housing DORSEY & WHITNEY LLP City of New Hope Broadway Lanel, A Limited Partnership U.S. Bancorp Piper Jaffray Inc. Fannie Mae Page -4- development revenue bonds refunded by the Bonds and the proceeds of the bonds refunded by such bonds, (iii) the intended application of the proceeds of the Bonds, and (iv) other factual matters relating to the exemption of the interest on the Bonds from federal income taxation. We have not been engaged, and have not undertaken, to review the accuracy, completeness or sufficiency of the Offering Circular or other offering material relating to the Bonds and we express no opinion relating thereto (excepting only the matters set forth as our opinion in the Offering Circular). Dated: August 14, 2003. Very truly yours, DORSEY & WHITNEY LLP MINNEAPOLIS SEATTLE NEWYO. WASHINGTON, D.C. DENVER LONDON SOUTHERN CALIFORNIA DES MOINES SAN FRANCISCO ANCHORAGE Fannie Mae Washington, D.C. U.S. Bancorp Piper Jaffray Inc. Minneapolis, Minnesota SUITE 1500 TOKYO 50 SOUTH SIXTH STREET PALO ALTO MINNEAPOLIS, MINNESOTA 55402-1498 FARGO TELEPHONE: (612) 340-2600 SALT LAKE CiT FAX: (612) 340-2868 GREAT PALLS www.dorseylaw.Com HONG KONG MISSOULA TORONTO SHANGHAI VANCOUVER Re: $2,655,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 City of New Hope, Minnesota Ladies and Gentlemen: On the date hereof we have rendered to the City of New Hope, Minnesota (the "Issuer") and U.S. Bancorp Piper Jaffray hic. (the "Underwriter") an opinion approving the validity of $2,655,000 aggregate principal amount of the Issuer's Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 (the "Bonds") issued pursuant to a Trust Indenture, dated as of August 1, 2003 (the "Indenture"), between the Issuer and U.S. Bank National Association, as trustee (the "Trustee'). Pursuant to the provisions of Section 6(c)(i) of the Bond Purchase Agreement, dated as of August 14, 2003, between the Issuer, the Underwriter and Broadway LaNel, A Limited Partnership, a Minnesota limited partnership, we have been requested to deliver this supplemental opinion to the addressees set forth above. Unless otherwise defined herein, all capitalized terms in this opinion shall have the meanings given to such terms in the Bond Purchase Agreement. In that connection, we have examined the Issuer Documents, the Resolution, the Offering Circular and such other opinions, documents, certificates and letters as we deem relevant and necessary in rendering this opinion. In this examination, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of originals of such latter documents, and the accuracy of the statements contained in such documents. Based on and subject to the foregoing, in our opinion: 1. To the best of knowledge of the attorneys in the firm rendering legal services in connection with the issuance of the Bonds and other than as disclosed in the Offering Circular, DORSEY & WHITNEY LLP Fannie Mae U.S. Bancorp Piper Jaffray Inc. Page 2 there is no action, suit, proceeding, inquiry or investigation by or before any court, governmental agency, public board or body pending or, to the best of our knowledge, threatened against the Issuer which (i) affects or questions the existence of the Issuer, the title to office of any officer or member of the Issuer or the territorial jurisdiction of the Issuer, (ii) seeks to prohibit, restrain or enjoin the issuance, sale or delivery of the Bonds, (iii) affects or questions the validity or enforceability of the Bonds, the Resolution or the Issuer Documents, (iv) questions the tax-exempt status of interest on the Bonds, or (v) questions the powers of the Issuer to cavy out the transactions contemplated by the Resolution or the Issuer Documents. 2. The Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended. 3. The Bonds, the Indenture, the Financing Agreement and the Regulatory Agreement conform as to form and tenor to the descriptions thereof contained in the Offering Circular and Appendices B, C and D, and the statements contained in the Offering Circular under the captions "THE BONDS" (other than under the subcaption "Book -Entry Only"), "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS," "TAX EXEMPTION AND RELATED CONSIDERATIONS," and Appendices A, B, C and D, insofar as such statements expressly summarize certain provisions of the Bonds, the Indenture, the Financing Agreement, the Regulatory Agreement and our bond opinion concerning certain tax matters relating to the Bonds, are accurate in all material respects. This opinion letter is rendered as of its date, without any undertaking to advise you of any change of law or fact that occurs after the date of this opinion letter, even though the changes may affect the legal analysis or conclusions in this opinion letter. The foregoing opinions are being furnished to you solely for your benefit and may not be relied upon by any other person (except your respective counsel, who may rely on the opinions contained in this letter to the same extent as if this letter were addressed to them) without our prior written consent in each instance. Dated: August 14, 2003. Very truly yours, 4 L) LLP M0-0TY U.S. Bancorp Piper Jaffray hic. 800 Nicollet Mall – 1P Floor Minneapolis, MN 55402 3400 CITY CENTER 33 SOUTH SIXTH STREET MINNEAPOLIS, MN 55402-3796 612 343-2800 Fax: 612 333-0066 www.gpmlaw.com August 14, 2003 INCLUDING THE LAW FIRM HALL & BYERS, P.A. 1010 WEST ST. GERMAIN STREET, SUITE 600 ST CLOUD, MN 56301 320 252-4414 Fax: 320 252-4482 www.gpmlaW.com Re: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003 Ladies and Gentlemen: We have acted as your counsel in connection with the issuance of the above - referenced bonds (the "Bonds") and your purchase thereof pursuant to a Bond Purchase Agreement, dated the date hereof. Capitalized terms used but not defined herein are used with the same meanings as in the Bond Purchase Agreement. We have rendered legal advice and assistance to you concerning the Offering Circular for the Bonds dated August 6, 2003 (including all Appendices thereto, the "Offering Circular"). We have generally reviewed and discussed with you, bond counsel and representatives of the Borrower and Fannie Mae the information and statements contained in the Offering Circular, but we have not independently checked the accuracy or completeness of the same. Based on the foregoing, we advise you that nothing has come to the attention of the lawyers in our firm who have given substantive legal attention to your representation described above which would lead such lawyers to believe that the Offering Circular contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; provided, however, that we do not express an opinion or belief as to any financial or statistical information contained in the Offering Circular. This letter is provided solely for the benefit of and may be relied on only by U.S. Bancorp Piper Jaffray Inc. We hereby consent to the references to us in the Offering Circular. GP:1487510 v1 , 0 ,�i�r�w(J�a• :p_l�/�y �.*."�e.c.( G RAT, PLANT, MDOTY, MDOTY & BENNETT, P. A. ATTORNEYS AT LAW STEPHEN J. DAVIS ATTORNEY AT LAW 4601 EXCELSIOR BOULEVARD SUITE SOO MINNEAPOLIS. MINNESOTA 55416-4960 MARGARET M. SOISVERT LEGAL ASSISTANT As of August 1, 2003 City of New Hope, Minnesota 4401 Xylon Avenue North New Hope, MN 55428 Fannie Mae c/o DDF 13150 Worldgate Drive Herndon, VA 20170 Glaser Financial Group, Inc. 2177 Youngman Avenue St. Paul, MN 55116 U.S. Bancorp Piper Jaffray Inc. 800 Nicollet Mall, 13`s Floor Minneapolis, MN 55402 TELEPHONE (S52) 265-9200 FACSIMILE 1962) 265-9966 Re: Lender: City of New Hope, Minnesota Loan Servicer: Glaser Financial Group, Inc. Borrower: Broadway LaNel, a Limited Partnership Project: Anthony James Apartments Location: New Hope, Minnesota Loan Amount: $2,655,000.00 Our File No.: 12226-0050 Ladies and Gentlemen: I have acted as counsel to Broadway LaNel, a Limited Partnership, a Minnesota limited partnership (the "Borrower") and Francis W. Lang and Eugene M. Nelson (collectively the "Key Principal") in connection with a loan (the "Loan") in the original principal amount of $2,655,000.00 from the City of New Hope, Minnesota (the "Lender" and/or the "Issuer") to the Borrower, from the proceeds of certain $2,655,000.00 City of New Hope, New Hope Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Apartments City of New Hope, Minnesota Fannie Mae Glaser Financial Group, Inc. U.S. Bancorp Piper Jaffray Inc. Page 2 Project) Series 2003 ("Bonds") and in connection with the credit enhancement of the Bonds by Fannie Mae (the "Credit Enhancement"). The Loan and Credit Enhancement is serviced by Glaser Financial Group, Inc., a Minnesota corporation (the "Loan Servicer") and is evidenced by a Multifamily Note executed and delivered by the Borrower to the Issuer and endorsed to Fannie Mae and U.S. Bank National Association ("Trustee"), as trustee for the holders of the Bonds, as their interests may appear, and is secured by a Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Financing Statement executed and delivered by the Borrower to the Issuer and Fannie Mae, the Issuer's interest in which is assigned to Fannie Mae and the Bond Trustee, as their interests may appear. I have been advised by the Borrower that the proceeds of the Loan have been used to refinance a loan secured by a multifamily residential property known generally as Anthony James Apartments (the "Project") located at 61 st Street and West Broadway in New Hope, Hennepin County, Minnesota. I have been advised by the Lender that it expects to assign the Loan to the Trustee under the Trust Indenture dated as of August 1, 2003 and Fannie Mae, pursuant to the terms of the Assignment and Intercreditor Agreement dated as of August 1, 2003 by and among the Issuer, the Trustee and Fannie Mae, and acknowledged, accepted and agreed to by the Borrower (the "Assignment'). The Borrower has requested that I deliver this opinion to you, has consented to reliance by Loan Servicer's counsel in rendering its opinion to the Loan Servicer and Fannie Mae and to reliance by the Loan Servicer and Fannie Mae on this opinion in servicing the Loan and the Credit Enhancement and in providing the Credit Enhancement respectively, and has waived any privity between the Borrower and me in order to permit you to so rely on this opinion. I understand and, with the consent of the Borrower, consent to your reliance on this opinion. I represent the Borrower and Key Principal only in connection with matters specifically referred to me for attention and representation, and accordingly, the opinion hereinafter set forth does not include within its scope any matter beyond my limited retention by the Borrower and Key Principal. Furthermore, in forming the opinions expressed herein, I have undertaken a limited review of the Borrower's and Key Principal's affairs restricted to a review of the following (all of which documents are dated as of the date hereof unless otherwise indicated): A. Multifamily Note, dated as of August 1, 2003, in the original principal amount of Two Million Six Hundred Fifty-five Thousand and No/100 Dollars ($2,655,000.00) executed by the Borrower in favor of the Issuer and endorsed to Fannie Mae and the Trustee as their interests may appear (the "Note'); B. Reimbursement Agreement dated as of August 1, 2003 by and between the Borrower and Fannie Mae ("Reimbursement Agreement'); City of New Hope, Minnesota Fannie Mae Glaser Financial Group, Inc. U.S. Bancorp Piper Jaffray Inc. Page 3 C. Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Financing Statement, including the Riders to Multifamily Instrument, dated as of August 1, 2003, executed by the Borrower for the benefit of the Issuer and Fannie Mae (together, the "Security Instrument'), granting a security interest in the Project as more specifically described in the Security Instrument (the "Property"); D. Uniform Commercial Code Financing Statements signed by the Borrower as debtor and naming Fannie Mae and the Bond Trustee as secured parties (the "Financing Statements"), and One Uniform Commercial Code Financing Statement signed by the Borrower as debtor and naming the Trustee (as custodian and collateral agent for Fannie Mae) as secured party regarding the Pledged Bonds Custody Agreement (the "Pledged Bonds Financing Statement'); E. Replacement Reserve and Security Agreement, dated as of August 1, 2003, executed by the Borrower and the Lender; F. Certificate of Borrower, dated as of August 14, 2003; G. Assignment of Management Agreement, executed by the Borrower, Fannie Mae and Lang -Nelson Associates, Inc. dated as of August 1, 2003; H. Subordination, Non -disturbance and Attomment Agreement dated as of August 1, 2003, executed by the Borrower, Loan Servicer, Fannie Mae and Trustee and Simon Coin Laundry Co., L.L.C.; I. Financing Agreement, dated August 1, 2003, executed by the Borrower, the Issuer, and the Trustee; J. Deed and Covenants Running With the Land dated as of December 1, 1985, between the New Hope Housing and Redevelopment Authority, as grantor, and the Borrower, as grantee, as amended and supplemented by the First Amendment to Deed and Covenants running with the Land, dated as of September 1, 1993, between the Borrower, a prior trustee and the New Hope Economic Development Authority, as amended and supplemented by the Second Amendment to Deed and Covenants Running With the Land, dated as of August 1, 2003, between the Borrower, the Trustee and the New Hope Economic Development Authority, as it may be subsequently amended, supplemented or restated from time to time. City of New Hope, Minnesota Fannie Mae Glaser Financial Group, Inc. ( U.S. Bancorp Piper Jaffray Inc. Page 4 K. Bond Purchase Agreement, dated August 14, 2003, executed by the Borrower, the Issuer and U.S. Bancorp Piper Jaffray Inc. ("Underwriter"); L. Remarketing Agreement, dated as of August 1, 2003, executed by the Borrower and Underwriter; M. Rate Cap Agreement; N. Pledged Bonds Custody and Security Agreement, dated as of August 1, 2003, executed by the Borrower, the Trustee as custodian and collateral agent, and Fannie Mae; O. Hedge Security Agreement, dated as of August 1, 2003, executed by the Borrower, the Loan Servicer and.Fannie Mae; P. Hedge Reserve Escrow Account Security Agreement, dated as of August 1, 2003, executed by the Borrower, the Loan Servicer and Fannie Mae; Q. The Assignment; R. Offering Circular, used in connection with the offering and sale of the Bonds, dated August 6, 2003 ("Official Statement"); S. With respect to the Borrower, a certified copy of the Certificate of Formation and Certificate of Limited Partnership, issued by the State of Minnesota on July 28, 2003, and a copy of the Limited Partnership Agreement (collectively, the "Organizational Documents"); T. Executed copies of the Partnership Consent of the Borrower; U. With respect to the Borrower, Certificate of Good Standing issued by the State on Minnesota on July 21, 2003(the "Good Standing Certificate"); V. A Certificate of the Borrower attached to this opinion as Exhibit A (the "Borrower's Certificate"); W. Title insurance commitment number 135711 issued by Commonwealth Land Title Insurance Company to the Lender, dated April 15, 2003, together with all endorsements to such commitment as of the date of this opinion (the "Title Commitment"); 1 City of New Hope, Minnesota Fannie Mae Glaser Financial Group, Inc. U.S. Bancorp Piper Jaffray Inc. Page 5 X. Such other documents, matters, statutes, ordinances, published rules and regulations, published judicial and governmental decisions interpreting or applying the same, and other official interpretations as I deem applicable in connection with this opinion. The documents listed in A through Q above are referred to collectively as the "Loan Documents". The documents listed in S through X above are referred to collectively as the "Ancillary Documents". The documents listed in A though X above are referred to collectively as the "Documents". In basing the opinions set forth in this opinion on "my knowledge", the words "my knowledge" signify that, in the course of my representation of the Borrower and Key Principal, no facts have come to my attention that would give me actual acknowledge or actual notice that any such opinions or other matters are not accurate. Except as otherwise stated in this opinion, I have undertaken no investigation or verification of such matters. No inference as to my knowledge of the existence or absence of such facts should be drawn from the fact of my representation as counsel to Borrower and Key Principal in connection with the Loan. In reaching the opinions set forth below, I have assumed the due authorization, execution and delivery of all Documents by all parties to the Loan other than the Borrower and Key Principal. In addition, I have also assumed that the Loan Documents accurately reflect the complete understanding of the parties with respect to the transactions contemplated thereby and the rights and obligations of the parties thereunder and that they will be enforced pursuant, to and in accordance with, the laws of the State of Minnesota. I have also assumed that the terns and conditions of the Loan as reflected in the Loan Documents have not been amended, modified or supplemented, directly or indirectly, by any other agreement or understanding of the parties or waiver of any of the material provisions of the Loan Documents. I have also assumed the authenticity of all documents submitted as originals, the genuineness of all signatures, the legal capacity of all natural persons, the conformity to originals of all documents submitted as certified or photostatic copies, the authenticity of the originals of such latter documents and the due enactment or adoption of applicable laws, statutes, regulations and ordinances. I have made reasonable inquiry of the Borrower and Key Principal with respect thereto and, based on such inquiries, my review of the Loan Commitment and the Ancillary Documents, and my knowledge, nothing has come to my attention that leads me to believe that I am not justified in so assuming. In rendering this opinion I have, with your approval, relied as to certain matters of fact on the Ancillary Documents, as set forth herein. I have made reasonable inquiry of the Borrower and Key Principal as to the accuracy and completeness of the Ancillary Documents City of New Hope, Minnesota Fannie Mae Glaser Financial Group, Inc. j U.S. Bancorp Piper Jaffray Inc. Page 6 and based on such inquiries and my knowledge, nothing has come to my attention that leads me to believe that I am not justified in relying thereon. Based upon the foregoing and subject to the assumptions and qualifications set forth in this letter, it is my opinion that: 1. Based solely on the Good Standing Certificate, a copy of which is attached hereto as Exhibit B, the Borrower is a limited partnership, duly organized, validly existing and in good standing under the laws of Minnesota with full power to execute and deliver the Loan Documents and to perform its obligations under each respective agreement. 2. The Borrower has the partnership authority to execute, deliver and perform its obligations under the Loan Documents. 3. The execution and delivery of the Loan Documents by or on behalf of the Borrower, and the consummation by the Borrower of the transactions contemplated thereby, and the performance by the Borrower of its obligations thereunder, have been duly and validly authorized by all necessary partnership action by or on behalf of the Borrower. 4. Each of the Loan Documents has been duly executed and delivered by the Borrower, and the individual executing the Loan Documents as the General Partner of Borrower has the authority and legal capacity to do so. Each of the Loan Documents constitutes the valid and legally binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject to the following qualifications: (i) the effect of applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally, and (ii) the effect of the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or of equity); and (iii) certain remedies, waivers, and other provisions of the Loan Documents may not be enforceable, but, subject to the qualifications set forth in the foregoing subparagraphs (i) and (ii), such unenforceability will not preclude (a) the enforcement of the obligation of the Borrower to pay the principal, interest late charges, if any and prepayment premium, if any, as provided in the Note, and (b) the foreclosure of the Security Instrument upon the event of a material breach. 5. The Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non -Recourse Liability executed with the Note has been duly executed and City of New Hope, Minnesota Fannie Mae Glaser Financial Group, Inc. ( U.S. Bancorp Piper Jaffray Inc. Page 7 delivered by Key Principal, in their individual capacity as Key Principal, and constitutes a binding obligation of the Key Principal. 6. The execution and delivery of, and the performance of the obligations under, the Loan Documents, will not violate the Organizational Documents of the Borrower. 7. Based solely upon (a) my knowledge and (b) the Borrower's Certificate, the execution and delivery of the Loan Documents will not (i) cause the Borrower to be in violation of, or constitute a material default under the provisions of any agreement to which the Borrower is a party or by which the Borrower is bound, (ii) conflict with, or result in the breach of, any court judgment, decree or order of any governmental body to which the Borrower is subject, and (iii) result in the creation or imposition of any lien, charge, or encumbrance of any nature whatsoever upon any of the property or assets of the Borrower, except as specifically contemplated by the Loan Documents. 8. Based solely upon (a) my knowledge and (b) the Borrower's Certificate, there is no litigation or other claim pending before any court or administrative or other governmental body or threatened against the Borrower, the Property, or any other properties of the Borrower, or the Key Principal. 9. Based solely on (a) my knowledge and (b) the Borrower's Certificate, no authorization, consent, approval, or other action by, or filing with, any Minnesota or federal court or governmental authority is required in connection with the execution and delivery by the Borrower of the Loan Documents. 10. The Security Instrument is in appropriate form for recordation in the land records of Hennepin County, Minnesota, and is sufficient, as to form, to create the encumbrance and security interest it purports to create in the real property, including fixtures, as described in the Security Instrument. 11. The Loan does not violate the usury laws or laws regulating the use of forbearance of money in the State of Minnesota. This opinion is subject to, and there is the possibility of limitation on enforcement of certain provisions of the Loan Documents which may arise because of, each of the following: i. Title matters of any nature whatsoever, including, without limitation, the priority of the lien or security interest created by the Documents (including, without limitation, priority with respect to future advances and after acquired property), and other matters within the scope of any title opinion, title binder or title policy issued to City of New Hope, Minnesota Fannie Mae Glaser Financial Group, Inc. U.S. Bancorp Piper Jaffray Inc. Page 8 Fannie Mae or the Loan Servicer. ii. The right to accelerate payment of the indebtedness may be restricted by the provisions of Minnesota Statutes, §580.30. iii. Interest following foreclosure may be limited by the provisions of Minnesota Statutes, §581.10. iv. Any rights of possession may be limited by Minnesota Statutes, §559.17. V. Possible restrictions upon the remedy of specific performance as a remedy for default. vi. The provisions of the Federal Bankruptcy Code which may invalidate an act of bankruptcy or a Chapter 11 petition as an event of default. vii. The provisions of §576.01 and Chapters 580, 581 and 582, Minnesota Statutes, which provide limitations on the rights of a mortgagee generally in the State of Minnesota. viii. The enforceability of each of the Documents is subject to statutes of limitation and to bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, liquidation, anti -deficiency, redemption, reinstatement, conservatorship or other laws, rulings or decisions affecting remedies or creditors rights and the collection of debtors' obligations generally. ix. General principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith, fair dealing, election of remedies and estoppel and other similar doctrines affecting the enforceability of agreements generally (regardless of whether considered in a proceeding in equity or law), if equitable remedies or defenses are sought. X. The failure of the Lender, Fannie Mae, the Trustee, or the Loan Servicer to comply with any applicable licensing, qualification or lending requirements, restrictions, laws, rules or regulations. xi. The effect, if any, of Court decisions given or changes in law or administrative regulations occurring after the date hereof. xii. No opinion is expressed as to the validity or enforceability of provisions City of New Hope, Minnesota Fannie Mae Glaser Financial Group, Inc. U.S. Bancorp Piper Jaffray Inc. Page 9 of the Documents to the extent they contain: (a) cumulative remedies to the extent such cumulative remedies purport to compensate, or would have the effect of compensating, the party entitled to the benefits thereof in an amount in excess of the actual loss suffered by such party, (b) choice of law or forum selection provisions, (c) any waiver of any constitutional or statutory rights or remedies, (d) grants of powers of attorney or designations of attorney or attorney-in- fact, (e) provisions which purport to establish evidentiary standards contained in the Documents, (f) the waiver of the right to a trial by jury in the event of any dispute under the Documents, (g) waivers of any defenses arising by reason of failure to mitigate damages, failure to act in a commercially reasonable manner, violations of duties of good faith or fair dealing, or other conduct of the Lender or Fannie Mae occurring after the date of the Documents, (h) the waiver of any exemption laws, (i) the waivers of redemption or reinstatement rights, (j) any provisions of the Documents requiring payment of a charge, fee, premium or penalty for early or late payment, (k) any provision which purports, by implication or otherwise, to state that the failure to exercise or delay exercising rights or remedies will not operate as a waiver of any such right or remedy, (1) any provision which provides for liquidated damages for breach; and (m) any provision which purports or would operate to render ineffective any waiver or modification not in writing. City of New Hope, Minnesota Fannie Mae Glaser Financial Group, Inc. U.S. Bancorp Piper Jaffray Inc. Page 10 xiii. No opinion is expressed as to compliance, or the effect of noncompliance by any party, other than the Borrower and Key Principal, with any state or federal laws or regulations applicable in connection with the transactions described in the Documents. xiv. Notwithstanding certain language of the Documents, you may be limited to the recovery of only reasonable expenses or attorneys' fees and legal costs in enforcing the Documents. xv. Minnesota Statutes, §290.371, subd. 4, provides that any corporation required to file a Notice of Business Activities Report does not have a cause of action upon which it may bring suit under Minnesota law unless the corporation has filed a Notice of Business Activities Report and provides that the use of the courts of the State of Minnesota for all contracts executed and all causes of action that arose before the end of any period for which a corporation failed to file a required report is precluded. Insofar as my opinion may relate to the valid, binding and enforceable character of any agreement under Minnesota law or in a Minnesota court, I have assumed that any party seeking to enforce such agreement has at all times filed, and will continue to duly file on a timely basis, all Notice of Business Activities Reports. xvi. Except as expressly stated herein, no opinion or statement is rendered as to the truth, accuracy or completeness of any of the factual representations or warranties of the Borrower and Key Principal in any of the Documents. xvii. No opinion is expressed as to any environmental, pollution, contamination, petroleum products, hazardous waste or similar matters of any nature whatsoever or legal obligations or liabilities resulting therefrom. I express no opinion and make no comment or statement as to the actual, potential or possible presence or absence of any hazardous substances, pollutants, dangerous chemicals, petroleum products, or similar substances located in, on, under, over, or adjacent to the property owned by the Borrower referenced in the Documents. xviii. The opinions expressed herein are limited to the laws of the State of Minnesota (excluding antitrust and securities laws), and I have not considered and express no opinion as to the laws of any other jurisdiction. xix. Minnesota law permits municipalities to require an insurer to withhold a portion of insurance proceeds in case of casualty loss for possible payment to the municipality, Minnesota Statutes, §65A.50. City of New Hope, Minnesota Fannie Mae Glaser Financial Group, Inc. U.S. Bancorp Piper Jaffray Inc. Page 11 xx. I express no opinion with respect to: (a) the legal description of the real estate subject to the Security Instrument or its compliance with zoning or subdivision laws and ordinances; and (b) the enforcement of any lien for amounts purportedly secured by the Security Instrument which is not (A) "principal debt or obligation," (B) "interest," or (C) "protective advances," each within the meaning of Minnesota Statutes, §287.05. xxi. No opinion is expressed as to the applicability of or compliance with federal securities laws or any state Blue Sky laws, or with respect to the availability of or compliance with any applicable exemptions from the registration or filing requirements of the federal securities laws or state Blue Sky laws, which may apply in connection with the transactions contemplated by the Documents. xxii. No opinion is expressed as to the existence or nature of the tax-exempt status of the interest to be paid with respect to the Bonds or as to the effect upon such tax-exempt status by the transactions contemplated by the Documents. xxiii. No opinion is expressed as to the truth or accuracy of any statements, representations or other matters set forth in the Official Statement. An opinion of counsel is predicated on all facts and conditions set forth in the opinion and is based upon counsel's analysis of the statutes, regulatory interpretations and case law in effect as of the date of the opinion. It is not a guarantee of the current status of the law and therefore, no assurance can be given that the conclusions reached herein would be agreed to by any administrative agency or sustained by any court, if contested, or that legislative or administrative changes or court decisions may not be forthcoming which would significantly and adversely affect the statements and conclusions in the foregoing opinion. Any such legislative or administrative change may be made retroactive with respect to transactions completed prior to the date of such changes. I assume no obligation to supplement this opinion (i) if any applicable laws change after the date hereof, (ii) if any such court decision is issued after the date hereof, or (iii) if I become aware of any facts that might change the opinion expressed above after the date hereof. I express no opinion as to the laws of any jurisdiction other than the laws of Minnesota and the laws of the United States of America. The opinions above concern only the effect of City of New Hope, Minnesota Fannie Mae Glaser Financial Group, Inc. F U.S. Bancorp Piper Jaffray Inc. Page 12 the laws (excluding the principles of conflict of laws) of Minnesota and the laws of the United States of America as currently in effect. I assume no obligation to supplement this opinion if any applicable laws change after the date of this opinion, or if I become aware of any facts that might change the opinions expressed above after the date of this opinion. I confirm that I do not have any financial interest in the project, the Property, or the Loan, and that, other than as counsel for the Borrower, I have no interest in the Borrower or the Lender and do not serve as a director, officer or an employee of the Borrower or the Lender. I have no undisclosed interest in the subject matters of this opinion. The foregoing opinions are for the exclusive reliance of the Lender, the Loan Servicer, the Underwriter, Fannie Mae and by any subsequent holdoof the Note. Yo#f s very truly, SJD/mz Z-111 '� �, i This Certificate of Borrower is made as of the 1st day of August, 2003, by Broadway LaNel, a Limited Partnership, a Minnesota limited partnership, (the "Borrower") for reliance upon by Stephen I Davis (the `Borrower's Counsel") in connection with the issuance of an opinion letter dated of even date herewith (the "Opinion Letter") by ("Borrower's Counsel") as a condition of settlement of the $2,655,000.00 loan (the "Loan") from the City of New Hope, Minnesota, ("Lender") to Borrower. In connection with the Opinion Letter, the Borrower hereby certifies to Borrower's Counsel, for his reliance, the truth, accuracy and completeness of the following matters: 1. The Organizational Documents (as defined in the Opinion Letter) are the only documents creating or governing the internal affairs of the Borrower or authorizing the Loan, and the Organizational Documents have not been amended or modified except as stated in the Opinion Letter. 2. The terms and conditions of the Loan as reflected in the Loan Documents (as defined in the Opinion Letter) have not been amended, modified or supplemented, directly or indirectly, by any other agreement or understanding of the parties or waiver of any of the material provisions of the Loan Documents. 3. All tangible personal property of the Borrower in which a security interest is granted under the Loan Documents (other than accounts or goods of a type normally used in more than one jurisdiction) is located at the Property (as defined in the Opinion Letter) and the Borrower's only place of business is located in Hennepin County, Minnesota. 4. No authorization, consent, approval, or other action by, or filing with, any Minnesota or federal court or governmental authority is required in connection with the execution and delivery by the Borrower of the Loan Documents. 5. The execution and delivery of the Loan Documents will not (i) cause the Borrower to be in violation of, or constitute a material default under the provisions of any agreement to which the Borrower is a party or by which the Borrower is bound, (ii) conflict with, or result in the breach of, any court judgment, decree or order of any governmental body to which the Borrower is subject, and (iii) result in the creation or imposition of any lien, charge, or encumbrance of any nature whatsoever upon any of the property or assets of the Borrower, except as specifically contemplated by the Loan Documents. -1- 6. There is no litigation or other claim pending before any court or administrative or other governmental body or threatened against the Borrower, the Property or any other properties of the Borrower. IN WITNESS WHEREOF, the Borrower has executed this Certificate of Borrower effective as of the date set forth above. BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited partnelsbip m -2- EXHIBIT B TO OPINION OF BORROWER'S COUNSEL ,,,axe of Minnesota SECRETARY OF STATE Certificate of Good Standing I, Mary Kiffineyer, Secretary of State of Minnesota, do certify that: The limited partnership listed below is a limited partnership formed under the laws of Minnesota; that the limited partnership was formed pursuant to Minnesota Statutes 322A by the filing of a Certificate of Limited Partnership with the Office of the Secretary of State on the date listed below; and that this limited partnership is authorized to do business as a limited partnership at the time this certificate is issued. Name: Broadway LaNel, A Limited Partnership Date Formed: 12/06/1985 This certificate has been issued on 07/21/03. rZ.0 FannieMae August 14, 2003 U.S. Bank National Association 60 Livingston Avenue Minneapolis, MN 55107-2292 3900 Wisconsin Avenue, NW Washington, DC 200162892 phone 202 752 7000 Re: $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 (the "Bonds"). Ladies and Gentlemen: This opinion is furnished to you in connection with the execution and delivery by Fannie Mae ("Fannie Mae") of its Credit Enhancement Instrument (the "Credit Facility") in connection with the Bonds. As Associate General Counsel of Fannie Mae, I am of the opinion that: (i) Fannie Mae has been duly organized under the Federal National Mortgage Association Charter Act, as amended, 12 U.S.C. §1716 et seq. (the "Act"), and is a corporation duly organized and existing under the laws of the United States; (ii) Fannie Mae has full right, power, and authority to execute and deliver the Credit Facility; and (iii) the Credit Facility has been duly authorized, executed, and delivered by Fannie Mae pursuant to the Act and constitutes a valid and binding obligation of Fannie Mae, enforceable in accordance with its terms, subject to any applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general applicability relating to or affecting creditors' rights from time to time in effect as such laws would be applied in the event of a bankruptcy, insolvency, reorganization, moratorium or similar occurrence affecting Fannie Mae and to the exercise of judicial discretion in accordance with general principles of equity, whether applied by a court of law or of equity. $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 August 14, 2003 Page Two My opinion is rendered only to, and may be relied upon only by, the addressees. My opinion herein is limited to the laws of the District of Columbia and of the United States of America, to the extent they are applicable, and I express no opinion as to the applicability of the laws of any other jurisdiction. Sine ly, n John Brinker Associate General Counsel 56119-1 Moody's Investors Service 99 Church Street New York, New York 10007 August 4, 2003 Mr. Francis Lang President BroadwayLaNel, a Limited Partnership 4601 Excelsior Blvd., Suite 601 St. Louis Park, MN 55416 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003 Dear Mr. Lang: Moody's Investors Service has assigned the rating of Aaa/VMIG 1 to the above -captioned bonds. The rating is based on the Direct Pay Credit Enhancement Instrument provided by Fannie Mae and will be changed whenever Fannie Mae's ratings are changed. Additionally, the rating will expire upon the termination of the Credit Enhancement Instrument in accordance with its terms. In assigning our rating we relied on draft documents. In order to maintain our rating, please provide us with a complete set of executed documents as soon as possible. If you have any questions regarding the rating or the information required for maintaining the rating, please do not hesitate to contact me at (212) 553-4066. Sincerely, Michael Loughl Assistant Vice esident / Analyst cc: Jerome Gilligan, Esq. Patrick McMullen Dorsey & Whitney LLP U.S. Bancorp Piper Jaffray, Inc. 50 South Sixth Street, Suite 1500 800 Nicollet Mall, Suite 800 Minneapolis, MN 55402 Minneapolis, MN 55402 REMARKETING AGREEMENT Between BROADWAY LANEL, A LIMITED PARTNERSHIP and U.S. BANCORP PIPER JAFFRAY INC. Remarketing Agent Dated as of August 1, 2003 Relating to $2,655,000 City of New Hope, Minnesota Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project) Series 2003 This REMARKETING AGREEMENT, dated as of August 1, 2003 (the "Agreement'), is entered into between BROADWAY LANEL, A LIMITED PARTNERSHIP, a Minnesota limited partnership (the "Borrower") and U.S. BANCORP PIPER JAFFRAY INC. (the "Remarketing Agent'). WITNESSETH: WHEREAS, the City of New Hope, Minnesota (the "Issuer") is issuing its $2,655,000 Variable Rate Demand Multifamily Housing Revenue Refunding Bonds (Broadway LaNel Project), Series 2003 (the "Bonds"), pursuant to a Trust Indenture, dated as of August 1, 2003 (the "Indenture"), between the Issuer and U.S. Bank National Association, as trustee (the "Trustee"); WHEREAS, the Bonds and the Indenture provide, among other things, that the owners of the Bonds (the `Bondholders") may elect (or may be required) in certain instances to tender their Bonds for purchase upon the terms and conditions contained in the Bonds and the Indenture; WHEREAS, the Indenture appoints the Remarketing Agent as remarketing agent for the Bonds to perform certain duties, including the use of its best efforts to remarket any Bonds tendered for purchase by the Bondholders; and WHEREAS, the Remarketing Agent has agreed to accept the duties and responsibilities of the remarketing agent for the Bonds under the Indenture and this Agreement; NOW, THEREFORE, for and in consideration of the mutual covenants made herein and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. Unless otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Indenture. Section 2. Appointment of Remarketing Agent. Subject to the terms and conditions contained herein, the Remarketing Agent hereby accepts its appointment under the Indenture as Remarketing Agent for the Bonds. This Agreement is the Remarketing Agreement referenced in Section 4.3 of the Indenture. The terms and conditions of the Indenture relating to the duties and obligations of the Remarketing Agent are incorporated herein by reference. Section 3. Responsibilities of Remarketing Agent. Subject to the terms and conditions set forth in this Agreement, the Remarketing Agent agrees to perform the duties of Remarketing Agent set forth in the Indenture, including without limitation the providing of notices to the persons and at the times and containing the information required by the Indenture. It is understood that in undertaking to perform such duties, and in the performance thereof, it is the intention of the parties that the Remarketing Agent will act solely as an agent and not as a principal except as expressly provided in Section 12. 1 (a) Determination of Interest Rates. The Remarketing Agent shall determine the interest rates on the Bonds in the manner and at the times specified therefor in the Indenture. (b) Remarketing of Tendered Bonds. (i) The Remarketing Agent shall use its best efforts to remarket Bonds to be purchased as described in the Indenture. (ii) The Remarketing Agent may suspend its remarketing efforts immediately upon the occurrence of any of the following events and after notice to the Issuer, the Borrower, the Trustee, the Tender Agent, the Loan Servicer and Fannie Mae, which suspension will continue only so long as the event continues to exist if, in the Remarketing Agent's reasonable judgment, the continuance of the event has a material adverse effect on its ability to remarket the Bonds: (1) a suspension or material limitation in trading in securities generally on the New York Stock Exchange; (2) a general moratorium on commercial banking activities in New York is declared by either federal or New York State authorities; (3) the engagement by the United States in hostilities resulting in a declaration of war or national emergency, or the occurrence of any other outbreak of hostilities or national or international calamity or crisis, financial or otherwise; (4) legislation shall be enacted by the Congress of the United States and become effective, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official statement by, or on behalf of, the United States Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter shall be issued or made, in any such case to the effect that, the offering or sale of obligations of the general character of the Bonds, or the remarketing of the Bonds, as contemplated hereby, is or would be in violation of any provision of the Securities Act of 1933, as amended (the "Securities Act") and as then in effect, or the Securities Exchange Act of 1934, as amended (the "Exchange Act') and as then in effect, or the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and as then in effect, or with the purpose or effect of otherwise prohibiting the offering or sale of obligations of the general character of the Bonds, or the Bonds, as contemplated hereby; (5) any event shall occur or information shall become known, which, in the Remarketing Agent's reasonable judgment, makes untrue, incorrect or misleading in any material respect any statement or 2 information contained in the then most current disclosure document provided to the Remarketing Agent in connection with the performance of its duties hereunder, whether provided pursuant to Section 5 or otherwise, or causes such document to contain an untrue, incorrect or misleading statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading; (6) any governmental authority shall impose, as to the Bonds, or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force; (7) any of the material representations and warranties of the Borrower made hereunder shall not have been true and correct on the date made; (8) the Borrower fails to observe any of the material covenants or agreements made herein; (9) any of the rating agencies then rating the Bonds shall suspend or withdraw the ratings assigned to the Bonds; or (10) an Event of Default shall occur and be continuing under the Indenture or there shall occur a Wrongful Dishonor under the Credit Facility. Section 4. Resignation and Removal of Remarketing Agent. The Remarketing Agent may, at any time, be removed, or resign and be discharged of its duties and obligations under the Indenture and this Agreement, subject to and in accordance with the applicable terms and conditions of the Indenture. Section 5. Disclosure Materials. (a) General. If the Remarketing Agent determines that it is necessary or desirable to use an official statement or other disclosure document in connection with its remarketing of the Bonds, the Remarketing Agent will notify the Issuer and the Borrower, and the Borrower will provide the Remarketing Agent with a disclosure document in respect of the Bonds satisfactory to the Remarketing Agent, the Issuer and their respective counsel. The Borrower will supply the Remarketing Agent with such number of copies of the disclosure document as the Remarketing Agent requests from time to time and the Borrower will amend the document (and all documents incorporated by reference) so that at all times the document will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In connection with the use of any disclosure document by the Remarketing Agent in its remarketing of the Bonds, the Borrower will furnish to the Remarketing Agent such certificates, accountants' letters and opinions of counsel as the Remarketing Agent reasonably requests. In addition, the Borrower 3 will take all steps reasonably requested by the Remarketing Agent that the Remarketing Agent or its counsel may consider necessary or desirable to register the sale of the Bonds by the Remarketing Agent under any federal or state securities law or qualify the Indenture under the Trust Indenture Act, or (b) enable the Remarketing Agent to establish a "due diligence" defense to any action commenced against the Remarketing Agent in respect of any disclosure document. (b) Compliance with Rule 15c2-12. In the event the Remarketing Agent is asked to remarket the Bonds in any situation that requires compliance with Rule 15c2-12 of the Exchange Act (the "Rule"): (i) the Borrower will provide the Remarketing Agent with an Offering Circular that the Borrower deems final as of its date (exclusive of pricing and other sales information permitted to be omitted by the Rule), prior to the date the Remarketing Agent bids for, offers or sells any Bonds; (ii) the Borrower will provide the Remarketing Agent with such number of copies of any preliminary offering circular or other disclosure document prepared in connection therewith, as the Remarketing Agent may need to supply at least one copy thereof to each potential customer who requests it; (iii) the Borrower shall provide the Remarketing Agent within seven (7) Business Days after the interest rate is determined or by the time "money confirmations" are to be sent to customers, whichever is earlier, with a number of copies of the final Offering Circular or disclosure document adequate to provide at least one copy of such final Offering Circular or disclosure document to any customer or any potential customer for a period commencing on the date such final Offering Circular or disclosure document is available and extending for the underwriting period as defined in the Rule (the "Underwriting Period") and, thereafter, for as long as may be required by the Rule. During the Underwriting Period, the Borrower agrees to update, by written supplement or amendment or otherwise, the final Offering Circular or disclosure document such that at all times during such period the final Offering Circular or disclosure document will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (iv) the Borrower will undertake, in a written agreement or contract for the benefit of Bondholders, to provide the information required by paragraph (b)(5) of the Rule to the persons or entities and at the times required by paragraph (b)(5) of the Rule. (c) Subsequent Events. In the event that there are any additional regulatory requirements, amendments or modifications to the securities laws which are applicable to the Remarketing Agent's performance of its obligations under this Agreement, the Borrower shall be required to take all steps reasonably requested by the Remarketing Agent that the Remarketing Agent or its counsel may consider necessary or desirable in order to comply with such additional requirements, as a condition precedent to the Remarketing Agent's performing its obligations hereunder. 12 Section 6. Indemnification and Contribution. (a) The Borrower agrees to indemnify and hold harmless the Remarketing Agent, and each person, if any, who controls the Remarketing Agent within the meaning of Section 15 of the Securities Act of 1933, as amended, to the extent permitted under applicable law, against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) caused by any untrue statement or alleged untrue statement of a material fact contained in an offering circular or other document provided pursuant to Section 5 hereof or in any amendment or supplement thereto (each, a "Disclosure Document'), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by any such untrue statement or omission or allegation thereof based upon information furnished in writing to the Borrower by the Remarketing Agent expressly for use in connection therewith. Notwithstanding the foregoing, Borrower shall not be responsible for indemnifying the Remarketing Agent for information in a Disclosure Document that is provided by the Loan Servicer, Fannie Mae or any other Credit Provider. (b) If any action or claim (including any governmental investigation) shall be brought or asserted against the Remarketing Agent or any person so controlling the Remarketing Agent based upon a Disclosure Document, and in respect of which indemnity may be sought from the Borrower, the Remarketing Agent or such controlling person shall promptly notify the Borrower in writing, and the Borrower shall assume the defense thereof, including the employment of counsel and the payment of all expenses. The Remarketing Agent or any such controlling person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Remarketing Agent or such controlling person unless (i) the employment thereof has been specifically authorized by the Borrower, (ii) the Borrower has failed to assume the defense and employ counsel, or (iii) the named parties to any such action (including any impleaded parties) include both the Remarketing Agent or such controlling person and the Borrower, and representation of the Remarketing Agent or such controlling person and the Borrower by counsel representing the Borrower would be inappropriate due to actual or potential differing interests between the Borrower and the other named party (in which case the Borrower shall not have the right to assume the defense of such action on behalf of the Remarketing Agent or such controlling person, it being understood, however, that the Borrower shall not, in connection with any one such action or separate but substantially similar or related actions arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any point in time for the Remarketing Agent and such controlling persons, which firm shall be designated in writing by the Remarketing Agent). The Borrower shall not be liable for any settlement of any such action effected without its consent, but if settled with the consent of the Borrower or if there is a final judgment for the plaintiff in any such action, the Borrower will indemnify and hold harmless any indemnified person from and against any loss or liability by reason of such settlement or judgment. The Borrower shall not, without the prior written consent of the Remarketing Agent, effect any settlement of any pending or threatened proceeding in respect of which the Remarketing Agent is a party and indemnity could have been sought hereunder by the Remarketing Agent, unless such settlement includes an 5 unconditional release of the Remarketing Agent from all liability or claims that are the subject matter of such proceeding. (c) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in Section 6(a) hereof is due in accordance with its terms but, for any reason, is held by a court to be unavailable on grounds of policy or otherwise, the Borrower and the Remarketing Agent will contribute to the total losses, claims, damages and liabilities (including legal or other expenses of investigation or defense) to which the Borrower and the Remarketing Agent may be subject in such proportion so that the Remarketing Agent is responsible for that portion represented by the percentage that the fee to be paid to the Remarketing Agent pursuant to Section 7 hereof bears to the principal amount of the Bonds under this Agreement and the Borrower is responsible for the balance. In no case, however, will the Remarketing Agent be responsible for any amount in excess of the fee applicable to the Bonds remarketed by the Remarketing Agent under this Agreement and no person guilty of fraudulent misrepresentation (within the meaning of Section I I(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph, each person who controls the Remarketing Agent within the meaning of the Securities Act shall have the same rights to contribution as the Remarketing Agent, and each person who controls the Borrower within the meaning of the Securities Act and each partner of the Borrower will have the same rights to contribution as the Borrower, subject to the foregoing sentence. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this paragraph, notify each party from whom contribution may be sought, but the failure to give such notice will not relieve the party from whom contribution may be sought from any obligation it may have to the party entitled to contribution. Section 7. Fees and Expenses. For the Remarketing Agent's services under this Agreement and the Indenture, and so long as the Bonds bear interest at the Weekly Variable Rate, the Borrower will pay the Remarketing Agent a semiannual fee of one -sixteenth of 1% of the aggregate principal amount of Bonds outstanding for the immediately preceding semiannual period, commencing January 15, 2004 and each January 15 and July 15 thereafter. The Remarketing Agent will give immediate notice to the Loan Servicer and the Trustee of the non- payment of the Remarketing Agent's fee on any date on which the fee is due and payable. When Bonds are remarketed in connection with the conversion of the interest rate to a Reset Rate or Fixed Rate, the Borrower and the Remarketing Agent will agree on a fee. The Borrower will pay all expenses of delivering remarketed Bonds and reimburse the Remarketing Agent for all direct, out-of-pocket expenses incurred by it as Remarketing Agent, including reasonable counsel fees and disbursements. Section 8. Representations, Warranties Covenants and Agreements of the Remarketing Agent. The Remarketing Agent, by its acceptance hereof, represents, warrants and covenants and agrees with the Borrower as follows: 6'. (a) the Remarketing Agent has been duly incorporated, is validly existing and is in good standing under the laws of the State of Minnesota, and is authorized by law to perform and observe the duties and obligations imposed upon it as Remarketing Agent by this Agreement and the Indenture; (b) the Remarketing Agent has full power and authority to execute and deliver this Agreement and to take all actions required or permitted to be taken by the Remarketing Agent by or under, and to perform and observe the covenants and agreements on its part contained in, this Agreement and the Indenture; and (c) assuming the due authorization, execution and delivery of this Agreement by the Borrower and the enforceability of this Agreement against the Borrower, this Agreement is the legal, valid and binding obligation of the Remarketing Agent, enforceable against the Remarketing Agent in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability affecting the enforcement of creditors' rights and to general principles of equity, regardless of whether such enforceability is considered in equity or at law. Section 9. Representations, Warranties, Covenants and Agreements of the Borrower. The Borrower, by its acceptance hereof, represents, warrants, covenants, and agrees with the Remarketing Agent that it: (a) is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Minnesota; (b) has full power and authority to take all actions required or permitted to be taken by the Borrower by or under, and to perform and observe the covenants and agreements on its part contained in, this Agreement and any other instrument or agreement relating thereto to which the Borrower is a party; (c) has, on or before the date hereof, duly taken all action necessary to be taken by it prior to such date to authorize (i) the execution, delivery and performance of this Agreement, the Bond Purchase Agreement, the Financing Agreement, the Regulatory Agreement, the Reimbursement Agreement, the Hedge Documents, the Mortgage Loan Documents (each a "Borrower Document'), and any other instrument or agreement that the Borrower is a party to and that has been or will be executed in connection with the transactions contemplated by the foregoing documents; (ii) the carrying out, giving effect to, consummation and performance of the transactions and obligations contemplated by the foregoing agreements; and (iii) the use and distribution of the Offering Circular dated August 6, 2003 prepared in connection with the Bonds; (d) will provide the Remarketing Agent at the address noted in Section 15 hereof, within 45 days of the end of each of its first three fiscal quarters, with copies of its unaudited quarterly financial statements, and (ii) within 120 days of the end of each fiscal year, with a copy of its annual financial statement for that fiscal year; and %/ (e) will promptly notify the Remarketing Agent by electronic means of any material adverse changes that may affect the remarketing of the Bonds, the disclosure in the then current disclosure document prepared pursuant to Section 5 or any fact or circumstance that may constitute, or with the passage of time will constitute, an event of default under the Indenture or the Borrower Documents. Section 10. Term of Agreement. This Agreement shall become effective on the Closing Date and shall continue in full force and effect until the payment in full of the Bonds or the earlier conversion of all Bonds to the Fixed Interest Rate, subject to the rights of resignation and removal as provided herein. Section 11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. Section 12. Dealing in Bonds by the Remarketing Agent. The Remarketing Agent, in its individual capacity, may in good faith buy, sell, own, hold and deal in any of the Bonds, including, without limitation, any Bonds offered and sold by the Remarketing Agent pursuant to this Agreement, and may join in any action that any Bondholder may be entitled to take with like effect as if it did not act in any capacity hereunder. The Remarketing Agent, in its individual capacity, either as principal or agent, may also engage in or be interested in any financial or other transaction with the Issuer and may act as depository, trustee, or agent for any committee or body of Bondholders secured hereby or other obligations of the Issuer as freely as if it did not act in any capacity hereunder. Section 13. Intention of Parties. It is the express intention of the parties hereto that any purchase, sale or transfer of any Bonds, as herein provided, shall not constitute or be construed to be the extinguishment of any Bonds or the indebtedness represented thereby or the reissuance of any Bonds. Section 14. Conflict. Notwithstanding anything to the contrary that may be contained in this Agreement or in the Indenture, in the event of a conflict between the terms of this Agreement and the terms of the Indenture, the terms of this Agreement in all such instances shall be controlling. Section 15. Miscellaneous. (a) Except as otherwise specifically provided in this Agreement, all notices, demands and formal actions under this Agreement shall be in writing and either (i) hand -delivered, (ii) sent by electronic means, or (iii) mailed by registered or certified mail, return receipt requested, postage prepaid, to: 0 The Remarketing Agent: U.S. Bancorp Piper Jaffray hie. 800 Nicollet Mall, 13`h Floor Minneapolis, Minnesota 55402-7020 Attention: Head of Municipal Underwriting Telephone: 612-303-5930 Fax: 612-303-6966 The Issuer: City of New Hope 4401 Xylon Avenue North New Hope, Minnesota 55428-4898 Attention: City Manager Telephone: 763-531-5100 Fax: 763-531-5136 The Borrower: Broadway LaNel, A Limited Partnership 4601 Excelsior Boulevard, Suite 601 St. Louis Park, Minnesota 55416 Attention: Francis W. Lang Telephone: 952-920-5338 Fax: 952-925-5640 With a copy to: Stephen Davis, Esq. 4601 Excelsior Boulevard, Suite 500 St. Louis Park, Minnesota 55416 Telephone: 952-285-9200 Fax: 952-285-9985 The Trustee: U.S. Bank National Association 60 Livingston Avenue EP-MN-WS3C St. Paul, Minnesota 55107-2292 Attention: Corporate Trust Services Telephone: 651-495-3910 Fax: 651-495-8096 The Loan Servicer: Glaser Financial Group, hie. 2177 Youngman Avenue St. Paul, Minnesota 55116 Attention: Mortgage Servicing Telephone: 651-603-5055 Fax: 651-644-0923 E