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$5,000,000 Bond 1996 Chardon Court Project - Destroy 060132DORSEY & WHITNEY LLP MINNEAPOLIS PILLSBURY CENTER SOUTH WASHINGTON, D.C. 220 SOUTH SIXTH STREET LONDON MINNEAPOLIS, MINNESOTA 55402-1498 BRUSSELS TELEPHONE: (612) 340-2600 HONG KONG FAX: (612) 340-2868 DES MOINES ROCHESTER COSTA MESA JEROME P. GILLIGAN (612) 3402962 September 20, 1996 Mr. Daniel Donahue City Manager City of New Hope 4401 Xylon Avenue North New Hope, MN 55428-4898 Re: $5,000,000 Multifamily Housing Revenue Bonds (Chardon Court Project), Series 1996 City of New Hope, Minnesota Dear Dan: NEW YORK DENVER SEATTLE FARGO BILLINGS MISSOULA GREAT FALLS Enclosed is a copy of the transcript of proceedings in connection with the above described Bonds for your records. It was a pleasure working with you on this matter. Yours trul , r e P. Gilli JPG:cmn Enclosure C CLOSING INDEX $5,000,000 Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 City of New Hope, Minnesota Date and Time of Closing: Date and Time of Preclosing: 9:00 A.M. on July 11, 1996 1:00 P.M. on July 10, 1996 Place of Closing and Preclosing: Office of Dorsey & Whitney LLP Minneapolis, Minnesota Terms Used Herein: City: City of New Hope, Minnesota Partnership: Northridge Properties of New Hope Limited Partnership Trustee: Norwest Bank Minnesota, National Association Underwriter: Dougherty Dawkins, Inc. Prior Bonds: Variable Rate Demand Rental Housing Revenue Bonds (Minnesota Multi -City Joint Housing Program) Series 1985 of the St. Paul HRA Prior Bonds Trustee: First Trust National Association Prior Lender: AmerUs Bank I. BASIC DOCUMENTS 1. Indenture of Trust between the City and the Trustee 2. Loan Agreement between the City and the Partnership 3. Declaration of Restrictive Covenants from Partnership in favor of Trustee 4. Bond Purchase Agreement between the City, the Partnership and the Underwriter 5. Combination Mortgage, Security Agreement and Fixture Financing Statement from the Partnership to the City, together with Assignment thereof from City to Trustee 6. Assignment of Rents and Leases from the Partnership to the City, together with Assignment thereof from City to Trustee 7. Debt Subordination Agreement by North Ridge Care Center, Inc. for benefit of Trustee 8. UCC -1 Financing Statement (Partnership, as debtor, City, as secured party, and Trustee, as assignee) 9. UCC -1 Financing Statement (City, as debtor, and Trustee, as secured party) 10. Subordination Agreement by New Hope Economic Development Authority for benefit of Trustee 11. Continuing Disclosure Agreement between the Partnership and Trustee II. OFFERING DOCUMENTS 12. Preliminary Official Statement, dated June 20, 1996 13. Official Statement, dated July 1, 1996 III. CITY DOCUMENTS 14. Request and Authorization from City to Trustee 15. Certificate of Official Action 16. General, Incumbency and No Litigation Certificate 17. No -Arbitrage Certificate, with attached certificates of Partnership and Underwriter 18. IRS Form 8038 -2- IV. PARTNERSHIP DOCUMENTS 19. Partnership Certificate with attached Limited Partnership Agreement of Partnership, together with evidence of filing of Certificate of Limited Partnership with Secretary of State and Partnership resolutions V. REFUNDING OF PRIOR BONDS 20. Direction from Prior Lender to Prior Bond Trustee to redeem portion of Prior Bonds allocable to Project 21. Certificate of Prior Bond Trustee 22. Satisfaction of Mortgage and Assignment of Rents related to Loan with proceeds of Prior Bonds and UCC -3 Termination Statements VI. TRUSTEE DOCUMENTS 23. Certificate and Receipt of Trustee VII. PROJECT DOCUMENTS 24. Title Insurance Policy 25. Survey 26. Insurance Certificates VIII. LEGAL OPINIONS 27. Opinion of Dorsey & Whitney LLP, as Bond Counsel 28. Supplemental Opinion of Dorsey & Whitney LLP 29. Opinion of Orbovich & Gartner Chartered, as counsel to the Partnership 30. Opinion of Faegre & Benson LLP, as Underwriter's counsel IX. MISCELLANEOUS CLOSING DOCUMENTS 31. Specimen Bond 32. Receipt of Underwriter -3- 33. Resolution of New Hope Economic Development Authority 34. Blue Sky Memorandum m! INDENTURE OF TRUST between CITY OF NEW HOPE, MINNESOTA and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION as Trustee Dated as of June 1, 1996 Relating to: Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 This instrument was drafted by: Dorsey & Whitney LLP Pillsbury Center South 220 South Sixth Street Minneapolis, Minnesota 55402 I TABLE OF CONTENTS (Not a Part of This Indenture) Paee PARTIES........................................................ vi RECITALS....................................................... vi GRANTING CLAUSES ........................................... vii ARTICLE ONE -DEFINITIONS AND GENERAL PROVISIONS ................................ 1-1 Section 1-1. Definitions .................................. 1-1 Section 1-2. Rules of Interpretation ........................ 1-7 ARTICLE TWO -GENERAL PROVISIONS OF THE BONDS .......... 2-1 Section 2-1. Terms of Bonds .............................. 2-1 Section 2-2. Execution .................................... 2-2 Section 2-3. Authentication ............................... 2-3 Section 2-4. Mutilated, Lost and Destroyed Bonds ........... 2-3 Section 2-5. Redemption of Bonds ......................... 2-3 Section 2-6. Notice of Redemption ........................ 2-6 Section 2-7. Effect of Redemption ......................... 2-7 Section 2-8. Partial Redemption of a Bond; Selection of Bonds to be Redeemed ............ 2-7 Section 2-9. Cancellation ................................. 2-7 Section 2-10. Registration, Transfer and Exchange of Bonds .......................... 2-8 Section 2-11. Interest Rights Preserved; Dating of Bonds ............................. 2-9 Section 2-12. Persons Deemed Owners ...................... 2-9 Section 2-13. Cessation and Continuation of Interest..................................... 2-9 Section 2-14. Special Provisions Regarding Beneficial Owners and Bonds in Book -Entry Form ...... 2-10 ARTICLE THREE -FORM OF THE BONDS AND DELIVERY OF BONDS..................................... 3-1 Section 3-1. Form of Bonds ............................... 3-1 Section 3-2. Delivery of Bonds ............................ 3-8 ARTICLE FOUR -GENERAL COVENANTS ........................ 4-1 Section 4-1. Payment of Principal and Interest .............. 4-1 Section 4-2. Performance of and Authority Acceleration ................................. 8-1 for Covenants .............................. 4-1 Section 4-3. Right to Payments under Agreement, Bondholders ............................... 8-2 Instruments of Further Assurance ............ 4-1 Section 4-4. Rights Under Agreement ..................... 4-2 Section 4-5. Recording and Filing ......................... 4-2 ARTICLE FIVE -FUNDS AND ACCOUNTS ........................ 5-1 Section 5-1. Trust Funds Pledged and Assigned Rights and Remedies of to the Trustee ............................... 5-1 Section 5-2. Application of Bond Proceeds ................. 5-1 Section 5-3. Bond Fund .................................. 5-1 Section 5-4. Property Insurance and Award Fund ........... 5-2 Section 5-5. Reserve Fund ............................... 5-3 Section 5-6. Non -Presentment of Bonds ................... 5-4 Section 5-7. Rebate Fund ................................. 5-4 Section 5-8. Repair and Replacement Reserve Fund ........ 5-5 ARTICLE SIX -INVESTMENTS .................................... 6-1 Section 6-1. Investments by Trustee ....................... 6-1 Section 6-2. Permitted Investments ....................... 6-1 ARTICLE SEVEN -DISCHARGE OF LIEN .......................... 7-1 Section 7-1. Conditions for Discharge ..................... 7-1 Section 7-2. Payment of Bonds ............................ 7-1 Section 7-3. Cancellation of Surrendered Bonds...................................... 7-2 ARTICLE EIGHT -DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS ............. 8-1 Section 8-1. Events of Default ............................ 8-1 Section 8-2. Acceleration ................................. 8-1 Section 8-3. Other Remedies; Rights of Bondholders ............................... 8-2 Section 8-4. Direction of Proceedings by Bondholders ............................... 8-3 Section 8-5. Application of Money ........................ 8-4 Section 8-6. Remedies Vested in Trustee .................. 8-5 Section 8-7. Rights and Remedies of Bondholders ............................... 8-5 Section 8-8. Termination of Proceedings ................... 8-6 Section 8-9. Waiver of Events of Default .................. 8-6 Section 8-10. Company as Agent of Municipality ............ 8-7 ARTICLE NINE -THE TRUSTEE ................................... 9-1 Section 9-1. Acceptance of the Trustee ..................... 9-1 Section 9-2. Fees, Charges and Expenses of 12-1 Section 12-4. the Trustee ................................. 9-5 Section 9-3. Notice to Bondholders if Default 12-2 Occurs ..................................... 9-5 Section 9-4. Intervention by Trustee ...................... 9-5 Section 9-5. Successor Trustee ............................ 9-5 Section 9-6. Resignation by the Trustee .................... 9-6 Section 9-7. Removal of Trustee .......................... 9-6 Section 9-8. Appointment of the Successor Trustee by the Bondholders; Temporary Trustee .......................... 9-6 Section 9-9. Concerning any Successor Trustees ............ 9-7 Section 9-10. Trustee Protected in Relying Upon Resolutions, Etc ............................. 9-7 Section 9-11. Successor Trustee as Custodian of Trust Funds ................................ 9-7 Section 9-12. Co -Trustee .................................. 9-7 ARTICLE TEN -SUPPLEMENTAL INDENTURES ................... 10-1 Section 10-1. Supplemental Indentures Not Requiring Consent of Bondholders ........... 10-1 Section 10-2. Supplemental Indentures Requiring Consent of Bondholders ..................... 10-1 Section 10-3. Rights of Trustee ............................. 10-3 ARTICLE ELEVEN -AMENDMENT OF AGREEMENT, DECLARATION, ASSIGNMENT AND MORTGAGE ............ 11-1 Section 11-1. Amendment, Etc. to Agreement, Declaration, Assignment and Mortgage Not Requiring Consent of Bondholders ..................... 11-1 Section 11-2. Amendments, Etc. to Agreement, Declaration, Assignment and Mortgage Requiring Consent of Bondholders ..................... 11-1 ARTICLE TWELVE -MISCELLANEOUS ............................ 12-1 Section 12-1. Consent, Etc. of Bondholders .................. 12-1 Section 12-2. Limitation of Rights .......................... 12-1 Section 12-3. Severability ................................. 12-1 Section 12-4. Notices ..................................... 12-2 Section 12-5. Counterparts ................................ 12-2 -iv- Section 12-6. Limitation of Municipality's Liability .................................... 12-2 SIGNATURES................................................... 12-3 am THIS INDENTURE OF TRUST, dated as of June 1, 1996, between the CITY OF NEW HOPE, MINNESOTA, a municipal corporation and political subdivision of the State of Minnesota, herein called the Municipality, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association duly established, existing and authorized to accept and execute trusts of the character herein set out under and by virtue of the laws of the United States of America, with its principal office, domicile and post -office address at Minneapolis, Minnesota, herein called the Trustee; WITNESSETH WHEREAS, pursuant to Minnesota Statutes, Chapter 462C, as amended (as the same may from time to time be amended or supplemented, hereinafter referred to as the Act), the Housing and Redevelopment Authority of the City of St. Paul, Minnesota (hereinafter referred to as the St. Paul HRA) has issued its Variable Rate Demand Rental Housing Development Revenue Bonds (Minnesota Multi -City Joint Rental Housing Program), Series 1985 (hereinafter referred to as the 1985 Bonds) a portion of which were used to provide financing for Chardon Court Apartments, a rental housing development containing 129 units located in the City (hereinafter referred to as the Project) which is owned by Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (hereinafter referred to as the Company); and WHEREAS, the Municipality, at the request of the Company, has determined to issue and sell its Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 (hereinafter, the Series 1996 Bonds) in order to refund the portion of the 1985 Bonds used to finance the Project (hereinafter referred to as the Refunded Bonds) which are presently outstanding; and WHEREAS, the Municipality has entered into a Loan Agreement, dated as of the date hereof (hereinafter the Agreement) with the Company pursuant to which the Company agrees to pay the Municipality an amount of funds sufficient at all times to pay when due the principal of and interest on the Bonds; and WHEREAS, the execution and delivery of this Indenture and the issuance of the Series 1996 Bonds have been in all respects duly and validly authorized by the Municipality. NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, THIS INDENTURE WITNESSETH: The Municipality, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the purchase and acceptance of the -vi- Bonds by the Holders thereof, in order to secure the payment of the principal of and interest on the Bonds according to their tenor and effect and the performance and observance by the Municipality of all the covenants expressed or implied herein and in the Bonds, does hereby grant, bargain, sell, convey, confirm, assign, transfer in trust, and pledge to the Trustee, and to its successors in trust, and to them and their assigns, forever, and grant a security interest in, the following: GRANTING CLAUSE FIRST All rights, interest and privileges of the Municipality in, to and under the Agreement, including, but not limited to, all payments, revenues and income derived by the Municipality under the Agreement (other than any amounts payable to the Municipality under Sections 4.03, 7.04 or 9.05 of the Agreement), which payments, revenues and income are hereby expressly assigned to the Trustee for deposit by the Trustee in trust accounts in accordance with Article Five hereof; and GRANTING CLAUSE SECOND All right, title and interest of the Municipality in, to and under the Mortgage (as defined herein) and the Assignment (as defined herein); and GRANTING CLAUSE THIRD All proceeds from any property described in these Granting Clauses hereof, and any and all other property of every name and nature from time to time hereafter by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or transferred, as and for additional security hereunder, by the Municipality or by anyone on its behalf or with its written consent, to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof; TO HAVE AND TO HOLD all the same with all privileges and appurtenances hereby conveyed and assigned, or agreed or intended so to be to the Trustee and its successors in said trust and to them and their assigns forever; IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all Holders of the Bonds issued under and secured by this Indenture, without privilege, priority or distinction as to lien or otherwise of any of said Bonds over any of the others except as otherwise expressly provided herein; PROVIDED, HOWEVER, that if the Municipality, its successors or assigns, shall well and truly pay, or cause to be paid, the principal of and interest due or to become due on the Bonds, or provide fully for payment thereof as herein -vii- provided, at the times and in the manner mentioned in the Bonds according to the true intent and meaning thereof, and shall make the payments into the Trust Funds as required under Article Five, or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee sums sufficient for payment of the entire amount due or to become due thereon as herein provided, and shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Indenture to be kept, performed and observed by it, and shall pay to the Trustee all sums of money due or to become due to it in accordance with the terms and provisions hereof, then this Indenture and the rights hereby granted shall cease, terminate and be void; otherwise, this Indenture shall be and remain in full force and effect. UNDER THE PROVISIONS OF THE ACT the Bonds are limited obligations of the Municipality payable solely from the revenue pledged to their payment. The Bonds do not constitute a debt of the Municipality within the meaning of any constitutional or statutory limitation, and do not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the Municipality or a charge against its general credit or taxing powers; the Bonds shall not be general obligations of the Municipality, nor shall they be payable in any manner by taxation, nor shall the Municipality be subject to any liability thereon. No Holder or Holders of the Bonds shall ever have the right to compel any exercise of the taxing power of the Municipality to pay the Bonds or the interest thereon nor to enforce payment thereof against any property of the Municipality, 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 by authority of the Act the Municipality and the Trustee mutually covenant and agree, for the equal and proportionate benefit of all Holders of the Bonds as follows: -viii- ARTICLE ONE DEFINITIONS AND GENERAL PROVISIONS Section 1-1. Definitions. In this Indenture the following terms have the following respective meanings unless the context hereof clearly requires otherwise: Act: Minnesota Statutes, Chapter 462C, as amended; Agreement: the Loan Agreement, dated as of the date of this Indenture, between the Company and the Municipality, including any amendment thereof or supplement thereto entered into in accordance with the provisions thereof and hereof; Assignment: the Assignment of Rents and Leases, dated as of the date hereof, from the Company to the Municipality, including any amendment thereof or supplement thereto in accordance with the provisions thereof and hereof; Beneficial Owner: with respect to any authorized denomination of a Bond of any series in Book -Entry Form, each Person who beneficially owns such Bond in such authorized denomination and on whose behalf, directly or indirectly, such authorized denomination of Bond is held by the Depository pursuant to the Book -Entry System; Bondholder: the person in whose name a Bond is registered in the Bond Register; Bonds: the Multifamily. Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996, issued by the Municipality pursuant to the Indenture; Bond Counsel: a firm of nationally recognized Bond Counsel selected by the Company; Bond Fund: the trust account created pursuant to Section 5-3 hereof; Bond Register: the register maintained by the Trustee pursuant to Section 2-10 hereof; Bond Year: shall have the meaning given to it in the Agreement; Book -Entry Form: all Bonds, if such Bonds are held (i) in the name of the Depository (or its nominee) with each stated maturity evidenced by a single Bond certificate or (ii) with the approval of the Company, the Municipality and the 1-1 Trustee, in any similar manner for which Beneficial Owners do not receive Bond certificates evidencing their beneficial ownership in any Bond; Book -Entry System: a system of recordkeeping, securities clearance and funds transfer and settlement maintained for securities by the Depository and participants (or Indirect Participants); Building: the building, fixtures and all other structures and improvements constructed on the Land; Business Day: any day other than a Saturday or Sunday or other day on which commercial banks in the city in which the principal corporate trust office_ of the Trustee is located are not open for business; Code: the Internal Revenue Code of 1986, as amended; all references herein to sections of the Code are to sections thereof as they exist on the date of execution of this Indenture, but include any amendment of the provisions thereof; Company: Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership, as it may be constituted from time to time and any permitted successor under Section 7.03 of the Agreement; Company Representative: a person designated to act on behalf of the Company as evidenced by a written certificate furnished to the Municipality and the Trustee containing the specimen signature of such person and signed for the Company by a general partner; such certificate may designate one or more alternate Company Representatives; Counsel: an attorney designated by or acceptable to the Trustee, duly admitted to practice law before the highest court of any state, whether or not employed by or attorney for the Company or the Municipality; Declaration: the Declaration of Restrictive Covenants executed by the Company in favor of the Trustee; Depository: The Depository Trust Company in New York, New York, its successors and assigns, or any other person who shall be an owner of all Bonds of any series directly or indirectly for the benefit of Beneficial Owners and approved by the Municipality, the Company and the Trustee to act as the Depository; provided any Depository shall be registered or qualified as a "clearing agency" within the meaning of Section 17A of the Securities Exchange Act of 1934, as amended; Determination of Taxability: the issuance of a statutory notice of deficiency by the Internal Revenue Service, or a ruling of the National Office or any 1-2 District Office of the Internal Revenue Service, or a final decision of a court of competent jurisdiction which holds in effect that the interest payable on any Bond is includable in the gross income of an owner of such Bond for federal income tax purposes (other than an owner who is a "substantial user" of the Project or a "related person" as such terms are defined in Section 103(b)(13) of the 1954 Code), if the period, if any, for contest or appeal of such action, ruling or decision by the Company or any Bondholder has expired without any such contest or appeal having been properly instituted by the Company or a Bondholder; provided, that the Company has been given notice of and the right to participate in such proceedings to the extent provided in, and in accordance with, the provisions of Section 8.04 of the Loan Agreement hereof and Section 2-5 hereof, and provided further that no such contest or appeal may be undertaken by the Company unless it first delivers to the Trustee an Opinion of Bond Counsel dated as of a then current date to the effect that interest payable on the Bonds is not includable in gross income of the owner of the Bonds for federal income tax purposes (other than an owner who is a "substantial user" or "related person" as such terms are defined in Section 103(b)(13) of the 1954 Code); Event of Default: any of the events referred to as such in Section 8-1 hereof; Force Majeure: any one or more of the following: acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the government of the United States or of the State of Minnesota or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; earthquakes; fires; storms; droughts, floods or other adverse weather conditions; explosions; breakages or accidents to machinery, transmission pipes or canals; temporary inability to obtain supplies or materials or governmental permits or licenses; or any other cause or event not reasonably within the control of the Company; Government Obligations: (a) direct general obligations of, or obligations the prompt payment of the principal of and the interest on which is fully and unconditionally guaranteed by, the United States of America, (b) obligations the payment of the principal of, premium, if any, and interest on which is fully guaranteed as a full faith and credit obligation of the United States of America, and (c) certificates or other evidence of ownership in principal to be paid or interest to accrue on a pool of obligations of the type described in (a) or (b) above, which obligations are held by a custodian (any obligation described in (a) or (b) above may be issued or held in book entry form on the books of the Department of Treasury of the United States of America); Holder: a Bondholder; 1-3 Indenture: this Indenture of Trust, including any supplement hereto or amendment hereof entered into in accordance with the provisions hereof; Indirect Participant: any person who is not a Participant, who clears securities through or maintains a custodial relationship with a Participant, either directly or indirectly, and who has access to the Book -Entry System; Interest Payment Date: each June 1 and December 1 commencing December 1, 1996; Land: the real estate described in Exhibit A attached to the Mortgage, on which the Building is located, other than any real estate released from the Mortgage in accordance with the terms thereof; Letter of Representations: the Letter of Representations from the Municipality to the Depository; Loan: the loan by the Municipality to the Company of the proceeds of the Bonds, exclusive of any accrued interest paid by an Original Purchaser of the Bonds upon the delivery thereof, but including the underwriting discount or other amount, if any, by which the amount received by or on behalf of the Municipality in connection with the sale of Bonds by the Municipality to an Original Purchaser is less than the principal amount of such Bonds; Loan Repayments: the payments required to be made by the Company pursuant to Section 4.02 of the Agreement; Moody's: Moody's Investors Service, Inc., a Delaware corporation and its successors; Mortgage: the Combination Mortgage, Security Agreement and Fixture Financing Statement, dated as of the date of this Indenture, from the Company to the Municipality, as the same may be amended or supplemented from time to time in accordance with the provisions thereof and hereof; Mortgaged Property: the property described in the granting clauses of the Mortgage; Municipality: the City of New Hope, Minnesota, its successors and assigns; Municipality Assignments: the Assignment of Mortgage and the Assignment of Assignment of Rents and Leases from the City to the Trustee; 1-4 Municipal Representative: the Mayor, the City Manager, or any other person at any time designated in writing by the Municipality to act in such capacity as evidenced by a written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed for the Municipality by the Mayor and the City Manager; Net Proceeds: with respect to any insurance payment or condemnation award, the amount remaining therefrom after payment of all expenses (including attorneys' fees and any extraordinary fees or expenses of the Trustee or the Company) incurred in the collection thereof; 1954 Code: the Internal Revenue Code of 1954, as amended; 1985 Bonds: the St. Paul HRA's Variable Rate Demand Rental Housing Development Revenue Bonds (Minnesota Multi -City Joint Housing Program), Series 1985; Opinion of Bond Counsel: a written opinion of Bond Counsel; Opinion of Counsel: a written opinion of Counsel; Original Purchaser: Dougherty Dawkins, Inc., Minneapolis, Minnesota; Outstanding: when used with reference to Bonds, as of the date of determination, all Bonds authenticated and delivered under this Indenture, except: (A) Bonds theretofore canceled by the Trustee or delivered to the Trustee canceled or for cancellation; (B) Bonds deemed paid in accordance with the provisions of Section 7-2 hereof; and (C) Bonds in lieu of which other Bonds shall have been authenticated and delivered pursuant to this Indenture; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Bonds have given any request, demand, authorization, direction, notice, consent or waiver under this Indenture, Bonds owned by the Municipality or the Company (or a "related person' as defined in Section 147(a) of the Code) shall be disregarded and deemed not to be Outstanding, except that in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which the Trustee knows to be so owned shall be disregarded; 1-5 Participant: means any securities broker or dealer, bank, trust company, clearing corporation or other organization entitled to directly record, clear and settle the transfers of beneficial ownership interest in any Bonds directly through the Depository and the Book -Entry System; Mortgage; Permitted Encumbrances: those encumbrances defined as such in the Permitted Investments: the obligations specified in Section 6-2 hereof; Persons: any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof, or any legal representative, administrator or trustee of any of the foregoing; Project: the Land and the Building as they may at any time exist; Property Insurance and Award Fund: the trust account created pursuant to Section 5-4 hereof; Rating Agency: Moody's or Standard & Poor's, and their respective successors and assigns; Rebate Fund: the trust account created pursuant to Section 5-7 hereof; Refunded Bonds: the portion of the 1985 Bonds issued to finance the Project, fund a debt service reserve fund and pay costs of issuance, which portion of the 1985 Bonds are outstanding in the aggregate principal amount of $5,000,000 as of the date hereof; Repair and Replacement Reserve Fund: the trust account created pursuant to Section 5-8 hereof; Reserve Fund: the trust account created pursuant to Section 5-5 hereof; Reserve Requirement: shall mean $205,000; St. Paul HRA: the Housing and Redevelopment Authority of the City of St. Paul, Minnesota, a public body corporate and politic; Standard & Poor's: Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. and its successors; 1-6 Trustee: Norwest Bank Minnesota, National Association, in Minneapolis, Minnesota, or any successor trustee appointed, qualified and acting as such under the provisions of this Indenture; Trust Estate: the property and funds described in the Granting Clauses of this Indenture, including the Trust Funds; and Trust Funds: the trust accounts created herein, designated the Bond Fund, the Reserve Fund, the Property Insurance and Award Fund, the Repair and Replacement Reserve Fund and the Rebate Fund. Section 1-2. Rules of Interpretation. (1) This Indenture shall be interpreted in accordance with and governed by the laws of the State of Minnesota. (2) The words "herein," "hereof," "hereunder," and words of similar import, without reference to any particular section or subdivision, refer to this Indenture as a whole rather than to any particular section or subdivision hereof. (3) References in this instrument to any particular article, section or subdivision hereof are to the designated article, section or subdivision of this instrument as originally executed. (4) Any terms not defined herein but defined in the Agreement shall have the same meaning herein unless the context hereof requires otherwise. (5) The Table of Contents and headings of articles and sections hereof are for convenience only and are not a part of this Indenture. (6) Unless the context hereof clearly requires otherwise, the singular shall include the plural and vice versa and the masculine shall include the feminine and vice versa. 1-7 ARTICLE TWO GENERAL PROVISIONS OF THE BONDS Section 2-1. Terms of Bonds. There is hereby authorized and created under this Indenture a series of Bonds entitled "City of New Hope, Minnesota, Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996". The Bonds shall be issued in substantially the form hereinafter set forth, with such appropriate variations, omissions and insertions as are permitted or required by this Indenture, and in accordance with the further provisions of this Article, and the total principal amount of Bonds that may be outstanding hereunder is expressly limited to $5,000,000, except as provided in Section 2-4. The Bonds shall: (a) be fully registered as to both principal and interest, bear a date of original issue of June 1, 1996, be in Book -Entry Form and, upon their authentication and delivery, be dated as provided in Section 2-11 hereof; (b) be in the aggregate principal amount of $5,000,000; (c) be in integral multiples of $5,000 and be lettered and numbered R-1 and upward; (d) mature on June 1 in the years and in the principal amounts set forth below and shall bear interest computed on the basis of a 360 -day year consisting of twelve 30 -day months, payable on June 1 and December 1, commencing December 1, 1996, at the respective rates per annum set forth below opposite the Stated Maturity of each Bond, and at the same rates (to the extent that the payment of such interest shall be legally enforceable) on overdue installments of interest: 2-1 Stated Maturity Principal Interest (Tune 1 Amount Rate 1997 $ 60,000 4.50% 1998 60,000 5.00 1999 65,000 5.25 2000 70,000 5.50 2001 70,000 5.75 2002 75,000 6.00 2003 80,000 6.10 2004 85,000 6.25 2005 90,000 6.40 2006 95,000 6.50 2007 105,000 6.60 2008 110,000 6.70 2009 120,000 6.75 2010 125,000 6.80 2014 600,000 7.00 2026 3,190,000 7.25 (e) be payable as to interest by check or draft mailed by the Trustee on each Interest Payment Date to the Holders thereof as such appear in the Bond Register as of the close of business on the 15th day (whether or not a Business Day) of the month preceding each Interest Payment Date and be payable as to principal and premium, if any, upon presentation and surrender at the principal corporate trust office of the Trustee; and (f) be subject to redemption prior to maturity upon the terms and conditions and at the prices and in the manner specified in this Article. Upon notice to the Trustee delivered not less than ten (10) days prior to any Interest Payment Date accompanied by proper wire transfer instructions, any Holder of Bonds in an aggregate principal amount equal to or greater than $1,000,000 may elect to be paid interest on such Bonds payable on such Interest Payment Date by Federal Reserve wire transfer in immediately available funds to any bank in the United States specified by such Holder which is a member of the Federal Reserve System. Section 2-2. Execution. The Bonds shall be executed on behalf of the Municipality by the manual or facsimile signatures of the Mayor and City Manager (or other officers of the Municipality authorized by proceedings of the governing body of the Municipality); provided, that if required by applicable laws, one such signature on each Bond shall be a manual signature. In case any officer whose 2-2 signature or a facsimile of whose signature shall appear on the Bonds shall cease to be such officer before the delivery of the Bonds, such signature or facsimile shall nevertheless be valid and sufficient for all purposes, the same as if he had remained in office until delivery. Section 2-3. Authentication. No Bond shall be valid or obligatory for any purpose or entitled to any security or benefit under this Indenture unless and until a certificate of authentication on such Bond, substantially in the form set forth in Sections 3-1 hereof, shall have been duly executed by an authorized representative of the Trustee. Certificates of authentication on different Bonds need not be signed by the same representative. The executed certificate of authentication on each Bond shall be conclusive evidence that it has been authenticated and delivered under this Indenture. Section 2-4. Mutilated. Lost and Destroyed Bonds. In case any Bond shall become mutilated or be destroyed or lost, the Municipality shall, if not then prohibited by law, cause to be executed, and the Trustee may authenticate and deliver, a new Bond of the same series and of like principal amount, number, maturity date and tenor in exchange and substitution for and upon cancellation of such mutilated Bond or in lieu of and in substitution for such Bond destroyed or lost, upon the Holder paying the reasonable expenses and charges of the Municipality and the Trustee in connection therewith, and, in case of a Bond destroyed or lost, such Holder filing with the Trustee evidence satisfactory to it that such Bond was destroyed or lost, and of his ownership thereof, and furnishing the Municipality, the Company and the Trustee with indemnity satisfactory to them. If the mutilated, destroyed or lost Bond has already matured or been called for redemption in accordance with its terms it shall not be necessary to issue a new Bond prior to payment. Section 2-5. Redemption of Bonds. (a) Optional Redemption. Bonds are each subject to redemption and prepayment, on or after June 1, 2001 in whole on any date or inparton any Interest Payment Date, and if in part a portion of the Bonds of each maturity in $5,000 principal amounts shall be selected by the Trustee for redemption by lot or such other method as the Trustee deems fair such that following such partial redemption the annual principal and interest to come due on the Bonds on any future calendar year following such redemption shall be substantially equal. Bonds redeemed pursuant to this Section 2-5(a) shall be redeemed at their principal amount and accrued interest plus the premiums, expressed as percentages of principal amount, set forth in the following table for the designated redemption dates: 2-3 Redemption Period Premium June 1, 2001 to May 31, 2002 2.0% June 1, 2002 to May 31, 2003 1.0% June 1, 2003 and thereafter none To effect the redemption of Bonds under this Section 2-5(a), the Company shall notify the Issuer and Trustee at least forty-five days before the redemption date (or such lesser number of days as may be agreed to by the Trustee and is sufficient to permit the Trustee to give the notice of redemption required by Section 2-6 hereof) of its intention to provide the Trustee, on or before the specified redemption date, with funds sufficient for the purpose of redeeming Bonds, including any redemption premium. (b) Mandatory Redemption Upon Determination of Taxability. Upon the occurrence of a Determination of Taxability, all Outstanding Bonds shall be subject to mandatory redemption, and shall be called for redemption by the Trustee, in whole, on the first Interest Payment Date for which notice can be given after the date upon which the Trustee receives written notice of the Determination of Taxability at a redemption price equal to their principal amount plus accrued interest to the redemption date. If the Trustee receives written notice from any Bondholder stating that (i) the Bondholder has been notified in writing by the Internal Revenue Service that it proposes to include the interest on any Bond in the gross income of such Bondholder or any other proceeding has been instituted against such Bondholder which may lead to a final decree or action as described in the definition of Determination of Taxability, and (ii) subject to the delivery by the Company of the Opinion of Bond Counsel required by Section 8.04 of the Agreement, such Bondholder shall afford the Company the opportunity to contest the same, either directly or in the name of the Bondholder, and until a conclusion of any appellate review, if sought, and the Trustee is satisfied that such information is accurate, then the Trustee shall promptly give notice thereof to the Company, to the Municipality and to each Bondholder. The Trustee shall thereafter coordinate any similar requests or notices it may have received from other Bondholders and shall keep them informed of the progress of any administrative proceedings or litigation. If a final decree or action as described in the definition of Determination of Taxability thereafter occurs, the Trustee shall make the required demand for prepayment of the Bonds and give notice of the redemption of the Bonds at the earliest date, and in the manner provided herein. (c) Mandatory Sinking Fund Redemption of Bonds. Bonds maturing on June 1, 2014 and June 1, 2026 are subject to mandatory redemption by lot or such other method as the Trustee deems fair, at their principal amount and accrued interest, on June 1 in the years and in the principal amount set forth below: 2-4 Mandatory Sinking Fund Redemption Schedule for Bonds Maturing on June 1, 2014 Year Principal Year Principal (June 1 Amount(Tune 1 Amount 2011 $135,000 2013 $155,000 2012 145,000 2014* 165,000 * Stated Maturity Mandatory Sinking Fund Redemption Schedule for Bonds Maturing on June 1, 2026 Year Principal Year Principal (June 1 Amount(Tune 1 Amount 2015 $175,000 2021 $265,000 2016 190,000 2022 285,000 2017 200,000 2023 310,000 2018 215,000 2024 330,000 2019 235,000 2025 355,000 2020 250,000 2026* 380,000 * Stated Maturity The Company may reduce the amount of Bonds to be redeemed on any June 1 by an amount equal to the principal amount of Bonds of the same maturity to be redeemed that shall be surrendered uncanceled by the Company to the Trustee; provided, that the Company shall have surrendered such Bonds to the Trustee not less than forty-five days prior to the applicable redemption date, together with a certificate of the Company Representative stating the Company's election to use such Bonds for such purpose. In such case, the Trustee shall reduce the amount of Bonds to be redeemed on such September 1 by the principal amount of Bonds of the same maturity to be redeemed so surrendered by the Company. In the event that Bonds are redeemed at the option of the Company pursuant to subsection (a) of this Section 2-5, the Bonds so optionally redeemed shall be applied as a credit against any Bonds of the same maturity to be redeemed on any June 1, such credit to be equal to the principal amount of such Bonds of the same maturity redeemed pursuant to subsection (a) of this Section 2-5. In such case Oal in each year, the Trustee shall reduce the amount of Bonds to be redeemed on each such redemption date by a portion of the principal amount of Bonds of the same maturity so redeemed pursuant to said subsection (a) of this Section 2-5 in the amount necessary to cause the annual principal and interest on the Bonds in any future calendar year following such redemption to be substantially equal. (d) Redemption of Bonds. In the event of damage to or destruction or condemnation of the Project to the extent provided in Section 8.02 of the Agreement, and the Company exercises its option to direct the redemption of all Outstanding Bonds upon the occurrence of one of those events as provided in Section 8.02 of the Agreement, the Bonds shall be subject to redemption and shall be redeemed by the Trustee on the then next succeeding Interest Payment Date for which the Trustee can cause the notice of redemption to be given as provided in Section 2-6, at a price equal to their principal amount with accrued interest to the redemption date, and without premium. Section 2-6. Notice of Redemption. Notice of redemption of any Bond shall be mailed by first class mail, postage prepaid, mailed by the Trustee not less than thirty days before the redemption date to each Holder of a Bond to be redeemed, but the failure to give such mailed notice, or defect in any notice so mailed, shall not affect the validity of the proceedings for the redemption of any Bond not affected by such defect or failure. All notices of redemption shall state the redemption date, the redemption price, the numbers, interest rates and CUSIP numbers of the Bonds to be redeemed and the place at which the Bonds are to be surrendered for payment, which shall be the principal corporate trust office of the Trustee, and that on the redemption date the redemption price will become due and payable on each such Bond and interest thereon shall cease to accrue on and after such time. If less than all Outstanding Bonds are to be redeemed, the Bonds to be redeemed shall be identified by reference to the series designation, date of issue, serial numbers and maturity dates. In addition to the notice prescribed by the preceding paragraph, the Trustee shall also give, or cause to be given, notice of the redemption of any Bond or Bonds or portions thereof at least 32 days before the redemption date by certified mail or telecopy to all registered securities depositories then in the business of holding substantial amounts of obligations of the character of the Bonds (such depositories now being The Depository Trust Company, of Garden City, New York; Pacific Securities Depository Trust Company, of San Francisco, California; and Philadelphia Depository Trust Company, of Philadelphia, Pennsylvania) and one or more national information services that disseminate information regarding municipal bond redemptions, and shall give, or cause to be given, notice of redemption of any Bonds by certified and or telecopy to the Original Purchaser upon the mailing of such notice of redemption to the Holders of the Bonds; provided that any defect in or any failure to give any notice of redemption prescribed by this 2-6 paragraph shall not affect the validity of the proceedings for the redemption of any Bond or portion thereof. Section 2-7. Effect of Redemption. Prior to the date fixed for redemption, funds shall be deposited with the Trustee to pay, and the Trustee is hereby authorized and directed to apply such funds to the payment of, the Bonds or portions thereof called, together with interest accrued thereon to the redemption date. Notice of redemption having been given in accordance with Section 2-6 hereof and the deposit of funds for redemption having been made, (i) the Bonds or portions thereof so to be redeemed shall be due and payable on the redemption date and at the redemption price specified in the notice of redemption, and on and after such date such Bonds shall cease to bear interest, (ii) such Bonds or portions thereof shall cease to be entitled to any lien, benefit or security under this Indenture, and (iii) the Holders of such Bonds or portions thereof shall have no rights in respect thereof except to receive payment of the redemption price thereof. Upon surrender of any Bond so called for redemption, such Bond shall be paid at the redemption date and at the redemption price specified in the notice of redemption. Interest due on or prior to any redemption date shall continue to be payable to the Holder of such Bond, according to its terms and in the customary manner. If any Bond called for redemption shall not be paid upon surrender thereof for redemption, such Bond shall continue to bear interest until paid at the rate specified in the Bond. Section 2-8. Partial Redemption of a Bond; Selection of Bonds to be Redeemed. Bonds shall be called for redemption only in integral multiples of $5,000. There shall be no partial redemption of any one Bond except a Bond in a denomination greater than $5,000. If less than all of the Outstanding Bonds are to be redeemed, except to the extent otherwise provided herein, the Trustee shall select by lot, or by such other method as the Trustee deems fair, those to be redeemed from among the Bonds then subject to redemption, and for this purpose the Trustee shall treat each Bond as representing that number of Bonds which is obtained by dividing the principal amount of such Bond by $5,000. Any Bond in a denomination greater than $5,000 and to be redeemed only in part shall be surrendered by the Holder thereof and the Municipality shall execute and the Trustee shall authenticate and deliver to such Holder, without charge, a new Bond of the same series of any authorized denomination requested by such Holder in an aggregate principal amount equal to the unredeemed portion of the Bond so surrendered. Section 2-9. Cancellation. All Bonds which have been redeemed shall be canceled by the Trustee and shall not be reissued. 2-7 Section 2-10. Registration. Transfer and Exchange of Bonds. (a) The Municipality will cause to be kept at the principal corporate trust office of the Trustee a Bond Register in which, subject to such reasonable regulations as the Trustee may prescribe, the Municipality shall provide for the registration of Bonds and the registration of transfers of Bonds as herein provided The Trustee is hereby appointed Bond Registrar for this purpose. (b) Upon surrender for transfer of any Bond at the principal corporate trust office of the Trustee, the Municipality shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Bonds of the same series and of a like maturity, interest rate and aggregate principal amount, as requested by the transferor. (c) At the option of the Holder, Bonds may be exchanged for Bonds of any authorized denominations, of a like aggregate principal amount, bearing interest at the same rate and maturing on the same date, upon surrender of the Bonds to be exchanged at the principal corporate trust office of the Trustee, and upon payment, if the Municipality shall so require, of the charges hereinafter provided. Whenever any Bonds are so surrendered for exchange, the Municipality shall execute, and the Trustee shall authenticate and deliver, the Bonds which the Holder making the exchange is entitled to receive. (d) All Bonds surrendered upon any exchange provided for in this Indenture shall be promptly canceled by the Trustee and thereafter disposed of as directed by the Municipality. (e) All Bonds issued in exchange for or upon transfer of Bonds shall be valid special obligations of the Municipality evidencing the same debt, entitled to the same benefits under this Indenture, as the Bonds surrendered for such exchange or transfer. (f) Every Bond presented or surrendered for transfer or exchange shall (if so required by the Municipality or the Trustee) be duly endorsed or be accompanied by a written instrument of transfer, in form satisfactory to the Municipality and the Trustee, duly executed by the Holder thereof or his attorney duly authorized in writing. (g) The Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds, other than exchanges expressly provided in this Indenture to be made without expense or without charge to Bondholders. 9M (h) The Trustee shall not be required (i) to transfer or exchange any Bond for a period of fifteen days next preceding any Interest Payment Date, or (ii) to transfer or exchange any Bond called or being called for redemption in whole or in part. Section 2-11. Interest Rights Preserved; Dating of Bonds. Each Bond delivered upon transfer of or in exchange for or in lieu of any other Bond shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Bond. Each Bond shall be dated by the Trustee as of the date of its authentication. Section 2-12. Persons Deemed Owners. The Municipality and the Trustee may treat the person in whose name any Bond is registered as the owner of such Bond for the purpose of receiving payment of principal of and interest on such Bond and for all other purposes whatsoever, whether or not such Bond be overdue, and neither the Municipality nor the Trustee shall be affected by notice to the contrary. Section 2-13. Cessation and Continuation of Interest. Interest on each Bond shall cease on its maturity date, or on any prior date on which it shall have been duly called for redemption as herein provided, provided that funds sufficient for the payment thereof with accrued interest have been deposited with the Trustee on or before the maturity date or redemption date, as the case may be, and in the case of redemption, that the requirements of Sections 2-6 and 2-7 hereof have been complied with, or shall cease on any date after maturity on which such deposit has been made, including accrued interest to the date of deposit and, to the extent permitted by law, interest on overdue installments of interest at the rate borne by such Bond, and the Holder shall have no further rights with respect to the Bonds or under this Indenture except to receive the payment so deposited. If any Bond is not presented for payment when due and funds sufficient to pay such Bond shall have been paid to the Trustee: (i) all liability of the Municipality for payment of such Bond shall forthwith cease, (ii) such Bond shall forthwith cease to be entitled to any lien, benefit or security under this Indenture and the Holder of such Bond shall forthwith have no rights in respect thereof except to receive payment thereof, and (iii) the Trustee shall hold such funds, without liability for interest thereon, for the benefit of the Holder of such Bond. Any money still held by the Trustee after four years after the later of (a) the date upon which such money was deposited with the Trustee or (b) from the date on which the principal of the Bond or interest thereon with respect to which such amount was paid to the Trustee matured or was called for redemption, shall, subject to any applicable escheat law, be paid by the Trustee to the Company, and Bondholders shall thereafter be entitled to look only to the Company for payment and the Company shall not be liable for any interest thereon. 2-9 Section 2-14. Special Provisions Regarding Beneficial Owners of Bonds in Book -Entry Form. (a) General. Notwithstanding any provision herein to the contrary, so long as the Bonds shall be in Book -Entry Form, the provisions of this Section 2.14 shall govern. (b) Registration, Recording and Transfer of Ownership. The Depository (or its nominees) shall be and remain recorded on the Bond Register as the owner of all Bonds in Book -Entry Form. No transfer of any Bond in Book -Entry Form shall be made, except from one Depository to another (or its nominee) or except to terminate the Book -Entry Form. All Bonds in Book -Entry Form shall be issued and remain in a single Bond certificate registered in the name of the Depository (or its nominee); provided, however, that upon termination of the Book -Entry Form pursuant to the Letter of Representations or as otherwise directed by written notice of the Company to the Municipality, Trustee and Depository, the Municipality shall, upon delivery of all Bonds of such series from the Depository, promptly execute, and the Trustee shall thereupon authenticate and deliver, Bonds to all persons who were Beneficial Owners thereof immediately prior to such termination; and the Trustee shall register such Beneficial Owners as owners of the applicable Bonds. The Trustee, as bond register and paying agent, shall maintain accurate books and records of the principal balance, if any, of each such outstanding Bond in Book -Entry Form, which shall be conclusive for all purposes whatsoever. Upon the authentication of any new Bond in Book -Entry Form in exchange for a previous Bond, the Trustee shall designate thereon the principal balance remaining on such Bond according to the Trustee's books and records. No Beneficial Owner (other than the Depository) shall be registered as the owner on the Bond Register for any Bond in Book -Entry Form or entitled to receive any Bond certificate. The beneficial ownership interest in any Bond in Book -Entry Form shall be recorded, evidenced and transferred solely in accordance with the Book -Entry System. Except as expressly provided to the contrary herein, the Company, the Municipality and the Trustee may treat and deem the Depository to be the absolute owner of all Bonds of each series which is in Book -Entry Form (i) for the purpose of payment of principal, redemption price, purchase price of and interest on such Bonds, (ii) for the purpose of giving notices hereunder, and (iii) for all other purposes whatsoever. 2-10 (c) Notices. The Municipality and the Trustee shall each give notices to the Depository of such matters and at such times as are required by the Letter of Representations. All notices of any nature required or permitted hereunder to be delivered to a owner of a Bond in Book -Entry Form shall be transmitted to Beneficial Owners of such Bonds at such times and in such manners as shall be determined by the Depository, the Participants and Indirect Participants in accordance with the Book -Entry System and Letter of Representations. (d) Payments. All payments of principal, redemption price and interest on each series of Bonds in Book -Entry Form shall be paid to the Depository in accordance with the Book -Entry System and the Letter of Representations by wire transfer. All payments of principal, redemption price and interest on any Bonds in Book -Entry Form due Beneficial Owners shall be made at such times and in such manner as shall be determined by the Depository, the Participants and Indirect Participants in accordance with the Book -Entry System and Letter of Representations. (e) Limitations on Liability. The Municipality, the Company and the Trustee shall have no responsibility, liability or obligation of any nature whatsoever with respect to (i) the accuracy of any records maintained by the Depository or any Participant or any Indirect Participant, (ii) the payment by the Depository to any Participant, or by any Participant of any amount due to any Beneficial Owner, in respect of the principal of or interest on the Bonds, (iii) the delivery by the Depository to any Participant, or by any Participant of any notice to any Beneficial Owner, that is required or permitted under the terms of this Order, (iv) the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the Bonds, or (v) any consent given or other action taken by the Depository as the Bondholder including the effectiveness of any action taken pursuant to an omnibus proxy. 2-11 ARTICLE THREE FORM OF BONDS AND DELIVERY OF BONDS Section 3-1. Form of Bonds. The Bonds shall be printed in substantially the following form: No. R - UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF HENNEPIN CITY OF NEW HOPE MULTIFAMILY HOUSING REFUNDING REVENUE BOND (Chardon Court Project) Series 1996 Interest Rate Maturity Date Date of Original Issue CUSIP June 1, 1996 REGISTERED HOLDER: PRINCIPAL AMOUNT: DOLLARS KNOW ALL MEN BY THESE PRESENTS that the City of New Hope, in the County of Hennepin and the State of Minnesota, for value received, promises to pay to the Registered Holder named above, or registered assigns, from the source and in the manner hereinafter provided, and upon presentation and surrender hereof at the principal corporate trust office of the Trustee named below, the principal amount specified above on the maturity date specified above, and to pay interest on said principal amount to the Holder hereof from June 1, 1996, or from the most recent interest payment date to which interest has been paid or duly provided for, until the principal amount is paid or discharged, at the rate per annum specified above, except as the provisions with respect to the redemption of this Bond before maturity may become applicable hereto. Interest is payable semiannually on each June 1 and December 1, commencing on December 1, 1996, by check or draft mailed to the person in whose name this Bond is registered in the 3-1 Bond Register maintained by the Trustee as of the close of business on the 15th day (whether or not a business day) of the preceding month, at his address as it appears on the Bond Register. Interest on this Bond shall be computed on the basis of a 360 - day year, consisting of twelve 30 -day months. The principal of and interest on this Bond are payable in lawful money of the United States of America. Upon notice to the Trustee delivered not less than 10 days before an Interest Payment Date accompanied by proper wire transfer instructions, any Holder of Bonds in any aggregate principal amount equal to or greater than $1,000,000 may elect to be paid the interest on such Bonds payable on the Interest Payment Date by Federal Reserve wire transfer in immediately available funds to any bank in the United States specified by such Holder which is a member of the Federal Reserve System. This Bond is one of an authorized issue of bonds (the Bonds) issued under and equally and ratably secured and entitled to the protection given by an Indenture of Trust, dated as of June 1, 1996 (the Indenture), duly executed and delivered by the City to Norwest Bank Minnesota, National Association, in Minneapolis, Minnesota, as Trustee (herein called the Trustee, which term includes any successor Trustee under the Indenture). Reference is made to the Indenture, including all indentures supplemental thereto, for the provisions, among others, with respect to the nature and extent of the security, the rights, duties and obligations of the City, the Trustee and the Holders of the Bonds, and the terms upon which the Bonds are issued and secured. This Bond is one of the series specified in its title (the Series 1996 Bonds) issued in the aggregate principal amount of $5,000,000. This Bond and the series of which it forms a part are issued pursuant to and in full compliance with the Constitution and laws of the State of Minnesota, particularly Minnesota Statutes, Chapter 462C, as amended, and pursuant to resolutions adopted and approved by the governing body of the City. The Bonds are issued by the City for the purpose of refunding certain multifamily housing revenue bonds previously issued by the Housing and Redevelopment Authority of St. Paul, Minnesota. The Bonds are payable primarily from revenues received pursuant to a Loan Agreement, dated as of June 1, 1996 (the Agreement), between the City and Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the Company), pursuant to which the Company is obligated to make Loan Repayments in amounts sufficient to pay the principal of and interest on, and the Trustee's fees and expenses in connection with, the Bonds as the same become due and payable. Loan Repayments sufficient for said purposes are to be paid to the Trustee for the account of the City and credited to a Bond Fund as a special trust fund created by the City and have been and are hereby pledged for that purpose. The Bonds are further secured by amounts held by the Trustee in trust funds established under the Indenture and by a Combination Mortgage, Security Agreement and Fixture Financing Statement, dated as of June 1, 1996 (the Mortgage), between the Company and the City, and an Assignment of Rents and Leases (the Assignment), 3-2 dated as of June 1, 1996, between the Company and the City, which Mortgage and Assignment have been assigned by the City to the Trustee. The obligations of the Company under the Agreement, the Mortgage and the Assignment, including, but not limited to, the obligation to make Loan Repayments, is a recourse obligation of the Company, but there is no personal liability of the general or limited partners of the Company thereunder. Reference is hereby made to the Agreement, the Mortgage and the Assignment, copies of which are on file with the Trustee, for a complete description of the rights, duties and obligations of the Company thereunder and a description of the property encumbered by the Mortgage and the Assignment. The Bonds do not constitute a debt of the State of Minnesota, the County of Hennepin or the City within the meaning of any constitutional or statutory limitation and do not constitute or give rise to a pecuniary liability of the State, the County or the City or a charge against its general credit or taxing powers. The Bonds are payable solely from the revenues and other property pledged to the payment thereof and do not constitute a charge, lien or encumbrance, legal or equitable, upon any other property of the City. No Holder or Holders 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 interest thereon nor to enforce payment thereof against any property of the City. Bonds are each subject to redemption and prepayment, at the option of the City upon direction by the Company on or after June 1, 2001 in whole on any date or in part on any interest payment date, and if in part by lot or such other method as the Trustee deems fair within each maturity as provided in the Indenture, at a redemption price equal to their principal amount and accrued interest plus the premiums, expressed as percentages of principal amount, set forth in the following table for the designated redemption dates: Redemption Period Premium June 1, 2001 to May 31, 2002 2.0% June 1, 2002 to May 31, 2003 1.0% June 1, 2003 and thereafter none The Bonds maturing on June 1, 2014 are subject to mandatory sinking fund redemption by lot or such other method as the Trustee deems fair, at their principal amount and accrued interest without premium on June 1 in the years and in the principal amounts (unless and to the extent a credit against any such amount is applied as provided in the Indenture) set forth below: 3-3 Year Principal Year Principal (June 1 Amount(June 1 Amount 2011 $135,000 2013 $155,000 2012 145,000 2014* 165,000 * Stated Maturity The Bonds maturing on June 1, 2026 are subject to mandatory sinking fund redemption by lot or such other method as the Trustee deems fair, at their principal amount and accrued interest without premium on June 1 in the years and in the principal amounts (unless and to the extent a credit against any such amount is applied as provided in the Indenture) set forth below: Year Principal Year Principal (Tune 1 Amount(June 1 Amount 2015 $175,000 2021 $265,000 2016 190,000 2022 285,000 2017 200,000 2023 310,000 2018 215,000 2024 330,000 2019 235,000 2025 355,000 2020 250,000 2026* 380,000 * Stated Maturity The Bonds are not otherwise subject to redemption prior to maturity, unless (i) the Company exercises its option to direct the redemption of all Outstanding Bonds in the event of damage to, destruction or condemnation of the Project as provided in Section 8.02 of the Agreement, in which event all Outstanding Bonds shall be redeemed in whole and not in part, on the next interest payment date for which notice of redemption can be given, at their principal amount and accrued interest and without premium, or (ii) the Company is obligated to direct the redemption of all Outstanding Bonds in the event of a Determination of Taxability (as defined in the Indenture) as provided in Section 8.03 of the Agreement, in which event all Outstanding Bonds are subject to redemption, in whole and not in part, on the next interest payment date for which notice of redemption can be given after the Trustee receives notice of such Determination, at their principal amount and accrued interest. As provided in the Agreement and the Indenture, no action or decision described in the definition of Determination of Taxability shall give rise to a Determination of Taxability unless the Company has been given written notice and, if it is so desired and is legally allowed, has been 3-4 given the opportunity to contest the same, either directly or in the name of any Bondholder, and until the conclusion of any appellate review, if sought. Notice of redemption of any Bond shall be mailed at least thirty days before the redemption date to each Holder of a Bond to be redeemed at his last address appearing on the Bond Register maintained with the Trustee, but no defect in or failure to give such mailed notice of redemption shall affect the validity of proceedings for redemption of any Bond not affected by such defect or failure. All Bonds so called for redemption will cease to bear interest on the specified redemption date, provided funds for their redemption have been duly deposited, and, except for the purpose of payment, shall no longer be protected by the Indenture and shall not be deemed outstanding under the provisions of the Indenture. It is provided in the Indenture that Bonds of this series of a denomination larger than $5,000 may be redeemed in part ($5,000 or a whole multiple thereof) and that upon any partial redemption of any such Bond the same shall be surrendered in exchange for one or more new Bonds in authorized form for the unredeemed portion of principal. The Holder of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any default or Event of Default under the Indenture, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. In certain events, on the conditions, in the manner and with the effect set forth in the Indenture, the principal of all Bonds issued thereunder and then outstanding may become or may be declared due and payable before the stated maturity thereof. Alterations of the Indenture, or of any indenture supplemental thereto, may be made only to the extent and in the circumstances permitted by the Indenture. The Bonds are issuable as fully registered Bonds in any denomination which is an integral multiple of $5,000. This Bond is transferable by the Registered Holder hereof upon surrender of this Bond for transfer at the office of the Trustee, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee and executed by the Registered Holder hereof or his attorney duly authorized in writing. Thereupon the City shall execute and the Trustee shall authenticate and deliver, in exchange for this Bond, one or more new fully registered Bonds of the same series in the name of the transferee, of an authorized denomination, in an aggregate principal amount equal to the principal amount of this Bond, of the same maturity, and bearing interest at the same rate. 3-5 IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, to happen and to be performed precedent to and in the execution and delivery of the Indenture and 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 series of which it forms a part, together with all other obligations of the City, does not exceed or violate any constitutional or statutory limitation of indebtedness. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Indenture until the Certificate of Authentication hereon shall have been executed by the Trustee by manual signature of one of its authorized representatives. IN WITNESS WHEREOF, the City of New Hope, Minnesota, by its governing body, has caused this Bond to be executed in its name by the signatures of its Mayor and City Manager. Date of Authentication: City Manager Mayor TRUSTEE'S CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds of the series designated therein and issued under the provisions of the within -mentioned Indenture. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee 0 3-6 Authorized Representative The following abbreviations, when used in the inscription on the face of this Bond, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM --as tenants in common; TEN ENT --as joint tenants by the entireties; JT TEN --as joint tenants with right of survivorship and not as tenants in common; UNIF TRANS MIN ACT-- ............................... Custodian ............................ (Cust) (Minor) under Uniform Transfers to Minors Act ................................... (State) Additional abbreviations may also be used although not in the above list. 3-7 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto (Please Print or Typewrite Name and Address of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: Please Insert Social Security Number or Other Identifying Number of Assignee Notice: The signature to this assignment must correspond with the name as it appears on the face of this Bond in every particular, without alteration or any change whatsoever. Signature(s) must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Bond Registrar, which requirements include membership or participation in the Securities Transfer Association Medalion Program (STAMP) or, such other "signature guaranty program" as may be determined by the Bond Registrar in addition to or in substitution for STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. Section 3-2. Delivery of Bonds. Upon the execution and delivery of this Indenture, the Municipality shall execute and deliver to the Trustee, and the Trustee shall authenticate, the Bonds in the aggregate amount of $5,000,000, and shall deliver them to the Original Purchaser at such time or times as may be directed by the Municipality, after filing with the Trustee the following: go i (a) A copy, duly certified by the Clerk of the Municipality, of the resolution or resolutions adopted and approved by the governing body of the Municipality authorizing execution and delivery of the Agreement, the Indenture, the Mortgage, the Assignment, Municipality Assignments and the Bonds; (b) An original, executed counterpart of the Agreement, the Mortgage, the Assignment, the Declaration, the Municipality Assignments and the Indenture; (c) Copies of all instruments and documents required by the Agreement to be filed at such time with the Trustee; and (d) A request and authorization to the Trustee on behalf of the Municipality, signed by the Mayor and the Manager, to deliver the Bonds to the Original Purchaser named therein upon payment to the Trustee for the account of the Municipality of the purchase price thereof plus accrued interest to the date of delivery of the Bonds which proceeds shall be applied as provided in Article Five. 3-9 ARTICLE FOUR GENERAL COVENANTS Section 4-1. Payment of Principal and Interest. The Municipality will promptly pay or cause to be paid, solely from the source herein specified, the principal of and interest on every Bond issued under this Indenture at the place, on the dates and in the manner provided herein and in said Bonds, according to the terms thereof. The principal and interest are payable primarily from revenues derived under the Agreement, which revenues are hereby specifically assigned and pledged to the payment thereof in the manner and to the extent herein specified. Nothing in the Bonds or in this Indenture shall be considered as assigning or pledging any other funds or assets of the Municipality (except the Agreement). The Bonds are further secured by amounts held by the Trustee in the Trust Funds (other than the Rebate Fund) and by the Mortgage and the Assignment. Section 4-2. Performance of and Authority for Covenants. The Municipality will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in this Indenture, in any and every Bond executed, authenticated and delivered hereunder and in all proceedings of its governing body pertaining thereto. The Municipality represents and warrants that it is duly authorized under the Constitution and laws of the State of Minnesota, including particularly and without limitation the Act, to issue the Bonds and to execute this Indenture, to make a secured or unsecured loan for the purpose of refunding the Refunded Bonds, and to assign and pledge the revenues in the manner and to the extent herein set forth; that all action on its part for the issuance of the Bonds and the execution and delivery of this Indenture has been duly and effectively taken; and that the Bonds in the hands of the Holders thereof are and will be valid and enforceable special obligations of the Municipality according to the import thereof. Section 4-3. Right to Payments under Agreement, Instruments of Further Assurance. The Municipality will defend its right to the payment of amounts due from the Company under the Agreement, for the benefit of the Holders of the Bonds against the claims and demands of all persons whomsoever. The Municipality will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such indentures supplemental hereto and such further acts, instruments and transfers as the Trustee may reasonably require for the better assuring, transferring, conveying, pledging, assigning and confirming unto the Trustee all and singular the rights assigned hereby and the amounts pledged hereby to the payment of the principal of and interest on the Bonds. Except as herein and in the Agreement provided, the Municipality will not sell, convey, mortgage, encumber or otherwise dispose of any part of the revenues and receipts from the Agreement or its rights under the Agreement. 4-1 Section 4-4. Rights Under Agreement. Neither a foreclosure of the lien of this Indenture nor the appointment of a receiver for the Trust Estate nor any other procedure related to the enforcement of the lien or the provisions of this Indenture shall of itself terminate or otherwise affect or impair the rights or obligations of the Company under the Agreement. The Agreement sets forth the covenants and obligations of the Municipality and the Company, including a provision that the Agreement may not be effectively amended, changed or modified without the written consent of the Trustee, and reference is hereby made to the same for a detailed statement of said covenants and obligations. The Municipality agrees that the Trustee in its name or in the name of the Municipality may enforce all rights of the Municipality and all obligations of the Company under and pursuant to the Agreement for and on behalf of the Bondholders, whether or not the Municipality is in default in its covenant to enforce such rights and obligations. Section 4-5. Recording and Filing. The Municipality will do all things reasonably required of it by the Trustee, in cooperation with and at the expense of the Company, to cause this Indenture and all required financing statements to be kept, recorded and filed in such manner and in such places as 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. rim ARTICLE FIVE FUNDS AND ACCOUNTS Section 5-1. Trust Funds Pledged and Assigned to the Trustee. The proceeds of the Bonds and all payments, revenues and income receivable by the Municipality under the Agreement and pledged and assigned by this Indenture to the Trustee, are to be paid by or on behalf of the Company directly to the Trustee and deposited by it in the funds described in this Article Five and held in trust for the purposes set forth herein, and shall not be subject to lien or attachment by any creditor of the Municipality or the Company. Section 5-2. Application of Bond Proceeds. The net proceeds of the Bonds shall be deposited with the Trustee as follows: (a) In the Bond Fund, the amount of money representing accrued interest, if any, on the Bonds. (b) In the Reserve Fund, an amount equal to $205,000. (c) To a separate account to be established with the Trustee and designated the "Refunding Account," all remaining proceeds of the Bonds. All amounts deposited in the Refunding Account under (c) above shall immediately be paid by the Trustee to AmerUs Bank, in Des Moines, Iowa, to reimburse AmerUs Bank for amounts to be paid by AmerUs Bank to redeem the Refunded Bonds. Section 5-3. Bond Fund. A special trust fund is hereby established with the Trustee and designated the 'Bond Fund". The Trustee shall deposit in the Bond Fund, forthwith upon receipt of the proceeds of the Bonds, interest accrued thereon from their date of issue to the date of delivery thereof to the Original Purchaser. Thereafter the Trustee shall deposit in the Bond Fund, as received, each of the Loan Repayments required by Section 4.02 of the Agreement, any interest on Loan Repayments not paid when due, and any other money paid to the Trustee under the Agreement or this Indenture for credit or transfer to the Bond Fund. Money in the Bond Fund shall be used and withdrawn by the Trustee solely to pay the interest on the Bonds as it becomes due and payable, including interest accruing on any Bond after its stated maturity, if not then paid or redeemed, and, to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the rate borne by the Bonds; to pay the principal amount of the Bonds at their respective stated maturities; or to redeem Bonds in accordance with Section 2-5 hereof. 5-1 If a Loan Repayment with respect to the Bonds is received and deposited into the Bond Fund by the Trustee and, due to the untimeliness of its tendering, money has been transferred from the Reserve Fund to the Bond Fund to account for such untimely payment, such Loan Repayment shall be deposited into the Reserve Fund to the extent that the amount on deposit in the Reserve Fund is less than the Reserve Requirement. Section 5-4. Property Insurance and Award Fund. (1) Net Proceeds of a condemnation award or claim for fire and extended coverage insurance on the Project received under Section 6.01 of the Agreement are to be paid to the Trustee if the condemnation award or insurance claim exceeds $75,000. The Trustee shall deposit all such Net Proceeds in a Property Insurance and Award Fund, and shall use and withdraw money in this Fund only for the purpose and upon the conditions stated in this Section. (2) If the Project is damaged or destroyed or taken by exercise of the power of eminent domain and the Company exercises its option to direct the Municipality to call for redemption all of the then Outstanding Bonds, the Trustee shall, as soon as possible, cause a notice of redemption of all Outstanding Bonds to be given in accordance with the provisions of Section 2-6 hereof. Upon the exercise of such option by the Company, and upon the receipt of an opinion of Counsel stating that all steps have been taken as required in Article Seven of this Indenture for the satisfaction and discharge of this Indenture, together with duplicate originals of all documents on which such opinion of Counsel is based, the Trustee shall use and apply the Net Proceeds, with all other funds in its hands not required for compensation and reimbursement of the Trustee, to the redemption and payment of all Bonds and interest accrued thereon. (3) If the option of the Company to call all of the Outstanding Bonds for redemption is not exercised, the Company is required by Section 6.01 of the Agreement to restore the Project after any such casualty or condemnation. The following items shall be deposited with the Trustee before any disbursement is made from the Property Insurance and Award Fund to pay such cost: (A) plans and specifications for restoration of the Project; (B) a contract or contracts for the furnishing of the necessary work and materials required for restoration in accordance with the plans and specifications; (C) an itemized, certified statement of the actual and estimated costs of the restoration, signed and sworn by the Company and the general contractor for the restoration (if other than the Company); and 5-2 (D) an amount of money required with the amount then on hand in the Property Insurance and Award Fund to pay the cost of such restoration as shown in the statement under (C) above, which amount shall be deposited by the Trustee in the Property Insurance and Award Fund. (4) After compliance with Subsection (3) above, the Trustee shall pay costs of restoration to the Company or other persons entitled thereto, as established by Company Representative's certificates and other documentation in form satisfactory to the Trustee, provided that such disbursements shall be made through a title insurance company and in accordance with normal and customary disbursement procedures and unless a title insurance company has insured the Trustee against mechanics liens, not more than 90% of the total cost of restoration as so certified shall be paid until receipt by the Trustee of an opinion of Counsel stating all filings and other steps necessary to perfect the security interests created by the Indenture and the Mortgage in all property, real, personal or mixed, which constitutes part of the Trust Estate or the Mortgaged Property as a result of such restoration, as against third party creditors of or purchasers for value from the Company and the Municipality, have been completed, and that the lien of the Mortgage on the Land is subject to no liens and encumbrances except Permitted Encumbrances. In the event that the restoration of the Project to substantially the condition existing before a taking by eminent domain would require the acquisition of lands or rights or interests in land additional to or in substitution for any part or all of that described in Exhibit A to the Mortgage, the cost thereof may be added to the cost of restoration to be reimbursed to the Company under the provisions of this Section if there are filed with the Trustee evidence of the acquisition of such land or an interest therein and an opinion of Counsel or a policy of title insurance evidencing that the Mortgage constitutes a lien on such additional or substituted land and rights or interests therein and the lien on the Mortgage on such additional or substituted land is subject to no liens and encumbrances except Permitted Encumbrances. Any additional property or rights or interests therein so acquired shall be and become part of the Trust Estate as fully as though originally set forth and described in Exhibit A to the Mortgage. Section 5-5. Reserve Fund. A special trust fund is hereby established with the Trustee and designated the "Reserve Fund." The Trustee shall deposit in the Reserve Fund the amount designated in Section 5-2. Thereafter, the Trustee shall deposit in the Reserve Fund any other money paid to the Trustee under the Agreement or this Indenture for credit or transfer to the Reserve Fund. Amounts on hand in the Reserve Fund shall be transferred by the Trustee to the Bond Fund if on any Interest Payment Date the amount then on hand in the Bond Fund is not sufficient to pay the principal and interest then due on the Bonds, whether at maturity or upon redemption or by acceleration. If not used for the purpose, the 5-3 Trustee shall hold the Reserve Fund in trust to be applied toward payment of the final Loan Repayment or toward redemption of Outstanding Bonds when Bonds are by their terms redeemable and all of the Outstanding Bonds are to be redeemed and paid in full, provided that so long as the balance on hand in the Reserve Fund is not less than the Reserve Requirement, earnings on investments of the Reserve Fund shall be transferred on each Interest Payment Date to the Bond Fund. In addition, if and to the extent that the balance on hand in the Reserve Fund exceeds the Reserve Requirement, the Trustee shall transfer such excess to the Bond Fund. In determining the balance on hand in the Reserve Fund for purposes of this Section 5-5, Permitted Investments shall be valued annually at the market value thereof. Section 5-6. Non -Presentment of Bonds. If any Bond is not presented for payment when due and funds sufficient to pay such Bond shall have been paid to the Trustee, all liability of the Municipality for payment of such Bond shall forthwith cease, and the Trustee shall hold such funds, without liability for interest thereon, for the benefit of the Holder of such Bond. Any money still held by the Trustee after four years from the date on which the Bond with respect to such amount was paid to the Trustee shall be paid by the Trustee to the Company, and Bondholders shall thereafter be entitled to look only to the Company for payment and the Company shall not be liable for any interest thereon. Section 5-7. Rebate Fund. A special trust fund is hereby established with the Trustee and designated the 'Rebate Fund". The Trustee shall make information regarding the Bonds and investments hereunder available to the Company, shall make deposits and disbursements from the Rebate Fund in accordance with the instructions received from the Company pursuant to Section 7.07 of the Agreement, shall invest the Rebate Fund pursuant to the requirements of Section 7.07 of the Agreement and shall deposit income from such investments immediately upon receipt thereof in the Rebate Fund. Not later than 30 days after the end of the fifth Bond Year and every five years thereafter, the Trustee shall pay to the United States ninety percent (90%) of the amount required to be deposited in the Rebate Fund as of such payment date and one hundred percent (100%) of the amount earned on the investment thereof as of such payment date, as such amounts are specified to the Trustee in a certificate signed by a Company Representative. Not later than 60 days after the final retirement of the Bonds, the Trustee shall pay to the United States one hundred percent (100%) of the balance required to be deposited in the Rebate Fund as of such payment date with respect to the Bonds, and one hundred percent (100%) of the amount earned on the investment thereof, as evidenced by a certificate signed by a Company Representative. Each payment shall be accompanied by such documents as may be required by then applicable Treasury Regulations and by a statement 5-4 prepared by the Company and furnished to the Trustee summarizing the determination of the amount to be paid to the United States. Section 5-8. Repair and Replacement Reserve Fund. A special trust fund is hereby established with the Trustee and designated the "Repair and Replacement Reserve Fund." Commencing on July 20, 1996, and on the twentieth day of each month thereafter, the Company shall pay to the Trustee the sum of $2,000 for deposit in the Repair and Replacement Reserve Fund. Monies in the Repair and Replacement Reserve Fund shall, to the extent herein provided, be disbursed by the Trustee to and at the written request of the Company and used by the Company to pay for the complete replacement of the roof on the Project, installation of a new boiler to replace the boiler in the Project, installation of new air conditioning units in the Project or the painting and caulking of a substantial portion of the exterior of the Building. Monies in the Repair and Replacement Reserve Fund may not be used for any purpose other than specifically specified in the preceding sentence, except to the extent applied to pay principal and interest on the Bonds pursuant to Section 8-5 hereof. The Company shall furnish to the Trustee a certificate of Company Representative requesting such disbursement and stating the amount, nature, and name and address of the payee of each expense eligible for payment from amounts in the Repair and Replacement Reserve Fund theretofore paid by the Company and the amount, nature, and name and address of the payee of each expense eligible for payment from amounts in the Repair and Replacement Reserve Fund due and payable and requested to be paid to a Person other than the Company. 5-5 ARTICLE SIX INVESTMENTS Section 6-1. Investments by Trustee. Except during the continuance of an Event of Default hereunder, money held for the credit of the Trust Funds shall, to the extent practicable and permitted by the Act and by the provisions hereof, be invested as received and reinvested by the Trustee in such Permitted Investments as are authorized by applicable laws and specified in writing by the Company. No investment shall ever be specified by the Company in such a manner as to cause the Bonds to be considered arbitrage bonds pursuant to Section 148 of the Code. Permitted Investments shall be made so as to mature or be subject to redemption at the option of the holder thereof on or prior to the date or dates the Company anticipates that the money therefrom will be required. The Trustee shall sell and reduce to cash funds a sufficient portion of investments or deposits under the provisions of this Section whenever the cash balance in the Fund for which the investment or deposit was made is insufficient for its current requirements. Securities so purchased or deposits made shall be held by the Trustee and shall be deemed at all times a part of the applicable Fund, and the interest earned thereon and any profit realized from such investments or deposits shall be credited to the Fund in which the investments or deposits are held. Any loss resulting from any investment or deposit shall be charged to the Fund from which the investment or deposit was made. The Trustee may purchase from or sell to itself or an affiliate, as principal or agent, securities herein authorized. Monies credited to any account or fund maintained hereunder which are uninvested pending disbursement or receipt of proper investment directions or as directed herein, may be deposited to and held in a non-interest bearing demand deposit account established with the Commercial Banking Department of the Trustee or with any bank affiliated with the Trustee, without the pledge of securities to or other collateralization of such deposit accounts. Section 6-2. Permitted Investments. The following shall be the Permitted Investments: (i) Government Obligations, (ii) obligations issued or guaranteed as to principal and interest by any agency or person controlled or supervised by and acting as an instrumentality of the United States of America, pursuant to authority granted by the Congress of the United States of America, (iii) obligations of the Government National Mortgage Association (including participation certificates issued by such Association), and the Federal National Mortgage Association (including participation certificates issued by such Association), (iv) interest-bearing deposit accounts (which may be represented by certificates of deposit, time deposit open account agreements or other deposit instruments) in national or state banks (including, without limitation, the Trustee) which deposits are either fully insured by the Federal Deposit Insurance Corporation or are with banks rated "AA,' "A-1" or "P-1" by Moody's or Standard & Poors, (v) 6-1 bankers' acceptances drawn on and accepted by national or state banks (including, without limitation, the Trustee) rated "AA," "A-1" or "P-1" by Moody's or S&P, (vi) notes or commercial paper rated in the highest rating category by Moody's or Standard & Poors, (vii) shares of investment companies (or cash equivalent investments) which are authorized to invest only in assets or securities described in (i), (ii) or (iii) above, (viii) repurchase agreements with financial institutions fully secured by securities described in (i), (ii) or (iii) above, provided that such securities securing repurchase agreements shall be in the possession of the Trustee or a third party (other than the other party to such repurchase agreement) acting solely as agent for the Trustee, and (ix) investment agreements with banks which meet the rating criteria set forth in (iv) above or investment agreements with non-bank financial institutions of which (a) all of the unsecured, direct long-term debt which is rated by a Rating Agency in one of the two highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) for obligations of that nature; or (b) if such non-bank financial institutions have no outstanding long-term debt which is rated, all of the short-term debt which is rated by Standard & Poor's and Moody's is rated the highest rating category (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) assigned to short-term indebtedness by such Rating Agencies. Each Permitted Investment shall mature no later than the next Interest Payment Date or shall be capable of being sold or liquidated on or prior to such Interest Payment Date at the option of the Trustee at a price of not less than the principal amount thereof plus accrued interest. 6-2 ARTICLE SEVEN DISCHARGE OF LIEN Section 7-1. Conditions for Discharge. If the Municipality shall pay or cause to be paid to the Trustee, for the Holders of the Bonds, the principal and interest to become due thereon at the times and in the manner stipulated herein, and if the Municipality shall keep, perform and observe all and singular the covenants and promises in the Bonds and in this Indenture expressed to be kept, performed and observed by it or on its part, and if all fees and expenses of the Trustee required by this Indenture to be paid shall have been paid, then these presents and the estate and rights hereby granted shall cease, determine and be void, and thereupon the Trustee shall cancel and discharge the lien of this Indenture, and execute and deliver to the Municipality such instruments in writing as shall be requisite to satisfy the lien hereof, and assign and deliver to the Municipality any property at the time subject to the lien of this Indenture which may then be in its possession except cash and securities held by the Trustee for the payment of the principal of and interest to accrue on the Bonds. Section 7-2. Payment of Bonds. Bonds with respect to which sufficient cash shall have been deposited with the Trustee to pay such Bonds and the interest thereon in full on their respective maturity dates or to an earlier date on which such Bonds may be redeemed in accordance with their terms, shall be deemed to be paid within the meaning of this Indenture, provided, however, that if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been duly given; and all liability of the Municipality to the Holder of such Bonds for the payment of principal and interest thereon shall forthwith cease, terminate and be completely discharged, and such Holder shall have a claim therefor solely upon the cash so deposited, and shall not be entitled thereafter to any other benefit of or security under this Indenture. Any Bond or Bonds shall also be deemed to be paid within the meaning of this Indenture if there is irrevocably deposited in escrow with the Trustee securities which are general obligations of the United States or which are unconditionally guaranteed as to payment by the United States, in such aggregate face amount, bearing interest at such rates and maturing on such dates as shall be sufficient, with any cash also irrevocably deposited in escrow, without reinvestment, to provide amounts sufficient to pay all principal and interest due on such Bonds to their stated maturity dates or to an earlier date upon which they are to be redeemed prior to maturity in accordance with their terms, provided that notice of such redemption shall have been duly given as herein required, or the Trustee shall have been given irrevocable instructions, in form satisfactory to the Trustee, to give such notice at the time and in the manner herein required and the Trustee shall have received an opinion of Bond Counsel to the effect that such deposit shall not adversely affect the exemption from federal income taxation of the interest on the Bonds. Notwithstanding any provision of any other Article or 7-1 Section of this Indenture which may be contrary to the provisions of this Section, all money or obligations set aside and held in trust pursuant to the provisions of this Section for the payment of Bonds (including interest) shall be applied to and used solely for the payment of the particular Bonds (including interest thereon) with respect to which such money and obligations have been so set aside in trust. Any deposit referred to in this Section 7-2 may be made with respect to all Bonds of a maturity or maturities. Anything in Article Ten hereof to the contrary notwithstanding, if money or obligations have been deposited or set aside with the Trustee pursuant to this Section for the payment of Bonds and such Bonds shall not have in fact been actually paid in full, no amendment to the provisions of this Section shall be made without the written consent of the Holder of each Bond affected thereby. Section 7-3. Cancellation of Surrendered Bonds. The Municipality or the Company may at any time surrender to the Trustee for cancellation by it any Bonds previously authenticated and delivered hereunder, which the Municipality or the Company acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. 7-2 ARTICLE EIGHT DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS Section 8-1. Events of Default. If any of the following events occurs, it is hereby defined as and declared to be and to constitute an Event of Default: (A) If default shall be made in the due and punctual payment of any interest on any Bond (in which event interest shall be payable to the extent permitted by law on the overdue installment of interest, in each case at the interest rate borne by the Bonds in respect of which such interest is overdue); or (B) If default shall be made in the due and punctual payment of the principal of any Bond, whether at the stated maturity thereof or at the date fixed for redemption thereof, or upon the maturity thereof by declaration; or (C) If default shall be made in the due and punctual payment of any other money required to be paid to the Trustee under the provisions hereof and such default shall have continued for a period of thirty days after written notice thereof, specifying such default, shall have been given by the Trustee to the Municipality and the Company, or by the Holders of not less than a majority in aggregate principal amount of the Outstanding Bonds to the Municipality, the Company and the Trustee; or (D) If default shall be made in the performance or observance of any other of the covenants, agreements or conditions on the part of the Municipality in this Indenture, or in the Bonds contained, and such default shall have continued for a period of thirty days after written notice thereof given in the manner provided in clause (C) above, unless the Trustee shall agree in writing to an extension of such time prior to its expiration, or for such longer period as may be reasonably necessary to remedy such default provided that the Municipality is proceeding with reasonable diligence to remedy the same; or (E) If an Event of Default occurs under Section 9.01 of the Agreement and is continuing. Section 8-2. Acceleration. Upon the occurrence of an Event of Default, the Trustee may, and upon the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of Bonds Outstanding shall, by notice in writing delivered to the Municipality and the Company declare the principal of all Bonds then Outstanding immediately due and payable, and such principal shall thereupon become and be immediately due and payable. At any time after such a declaration of acceleration has been made, but before any sale of the RE Trust Estate, or any part thereof, has been made under this Article, or the Mortgaged Property has been made under this Article or under Article Four of the Mortgage, the Holders of twenty-five percent (25%) in aggregate principal amount of the Bonds Outstanding, by written notice to the Municipality and the Trustee, may rescind and annul such declaration and its consequences if: (1) There has been paid to or deposited with the Trustee by or for the account of the Municipality and/or collected out of the Trust Estate, or provision satisfactory to the Trustee has been made for the payment of, a sum sufficient to pay: (A) all overdue installments of interest on all Bonds; (B) the principal of any Bonds which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates borne by such Bonds; (C) to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the rate borne by the Bonds; and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. (2) All Events of Default, other than the non-payment of the principal of Bonds which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 8-9 hereof. No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon. Section 8-3. Other Remedies: Rights of Bondholders. Upon the occurrence of an Event of Default, the Trustee may pursue any available remedy by suit at law or equity to enforce the covenants of the Municipality herein, including without limitation, any remedy of a secured party under the Minnesota Uniform Commercial Code, foreclosure and mandamus, and including such appropriate judicial proceedings as the Trustee shall deem most effective to protect and enforce, or aid in the protection and enforcement of, the covenants and agreements herein, in the Mortgage and in the Agreement. Upon the occurrence of an Event of Default under the Agreement, the Trustee may enforce any and all rights of the Municipality thereunder and any and all of the Trustee's rights under the Mortgage or the Assignment. If an Event of Default shall have occurred, and if it shall have been requested so to do by Holders of twenty-five percent (25%) in aggregate principal AP) j amount of Bonds Outstanding and shall have been indemnified as provided in Section 9-1 hereof, the Trustee shall be obliged to exercise such one or more of the rights and powers conferred by this Section or by the Mortgage or the Assignment as the Trustee, being advised by Counsel, shall deem most expedient in the interests of the Bondholders; and the foregoing shall apply also, if an Event of Default shall have occurred under the Agreement to the enforcement by the Trustee of the rights of the Municipality thereunder; provided, however, that the Trustee shall have the right to decline to comply with any such request if the Trustee shall be advised by Counsel that the action so requested may not lawfully be taken or if the Trustee in good faith shall determine that such action would be unjustly prejudicial to the Holders of Bonds not parties to such request. No remedy by the terms of this Indenture conferred upon or reserved to the Trustee or to the Bondholders is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bondholders hereunder or now or hereafter existing at law or in equity or by statute. The assertion or employment of any right or remedy hereunder shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default, or acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient by the Trustee or Bondholders, as the case may be. No waiver of any default or Event of Default hereunder, whether by the Trustee or by the Bondholders, shall extend to or shall affect any subsequent default or Event of Default or shall impair any rights or remedies consequent thereon. Section 8-4. Direction of Proceedings by Bondholders. The Holders of twenty-five percent (25%) in aggregate principal amount of Bonds then Outstanding 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, including enforcement of the rights of the Municipality under the Agreement or for the appointment of a receiver, proceedings for the enforcement of the terms and conditions of the Mortgage or the Assignment or any other proceedings hereunder; provided that (a) such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture; (b) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Bondholders not taking part in such direction; and (c) the 8-3 Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 8-5. Application of Money. All money received by the Trustee pursuant to any right given or action taken under the provisions of this Article shall, after payment of the cost and expenses of the proceedings resulting in the collection of such money and of the expenses, liabilities and advances incurred or made by the Trustee, be deposited in the Bond Fund and all money in the Trust Funds, other than moneys in the Rebate Fund, shall be applied as follows: (A) Unless the principal of all the Bonds shall have become or shall have been declared due and payable, all such money shall be applied: FIRST: To the payment to the persons entitled thereto of all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest, and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or privilege; and SECOND: To the payment to the persons entitled thereto of the unpaid principal of any of the Bonds which shall have become due (other than Bonds called for redemption and for the payment of which money is held pursuant to the provisions of this Indenture), in the order of their due dates, and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, then to the payment ratably, according to the amount of principal due on such date, to the persons entitled thereto without any discrimination or privilege. (B) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all such money shall be applied 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 thereto without any discrimination or privilege. (C) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of Section 8.2 hereof, then, subject to the provisions of paragraph (B) of this Section in the event that the principal of all the Bonds shall later become due or be declared due and payable, the money shall be applied in accordance with the provisions of paragraph (A) of this Section. i Whenever money is to be applied by the Trustee pursuant to the provisions of this Section, such money shall be applied by it at such times, and from time to time, as the Trustee shall determine, having due regard to the amount of such money available for application and the likelihood of additional money becoming available for such application in the future. Whenever the Trustee shall apply such funds, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another 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 dates shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposits with it of any such money and of the fixing of any such date, and shall not be required to make payment to the Holder of any unpaid Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid. Whenever all Bonds and interest thereon have been paid under the provisions of this Section and all expenses and charges of the Trustee have been paid, any balance remaining shall be paid to the person entitled to receive the same; if no other person shall be entitled thereto, then the balance shall be paid to the Company. Section 8-6. Remedies Vested in Trustee. All rights of action including the right to file proof of claims under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any Holders of the Bonds, and any recovery of judgment shall be for the equal benefit of the Holders of the Outstanding Bonds. Section 8-7. Rights and Remedies of Bondholders. No Holder of any Bond shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of this Indenture or for the execution of any trust hereof or for the appointment of a receiver or any other remedy hereunder, unless a default shall have become an Event of Default and the Holders of twenty-five percent (25%) in aggregate principal amount of Bonds then Outstanding shall have made written request to the Trustee and shall have offered it reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name, nor unless also they have offered to the Trustee indemnity, as provided in Section 9-1 hereof, nor unless the Trustee shall thereafter fail or refuse to exercise the powers hereinbefore granted, or to institute such action, suit or proceeding in its own name; it being understood and intended that no one or more Holders of the Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Indenture by its, his or their action or to enforce any right hereunder except in the manner herein provided, and that all proceedings M at law or in equity shall be instituted, had and maintained in the manner herein provided, and for the equal benefit of the Holders of all Outstanding Bonds. Nothing in this Indenture contained, however, shall affect or impair the right of any Bondholder to enforce by suit or otherwise the payment of the principal of and interest on the Bond at and after the maturity thereof, or the obligation of the Municipality to pay the principal of and interest on each of the Bonds issued hereunder to the respective Holders thereof at the time and place, from the source and in the manner in said Bonds expressed. Section 8-8. Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver, by entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the Municipality and the Trustee shall be restored to their former positions and rights hereunder with respect to the property herein conveyed, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken. Section 8-9. Waiver of Events of Default. The Trustee may in its discretion waive any Event of Default hereunder and its consequences and rescind any declaration of acceleration of principal, and shall do so upon written request of the Holders of twenty-five percent (25%) in aggregate principal amount of all Outstanding Bonds; provided, however, that there shall not be waived (a) any Event of Default in the payment of the principal of any Outstanding Bonds at the dates of maturity specified therein or (b) any Event of Default in the payment when due of the interest on any Bonds, unless prior to such waiver or rescission the Municipality has paid or deposited (or caused to be paid or deposited) with the Trustee a sum sufficient to pay: (A) all overdue installments of interest of the Bonds; (B) the principal of any Bonds which have become due otherwise than by such declaration of acceleration, and interest thereon at the rate borne by the Bonds; (C) to the extent permitted by law, interest upon overdue installments of interest at the rate borne by the Bonds; and (D) all expenses of the Trustee hereunder. No such waiver or rescission shall extend to any subsequent or other default or Event of Default, or impair any right consequent thereon. Section 8-10. Company as Agent of Municipality. With regard to any alleged default concerning which notice is given to the Company under the provisions of Section 8-1 hereof, the Municipality hereby names and appoints the Company as its attorney-in-fact and agent with full authority to perform any covenant or obligation of the Municipality alleged in said notice to constitute a default or Event of Default, in the name and stead of the Municipality with full power to do any and all things and acts to the same extent that the Municipality could do and perform any such things and acts and with power of substitution; provided, that the Company shall first give the Municipality notice of its intention so to perform in behalf of the Municipality. The Municipality may at any time, by written notice to the Company and the Trustee, cancel, withdraw, limit or modify the appointment hereby made. RM ARTICLE NINE THE TRUSTEE Section 9-1. Acceptance of the Trustee. The Trustee hereby accepts the trusts imposed upon it by this Indenture, and agrees to perform said trusts, but only upon and subject to the following terms and conditions: (A) Except during the continuance of an Event of Default or the continuance of a default in the performance or breach of any covenant or warranty of the Municipality under this Indenture or during the continuance of an Event of Default or default of which the Trustee has actual or constructive knowledge under the Agreement, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (B) In case an Event of Default has occurred and is continuing, or there is a default in the performance or breach of any covenant or warranty of the , Municipality under this Indenture, or during the continuance of an Event of Default or default, of which the Trustee has knowledge, under the Agreement or the Mortgage the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (C) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or his own willful misconduct, except that (1) this Subsection (C) shall not be construed to limit the effect of Subsection (A) of this Section; 9-1 (2) the Trustee shall not be liable for any error of judgment made in good faith, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Bonds relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (D) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. (E) The Trustee may execute any of the trusts or powers hereof and perform any of its duties by or through attorneys, agents, receivers, or employees but shall be answerable for the conduct of the same in accordance with the standard specified in Subsection (B) above, and shall be entitled to advice of Counsel concerning all matters of trusts hereof and duties hereunder, and may in all cases pay such reasonable compensation to any attorney, agent, receiver or employee retained or employed by it in connection herewith. The Trustee may act upon the opinion or advice of any attorney, surveyor, engineer or accountant selected by it in the exercise of reasonable care or, if selected or retained by the Municipality, approved by the Trustee in the exercise of such 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. (F) The Trustee shall not be responsible for any recital herein, or in the Bonds (except with respect to the certificate of the Trustee endorsed on the Bonds), or for the investment of money (except as provided in Section 6-1 hereof) or for the filing or re -filing of this Indenture, the Mortgage, the Agreement or any supplement or amendment thereto, or the filing of financing statements (except as provided in Subsection (N) below), or for the validity of the execution by the Municipality of this Indenture, or of any supplemental indentures or instruments of further assurance, or for the sufficiency of the security for the Bonds issued hereunder or intended to be secured hereby, or for the value of the property herein conveyed or otherwise as 9-2 to the maintenance of the security hereof. The Trustee may (but shall be under no duty to) require of the Municipality or the Company full information and advice as to the performance of the covenants, conditions and agreements in the Agreement and shall make its best efforts, but without any obligation, to advise the Municipality and the Company of any impending default known to the Trustee. Except as otherwise provided in Section 8-3 hereof, the Trustee shall have no obligation to perform any of the duties of the Municipality under the Agreement. (G) The Trustee shall not be accountable for the use or application by the Municipality or the Company of any of the Bonds or the proceeds thereof or for the use or application of any money paid over by the Trustee in accordance with the provisions of this Indenture. The Trustee may become the owner of Bonds secured hereby with the same rights it would have if not Trustee. (H) The Trustee shall be protected in acting upon any notice, order, requisition, request, consent, certificate, order, opinion (including an opinion of Counsel), affidavit, letter, telegram or other paper or document in good faith deemed by it to be genuine and correct and to have been signed or sent by the proper person or persons. 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 Holder of any Bond, shall be conclusive and binding upon all future Holders of the same Bond and Bonds issued in exchange therefor or in place thereof. (I) As to the existence or nonexistence of any fact or as to the sufficiency or authenticity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a certificate of the Municipality signed by a Municipal Representative, or a certificate of the Company signed by a Company Representative, as sufficient evidence of the facts stated therein. The Trustee may accept a certificate of the recording officer of the Municipality under the seal of the Municipality to the effect that a motion, resolution or ordinance in the form therein set forth has been adopted by the governing body of the Municipality as conclusive evidence that such motion, resolution or ordinance has been duly adopted, and is in full force and effect, and may accept such motion, resolution or ordinance as sufficient evidence of the facts stated therein and the necessity or expediency of any particular dealing, transaction or action authorized or approved thereby, but may at its discretion, secure such further evidence deemed necessary or advisable, but shall in no case be bound to secure the same. (J) At any and all reasonable times, the Trustee, and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right fully to inspect any and all of the property herein conveyed, including all books, papers and records of the Municipality pertaining to the Bonds, and to take such memoranda from and in regard thereto as may be desired. 9-3 (K) The Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises. (L) Notwithstanding anything elsewhere in this Indenture contained, the Trustee shall have the right, but shall not be required, to demand, in respect to the authentication of any Bonds, the withdrawal of any cash or any action whatsoever within the purview of this Indenture, any showings, certificates, opinions (including opinions of Counsel), appraisals or other information, or corporate action or evidence thereof, in addition to that by the terms hereof or of the Agreement or the Mortgage required as a condition of such action by the Trustee, deemed desirable for the purpose of establishing the right of the Municipality or the Company to the authentication of any Bonds, the withdrawal of any cash, the release of any property, or the taking of any other action by the Trustee. (M) Before taking any action hereunder requested by Bondholders, the Trustee may require that it be furnished an indemnity bond or other indemnity satisfactory to it for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which results from the negligence or willful default of the Trustee, by reason of any action so taken by the Trustee. (N) The Trustee shall execute, file and record all instruments, including financing statements and continuation statements, in such places and in such form and with such content and within the time period required by law, as are necessary to ensure the continued perfection of the security interests granted to the Trustee by the Municipality under this Indenture and by the Company under the Mortgage until such security interests are terminated pursuant to the provisions hereof. Assumption of these duties by the Trustee shall not be construed as a representation by the Trustee: (1) that the recording or filing of the initial financing statements or other instruments at the time of the issuance of the Bonds were proper; or (2) that the collateral covered by any continuation statement filed by the Trustee is still in existence. (0) Notwithstanding any other provision of this Indenture, the Trustee shall be a bank or trust company subject to examination by federal regulatory authorities. (P) In the event the Trustee shall at any time have or acquire any conflicting interest, the Trustee shall, within ninety (90) days after ascertaining that it has such a conflicting interest, either eliminate such conflicting interest or resign as Trustee, such resignation to become effective upon the effectiveness of the appointment of a successor trustee, as provided in this Indenture. The Trustee and the Municipality agree to take prompt steps to have a successor trustee appointed in the manner provided in this Indenture. As used in this paragraph, a "conflicting interest' shall exist in all situations in which an indenture trustee would be deemed to have a conflicting interest under Section 310(b)(1) of the Trust Indenture Act of 1939, as amended, 15 U.S.C. Section 77jjj(b)(1). Section 9-2. Fees. Charges and Expenses of the Trustee. The Trustee shall be entitled to payment and/or reimbursement for reasonable fees for services rendered hereunder and all advances, legal fees and other expenses reasonably and necessarily made or incurred by it in and about the execution of the trusts created by this Indenture and in and about the exercise and performance of the powers and duties of the Trustee hereunder and for the reasonable and necessary costs and expenses incurred in defending any liability in the premises of any character whatsoever (unless such liability is adjudicated to have resulted from the negligence or willful default of the Trustee). In this regard the Municipality has made provisions in Section 4.03 of the Agreement for the payment of said fees, advances, legal fees, costs and expenses, and reference is hereby made to said Agreement for the provisions so made. Upon an Event of Default, but only upon an Event of Default, the Trustee shall have a first lien with right of payment prior to payment on account of interest or principal of any Bond, except those Bonds deemed to be paid within the meaning of Section 7-2 hereof, upon the Trust Estate for said fees, advances, legal fees, costs and expenses incurred by it. Section 9-3. Notice to Bondholders if Default Occurs. The Trustee shall give to the Holders of all Bonds notice of all defaults or Events of Default known to the Trustee, within ninety days after the occurrence of a default or Event of Default unless such default or Event of Default shall have been cured before the giving of such notice. Section 9-4. Intervention by Trustee. In any judicial proceeding to which the Municipality is a party and which in the opinion of the Trustee and its Counsel has a substantial bearing on the interest of Holders of Bonds, the Trustee may intervene on behalf of Bondholders and shall do so if requested in writing by the Holders of at least a majority of the aggregate principal amount of the Outstanding Bonds. The rights and obligations of the Trustee under this Section are subject to the approval of a court of competent jurisdiction in the premises. Section 9-5. Successor Trustee. Any corporation, association or agency 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, sale, merger, consolidation or transfer to which 9-5 it is a party, ipso facto, shall be and become successor trustee hereunder and vested with all of the title to the whole property or Trust Estate, and all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Trustee shall give prompt written notice to the Municipality and the Company of such merger, consolidation or transfer. Section 9-6. Resignation by the Trustee. The Trustee and any successor trustee may at any time resign from the trusts hereby created by giving written notice to the Municipality and the Company and by first class mail to each Bondholder, and such resignation shall take effect upon the appointment of a successor trustee by the Bondholders or by the Municipality. Such notice to the Municipality and the Company may be served personally or sent by registered mail. Section 9-7. Removal of Trustee. The Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the Trustee, to the Company and to the Municipality, signed by the Holders of a majority in aggregate principal amount of the then Outstanding Bonds. Section 9-8. Appointment of the Successor Trustee By the Bondholders: Temporary Trustee. In case the Trustee shall resign or be removed, or be dissolved or shall be in course of dissolution or liquidation, or otherwise become incapable of acting hereunder, or in case it shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor may be appointed by the Holders of a majority in aggregate principal amount of the then Outstanding Bonds, by an instrument or concurrent instruments in writing signed by such Holders, or by their attorney-in-fact, duly authorized; provided that no such appointment shall be effective without the written consent of the Company, which consent shall not be withheld unreasonably. Nevertheless, in case of such vacancy, the Municipality by resolution of its governing body may appoint a temporary trustee to fill such vacancy until a successor trustee shall be appointed by the Bondholders in the manner above provided; and any such temporary trustee so appointed by the Municipality shall immediately and without further act be superseded by the trustee so appointed by such Bondholders. Every such trustee appointed pursuant to the provisions of this Section shall be a trust company or bank subject to examination by federal regulatory authorities having a reported capital and surplus not less than $50,000,000, if there be such an institution willing, qualified and able to accept the trust upon reasonable or customary terms. If no temporary trustee or successor trustee has been appointed as herein provided after sixty days from the mailing of notice of resignation by the Trustee under Section 9-6 hereof, or from the date the Trustee is otherwise incapable of acting hereunder, the Trustee or any Bondholder may petition a Minnesota court of competent jurisdiction to appoint a successor trustee. Section 9-9. Concerning any Successor Trustees. Every successor trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor, to the Company, and also to the Municipality, an instrument in writing accepting such appointment hereunder, and thereupon such successor, without any further act, assignment or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessors as trustee; but such predecessor shall, nevertheless, on the written request of the Municipality, or of its successor trustee, execute and deliver an instrument transferring to such successor trustee all the estates, properties, rights, powers and trusts of such predecessor hereunder, and every predecessor trustee shall deliver all securities and moneys held by it as trustee hereunder to its successor. Should any instrument in writing from the Municipality be required by any successor trustee for more fully and certainly vesting in such successor the estates, rights, powers and duties hereby vested or intended to be vested in the predecessor trustee, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Municipality. The resignation of any trustee and the instrument or instruments removing any trustee and appointing a successor hereunder, together with all other instruments provided for in this Article shall be forthwith filed and/or recorded by the successor trustee in each recording office where the Indenture and/or the Mortgage, or any financing statements relating thereto, shall have been filed and/or recorded. Section 9-10. Trustee Protected in Relying Upon Resolutions, Etc. The resolutions, orders, requisitions, opinions, certificates and other instruments provided for in this Indenture may be accepted by the Trustee as conclusive evidence of the facts and conclusions stated therein and shall be full warrant, protection and authority to the Trustee for the release of property and the withdrawal of cash hereunder. Section 9-11. Successor Trustee as Custodian of Trust Funds. In the event of a change in the office of trustee the predecessor trustee which has resigned or been removed shall cease to be custodian of the Trust Funds, and the successor trustee shall be and become such custodian. Section 9-12. Co -Trustee. At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Estate may at the time be located, the Municipality and the Trustee shall have power to appoint, and, upon the request of the Trustee or of the Holders of at least a majority in aggregate principal amount of Bonds Outstanding, the Municipality shall for such purpose join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint one or more persons approved by the Trustee either to act as co -trustee or co -trustees, jointly with the Trustee of all or any part of the Trust Estate, or to act as separate 9-7 trustee or separate trustees of all or any part of the Trust Estate, and to vest in such person or persons, in such capacity, such title to the Trust Estate or any part thereof, and such rights, powers, duties, trusts or obligations as the Municipality and the Trustee may consider necessary or desirable, subject to the remaining provisions of this Section. If the Municipality shall not have joined in such appointment within fifteen days after the receipt by it of a request so to do, or in case an Event of Default shall have occurred and be continuing, the Trustee alone shall have power to make such appointment. The Municipality 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, duties and obligations of such co -trustee or separate trustee. Every co -trustee or separate trustee shall, to the extent permitted by law but to such extent only, be appointed subject to the following terms, namely: (A) The Bonds shall be authenticated and delivered, and all rights, powers, trusts, duties and obligations by this Indenture conferred upon the Trustee in respect of the custody, control and management of moneys, papers, securities and other personal property shall be exercised solely by the Trustee. (B) All rights, powers, trusts, duties and obligations conferred or imposed upon the trustees shall be conferred or imposed upon and exercised or performed by the Trustee, or by the Trustee and such co -trustee or co -trustees or separate trustee or separate trustees jointly, as shall be provided in the instrument appointing such co -trustee or co -trustees or separate trustee or separate trustees, except to the extent that, under the law of any jurisdiction in which any particular act or acts are to be performed, the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such act or acts shall be performed by such co -trustee or co -trustees or separate trustee or separate trustees. (C) Any request in writing by the Trustee to any co -trustee or separate trustee to take or to refrain from taking any action hereunder shall be sufficient warrant for the taking, or the refraining from taking, of such action by such co -trustee or separate trustee. (D) Any co -trustee or separate trustee may delegate to the Trustee the exercise of any right, power, trust, duty or obligations, discretionary or otherwise. on (E) The Trustee at any time, by any instrument in writing, with the concurrence of the Municipality, may accept the resignation of or remove any co -trustee or separate trustee appointed under this Section, and, in case an Event of Default shall have occurred and be continuing, the Trustee shall have power to accept the resignation of, or remove, any such co -trustee or separate trustee without the concurrence of the Municipality. Upon the request of the Trustee, the Municipality shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. (F) No trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. (G) Any demand, request, direction, appointment, removal, notice, consent, waiver or other action in writing delivered to the Trustee shall be deemed to have been delivered to each such co -trustee or separate trustee. (H) Any money, papers, securities or other items of personal property received by any such co -trustee or separate trustee hereunder shall forthwith, so far as may be permitted by law, be turned over to the Trustee. Upon the acceptance in writing of such appointment by any such co -trustee or separate trustee, it or he shall be vested with such title to the Trust Estate or any part thereof, and with such rights, powers, duties or obligations, as shall be specified in the instrument of appointment jointly with the Trustee (except insofar as local law makes it necessary for any such co -trustee or separate trustee to act alone) subject to all the terms of this Indenture. Every such acceptance shall be filed with the Trustee. Any co -trustee or separate trustee may, at any time by an instrument in writing, constitute the Trustee, its or his attorney-in-fact and agent, with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any co -trustee or separate trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Estate, and all rights, powers, trusts, duties and obligations of said co -trustee or separate trustee shall, so far as permitted by law, vest in and be exercised by the Trustee unless and until a successor co -trustee or separate trustee shall be appointed in the manner herein provided. ARTICLE TEN SUPPLEMENTAL INDENTURES Section 10-1. Supplemental Indentures Not Requiring Consent of Bondholders. The Municipality and the Trustee may, from time to time and at any time, without the consent of, or notice to, any of the Bondholders, and when so required by this Indenture shall, enter into an indenture or indentures supplemental to this Indenture as shall not be inconsistent with the terms and provisions hereof (which supplemental indenture or indentures shall thereafter form a part hereof), so as thereby (a) to cure any ambiguity or formal defect or omission in this Indenture or in any supplemental indenture, (b) to grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Bondholders or the Trustee, (c) to describe or identify more precisely any part of the Trust Estate or to subject to the lien and pledge of this Indenture additional revenues, properties or collateral, (d) to evidence the appointment of a separate trustee or a co -trustee or the succession of a new Trustee hereunder, (e) to modify, eliminate and/or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the Trust Indenture Act of 1939, as then amended, or under any similar federal statute hereafter enacted, and to add to this Indenture such other provisions as may be expressly permitted by said Trust Indenture Act of 1939, excluding, however, the provisions referred to in Section 316(a)(2) of said Trust Indenture Act of 1939, (f) to make any other change in the Indenture which, in the judgment of the Trustee, is not to the prejudice of the Trustee or the Holders of the Bonds. Section 10-2. Supplemental Indentures Requiring Consent of Bondholders. Exclusive of supplemental indentures covered by Section 10-1 hereof and subject to the terms and provisions contained in this Section, and not otherwise, the Trustee, upon receipt of an instrument evidencing the consent to the below -mentioned supplemental indenture by the Holders of not less than a majority of the aggregate principal amount of the Outstanding Bonds, shall join with the Municipality in the execution of such other indenture or indentures supplemental hereto as shall be deemed necessary and desirable for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture or in any supplemental indenture; provided, however, that nothing herein contained shall permit or be construed as permitting, without the consent of the Holders of all Outstanding Bonds, (a) an extension of the maturity of the principal of or the interest on any Bond issued hereunder, (b) a reduction in the principal amount of any Bond or redemption premium, if any, or the rate of interest thereon, (c) a privilege or priority of any Bond or Bonds over any other Bond or Bonds, (d) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental 10-1 indenture, (e) the creation of any lien ranking prior to or on a parity with the lien of this Indenture on the Trust Estate or any part thereof, except as hereinbefore expressly permitted, (f) the deprivation of the Holder of any then Outstanding Bonds of the lien hereby created on the Trust Estate, or (g) the modification of any of the provisions of this Section. If at any time the Municipality shall request the Trustee to enter into any such supplemental indenture for any of the purposes of this Section, the Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such supplemental indenture to be mailed to each Bondholder. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the principal office of the Trustee for inspection by all Bondholders. The Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to mail such notice, and any such failure shall not affect the validity of such supplemental indenture when consented to and approved as provided in this Section. If the Holders of a majority in aggregate principal amount of the Outstanding Bonds, at the time of the execution of any such supplemental indenture, shall have consented to and approved the execution thereof as herein provided, no Holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Municipality from executing the same or from taking any action pursuant to the provision thereof. Upon the execution of any such supplemental indenture as in this Section permitted and provided this Indenture shall be and be deemed to be modified and amended in accordance therewith. Anything herein to the contrary notwithstanding, a supplemental indenture under this Article Ten which adversely affects the rights of the Company under the Agreement shall not become effective unless and until the Company shall have consented in writing to the execution and delivery of such supplemental indenture. In this regard the Trustee shall cause notice of any such supplemental indenture to the execution and delivery of which the Company has not already consented, together with a copy of the proposed supplemental indenture and a written consent form to be signed by the Company, to be mailed by registered mail to the Company, at least thirty days prior to the proposed date of execution and delivery of any such supplemental indenture. The Company shall be deemed to have consented to the execution and delivery of such supplemental indenture if the Trustee does not receive a letter of protest or objection, signed by a Company Representative on or before 4:00 o'clock P.M. Central time of the thirtieth day after the mailing of said notice and proposed supplemental indenture to the Company, and the notice mailed to the Company pursuant to the preceding sentence shall so state. 10-2 Section 10-3. Rights of Trustee. If, in the opinion of the Trustee, any supplemental indenture provided for in this Article affects the rights, duties or immunities of the Trustee under this Indenture or otherwise, the Trustee may, in its discretion, decline to execute such supplemental indenture, except to the extent that this may be required in the case of a supplemental indenture entered into under Section 10-1 hereof. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an opinion of Counsel as conclusive evidence that any such supplemental indenture conforms to the requirements of this Indenture. 10-3 ARTICLE ELEVEN AMENDMENT OF AGREEMENT, DECLARATION, ASSIGNMENT AND MORTGAGE Section 11-1. Amendment. Etc. to Agreement. Assignment and Mortgage Not Requiring Consent of Bondholders. The Municipality, the Company and the Trustee may, without the consent of or notice to the Bondholders, consent to any amendment, change or modification of the Agreement, the Declaration, the Assignment or the Mortgage which may be required or permitted (i) by the provisions of the Agreement, the Assignment, the Mortgage or this Indenture, (ii) for the purpose of curing any ambiguity or formal defect or omission, (iii) in connection with additional building or buildings and improvements and additional real or personal property which may be acquired and which constitute a part of the Project, or so as more precisely to identify items of property or substitute, add or release such items pursuant to the Agreement or the Mortgage, (iv) to add to the covenants of the Company or to surrender any right or power conferred upon the Company, or (v) in connection with any other change therein which, in the judgment of the Trustee, is not to the prejudice of the Trustee or the Holders of the Bonds. Section 11-2. Amendments. Etc. to Agreement. Declaration. Assignment and Mortgage Requiring Consent of Bondholders. Except for the amendments, changes or modifications as provided in Section 11-1 of this Indenture, neither the Municipality nor the Trustee shall consent to any other amendment, change or modification of the Agreement, the Declaration, the Assignment or the Mortgage without the giving of notice and the written approval or consent of the Holders of not less than a majority in aggregate principal amount of the then Outstanding Bonds, given and procured as in this Section provided. If at any time the Municipality and the Company shall request the consent of the Trustee to any such proposed amendment, change or modification of the Agreement, the Declaration, the Assignment or the Mortgage the Trustee shall, upon being satisfactorily indemnified by the Company with respect to expenses, cause notice of such proposed amendment, change or modification to be given in the same manner as provided by Section 10-2 hereof with respect to supplemental indentures. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the principal office of the Trustee for inspection by all Bondholders. The Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to give such notice, and any such failure shall not affect the validity of such amendment, change or modification when consented to and approved as provided in this Section. If the Holders of a majority in aggregate principal amount of the Outstanding Bonds, at the time of the execution of any such amendment, change or modification shall have consented to and approved the execution thereof as herein provided, no Holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Municipality from executing the same or from taking any action pursuant to the provisions thereof; provided, that nothing herein contained shall permit, or be construed as permitting, without the consent of the Holders of all Outstanding Bonds, any amendment, change or modification of the Agreement which would (a) reduce the amount payable by the Company thereunder, or (b) defer the time for payment of the amounts payable by the Company thereunder, or any amendment, change or modification of the Mortgage which would (a) permit the creation of any lien ranking prior to or on a parity with the lien of the Mortgage on the Mortgaged Property, except as expressly permitted or (b) deprive the Holder of any Outstanding Bond of the lien created by the Mortgage on the Mortgaged Property. 11-2 ARTICLE TWELVE MISCELLANEOUS Section 12-1. Consent. Etc. of Bondholders. Any consent, request, direction, approval, objection or other instrument required by this Indenture to be signed and executed by Bondholders may be in any number of concurrent writings of similar tenor and may be signed or executed by such Bondholders in person or by agent appointed in writing. Proof of the execution of any such consent, request, direction, approval, objection or other instrument or of the writing appointing any such agent and of the ownership of Bonds, if made in the following manner, shall be sufficient for any of the purposes of this Indenture, and shall be conclusive in favor of the Trustee with regard to any action taken by it under such request or other instrument, namely: (A) The fact and date of the execution by any person of any such writing may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgements within such jurisdiction that the person signing such writing acknowledged before him the execution thereof, or by an affidavit of any witness to such execution. (B) The fact of ownership of Bonds and the amount or amounts, numbers and other identification of such Bonds, and the date of holding the same shall be proved by the Bond Register. Section 12-2. Limitation of Rights. With the exception of rights herein conferred, nothing expressed or mentioned in or to be implied from this Indenture or the Bonds is intended or shall be construed to give to any person or company other than the parties hereto, and the Holders of the Bonds, any- legal or equitable right, remedy, or claim under or in respect to this Indenture or any covenants, conditions and provisions herein contained; this Indenture and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and the Holders of the Bonds hereby secured as herein provided. Section 12-3. Severability. If any provision of this Indenture shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions or in all cases because it conflicts with any provisions of any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. 12-1 The invalidity of any one or more phrases, sentences, clauses or paragraphs in this Indenture contained shall not affect the remaining portions of this Indenture or part thereof. Section 12-4. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when mailed by registered or certified mail, postage prepaid, with proper address as indicated below. The Municipality, the Company and the Trustee may, by ten (10) days' written notice given by each to the others, designate any other address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Indenture. Until otherwise provided by the respective parties, all notices, certificates and communications to each of them shall be addressed as follows: To the Municipality: City of New Hope City Hall 4401 Xylon Avenue North New Hope, Minnesota 55428 Attention: City Manager To the Trustee: Norwest Bank Minnesota, National Association 6th and Marquette Avenue Minneapolis, Minnesota 55479-0069 Attention: Corporate Trust Department To the Company: Northridge Properties of New Hope Limited Partnership c/o North Ridge Care Center 5430 Boone Avenue North New Hope, Minnesota 55428 Attention: Charles T. Thompson Section 12-5. Counterparts. This Indenture may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 12-6. Limitation of Municipality's Liability. No provision, covenant or agreement contained in this Indenture or the Bonds, or any obligation herein or therein imposed upon the Municipality, or the breach thereof, shall constitute or give rise to or impose upon the Municipality a pecuniary liability or a charge upon its general credit or taxing powers. In making the agreements, provisions and covenants set forth in this Indenture, the Municipality has not 12-2 obligated itself except with respect to the Agreement and the application of the revenues therefrom as hereinabove provided. IN WITNESS WHEREOF, the City of New Hope, Minnesota, has caused these presents to be signed in its name and behalf by the Mayor and Acting City Manager, and to evidence its acceptance of the trusts hereby created, Norwest Bank Minnesota, National Association, has caused these presents to be signed in its name and behalf by its duly authorized Corporate Trust Officer all as of the date first above written. CITY OF NEW HOPE, MINNESOTA Mayor y And Acting City Manager NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee Its Corporate That 0fff 12-3 LOAN AGREEMENT between CITY OF NEW HOPE, MINNESOTA and NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP Dated as of June 1, 1996 The interest of the City of New Hope, Minnesota in the payments to be received by the City under this Loan Agreement (except for payments under Sections 4.03(2), 7.04 and 9.05 hereof) has been assigned to Norwest Bank Minnesota, National Association, in Minneapolis, Minnesota, as Trustee under an Indenture of Trust, dated as of June 1, 1996, between the City of New Hope, Minnesota and Norwest Bank Minnesota, National Association, as Trustee. This instrument was drafted by: Dorsey & Whitney LLP Pillsbury Center South 220 South Sixth Street Minneapolis, Minnesota 55402 TABLE OF CONTENTS (Not a Part of this Loan Agreement) PW.e PARTIES........................................................ iv ARTICLE 1 - Definitions, Exhibits and Rules of Interpretation ........ 1-1 Section 1.01. Definitions .................................. 1-1 Section 1.02. Rules of Interpretation ........................ 1-6 Section 1.03. Limited Obligations of Municipality ............ 1-7 ARTICLE 2 - Representations ..................................... 2-1 Section 2.01. Representations by the Municipality ........... 2-1 Section 2.02. Representations by the Company .............. 2-2 ARTICLE 3 - The Project; Issuance of the Bonds ..................... 3-1 Section 3.01. Completion of the Project ..................... 3-1 Section 3.02. Issuance of the Bonds ......................... 3-1 ARTICLE 4 - The Loan ........................................... 4-1 Section 4.01. Amount and Source of Loan .................. 4-1 Section 4.02. Repayment of Loan ........................... 4-1 Section 4.03. Additional Payments ......................... 4-2 Section 4.04. Company's Obligations Unconditional ......... 4-2 Section 4.05. Company's Remedies ......................... 4-3 Section 4.06. Limitation of Liability ......................... 4-3 ARTICLE 5 - Title, Maintenance, Modifications, Taxes, Insurance and Disposition .................................... 5-1 Section 5.01. Title to Project ............................... 5-1 Section 5.02. Maintenance ................................. 5-1 Section 5.03. Modifications ................................ 5-1 Section 5.04. Taxes, Other Governmental Charges and Utility Charges; Liens ............................. 5-2 Section 5.05. Insurance .................................... 5-2 Section 5.06. Assignments of Agreement ................... 5-4 -i- ARTICLE 6 - Damage, Destruction and Condemnation .............. 6-1 Section 6.01. Company to Repair, Replace, Rebuild or Restore 6-1 Section 6.02. Cooperation of the Municipality and the Trustee ............................ 6-2 ARTICLE 7 - Company's Covenants ............................... 7-1 Section 7.01. Covenants for Benefit of Trustee ARTICLE 9 - Events of Default and Remedies ...................... 9-1 Section 9.01. and Holders of Bonds ...................... 7-1 Section 7.02. Inspections; Reports and Financial Statements .. 7-1 Section 7.03. Continuing Existence ......................... 7-1 Section 7.04. Indemnity ................................... 7-2 Section 7.05. Statement of Compliance ..................... 7-3 Section 7.06. Execution of Financing Statements ............. 7-3 Section 7.07. Tax Covenants ............................... 7-3 Section 7.08. Rates and Charges; Retention of 9-3 Independent Management Consultant ........ 7-5 Section 7.09. Payments to Affiliates ......................... 7-6 ARTICLE 8 - Company's Options .................................. 8-1 Section 8.01. Prepayment of Loan .......................... 8-1 Section 8.02. Option to Accelerate Payment of Loan and Direct Redemption of Bonds .................................. 8-1 Section 8.03. Company's Obligation to Prepay Loan and Direct Redemption of Bonds ....... 8-1 Section 8.04. Concerning a Determination of Taxability ............................... 8-2 ARTICLE 9 - Events of Default and Remedies ...................... 9-1 Section 9.01. Events of Default ............................. 9-1 Section 9.02. Municipality's Remedies ...................... 9-2 Section 9.03. Disposition of Funds .......................... 9-2 Section 9.04. Manner of Exercise ........................... 9-2 Section 9.05. Attorneys' Fees and Expenses .................. 9-2 Section 9.06. Effect of Waiver .............................. 9-3 Section 9.07. Trustee's Exercise of the Municipality's Remedies ................... 9-3 ARTICLE 10- General ........................................... 10-1 Section 10.01. Termination of this Agreement ................ 10-1 Section 10.02. Notices ...................................... 10-1 Section 10.03. Binding Effect ................................ 10-1 Section 10.04. Severability .................................. 10-1 Section 10.05. Amendments, Changes and Modifications .............................. 10-2 Section 10.06. Execution Counterparts ....................... 10-2 SIGNATURES................................................... 10-2 THIS LOAN AGREEMENT, dated as of the first day of June 1, 1996, between the CITY OF NEW HOPE, MINNESOTA, a municipal corporation and political subdivision of the State of Minnesota (hereinafter, together with any successor to its functions, referred to as the Municipality) and NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP, a Minnesota limited partnership (hereinafter, together with any permitted successor under Section 7.03 hereof, referred to as the Company); WITNESSETH: WHEREAS, pursuant to Minnesota Statutes, Chapter 462C, as amended (as the same may from time to time be amended or supplemented, hereinafter referred to as the Act), the Housing and Redevelopment Authority of the City of St. Paul, Minnesota has issued its Variable Rate Demand Rental Housing Revenue Bonds (Minnesota Multi -City Joint Rental Housing Program), Series 1985 (hereinafter referred to as the 1985 Bonds) a portion of which were used to finance the cost of acquisition, construction and equipping of a multifamily rental housing development containing 129 housing units in the Municipality (hereinafter referred to as the Project); and WHEREAS, the Company has requested the Municipality to issue its revenue bonds under the Act in order to refund the portion of the outstanding 1985 Bonds used to finance the Project (hereinafter referred to as the Refunded Bonds; and WHEREAS, simultaneously with the execution and delivery of this Loan Agreement, the Municipality and Norwest Bank Minnesota, National Association, in Minneapolis, Minnesota, as Trustee (hereinafter, together with any successor trustee under the below mentioned Indenture, referred to as the Trustee), will execute and deliver an Indenture of Trust, dated as of the date hereof, pursuant to which the Municipality will issue $5,000,000 in aggregate principal amount of its Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 (hereinafter referred to as the Bonds), and will pledge and assign to the Trustee, among other things, all Loan Repayments (as hereinafter defined), to secure the full and prompt payment of the principal of, premium, if any, and interest on the Bonds; NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto DO HEREBY AGREE as follows: -iv- ARTICLE I Definitions, Exhibits and Rules of Interpretation Section 1.01. Definitions. In this Loan Agreement the following terms have the following respective meanings unless the context hereof clearly requires otherwise: Act: Minnesota Statutes, Chapter 462C, as amended; Affiliate: any Person who, with respect to a second Person, directly or indirectly controls, is controlled by, or is under common control with the second Person (or any ancestor, descendant, sibling or spouse); Agreement: this Loan Agreement, including any amendment hereof or supplement hereto entered into in accordance with the provisions hereof and of the Indenture; Assignment: the Assignment of Rents and Leases, dated as of the date hereof, from the Company to the Municipality including any amendment thereof or supplement thereto in accordance with the provisions thereof and hereof; Bondholder: the person in whose name a Bond is registered in the Bond Register; Bonds: the Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996, issued pursuant to the Indenture; Bond Counsel: a firm of nationally recognized Bond Counsel selected by the Company; Bond Fund: the trust account created pursuant to Section 5-3 of the Indenture; Bond Register: the register maintained by the Trustee pursuant to Section 2-10 of the Indenture; Bond Year: each one-year period that ends on the date selected by the Company as provided in the Tax Certificate; provided that the first and last Bond Years may be short periods and if no day is selected by the Company before the earlier of the final maturity date of the Bonds or the date that is five (5) years after the date of issue of the Bonds, Bond Years shall end on each anniversary date of the issue date (June 1) and on the final maturity date; 1-1 Building: the building, fixtures and all other structures and improvements previously constructed on the Land as set forth in Section 3.01 hereof; Business Dav: any day other than a Saturday or Sunday or other day on which commercial banks in the city in which the principal corporate trust office of the Trustee is located are not open for business; Code: the Internal Revenue Code of 1986, as amended; all references herein to sections of the Code are to sections thereof as they exist on the date of execution of this Agreement, but include any amendment of the provisions thereof; Company: Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership, as it may be constituted from time to time and any permitted successor under Section 7.03 hereof; Company Representative: a person designated to act on behalf of the Company as evidenced by a written certificate furnished to the Municipality and the Trustee containing the specimen signature of such person and signed for the Company by a general partner; such certificate may designate one or more alternate Company Representatives; Counsel: an attorney designated by or acceptable to the Trustee, duly admitted to practice law before the highest court of any state, whether or not employed by, or attorney for, the Company or the Municipality; Declaration: the Declaration of Restrictive Covenants executed by the Company in favor of the Trustee; Determination of Taxability: the issuance of a statutory notice of deficiency by the Internal Revenue Service, or a ruling of the National Office or any District Office of the Internal Revenue Service, or a final decision of a court of competent jurisdiction which holds in effect that the interest payable on any Bond is includible in the gross income of an owner of such Bond for federal income tax purposes (other than an owner who is a "substantial user" of the Project or a "related person" as such terms are defined in Section 103(b)(13) of the 1954 Code), if the period, if any, for contest or appeal of such action, ruling or decision by the Company or any Bondholder has expired without any such contest or appeal having been properly instituted by the Company or a Bondholder; provided, that the Company has been given notice of and the right to participate in such proceedings to the extent provided in, and in accordance with, the provisions of Section 8.04 hereof and Section 2-5 of the Indenture and provided further that no such contest or appeal may be undertaken by the Company unless it first delivers to the Trustee an Opinion of Bond Counsel dated as of the then current date to the effect that interest 1-2 payable on the Bonds is not includible in gross income of the owner of the Bonds for federal income tax purposes (other than an owner who is a "substantial user" of the Project or a "related person" as such terms are defined in Section 103(b)(13) of the 1954 Code); Event of Default: any of the events referred to as such in Section 9.01 hereof; Force Majeure: any one or more of the following: acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the government of the United States or of the State of Minnesota or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; earthquakes; fires; storms; droughts, floods or other adverse weather conditions; explosions; breakages or accidents to machinery, transmission pipes or canals; temporary inability to obtain supplies or materials or governmental permits or licenses; or any other cause or event not reasonably within the control of the Company; Holder: a Bondholder; Indenture: the Indenture of Trust between the Municipality and the Trustee, dated as of the date of this Agreement, including any supplement thereto or amendment thereof entered into in accordance with the provisions thereof; Interest Payment Date: each June 1 and December 1, commencing June 1, 1996; Land: the real estate described in Exhibit A to the Mortgage, on which the Project is located, other than any real estate released from the Mortgage in accordance with the terms thereof; Loan: the loan by the Municipality to the Company of the proceeds of the Bonds, exclusive of any accrued interest paid by an Original Purchaser of the Bonds upon the delivery thereof, but including the underwriting discount or other amount, if any, by which the amount received by or on behalf of the Municipality in connection with the sale of the Bonds by the Municipality to an Original Purchaser is less than the principal amount of such Bonds; Loan Repayments: the payments required to be made by the Company pursuant to Section 4.02 hereof; Management Consultant: means an independent firm which is a professional management consultant with respect to the operation of senior rental 1-3 housing developments which is selected by the Company and which has the skill and experience necessary to render the particular report required by this Agreement; Mortgage: the Combination Mortgage, Security Agreement and Fixture Financing Statement, dated as of the date of this Agreement, from the Company to the Municipality, as the same may be amended or supplemented from time to time in accordance with the provisions thereof and of the Indenture; Mortgaged Property: the property described in the granting clauses of the Mortgage; Municipality: the City of New Hope, Minnesota, its successors and assigns; Municipality Assignments: the Assignment of Mortgage and the Assignment of Assignment of Rents and Leases from the City to the Trustee; Municipal Representative: the Mayor, the City Manager, or any other person at any time designated in writing by the Municipality to act in such capacity as evidenced by a written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed for the Municipality by the Mayor or the City Manager; Net Income Available for Debt Service: for any period of calculation the total operating revenue of the Project, including interest earnings on amounts in the Reserve Fund for such period, over expenses of operation of the Project, to which shall be added depreciation, amortization and interest expense on the Bonds, to the extent included in expenses of operation of the Project, and from which shall be excluded any extraordinary items and any gain or loss resulting from either extinguishment of indebtedness or the sale, exchange or other disposition of assets; Net Proceeds: with respect to any insurance payment or condemnation award, the amount remaining therefrom after payment of all expenses (including attorneys' fees and any extraordinary fees or expenses of the Trustee or the Company) incurred in the collection thereof; 1954 Code: the Internal Revenue Code of 1954, as amended; 1985 Bonds: the St. Paul HRA's Variable Rate Demand Rental Housing Revenue Bonds (Minnesota Multi -City Joint Housing Program), Series 1985; Opinion of Bond Counsel: a written opinion of Bond Counsel; Opinion of Counsel: a written opinion of Counsel; 1-4 Original Purchaser: Dougherty Dawkins, Inc., Minneapolis, Minnesota; Outstanding: when used with reference to Bonds, as of the date of determination, all Bonds authenticated and delivered under the Indenture, except: (A) Bonds theretofore canceled by the Trustee or delivered to the Trustee canceled or for cancellation; (B) Bonds deemed paid in accordance with the provisions of Section 7-2 of the Indenture; and (C) Bonds in lieu of which other Bonds shall have been authenticated and delivered pursuant to the Indenture; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Bonds have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, Bonds owned by the Municipality or the Company (or a "related person' as defined in Section 147(a) of the Code) shall be disregarded and deemed not to be Outstanding, except that in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which the Trustee knows to be so owned shall be disregarded; Permitted Encumbrances: those encumbrances defined as such in the Mortgage; Person: any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof, and any legal representative, administrator or trustee of any of the foregoing; Project: the Building and the Land as it may at any time exist; Property Insurance and Award Fund: the trust account created pursuant to Section 5-4 of the Indenture; Rebate Fund: the trust account created pursuant to Section 5-7 of the Indenture; Refunded Bonds: the portion of the 1985 Bonds issued to finance the Project, fund a debt service reserve fund and pay costs of issuance, which portion of the Refunded Bonds outstanding in the aggregate principal amount of $5,000,000 as of the date hereof; EQ: Repair and Replacement Reserve Fund: the trust account created pursuant to Section 5-8 of the Indenture; Reserve Fund: the trust account created pursuant to Section 5-5 of the Indenture; Reserve Requirement: shall mean, as of any date of calculation, an amount equal to fifty percent (50%) of the maximum amount of principal and interest to come due on the Bonds in the current or any future calendar year (based on the assumption that the Bonds are not redeemed prior to their maturity other than pursuant to Section 2-5(c) of the Indenture); St. Paul HRA: The Housing and Redevelopment Authority of the City of St. Paul, Minnesota, a public body corporate and politic; Tax Certificate: the Partnership Tax Certificate dated July 11, 1996, executed and delivered by the Company in connection with the issuance of the Bonds a copy of which is on file with the Trustee; Term: the duration of this Agreement, which shall be from the date hereof until June 1, 2026, unless this Agreement is extended or sooner terminated in accordance with its terms; Trustee: Norwest Bank Minnesota, National Association, in Minneapolis, Minnesota, or any successor trustee appointed, qualified and acting as such under the provisions of the Indenture; and Trust Funds: the trust accounts created pursuant to the Indenture, designated the Bond Fund, the Property Insurance and Award Fund, the Reserve Fund, the Repair and Replacement Reserve Fund and the Rebate Fund. Section 1.02. Rules of Interpretation. (1) This Agreement shall be interpreted in accordance with and governed by the laws of the State of Minnesota. (2) The words "herein' and "hereof' and "hereunder' and words of similar import, without reference to any particular section or subdivision, refer to this Agreement as a whole rather than to any particular section or subdivision hereof. 1-6 ( (3) References in this instrument to any particular article, section or subdivision hereof are to the designated article, section or subdivision of this instrument as originally executed. (4) Any terms not defined herein but defined in the Indenture shall have the same meaning herein unless the context hereof requires otherwise. (5) The Table of Contents and titles of articles and sections herein are for convenience only and are not a part of this Agreement. (6) Unless the context hereof clearly requires otherwise, the singular shall include the plural and vice versa and the masculine shall include the feminine and vice versa. (7) Except to the extent otherwise expressly provided herein, all accounting terms not otherwise defined herein have the meaning assigned to them in accordance with generally accepted accounting principles and all calculations to be made hereunder shall be made in accordance with generally accepted accounting principles. Section 1.03. Limited Obligations of Municipality. Notwithstanding any other provision or obligation stated in or implied by this Agreement, the Bonds shall not be payable from nor charged upon any funds other than the revenue pledged to the payment thereof, nor shall the Municipality be subject to any liability thereon. No Holder or Holders of the Bonds shall ever have the right to compel any exercise of the taxing power of the Municipality to pay the Bonds or the interest thereon nor to enforce payment thereof against any property of the Municipality except the property pledged under the Indenture. The Bonds shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the Municipality except the property pledged under the Indenture. No Bonds shall constitute a debt of the Municipality within the meaning of any constitutional or statutory limitation. 1-7 ARTICLE 2 Representations Section 2.01. Representations by the Municipality. The Municipality makes the following representations: (1) The Municipality is a duly organized and existing municipal corporation and political subdivision of the State of Minnesota. (2) In authorizing the issuance of the Refunded Bonds by the St. Paul HRA, the Municipality's purpose at such time, and in its judgment the effect thereof was, to (i) encourage the development of additional needed housing facilities in the Municipality and, (ii) increase the tax base of the Municipality and overlapping jurisdictions. (3) The refunding of the Refunded Bonds which remain outstanding, the issuance and sale of the Bonds, the execution and delivery of this Agreement, the Mortgage, the Assignment, the Municipality Assignments and the Indenture and the performance of all covenants and agreements of the Municipality contained in this Agreement, the Mortgage, the Assignment, the Municipality Assignments and the Indenture and of all other acts and things required under the Constitution and laws of the State of Minnesota to make this Agreement, the Mortgage, the Assignment, the Municipality Assignments and the Indenture valid and binding obligations of the Municipality in accordance with their terms are authorized by the Act and have been duly authorized by resolutions of the governing body of the Municipality adopted at meetings thereof duly called and held by the affirmative vote of not less than a majority of its members. (4) To refund the Refunded Bonds which remain outstanding, and in anticipation of the collection of the payments to be made by the Company pursuant to this Agreement, the Municipality has duly authorized the Bonds in the principal amount of $5,000,000 to be issued upon the terms set forth in the Indenture, under the provisions of which the Municipality's interest in this Agreement and the payments due hereunder are pledged to the Trustee as security for the payment of the principal of and interest on the Bonds. (5) The execution and delivery of this Agreement and the other agreements contemplated hereby to which the Municipality is a party, including without limitation the Indenture, will not conflict with, or constitute on the part of the Municipality a breach of, or a default under, any existing (i) law, or (ii) provisions of any legislative act, constitution or other proceeding establishing or relating to the establishment of the Municipality or its affairs or its resolutions, or 2-1 j (iii) agreement, indenture, mortgage, lease or other instrument to which the Municipality is subject or is a party or by which it is bound. (6) No officer of the Municipality who is authorized to take part in any manner in making this Agreement or any contract contemplated hereby has a personal financial interest in or has personally and financially benefitted from this Agreement or any such contract. (7) There is not pending or threatened any suit, action or proceeding against or affecting the Municipality before or by any court, arbitrator, administrative agency or other governmental authority which materially and adversely affects the validity, as to the Municipality, of this Agreement, any of its obligations hereunder or any of the transactions contemplated hereby. Section 2.02. Representations by the Company. The Company makes the following representations: (1) The Refunded Bonds which remain outstanding will be called for redemption on September 3, 1996, in accordance with the requirements of the Indenture of Trust, dated as of May 1, 1985, between the St. Paul HRA and First Trust National Association (formerly known as First Trust Company, Inc.), as Trustee. (2) The Company is a Minnesota limited partnership, has power to enter into this Agreement, Assignment, the Declaration and the Mortgage and to carry out its obligations hereunder, and by proper action under the partnership agreement for the Company has authorized the execution and delivery of this Agreement, the Assignment, the Declaration and the Mortgage. (3) The execution and delivery of this Agreement, the Assignment, the Declaration and the Mortgage and the consummation of the transactions contemplated hereby, and the fulfillment of the terms and conditions hereof do not and will not conflict with or result in a breach of any of the terms or conditions of the partnership agreement of the Company or of any mortgage, indenture, loan agreement or other corporate restriction or of any agreement or instrument to which the Company (or any of its general partners) is now a party or to which any property of the Company is subject, and do not and will not constitute a default under any of the foregoing, or result in the creation or imposition of any lien, charge or encumbrance of any nature upon any of the property or assets of the Company contrary to the terms of any instrument or agreement to which the Company is a party or by which it is bound. (4) The Company has not been served with respect to any suit, action or proceeding against the Company (or any of its general partners) before or by any court, arbitrator, administrative agency or other governmental authority which 2-2 materially and adversely affects the validity, as to the Company, of any of the transactions contemplated hereby or the ability of the Company to perform its obligations hereunder or as contemplated hereby, and to the best of the Company's knowledge there is not any such suit, action or proceeding against or affecting the Company (or any of its general partners) pending or threatened. (5) The Company has reviewed and approved the provisions of the Indenture. (6) To the best of Company's knowledge, the use of the Project complies with all presently applicable zoning, development, pollution control, water conservation, environmental and other laws, regulations, rules and ordinances of the federal government and the State and the respective agencies thereof and the political subdivisions in which the Project is located; to the best of Company's knowledge, the Company has obtained all necessary approvals of and licenses, permits, consents and franchises from federal, state, county, municipal or other governmental authorities having jurisdiction over the Project to operate the Project and to enter into and perform its obligations under this Agreement, the Assignment, the Declaration and the Mortgage. (7) To the best of the Company's knowledge, in addition to the Bonds, no other obligations have been or are expected to be issued under Section 103 of the Code for sale at substantially the same time as the Bonds are sold pursuant to a common plan of marketing and at substantially the same rate of interest as the Bonds and which are payable in whole or part by the Company or otherwise have with the Bonds any common or pooled security for the payment of debt service thereon, or which are otherwise treated as the same "issue of obligations' as the Bonds under the Code. (8) The Company is not in the trade or business of selling properties such as the Project and has acquired the Project for investment purposes only or otherwise for use by the Company in its trade or business, and therefore the Company has no intention now or in the foreseeable future to voluntarily, sell, surrender or otherwise transfer, in whole or part, its interest in the Project. (9) No license is presently required for operation of the Project. 2-3 ARTICLE 3 The Project; Issuance of the Bonds Section 3.01. Completion of the Project. The Building has been constructed on the Land substantially in accordance with the plans and specifications therefor so as to be fully operable by the Company for its intended purpose. Section 3.02. Issuance of the Bonds. To provide funds to be lent to the Company for the refunding of the Refunded Bonds, the Municipality has contracted for the sale of the Bonds and the Company hereby approves the terms of the sale of the Bonds. Forthwith upon the execution of the Indenture, the Municipality will execute the Bonds and cause them to be authenticated by the Trustee and delivered to the Original Purchaser thereof upon payment of the purchase price specified by the Municipality and filing with the Trustee of all documents required by the Indenture to be furnished to the Trustee before authentication and delivery. The Municipality has directed that the proceeds of the sale of the Bonds be transmitted to the Trustee, which is required by the Indenture to apply the same as therein provided. 3-1 ARTICLE 4 The Loan Section 4.01. Amount and Source of Loan. The Municipality agrees to lend to the Company, upon the terms and conditions herein specified, the proceeds received by the Municipality from the sale of the Bonds, excluding any accrued interest, by causing such proceeds to be transferred to the Trustee for disbursement in accordance with the Indenture. The amount of the loan so made shall be deemed to include any "discount' or other amount by which the aggregate price at which the Municipality sells the Bonds to the Original Purchaser thereof is less than the principal amount of the Bonds so sold. The obligation of the Municipality to lend such proceeds shall be discharged, and the obligation of the Company to repay the Loan shall become effective, when such proceeds are received by the Trustee from the Municipality or the Original Purchaser. Section 4.02. Repayment of Loan. The Company agrees to repay the Loan in installments of Loan Repayments which, in the aggregate, shall be in an amount sufficient to pay in full all principal of, premium, if any, and interest on the Bonds from time to time Outstanding when due, whether at their stated maturities, upon acceleration, call for redemption or otherwise. In addition, the Company agrees to pay interest on overdue installments of principal and (to the extent lawful) interest on the Loan at the rate or rates borne by the Bond or Bonds as to which such installments are overdue. To provide for the full and prompt payment of the principal and interest on the Bonds, the Company shall pay, on or before the twentieth day of each month, commencing July 20, 1996, an amount equal to one-sixth of the interest to become due on the Bonds on the next Interest Payment Date plus one -twelfth of the principal to become due on the Bonds on the next two Interest Payment Dates, whether at the stated maturity thereof, on a date fixed for redemption thereof pursuant to Section 2-5(c) of the Indenture or otherwise. Each payment by the Company under this Section shall be made directly to the Trustee at its principal corporate trust office for the account of the Municipality and shall be deposited in the Bond Fund. If, on any Interest Payment Date, the amount on deposit in the Bond Fund exceeds the amount of interest and principal payable on the Bonds on such date (or, if no principal is payable on the Bonds on such date, one-half of the principal payable on the next Interest Payment Date), such excess shall be a credit against the Loan Repayments next due and payable by the Company hereunder. 4-1 Section 4.03. Additional Payments. The Company will also pay the following amounts to the following persons: (1) to the Trustee, within ten Business Days after written notice that such payment is due, all reasonable fees of the Trustee for services rendered under the Indenture and all fees and charges of counsel, accountants, engineers and others incurred in the performance, on request of the Trustee, of services under the Indenture for which the Trustee and such other persons are entitled to payment or reimbursement, provided that the Company may, without creating a default hereunder, contest in good faith the reasonableness of any such fees or expenses other than the Trustee's fees for ordinary services as may be set forth in the Indenture; (2) to the Municipality, all reasonable expenses incurred by the Municipality in connection with the transactions contemplated hereby and by the Indenture which are not otherwise required to be paid by the Company under the terms of this Agreement, provided that a Company Representative shall have given written approval to the incurring of such expenses; (3) to the Municipality or the Trustee, as the case may be, the amount of all advances of funds made by either of them under the provisions hereof or of the Mortgage; (4) to the Trustee the required deposits to the Repair and Replacement Reserve Fund at the times and in the amounts required by Section 5-8 of the Indenture; and (5) to the Trustee for deposit in the Reserve Fund an amount which is sufficient to cause the amount in the Reserve Fund to.equal the Reserve Requirement if at any time the amount in the Reserve Fund is less than the Reserve Requirement. In the event the Company should fail to make any of the payments required by this Section, the item in default shall continue as an obligation of the Company until the amount in default shall have been fully paid. Section 4.04. Company's Obligations Unconditional. All payments required of the Company hereunder shall be paid without notice or demand and without setoff, counterclaim, abatement, deduction or defense. The Company will not suspend or discontinue any Loan Repayments, and will perform and observe all of its other agreements in this Agreement, and, except as expressly permitted in this Agreement, will not terminate the Agreement for any cause, including but not limited to any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Project, eviction by paramount title, commercial 4-2 frustration of purpose, bankruptcy or insolvency of the Municipality or the Trustee, change in the tax or other laws or administrative rulings or actions of the United States of America or of the State of Minnesota or any political subdivision thereof, or failure of the Municipality to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with this Agreement or the Indenture. Section 4.05. Company's Remedies. Nothing contained in this Article shall be construed to release the Municipality from the performance of any of its agreements in this Agreement, and if the Municipality should fail to perform any such agreement, the Company may institute such action against the Municipality as the Company may deem necessary to compel the performance, so long as such action shall not violate the Company's agreements in Section 4.04. The Company may at its own cost and expense, and in its own name, prosecute or defend any action or proceeding against third parties or take any other action which the Company deems reasonably necessary in order to secure or protect its title to the Project and right of possession, occupancy and use thereof under this Agreement. In this event the Municipality agrees to cooperate fully with the Company and to take all action necessary to effect the substitution of the Company for the Municipality in any such action or proceeding if the Company shall so request and agrees to pay all expenses. Section 4.06. Limitation of Liability. There shall be no personal liability hereunder of the general or limited partners of the Company except as hereinafter set forth. The personal liability of the Company and its partners shall be limited to the assets of the Company, the Project and any collateral securing this Loan Agreement, including without limitation, the Mortgage and the Assignment, and any and all funds held by or on behalf of the Trustee for the benefit of the bondholders. Notwithstanding the foregoing, the general partners of the Company shall be liable personally for any distributions of profits and loss from the Company made during the pendency of an Event of Default under this Agreement. In addition, the general partners of the Company shall be liable personally for any losses suffered by the Bondholders as a direct result of any intentional waste of all or any portion of the Project; any intentional misapplication of insurance or condemnation proceeds; or any fraud or false representation by the Company in the Official Statement or in any other materials delivered to the Bondholders in connection with the original issuance of the Bonds. 4-3 ARTICLE 5 Title, Maintenance, Modifications, Taxes, Insurance and Disposition Section 5.01. Title to Project. The Municipality acknowledges that as between the Municipality and the Company: (i) the Company shall be the sole owner of the Project, and shall be entitled to sole and exclusive possession of the Project, and (ii) neither the Municipality, the Trustee nor any Bondholders shall be entitled to or have any security interest in the Project or the Company's title to and interest therein except as provided in the Assignment and the Mortgage. The Company represents that it has no present intention to sell, lease (other than in the ordinary course of business), or dispose of the Project, except as provided herein, but the Company may sell the Project or enter into a master lease of the Project, or any part thereof, for any lawful purpose, provided that (a) no such sale or lease shall be inconsistent with the provisions of this Agreement, the Assignment, the Mortgage or the Indenture, (b) the Company shall remain fully obligated and responsible under this Agreement, the Assignment and the Mortgage to the same extent as if such contract of sale or lease had not been executed, (c) the contract of sale or lease shall provide that no purchaser or lessee shall be allowed to utilize a substantial portion of the Project primarily for an activity which would not itself qualify as a "multifamily housing development," as defined in the Act, and (d) any purchaser shall assume all of the obligations of the Company under this Agreement, the Declaration, the Mortgage and the Assignment and shall have a net worth of at least $2,000,000 and experience in owning or operating at least one senior rental housing development which is similar in operation to the Project; and (e) the Company shall cause to be furnished to the Trustee an opinion of Bond Counsel to the effect that the excludability of interest on the Bonds from gross income will not be adversely affected by such sale or lease. Any such lease or transfer shall contain a provision satisfactory to the Trustee that any payment to become due to the Company thereunder shall be payable to the Trustee if an Event of Default exists, or the Trustee, in its discretion, may accept a conditional assignment from the Company of any such leases or agreements. Section 5.02. Maintenance. During the term of this Agreement, the Company will keep the Project in good repair and operating condition and in as safe condition as its operations will reasonably permit, making all repairs thereto and renewals and replacements thereof which may be necessary for this purpose, in the reasonable judgment of the Company, so that the Project will remain suitable for use as a facility of the character described in and contemplated by this Agreement, or such other uses as are not inconsistent with the Act. Section 5.03. Modifications. The Company may from time to time make any additions, modifications, substitutions, deletions, or improvements to the 5-1 Project that it may deem desirable for its purposes; provided, however, that no addition, modification, substitution, deletion or improvement shall be made in such a manner or to such an extent as to (1) cause the interest on the Bonds (in the hands of any person who is not a "substantial user' of the Project or a "related person") to become includible in gross income for purposes of federal income taxation, (2) adversely and materially affect the operating efficiency of the Project, or (3) materially impair the value of the Project. Section 5.04. Taxes, Other Governmental Charges and Utility Charges: Liens. The Company shall, before any penalty attaches thereto, pay and discharge, or cause to be paid and discharged, all taxes, assessments, utility charges and other governmental charges imposed upon or against the Project, and, except as otherwise provided for in this Section 5.04 will not suffer to exist any mechanic's, statutory or other lien on the Project or any part thereof which might or could be held to be equal or prior to the lien of the Mortgage. If, under applicable law, any such tax, assessment or charge may, at the option of the Company, be paid in installments, with or without interest, the Company may exercise such option. Nothing in this section shall require the payment or discharge of any such taxes, assessments, charges or liens imposed upon the Project so long as the Company shall in good faith and at its own expense contest the same or validity thereof by appropriate legal proceedings, which shall operate to prevent the collection thereof or other realization thereon and the sale or forfeiture of the Project or any part thereof to satisfy the same; provided, that during such contest the Company shall, at the option of the Trustee, provide security reasonably satisfactory to the Trustee assuring the discharge of the Company's obligation for such taxes, assessments, charges or liens and of any additional charge, penalty or expense arising from or incurred as a result of such contest; and provided further, that if at any time payment of any such taxes, assessments or charges, or discharge of such liens, shall become necessary to prevent the delivery of a tax deed conveying the Project or any portion thereof, or to prevent the sale or the forfeiture of the Project or any part thereof, because of nonpayment, the Company shall pay the same, or discharge the same using appropriate legal proceedings in sufficient time to prevent the delivery of such tax deed or such sale or forfeiture. Section 5.05. Insurance. (1) The Company shall procure and maintain continuously in effect with respect to the Project policies of insurance against such risks and in such amounts, with such deductible provisions, as are customary for a prudent owner of property of the type and size comparable to the Project. Without limiting the generality of the foregoing provision, the Company shall specifically maintain the following insurance: 5-2 loss: (A) Direct damage insurance covering the following risks of (i) Fire, (ii) Extended Coverage Perils, (iii) Vandalism and Malicious Mischief, (iv) Boiler Explosion (but only if boilers are present), (v) Water Damage, (vi) Demolition Cost, (vii) Debris Removal, and (viii) Collapse, in an amount equal to the full replacement value of the Building, but in no event less than the principal amount of the Outstanding Bonds. ("Full replacement value" shall include the actual replacement cost of the Building (exclusive of foundations, footings, architectural, engineering, legal, and administrative fees) and contents therein, without deduction for depreciation.) Coverage on any portion of the Project during construction thereof shall be maintained on a completed value basis during the course of construction. "Full replacement value" shall be determined at least once every three years by an appraisal or report from an appraiser or reputable insurance consultant selected by the Company. A copy of such appraisal or report shall be furnished to the Trustee by the Company. The policies required by this paragraph (A) shall either be subject to no co-insurance or contain an agreed amount clause. (B) General liability insurance against liability for injuries to or death of any person or damage to or loss of property arising out of or in any way relating to the condition of the Project or any part thereof, in an amount not less than $3,000,000 for all personal injuries, deaths and property damage resulting from any one accident on a combined single -limit basis; provided that the requirements of this paragraph (B) with respect to the amount of insurance may be satisfied by an excess coverage policy. (C) Workers' compensation insurance or qualified self-insurance against liability for compensation under the Workers' Compensation Act now or hereafter enacted in Minnesota to cover all persons employed by the Company and to cover liability for compensation under any such act. 5-3 (D) Business interruption insurance or loss of rental income insurance in an amount adequate to make all Loan Repayments payable hereunder for a period of not less than twelve (12) months after the date of damage to or destruction of the Project. (2) All insurance provided for in Subsection (1) shall be effective under a valid and enforceable policy or policies issued by an insurer of recognized responsibility licensed to do business in the State of Minnesota having a Best's Insurance Guide rating of at least "A". (3) All policies of insurance required in paragraph (A) of Subsection (1) shall be written in the names of the Company. These policies shall provide that the proceeds of such insurance shall be payable to the Trustee pursuant to a standard mortgagee clause and all policies of insurance required under paragraphs (B) and (D) of Subsection (1) shall be endorsed to show the Municipality and the Trustee as additional insureds. (4) The Company shall deposit with the Trustee policies evidencing all such insurance, or a certificate or certificates of the respective insurers stating that such insurance is in force and effect. Each policy of insurance herein required shall contain a provision that the insurer shall not cancel, refuse to renew or materially modify it without giving written notice to the Trustee at least thirty days before the cancellation, nonrenewal or modification becomes effective. Before the expiration of any policy of insurance herein required, the Company shall furnish the Trustee with evidence satisfactory to the Trustee that the policy has been renewed or replaced by another policy conforming to the provisions of this Article, or that there is no necessity therefor under the terms hereof. In lieu of separate policies, the Company may maintain blanket policies having the coverage required herein, in which event it shall deposit with the Trustee a certificate or certificates of the respective insurance as to the amount of coverage in force on the Project. (5) Upon the happening of any loss or damage covered by any policies required by Subsection 1(A) from one or more of the causes insured against, if the claim under such policy or policies exceeds $75,000 the Company shall make due proof of loss containing a power of attorney in favor of the Trustee and endorse all drafts drawn for the payment thereof to the order of the Trustee and sign receipts therefor. The Company shall do all things necessary or desirable to cause the insurers to make payment in full directly to the Trustee in such case. Any adjustment in settlement of such loss must be acceptable to the Trustee. Section 5.06. Assignments of Agreement. This Agreement may not be assigned by either the Municipality or the Company without the consent of the other, except that the Municipality shall assign to the Trustee its rights under this 5-4 i Agreement as provided in Section 7.01 hereof and the Company may assign this Agreement to any successor which may assume its obligations in accordance with the provisions of Section 7.03 hereof. 5-5 ARTICLE 6 Damage, Destruction and Condemnation Section 6.01. Company to Repair, Replace. Rebuild or Restore. If there are any Outstanding Bonds when all or any part of the Project is taken by eminent domain, or destroyed or damaged, unless the Company exercises its option to direct the redemption of all Outstanding Bonds pursuant to Section 8.02 hereof: (1) The Company shall proceed promptly, subject to the provisions of subsection (2) and subject to delays occasioned by Force Majeure, to replace, repair, rebuild and restore the Project to substantially the same condition as existed before the taking or event causing the damage or destruction, with such changes, alterations and modifications (including substitution or addition of other property) as may be desired by the Company and will be suitable for continued operation of the Project for the business purposes of the Company, and the Company will pay all costs thereof and, if the condemnation award or insurance claim does not exceed $75,000, be entitled to retain all Net Proceeds of the condemnation award or insurance claim. (2) If the condemnation award or insurance claim exceeds $75,000, all Net Proceeds thereof shall be paid directly to the Trustee and deposited in the Property Insurance and Award Fund. The Trustee shall apply the Net Proceeds to payment of the costs of repair, replacement, rebuilding or restoration upon compliance with Section 5-4 of the Indenture. If the Net Proceeds are not sufficient to pay such costs in full, the Company will nonetheless complete the same and will pay that portion of the cost thereof in excess of the amount of the Net Proceeds. (3) The Company shall not, by reason of the payment of any costs of repair, rebuilding, replacement or restoration, be entitled to any reimbursement from the Municipality or any abatement or diminution of the amounts payable under Article 4 hereof or the other sums payable by the Company hereunder. Any balance of Net Proceeds remaining in the Property Insurance and Award Fund after payment of all costs of repair, rebuilding, replacement or restoration shall be paid to the Company. (4) All buildings and improvements acquired in the repair, rebuilding, replacement or restoration of the Project, together with any interests in land acquired by the Company as necessary for such restoration, shall be deemed a part of the Project and, subject to the lien of the Mortgage, and available for use and occupancy by the Company without the payment of any additional amounts other than those provided in Article 4 hereof, to the same extent as if they had been specifically described in Exhibit A to the Mortgage; provided, that no land, interest in 6-1 land, buildings or improvements shall be acquired subject to any lien or encumbrance other than Permitted Encumbrances. (5) The Net Proceeds of any (i) insurance or portion thereof attributable to damage or destruction separately incurred by property of the Company, or (ii) condemnation award or portion thereof separately awarded for damages to or taking of the property of the Company, or for damages on account of the taking of or interference with the Company's rights to possession, use or occupancy of the Project, shall be and remain at all times the property of the Company. Section 6.02. Cooperation of the Municipality and the Trustee. The Municipality and the Trustee will cooperate fully with the Company in filing any proof of loss with respect to any insurance policy covering casualties referred to in Section 6.01 hereof and in the handling and conduct of any litigation arising with respect thereto, and will, to the extent they may lawfully do so, permit the Company to appear in any such litigation or proceeding in the name and on behalf of the Trustee. The Trustee will cooperate fully with the Company in the handling and conduct of any prospective or pending condemnation proceedings affecting the Project or any part thereof, and will, to the extent it may lawfully do so, permit the Company to appear in any such litigation or proceedings in the name and on behalf of the Trustee. In no event will the Municipality or the Trustee voluntarily settle or consent to the settlement of any proceeding arising out of any insurance claim, or any prospective or pending condemnation proceedings, with respect to the Project or any part thereof without the written consent of the Company. 6-2 ARTICLE 7 Company's Covenants Section 7.01. Covenants for Benefit of Trustee and Holders of Bonds. The Company recognizes the power of the Municipality to assign and pledge its interest in this Agreement (other than those payments required to be made to the Municipality under Sections 4.03, 7.04 or 9.05 hereof) to the Trustee as security for the payment of the principal of, premium, if any, and interest on the Bonds and the payment of all fees and expenses of the Trustee and others, as provided in the Indenture. Each of the terms and provisions of this Agreement is a covenant for the use and benefit of the Trustee and the Holders of the Bonds, so long as any thereof shall remain Outstanding; but upon payment in full of the Bonds in accordance with Section 7-2 of the Indenture and of all fees and charges of the Trustee in accordance with Section 9-2 of the Indenture, all references in this Agreement to the Bonds and the Trustee shall be ineffective, and neither the Trustee nor the Holder of any of the Bonds shall thereafter have any rights hereunder, save and except those that shall have theretofore vested. Section 7.02. Inspections: Reports and Financial Statements. The Company will furnish to the Trustee any and all such other information as the Trustee may reasonably request, with respect to the performance by the Company of its covenants in this Agreement. The Company covenants that it will keep proper books of record and account in which full, true and correct entries shall be made of all dealings or transactions of or in relation to the business and affairs of the Company, in accordance with generally accepted accounting principles consistently applied, and will furnish or cause to be furnished to the Trustee: (1) within one hundred twenty (120) days after the last day of each fiscal year of the Company ending on or after December 31, 1996, financial statements of the Company for the preceding fiscal year, including an income statement and balance sheet, audited by an independent certified public accountant; and (2) within ninety (90) days after the end of each March, June, September and December, financial statements prepared by the Company and not reviewed by any third party, showing the financial position and results of operation of the Company for such quarter and year to date, and showing all items of income and expense for operation of the Project during such quarter. Section 7.03. Continuing Existence. The Company will maintain its existence as a limited partnership organized under the laws of the State of Minnesota throughout the term of this Agreement and will not wind up or otherwise dispose of all or substantially all of its assets; provided that the Company 7-1 may sell or otherwise transfer to another Person all or substantially all of it assets as an entirety and thereafter wind up (and be discharged from liability hereunder) if the transferee Person assumes in writing all of the obligations of the Company under this Agreement and any sale of the Project complies with the requirements of Section 5.01 hereof. At least thirty days before any such transaction becomes effective, the Company shall give the Municipality and the Trustee written notice. Every such transferee Person shall be bound by all of the covenants and agreements of the Company herein with respect to any further sale or transfer. So long as the Company is the owner of the Project the general partners in the Company as of the date of this Agreement or their lineal descendants shall own at least two-thirds of the general partnership voting interests in the Company. The general partners of the Company as of the date of this Agreement are Charles T. Thompson, Charles P. Thompson, James J. Pattee, M. D. and M. Melinda Pattee. Section 7.04. Ind_ e� The Company will pay, and will protect, indemnify and save the Municipality harmless from and against all liabilities, losses, damages, costs, expenses (including reasonable attorneys' fees), causes of action, suits, claims, demands and judgments of any nature arising from: (1) any injury to or death of any person or damage growing out of or connected with the use, non-use, condition or occupancy of the Project or all part thereof other than arising from the actions of the City; (2) violation of any agreement or condition of this Agreement by the Company other than any violations caused by the Municipality; (3) violation of any contract, agreement or restriction by the Company relating to the Project which shall have existed at the date of execution of this Agreement; (4) violation of any law, ordinance or regulation affecting the Project or all part thereof or the ownership, occupancy or use thereof; and (5) any statement or information relating to the expenditure of the proceeds of the Bonds contained in the "No -Arbitrage Certificate" or similar document furnished by the Company to the Municipality which, at the time made, is misleading, untrue or incorrect in any material respect. The provisions of this Section 7.04 shall survive the retirement and payment of the Bonds and the discharge of the Company's other obligations hereunder. 7-2 Section 7.05. Statement of Compliance. The Company will deliver to the Municipality and the Trustee, within 90 days following the end of each fiscal year, a certificate signed by the Company Representative stating that: (A) he has made, or caused to be made, all review of the Company's activities during the preceding year with respect to performance under this Agreement, and (B) to the best of his knowledge, based upon the results of such review, the Company has fulfilled all of its obligations under this Agreement, or if there has been all default in the fulfillment of any obligations, specifying the nature of each such default and its status. Section 7.06. Execution of Financing Statements. The Company agrees that it will, at its sole expense, execute and file or cause to be filed any financing statements deemed necessary by the Trustee to perfect the security interest of the Trustee in this Agreement and the payments to be made hereunder, including any financing statements which the Municipality may be required to file under the Indenture. Section 7.07. Tax Covenants. In order to ensure that the interest on the Bonds shall at all times be free from federal income taxation, the Company specifically represents, warrants and covenants with the Municipality, the Trustee and all Holders of the Bonds: (A) that it will fulfill all conditions specified in Section 103 of the 1954 Code and in Sections 103 and 141 through 150 of the Code and applicable Treasury Regulations as is necessary to maintain the tax-exempt status of the interest borne by the Bonds; (B) at least 90% of the proceeds of the Refunded Bond have been used to provide amounts paid or incurred on or after the date official action was taken by the Municipality with respect to the Project as contemplated by Treasury Regulations, Section 1.103-8(a)(5)(v) and which are chargeable to the capital account of the Project or would be so chargeable except with a proper election by the Company (for example, under Section 266 of the Code) or but for a proper election by the Company to deduct such amounts (not including, however, costs of issuance of the Refunded Bonds or the Bonds, such as underwriters' compensation, counsel fees, financial advisor fees, trustee fees, paying agent and certifying and authenticating agent fees, accountant fees, printing costs, costs incurred in connection with the required public approval process, fees and costs of the Municipality, costs of engineering and feasibility studies or similar costs); 7-3 (C) that all of the proceeds of the Refunded Bonds, including investment earnings thereon, have been spent on the cost of construction of the Project and costs of issuance of the Refunded Bonds with the exception of $515,000 in the reserve fund established with respect to the Refunded Bonds; (D) that no portion of the proceeds of the Refunded Bonds or the Bonds have been or will be used to provide any private or commercial golf course, country club, massage parlor, tennis club, skating facility (including roller skating, skateboard and ice skating), racquet sports facility (including any handball or racquetball court), hot tub facility, suntan facility or racetrack, or any property to be affixed to or consumed in the production of property for sale, or any airplane, skybox or other private luxury box or store the principal business of which is the sale of alcoholic beverages for consumption off premises, or any housing facility to be rented or used as all permanent residence, or any building or structure that is used primarily for the self -storage of goods, wares or merchandise for compensation; (E) that all of the proceeds of the Bonds will be applied to the payment of amounts drawn under a Letter of Credit to pay the principal of the Refunded Bonds still outstanding or to pay costs of issuance of the Bonds; (F) that no more than two percent (2%) of the proceeds of the Bonds or the proceeds of the Refunded Bonds will be applied to the payment of cost of issuance of the Bonds (within the meaning of Section 147(8) of the Code), and that all other cost of issuance will be paid by the Company from funds other than proceeds of the Bonds; (G) that the Company has not leased, sold, assigned, granted or conveyed and will not lease, sell, assign, grant or convey all or any portion of the facilities financed by the Bonds or the Refunded Bonds or any interest therein to the United States or any agency or instrumentality thereof within the meaning of Section 149(b) of the Code; (H) that no obligations have been or will be issued under Section 141, 142, 143, 144 or 145 of the Code which are sold at substantially the same time as the Bonds, pursuant to all common plan of marketing and which are payable in whole or in part by the Company or otherwise have any common or pooled security for the payment of debt service thereon with the Bonds; (I) that the average maturity of the Bonds (20.198 years) does not exceed 120% of the average reasonably expected economic life of the facilities financed or refinanced by the Bonds (30 years) as determined in accordance with Section 147(b) of the Code; l 7-4 (J) that it shall provide the Municipality all information required to satisfy the informational requirements set forth in Section 149(e) of the Code, including the information necessary to complete IRS Form 8038; (K) that it will not use the proceeds of the Bonds in such all manner as to cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code and applicable Treasury Regulations; to this end, the Company shall comply with the provisions of the Tax Certificate setting forth the procedures to be followed by the Company to comply with Section 148(f) of the Code; (L) that, in order to comply with the foregoing paragraph (K), the Company shall calculate the Rebate Amount (as defined in the Tax Certificate) within 30 days of each Computation Date as provided in the Tax Certificate; upon each such calculation, the Company shall furnish the Trustee a certificate showing how such calculation was made, and, in the case of the calculations made at the end of every fifth Bond Year and upon payment in full of the Bonds, such calculations shall be accompanied by a written statement of a firm of independent certified public accountants or nationally recognized bond counsel stating that they have reviewed such calculations and believe them to be correct, and shall pay to the Trustee, for deposit in the Rebate Fund, the Rebate Amount so determined; the Company shall separately account for the earnings from the investment of the Rebate Amount and such earnings shall become part of the Rebate Amount; (M) that the Company will use and operate the Project in accordance with the terms of the Declaration until the later of (i) the date on which the Qualified Project Period (as defined in the Declaration) terminates or (ii) the date on which the Bonds have been fully paid, and knows of no reason why the Project will not be so operated; and (N) that it will comply with and fulfill all other requirements and conditions of the 1954 Code, the Code and Treasury Regulations and rulings issued pursuant thereto relating to the acquisition, construction and operation of the facilities financed by the Bonds and the Refunded Bonds to the end that interest on the Bonds shall at all times be excludable from gross income for purposes of federal income taxation. Section 7.08. Rates and Charges: Retention of Management Consultant. (A) The Company represents that it will exercise every reasonable effort to operate the Project and charge and collect, or cause to be charged and collected, subject to applicable requirements or restrictions imposed by law, rents and fees, such that Net Income Available for Debt Service in each fiscal 7-5 year of the Company will be at least one hundred ten percent (110%) of the debt service on the Bonds during such fiscal year. (B) If the Net Income Available for Debt Service of the Company for any fiscal year is less than 110% of the debt service on the Bonds during such fiscal year, then the Company will promptly employ a Management Consultant to review and analyze the financial statements for the Company and the Project, inspect the Project, its operation and administration and submit to the Company and the Trustee a written report, and make such recommendations as to the operation and administration of the Project as such Management Consultant deems appropriate, including any recommendation as to a revision of the rents and fees of the Project or the methods of operation thereof. The Company agrees to consider any recommendations by the Management Consultant and, to the fullest extent feasible, to adopt and carry out such recommendations. (C) Notwithstanding paragraph (A) above, so long as the Company is otherwise in full compliance with its obligations under this Agreement, including following, to the fullest extent feasible, the recommendations of the Management Consultant, it shall not constitute an Event of Default that the Net Income Available for Debt Service of the Company for any fiscal year of the Company are less than 110% of the debt service on the Bonds for such fiscal year. Section 7.09. Payments to Affiliates. The Company agrees that no amounts will be paid or property transferred to any person who is an Affiliate of the Company in consideration of any property or services provided by the Affiliate that exceed in value that which would be paid or transferred if such person had not been an Affiliate. Notwithstanding the foregoing, subject to the Debt Subordination Agreement, dated June 1, 1996, by North Ridge Care Center, Inc., for the benefit of the Trustee, payments may be made by the Company on loans and advances from North Ridge Care Center, Inc., and so long as no Event of Default has occurred and is continuing, and so long as no Event of Default shall result therefrom, property or amounts may be distributed by the Company to partners or owners of the Company in respect to their partnership or ownership interest, but solely upon their agreement to return such distribution if it should be required for the Company to avoid an Event of Default within two years following such distribution. 7-6 ARTICLE 8 Company's Options Section 8.01. Prepayment of Loan. The Company may at any time transmit funds directly to the Trustee, for deposit in the Bond Fund, in addition to amounts, if any, otherwise required at that time pursuant to this Agreement, and direct that said money be utilized by the Trustee for the redemption of Bonds which are then or will be redeemable in accordance with their terms. Section 8.02. Option to Accelerate Payment of Loan and to Direct Redemption of Bonds. The Company shall have the option to repay the Loan in full, and to direct the Municipality to call for redemption and prepayment all of the Outstanding Bonds if (a) all or substantially all the Project shall have been damaged or destroyed to such extent that in the reasonable opinion of the Company, the repair and restoration is economically not practicable or cannot be accomplished within ninety days; or (b) there occurs the condemnation of all or substantially all the Project or the taking by eminent domain of such use or control of the Project as to render it unsatisfactory to the Company for its intended use for a period of time longer than ninety days. In any such case the Company shall, to exercise its option hereunder, notify the Municipality and Trustee in writing within one hundred eighty days following occurrence of the event, and within sixty days thereafter deposit with the Trustee all sum sufficient, with other funds held by the Trustee and available for such purpose, (i) to redeem at the earliest practicable Interest Payment Date all Bonds then Outstanding at a redemption price equal to the principal amount thereof, (ii) to pay the interest which will become due on such Bonds to and including the redemption date, and (iii) to pay all expenses of the Municipality and the Trustee accrued and to accrue through the redemption date. Section 8.03. Company's Obligation to Prepay Loan and Direct Redemption of Bonds. If the Company receives a notice from any Bondholder, the Trustee or any other source of a Determination of Taxability, the Company shall immediately pay to the Trustee for deposit in the Bond Fund the following sums: (A) an amount equal to the principal amount of all Bonds then Outstanding, plus (B) an amount equal to the interest accrued on all Outstanding Bonds to the redemption date upon which all then Outstanding Bonds are to be called for redemption in accordance with the provisions of Section 2-5(b) of the Indenture. Such amounts shall be held and disbursed by the Trustee as provided in Section 5-3 of the Indenture. ME Section 8.04. Concerning a Determination of Taxability. No action or decision described in the definition of Determination of Taxability shall give rise to a Determination of Taxability unless the Company has been given written notice and, if it is so desired and is legally allowed, has been given the opportunity to contest the same, either directly or in the name of any Bondholder, and until conclusion of any appellate review, if sought. The Company will not contest any action or decision described in the definition of Determination of Taxability unless the Company first delivers to the Trustee an Opinion of Bond Counsel dated as of a then current date to the effect that interest payable on the Bonds is not includible in gross income of the Holder of the Bonds for federal income tax purposes (other than a Holder who is a "substantial user" of the Project or a "related person" as such terms are defined in Section 103(b)(13) of the 1954 Code). The Trustee shall accept notices from Bondholders concerning action by the Internal Revenue Service and deal with them in the manner provided in Section 2-5 of the Indenture. M ARTICLE 9 Events of Default and Remedies Section 9.01. Events of Default. Any one or more of the following events is an Event of Default under this Agreement: (1) if the Company shall fail to make any Loan Repayment when due and such failure shall continue for all period of five days after written notice given to the Company by the Trustee, or until the next Interest Payment Date, whichever is sooner; or (2) if the Company shall fail to pay when due any amounts due under this Agreement or the Mortgage other than Loan Repayments, and continuance of such default for thirty days after written notice thereof given to the Company by the Municipality or the Trustee; or (3) if the Company shall fail to observe and perform, for reasons other than the current pendency of a Force Majeure, any other covenant, condition or agreement on its part under this Agreement, the Assignment, the Declaration or the Mortgage for a period of thirty days after written notice, specifying such default and requesting that it be remedied, given to the Company by the Municipality or the Trustee, or for such longer period as may be reasonably necessary to remedy such default provided that the Company is proceeding with reasonable diligence to remedy the same; or (4) if all court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing all receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for all period of 60 consecutive days; (5) if the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by all receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of the Company or for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due or shall take any partnership action in furtherance of any of the foregoing; or X31 (6) if any representation or warranty made by the Company herein or in the Mortgage, or by an officer or representative of the Company in any document or certificate furnished the Trustee in connection herewith or therewith or pursuant hereto or thereto, shall prove at any time to be incorrect or misleading in any material respect as of the date made. Section 9.02. Municipality's Remedies. Whenever any Event of Default shall have happened and be subsisting, the Municipality, but only with the prior written consent of the Trustee, or the Trustee, may (i) declare all installments of the Loan payable under Section 4.02 for the remainder of the Term (being an amount equal to that necessary to pay in full all Outstanding Bonds, assuming acceleration of the Bonds under the Indenture, and to pay all other indebtedness thereunder) to be immediately due and payable, whereupon the same shall become immediately due and payable by the Company, and, in the event the Company does not, forthwith, deposit with the Trustee an amount sufficient to satisfy its obligations under the preceding clause, then the Trustee may take whatever action at law or in equity may appear necessary or appropriate to collect the Loan Repayments then due and thereafter to become due, and (ii) take whatever action at law or in equity may appear necessary to enforce the performance and observance of any obligation, agreement or covenant of the Company under this Agreement. Section 9.03. Disposition of Funds. Any amounts collected pursuant to action taken under Section 9.02 shall be paid into the Bond Fund and applied in accordance with the provisions of the Indenture. Section 9.04. Manner of Exercise. No remedy herein conferred upon or reserved to the Municipality is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be all waiver thereof, 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 the Municipality to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. Section 9.05. Attorneys' Fees and Expenses. In the event the Company should default under any of the provisions of this Agreement and the Municipality or the Trustee should employ attorneys or incur other expenses for the collection of the Loan or the enforcement of performance of any obligation or agreement on the part of the Company, the Company, to the extent then permitted by Minnesota law, 9-2 will on demand pay to the Municipality or the Trustee the reasonable fee of such attorneys and such other expenses so incurred. Section 9.06. Effect of Waiver. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. Section 9.07. Trustee's Exercise of the Municipality's Remedies. Whenever any Event of Default shall have happened and be subsisting the Trustee may, but except as otherwise provided in the Indenture shall not be obliged to, exercise any or all of the rights of the Municipality under this Article 9. In addition, the Trustee shall have available to it all of the remedies prescribed by the Mortgage and Assignment. 9-3 ARTICLE 10 General Section 10.01. Termination of this Agreement. At any time when no Bonds remain Outstanding, and arrangements satisfactory to the Municipality and the Trustee have been made for the discharge of all accrued liabilities under this Agreement, this Agreement shall terminate. Section 10.02. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when mailed by registered or certified mail, postage prepaid, with proper address as indicated below. The Municipality, the Company and the Trustee may, by ten (10) days' written notice given by each to the others, designate any other address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Agreement. Until otherwise provided by the respective parties, all notices, certificates and communications to each of them shall be addressed as follows: To the Municipality: City of New Hope City Hall 4401 Xylon Avenue North New Hope, Minnesota 55428 Attention: City Manager To the Company: Northridge Properties of New Hope Limited Partnership C/o North Ridge Care Center 5430 Boone Avenue North New Hope, Minnesota 55428 Attention: Charles T. Thompson To the Trustee: Norwest Bank Minnesota, National Association 6th and Marquette Avenue Minneapolis, Minnesota 55479-0069 Attention: Corporate Trust Department Section 10.03. Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the Municipality and the Company and their respective successors and assigns. Section 10.04. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 10.05. Amendments. Changes and Modifications. Except as otherwise provided in this Agreement or in the Indenture, subsequent to the initial issuance of Bonds and before the Indenture is satisfied and discharged in accordance with its terms, this Agreement may not be effectively amended, changed, modified, altered, or terminated by the Municipality and the Company without the written consent of the Trustee. Section 10.06. Execution Countervarts. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. IN WITNESS WHEREOF, the Municipality and the Company have caused this Agreement to be executed and attested by their duly authorized officers, all as of the date first above written. CITY OF NEW HOPE, MINNESOTA s ZIts Mayor`M A diSS�� • \ \ ,t �z� Its Acting City Manager 10-2 NORTHRIDGE PROPERTIES OF NEW /f HOPE LIMITED PARTNERSHIP By d" Charles P. Thompson, Its General Partner 10-3 r DECLARATION OF RESTRICTIVE COVENANTS STATE OF MINNESOTA ) ) SS COUNTY OF HENNEPIN ) KNOW ALL PERSONS BY THESE PRESENTS: This Declaration is made on the date hereinafter set forth by the corporation, partnership, proprietorship, joint venture or other entity executing this Declaration as the "Declarant." WITNESSETH WHEREAS, the Declarant is the owner of certain real property described on Exhibit A attached hereto and made a part hereof for all purposes (the "Land"): WHEREAS, Declarant desires to adopt a uniform plan for the operation of the Land and improvements now and hereafter located on the Land (such Land and improvements thereon being hereafter collectively referred to as the "Development") on the basis hereinafter stated; WHEREAS, the City of New Hope, Minnesota (hereinafter referred to as the "City") has heretofore determined to issue its Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 in the original principal amount of $5,000,000 (the "Bonds") on behalf of the Declarant to refinance certain obligations issued to finance the Declarant's rental housing development located within the corporate limits of the City, to be occupied primarily or in part by persons of low and moderate income, and which was acquired, constructed and equipped, and occupied in conformance with the requirements of the Housing Act as hereafter defined, and in conformance with Section 103(b)(4)(A) of the Internal Revenue Code of 1954, as amended (the "Code"), and the regulations proposed or promulgated thereunder, all for the public purpose of assisting persons to obtain decent, safe and sanitary housing at rentals they can afford; and WHEREAS, the Bonds are issued pursuant to an Indenture of Trust dated as of June 1, 1996 (the "Indenture") by and between the City and Norwest Bank Minnesota, National Association (the "Trustee"); WHEREAS, in order to satisfy the requirements of the Code the Declarant does hereby impose upon the Land the following covenants and restrictions which shall be covenants running with the land and shall be binding upon and inure to the benefit of and be a burden on any purchaser, grantee, owner or lessee of any portion of the Land and any other person or entity having any right, title or interest therein and upon the respective heirs, executors, administrators, devisees, successors and assigns of any purchaser, grantee, owner or lessee of any portion of the Land and any other person or entity having any right, title or interest therein. Section 1. 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: "Adjusted Family Income" shall mean the adjusted gross income of all persons who reside in a single residential rental unit, calculated as set forth on Exhibit D hereto (or such other form as may be acceptable to the Trustee and approved by Bond Counsel) or as shown on such persons' most recent income tax returns filed with the Internal Revenue Service, less such adjustments as shall be consistent with determination of lower-income families under Section 8 of the United States Housing Act of 1937 and the regulations promulgated thereunder calculated in the manner prescribed in Treasury Regulation Section 1.167(k) - 3(b)(3), as said Section 8 and Treasury Regulation Section 1.167(k) - 3(b)(3) shall be in effect on the date of initial issuance and delivery of the Bonds. "Bond Counsel" means Dorsey & Whitney LLP, or any other attorney or firm of attorneys, acceptable to the Issuer, experienced in matters pertaining to the tax- exempt financing of residential rental property, and duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bonds" shall mean the Issuer's Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 to be issued pursuant to the Indenture in the original principal amount of $5,000,000. "Certification Year" means, with respect to any tenant, the 12 -month period which begins on the earlier of (i) the first date on which such tenant first occupies the residential unit in the Development on a rental basis subsequent to the first date upon which such residential unit shall be available for rental subsequent to the acquisition, construction and rehabilitation financed in whole or in.part from proceeds of the Bonds; or (ii) the date on which such tenant signs a lease with respect to a residential unit in the Development. "City" shall mean the City of New Hope, a Minnesota municipal corporation. -2- "Code" shall mean the Internal Revenue Code of 1954, as amended, and the final or temporary regulations promulgated thereunder from time to time. "Completion Date" shall mean the date of substantial completion of construction and equipping of the Development which date has been determined to be October 14,1985. "Declarant" shall mean Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership, and its successors and assigns. "Development" shall mean the 129 -unit rental housing project located on the real property described on Exhibit A hereto, which shall be owned and operated as a multifamily rental housing development under the Housing Act and as a residential rental project within the meaning of Treasury Regulation Section 1.103- 8(b)(4) issued under Section 103(b)(4)(A) of the Code. "Federal Targeted Area" shall mean a Targeted Area of the kind described in the Housing Act. "HAP Contract" means any Housing Assistance Payments Contract executed by and between the PHA and the Declarant pursuant to Section 8 of the United States Housing Act of 1937 (42 U.S.C. §1437f). "Housing Act" means Minnesota Statutes Chapter 462C, as amended or replaced; provided that the tenant income restrictions and occupancy requirements set forth herein shall not change by any amendment or replacement of Chapter 462C until and unless a Certificate of Amendment or Termination or Deletion of Covenants, in substantially the form of Exhibit B hereto has been executed by the City and placed of record in the public land records office in which this Declaration was filed and recorded. "Indenture" shall mean the Indenture of Trust dated as of June 1, 1996 by and between the Issuer and the Trustee, as the same may be from time to time supplemented or amended. "Land" shall mean the real property described in Exhibit A attached hereto. "Lower -Income Tenants" shall mean and include individuals or families with Adjusted Family Income which does not exceed eighty percent (80%) of the median gross income for the area in which the Development is located, determined in a manner consistent with determinations of median income made under the leased housing program established under Section 8 of the United States Housing Act of 1937, as amended (or if such program is terminated, under such program as is in effect immediately before such termination). In no event, however, will the -3- 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. "Mortgage" shall mean that certain Combination Mortgage, Security Agreement and Fixture Financing Statement dated as of June 1, 1996, granting a mortgage on and security interest in the land, buildings and equipment comprising the Development, made from the Declarant to the City and assigned by the City to the Trustee. "PHA" shall mean any public agency or body that enters into a HAP Contract with the Developer. "Qualified Number of Days" shall mean 50 percent of the total number of days in the period from May 1, 1985 through the term of the Bonds (assuming the Bonds are paid on the latest maturity date of any of them), plus the term of any refunding obligations. "Qualified Project Period" means a period beginning on the first day on which at least 10 percent of the residential units in the Development were first occupied which date has been determined to be no later than December 1, 1985, and ending on the later of the date (x) which is 10 years after the date on. which at least 50 percent of the residential units in the Development are first occupied; (y) which is a Qualified Number of Days after the date on which any of the residential units in the Development is first occupied; or (z) on which any assistance provided with respect to the Development under Section 8 of the United States Housing Act of 1937 terminates. "Targeted Area" shall mean a "targeted area" as defined in the Housing Act. "Trustee" shall mean Norwest Bank Minnesota, National Association, a national banking association, or any successor trustee duly appointed and acting under the Indenture. Unless the context clearly requires otherwise, words of the masculine gender shall be construed to include correlative words of the feminine and neuter genders and vice versa, and words of the singular number shall be construed to include correlative words of the plural number and vice versa. This Declaration of Restrictive Covenants and all the terms and provisions .hereof shall be construed to effectuate the purposes set forth herein and to sustain the validity hereof. The terms and phrases used in the recitals of this Declaration of Restrictive Covenants have been included for convenience of reference only, and the meaning, construction and interpretation of all such terms and phrases for purposes of this Declaration of Restrictive Covenants shall be determined by Ell references to this Section. The titles and headings of the sections of this Declaration of Restrictive Covenants have been inserted for convenience or reference only and are not to be considered a part hereof and shall never be considered or given any effect in construing this Declaration of Restrictive Covenants or any provision hereof or in ascertaining intent, if any questions of intent shall arise. Section 2. Residential Rental Project: Federal Income Tax Law. The Declarant understands, agrees and intends that the Development is to be owned, managed and operated, for as long as the Bonds remain outstanding and unpaid but in any event for the Qualified Project Period, as a "residential rental project" as such phrase is utilized in Section 103(b)(4)(A) of the Code. Declarant shall promptly take whatever action may be required to correct any failure to comply with this Section and shall take whatever action may be directed by the Trustee to verify or confirm compliance with this Section. Section 3. Lower -Income Tenants: Federal Income Tax Law. (1) To the end of satisfying the requirements of Section 103(b)(4)(A) of the Code relating to individuals of low and moderate income, during the Qualified Project Period, the Declarant hereby represents, covenants and agrees as follows: (a) At all times during the Qualified Project Period, at least 20 percent of the completed residential units in the Development (or 15 percent of such units if the Development is located in a Federal Targeted Area) shall be occupied (within the meaning of Treasury Regulation Section 103- 8(b)(5)(ii) under Section 103(b)(4)(A) of the Code) by Lower -Income Tenants. For purposes of satisfying the requirements of the preceding sentence, the following rules apply: (i) an individual qualifies as a Lower -Income Tenant and will continue to qualify as such as long as he or she continues to reside in such unit even though such Lower -Income Tenant's income rises and the occupant subsequently ceases to meet the income or other requirements of a Lower -Income Tenant; and (ii) when a Lower -Income Tenant leaves a unit, such unit will be considered as occupied by a Lower -Income 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 shall exceed 31 days, at which time the status of the new tenant as a Lower -Income Tenant is to be determined; -5- (b) The Declarant agrees that in order to avoid violating the requirement that at all times during the Qualified Project Period at least 20 percent of the completed residential units in the Development (or 15 percent of such units if the Development is located in a Federal Targeted Area) will be occupied by Lower -Income Tenants the following requirements will apply: (i) during initial rent -up of the Development, at least 20 percent (or 15 percent in a Federal Targeted Area) of the residential units rented up at any time in the Development (upon and after the first date upon which ten percent (10%) of the residential units are first occupied) will be occupied by Lower -Income Tenants; and (ii) the Declarant will refrain from renting residential units to persons other than Lower -Income Tenants as necessary to satisfy the requirements; (c) Except as otherwise provided in Section 3(2) hereof, the Declarant shall obtain and maintain on file a swom, notarized income certification in the form attached hereto as Exhibit D (the "Income Computation and Certification (Lower Income Tenants)") from each Lower - Income Tenant residing in the Development and in the form and manner required by Treasury Regulation §1.167(k) -3(b), as it shall be in effect on the date of initial issuance of the Bonds, or in such other form and manner 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 issued under Section 103(b)(4)(A) of the Code; (d) Except as otherwise provided in Section 3(2) hereof, the Declarant shall obtain and maintain on file from each Lower -Income Tenant residing in the Development (i) a copy of such Lower -Income Tenant's most recently filed federal income tax return or (ii) a verification from the Lower - Income Tenant's employer, if any, or other source of income, if any, of said tenant's income and earnings; (e) Within ten (10) days after the initial occupancy of any unit in the Development by a Lower Income Tenant, the Declarant will provide to the Issuer and the Lender and, if requested, the City, copies of such Lower Income. Tenant's Income Computation and Certification in the form attached hereto as Exhibit D together with supporting documentation (including copies of federal income tax returns or employer verification of earnings); and the Declarant will permit any duly authorized representative of the Trustee, the Department of the Treasury or the Internal Revenue Service to inspect M the books and records of the Declarant pertaining to the income of Lower - Income Tenants residing in the Development; and (f) Except as otherwise provided in Section 3(2) hereof, the Declarant shall prepare and submit to the Trustee and on or before the first day of February, May, August and November of each year during the Qualified Project Period and within thirty (30) days after any change in occupancy of a residential unit in the Development by a Lower Income Tenant, a Certificate of Continuing Compliance as to compliance with this Section 3, executed by the Declarant, and in substantially the form attached hereto as Exhibit C. (2) The Declarant need not fulfill the requirements of subparagraphs (c) and (d) of Section 3(1) hereof, nor need the Declarant fulfill the reporting requirements of subparagraphs (e) and (f) of Section 3(1) hereof, and shall be deemed to be in compliance with this Section 3, if: (a) The Declarant shall have executed a HAP Contract with respect to the Development, pursuant to Section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f); (b) The HAP Contract provides that at least 20 percent of the residential units in the Development (or 15 percent of such units in a Federal Targeted Area) shall be leased to individuals and families qualifying as Lower -Income Families under Section 8 of the United States Housing Act of 1937 and the regulations thereunder, and, for purposes of making such determination, the percentage of median gross income which qualifies as.low or moderate income is at least 80 percent; (c) The Declarant shall at all times be and remain in full compliance with all provisions and requirements of the HAP Contract and the PHA as administrator of the HAP Contract shall report such compliance to the Trustee at such time or times as the (City or name of City Agency holding Section 8 allocation*) and Trustee may agree. Immediately upon termination of the HAP Contract, for any reason whatsoever, or upon receipt of notice by the Declarant that the Declarant is in default under the HAP Contract or that the Development is not in compliance with the rental requirements of this Section 3, or upon receipt of notice that the percentage of median gross income utilized to determine if individuals or families qualify as Lower -Income Families for purposes of the HAP Contract exceeds 80 percent, the Declarant shall be required, and the Declarant agrees, to henceforward fulfill all data and reporting requirements of subparagraphs (c), (d) and (f) of Section 3(1) with respect to all new Lower -Income Tenants and with respect to occupancy of -7- the Development as a whole, and to promptly obtain, prepare and submit to the the Trustee such supplemental information with respect to existing Lower -Income Tenants as the Trustee shall reasonably require to establish compliance with this Section 3. Section 4. Multifamily Housing Development; Certain State Statutory Requirements. The Declarant hereby declares its understanding, intent and agreement that the Development is to be owned, managed and operated as a "multifamily housing development," as such term is defined in the Housing Act, and that the Development shall be operated in all respects in conformance with the requirements and provisions of the Housing Act, for -so long as the Developer Loan remains outstanding and unpaid. Section 5. Covenants Run with the Land; Term. The Declarant hereby declares its express intent that the covenants, reservations and restrictions set forth herein shall be deemed covenants running with the Land and shall pass to the Declarant's successors in title. Each and every contract, deed or other instrument hereafter executed covering or conveying the Land or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, regardless of whether or not such covenants are set forth in such contract, deed or other instrument. Unless sooner terminated in accordance with Section 9 hereof, such covenants shall continue in full force and effect for as long as the Bonds remain outstanding or for the Qualified Project Period, whichever is longer. Section 6. Uniformity; Common Plan. The provisions hereof shall apply uniformly to the entire Development in order to establish and carry out a common plan for the use, development and improvement of the Land. Section 7. Burden and Benefit. The Declarant hereby declares its understanding and intent that the burden of the covenants set forth herein concern the Land in that the Declarant's legal interest in the Land may be rendered less valuable thereby. The Declarant hereby further declares its understanding and intent, however, that the benefit of such covenants concern the Land by enhancing and increasing the enjoyment and use of the Land and the Development by or for Lower -Income Tenants, and to benefit the the Trustee and the owners from time to tone of the Bonds; provided BE however, that the beneficiaries hereof shall be limited to the Trustee and the owners from time to time of the Bonds. Section 8. Remedies; Enforceability. In the event of a violation or attempted violation of any of the provisions hereof, the Trustee, or its successors and assigns, shall give written notice thereof to the Declarant, and if such violation or attempted violation is not cured within thirty (30) days thereafter, may institute and prosecute any proceeding at law or in equity to abate, prevent or enjoin any such violation or attempted violation, or to recover monetary damages caused by such violation or attempted violation. Declarant agrees that an action to recover monetary damages for violation or attempted violation of the provisions hereof will not be an adequate remedy at law, and the Trustee shall have the right to institute an action for and seek specific performance by the Declarant to remedy such violation or attempted violation. The provisions hereof are imposed upon and made applicable to the Land and shall run with the Land and shall be enforceable against the Declarant, each purchaser, grantee, owner or lessee of the Development, and the respective heirs, legal representatives, successors and assigns of the Declarant and each such purchaser, grantee, owner or lessee. No delay.in enforcing the provisions hereof as to any breach or violation shall impair, damage or waive the right of any party entitled 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. The monetary damages recoverable by any beneficiary of the covenants expressed herein shall be limited in that such beneficiaries shall have recourse solely to the Development and the assets of the Developer, and none of the general or limited partners of the Developer shall have any personal liability for such monetary damages. Section 9. Amendment; Termination. A. The provisions of this Declaration shall not be amended, terminated or deleted prior to the stated term set forth in this Declaration except by an instrument in writing duly executed by the Trustee and Declarant or their respective successors or assigns, or in accordance with paragraph (D) of this Section 9 provided that Section 4 hereof shall terminate automatically upon payment of the Bonds as evidenced by a certificate of the Trustee to that effect. Unless sooner terminated or amended or deleted from this Declaration as in this Section provided, each of the covenants and restrictions set forth in this Declaration above shall continue in full force and effect during the longer of the remaining term of the Bonds or 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 93 of this Declaration hereof are intended to survive the expiration and satisfaction of any security instruments placed of record evidencing and securing financing arrangements made for the acquisition and construction of the Development, if such expiration and satisfaction occurs prior to the expiration of the Qualified Project Period. B. At any "Appropriate Time', as hereinafter defined, the Declarant, or its successors or assigns, may request that the Trustee execute and deliver to the then Owner of the Development a Certificate of Amendment or Termination or Deletion of Covenants in the form attached to this Declaration as Exhibit "B", which Certificate shall have been previously executed by the Declarant, its successor or assign. If the Declarant's request is made at an "Appropriate Time", the Trustee will execute and deliver to the Declarant the Certificate of Amendment or Termination or Deletion of Covenants. Any such certification entered into by the Trustee 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 this Declaration with respect to the obligations of the Declarant and its successors and assigns under this Declaration, it being the intention of the City 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. C. It shall be an "Appropriate Time" for the Trustee'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 Declaration. 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 Declarant delivers to the Trustee with the Declarant' s request, a written opinion of Bond Counsel addressed to the Declarant 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 Bonds. Such opinion of Bond Counsel shall clearly state whether it addresses amendment, termination or deletion of the covenants and restrictions 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 Trustee shall execute and deliver the Certificate of Termination or Deletion of Covenants to the Declarant. D. The provisions hereof shall be deemed to be no longer in effect in the event of noncompliance with the provisions of Section 103(b)(4)(A) of the -10- 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 Issuer from enforcing the requirements hereof), or condemnation or similar events but only if within a reasonable period, a principal amount of the Bonds equal to the outstanding principal amount of the Developer Loan are paid and redeemed. To evidence an event of the kind stated in this paragraph D, the Trustee or other appropriate person, shall execute and deliver a Certificate of Termination of Covenants in substantially the form of Exhibit B attached hereto upon receipt of an opinion of Bond Counsel to the effect that termination of this Declaration as a result of such event will not adversely affect the exemption from federal income taxation of interest received or to be received on the Bonds. Section 10. Consideration. The City has determined to adopt and implement the financing program for the Development, and to issue the Bonds to obtain moneys to carry out the financing program for the purpose, among others, of making a loan to the Declarant to refinance indebtedness of the Declarant incurred to acquire, construct and operate the Development in order to provide additional decent, safe and sanitary rental housing in part for Lower Income Tenants. In consideration of the adoption and implementation of the financing program and the issuance of the Bonds by the City, the Declarant has accepted the terms and provisions hereof. Section 11. Recording. The Declarant shall cause this Declaration of Restrictive Covenants and all amendments and supplements hereto and all Certificates relating hereto (except Exhibits C and D) to be recorded and filed in such manner in the appropriate public real estate records office in and for Hennepin County and shall pay all fees and charges incurred in connection therewith. Section 12. Governing Law. This instrument shall be governed by the laws of the State of Minnesota. Section 13. Notices. Any notice required to be given hereunder shall be given by registered or certified mail at the addresses specified below or at such other addresses as may be specified in writing by the parties hereto: -11- City: City of New Hope City Hall 4401 Xylon Avenue North New Hope, Minnesota 55428 Declarant: Northridge Properties of New Hope Limited Partnership c/o North Ridge Care Center 5430 Boone Avenue North New Hope, Minnesota 55428 Attn: Charles T. Thompson Trustee: Norwest Bank Minnesota, National Association Sixth and Marquette Minneapolis, Minnesota 55379 Attn: Corporate Trust Department Section 14. Severability. If any provisions of this Declaration of Restrictive Covenants shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions shall not in any way be affected or impaired. [Remainder of this page has been left blank intentionally.] -12- IN WITNESS WHEREOF, the Declarant has caused this instrument to be signed on its behalf by its duly authorized Managing General Partner, as of the 1st day of June, 1996. NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP B y : C �tl�E►v�I�J Charles P. Thompson, Its Managing General Partner Notice Address: 5430 Boone Avenue North New Hope, Minnesota 55428 Attn: Charles T. Thompson STATE OF MINNESOTA) ) ss. COUNTY OF HENNEPIN) The fo oing instrument was acknowledged before me this day of L 1996, by Charles P. Thompson, the Managing General Partner of r�perties of New Hope Limited Partnership, a Minnesota limited partnership, on behalf of the limited partnership. AnAM��`MnnnanAr rAnnnnhM/�M�A1`nA� �.1 �� ' .��s �,/�`✓ t ATHERiNEF,UTZMANN Notary Public NOTARY Vf.IENESOTA .1 RSy (:P'aiNSSIC^ EcpttaS Jan. 31, 2000 tl - Signature Page to Declaration of Restrictive Covenants -13- EXHIBIT A Legal Description Lot 1, Block 1, Charlie Thompson Addition, according to the plat thereof on file and of record in the office of the Registrar of Titles in and for Hennepin County, Minnesota, except the East 177.5 feet thereof. A-1 EXHIBIT B CERTIFICATION OF AMENDMENT OR TERMINATION OR DELETION OF COVENANTS WHEREAS, a the present owner of the following described land (the "Land") in the County of Hennepin and State of Minnesota, to -wit: [INSERT LEGAL DESCRIPTION] is WHEREAS, Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Declarant") entered into a Declaration of Covenants and Restrictions dated as of June 1, 1996 (the "Declaration") recorded in the office of the Registrar of Titles in and for the County of Hennepin and State of Minnesota on , 1996 as Document No. ; and WHEREAS, the Declaration contained certain covenants and restrictions which run with the land and are binding upon the Declarant, its successors and assigns; and WHEREAS, the Trustee was given in said Declaration 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 benefitted by such covenants and restrictions; and WHEREAS, under the terms and provisions of said Declaration it is now appropriate to deliver this Certificate and to amend or terminate or delete such covenants and restrictions and all preconditions thereto have been fully satisfied; NOW THEREFORE, this is to certify that [(a) OR (b) WHICH EVER IS APPLICABLE]: (a) the covenants and restrictions set forth in Section * of the Declaration are null and void and of no further force or effect; the Registrar of Titles in and for the County of Hennepin and State of Minnesota is hereby authorized to accept this instrument for recording and filing as a conclusive determination of the termination and release of all covenants and restrictions set forth in Section * of the Declaration, as specified and as a complete termination of all rights and other remedial provisions with respect to Section 8 of the Declaration provided that deletion of the covenants and restrictions set forth in said Section * of the Declaration shall not modify, amend or delete any other covenant or restriction expressed in the Declaration, unless all the covenants and restrictions of the Declaration are hereby deleted [or] (b) the covenants and restrictions set forth in Sections * of the Declaration (or any of them, as specified) are hereby amended to read as follows: [insert text of amendment]; the 1511M Registrar of Titles in and for the County of Hennepin and State of Minnesota are hereby authorized to accept this instrument for recording and filing as a conclusive determination of the amendment of the covenants and restrictions set forth in Section * of the Declaration, as specified. Dated this day of *Specify Section LM NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee WE I STATE OF MINNESOTA) ) ss. COUNTY OF ) On this _ day of _ . 19 _, before me a Notary Public within and for said County, personally appeared and . each to me personally known, who, being by me duly sworn, did say -that they are the and of and that said instrument was signed on behalf of said and that said and acknowledged said instrument to be the free act and deed of such Notary Public L�3 EXHIBIT C CERTIFICATION OF CONTINUING COMPLIANCE The undersigned, of Northridge Properties of New Hope Limited Partnership (the "Declarant') being the present owner of the real property described in the Declaration identified below, hereby certify as follows: 1. The undersigned have read and are familiar with the provisions of the Declaration of Restrictive Covenants dated as of June 1, 1996 (the "Declaration") entered into by a and duly recorded in the appropriate public real estate records in and for Hennepin County, Minnesota on 1996 as Document No. 2. With respect to Sections 2 and 3 of the Declaration, all of the covenants and restrictions expressed in Sections 2 and 3(1) therein have been fully and faithfully observed and performed at all times during the 12 month period preceding the date of this Certificate. 3. With respect to Section 4 of the Declaration, all the covenants and restrictions expressed in said Section 4 have been fully and faithfully observed and performed at all times during the 12 month period preceding the date of this Certificate. **4. (a) completed residential units in the Development which constitute % of all residential units in the Development, were occupied by persons or families with respect to whom assistance was provided under Section 8 of the National Housing Act of 1937, as amended. (b) completed residential units in the Development which constitute % of all residential units in the Development, were occupied by persons or families who qualify as Lower -Income Tenants or were held vacant and reserved for occupancy by Lower -Income Tenants. (c) Attached as Schedule I -is a list, by unit numbers and tenant names (if the unit is occupied) of all units enumerated in paragraphs (a) and (b), above. **fill in appropriate blanks - if not applicable, fill in 'N/A". C-1 5. The Declarant is not in default under any of its obligations under the Declaration except as set forth on Schedule II, if any, attached hereto. 6. Words and phrases used in this certification shall have the same meanings herein as in the Declaration. NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP By— Its C-2 EXHIBIT D INCOME COMPUTATION AND CERTIFICATION (Lower Income Tenants) Development: Address: Developer: I/We, the undersigned, being first duly sworn, state that I/we have read and answered fully, frankly and personally each of the following questions for all persons who are to occupy the limit in the above apartment development for which application is made, all of whom are listed below: 1. 2. 3. Name of Members Relationship of the to Head of Household Household HEAD SPOUSE Social Security Number Income Computation 5. Place of Employment 6. The anticipated income of all the above persons_ during the 12 -month period beginning this date, - a. including all wages and salaries, overtime pay, commissions, fees, tips and bonuses before payroll deductions; net income from the operation of a business or profession or from the rental of real or personal property (without deducting expenditures for business expansion or D-1 amortization of capital indebtedness); interest and dividends; the full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts; payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay; the maximum amount of public assistance available to the above persons; periodic and determinable allowances, such as alimony and child support payments and regular contributions and gifts received from persons not residing in the dwelling; and all regular pay, special pay and allowances of a member of the Armed Forces (whether or not living in the dwelling) who is the head of the household or spouse; b. excluding casual, sporadic or irregular gifts; amounts which are specifically for or in reimbursement of medical expenses; lump sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and worker's compensation), capital gains and settlement for personal or property losses; amounts of educational scholarships paid directly to the student or the educational institution, and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees, books and equipment, but in either case only to the extent used for such purposes; special pay to a serviceman head of a family who is away from home and exposed to hostile fire; relocation payments under Title II of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; foster child care payments; the value of coupon allotments for the purchase of food pursuant to the Food Stamp Act of 1964 which is in excess of the amount actually charged for the allotments; and payments received pursuant to participation in ACTION volunteer programs. 7. If any of the persons described above (or whose income or contributions was included in item 6) has any savings, bonds, equity in real property or other form of capital investment, provide: a. the total value of all such assets owned by all such persons: b. the amount of income expected: to be derived from such assets in the 12 -month period commencing this date;..$ , and C. the amount of such income which is included in item 6: D-2 0 a. Will all of the persons listed in column 1 above be or have they been full-time students during five calendar months of this calendar year at an educational institution (other than a correspondence school) with regular faculty and students? Yes No b. Is any such person (other than nonresident aliens) married and eligible to file a joint federal income tax return? Yes No We acknowledge that all of the above information is relevant to the status under federal income tax law of the interest on bonds issued to finance the apartment for which application is being made. We consent to the disclosure of such information to the City of New Hope, as the issuer of such bonds, and to Norwest Bank Minnesota, National Association, as trustee under the Indenture of Trust under which such bonds were issued. D-3 THE UNDERSIGNED HEREBY CERTIFY THAT THE INFORMATION SET FORTH ABOVE IS TRUE AND CORRECT IN ALL RESPECTS; AND THE UNDERSIGNED ACKNOWLEDGE THAT THE LEASE EXECUTED BY THE UNDERSIGNED MAY BE CANCELED UPON 10 DAYS WRITTEN NOTICE IF THE UNDERSIGNED HAVE MISREPRESENTED ANY OF THE INFORMATION SET FORTH ABOVE. Head of Household Spouse Subscribed and sworn to before me this _ day of (Notary Seal) Notary Public in and for the State of My Commission Expires: - M1 FOR COMPLETION BY DEVELOPMENT OWNER (OR ITS MANAGER) ONLY: 1. Calculation of tenant income: a. Enter amount entered for entire household in 6 above: $ b. If the amount entered in 7.a above is greater than $5,000, enter the greater of (i) the amount entered in 7.b less the amount entered in 7.c or (ii) 10% of the amount entered in 7.a.: C. TOTAL ELIGIBLE INCOME (Line l.a plus line Lb): 2. The amount entered in l.c is less than or equal to 80% of median income for the area in which the Development is located, as defined under the Declaration. 3. Number of apartment unit assigned: 4. This apartment unit was was not last occupied for a period of at least 31 consecutive days by persons whose aggregate anticipated annual income as certified in the above manner upon their initial occupancy of the apartment unit was less than or equal to 808 of median gross income in the area. 5. Applicant qualifies as a Lower Income Tenant (20% of all tenants must meet). BOND PURCHASE AGREEMENT July 11, 1996 City of New Hope, Minnesota City Hall New Hope, Minnesota Northridge Properties of New Hope Limited Partnership 5430 Boone Avenue New Hope, Minnesota 55428 RE: CITY OF NEW HOPE, REFUNDING REVENUE SERIES 1996 (the "Bonds") Ladies and Gentlemen: MINNESOTA MULTIFAMILY HOUSING BONDS (CHARDON COURT PROJECT), The undersigned, Dougherty Dawkins, Inc. (the "Underwriter"), hereby offers to purchase, upon the terms and conditions hereinafter specified, the above -referenced bonds in the aggregate principal amount of $5,000,000 to be issued by the City of New Hope, Minnesota (the "Municipality"), and dated as of their date of delivery. The Bonds are described in an Official Statement dated July 1, 1996 including the Appendices thereto (the "Official Statement"). If and when accepted by you, this document shall constitute our Bond Purchase Agreement (the "Bond Purchase Agreement"). 1. Background. The Bonds will be issued by the Municipality pursuant to an Indenture of Trust (the "Indenture") between the Municipality and Norwest Bank Minnesota, National Association, as trustee thereunder (the "Trustee"). Proceeds of the Bonds will be loaned pursuant to a Loan Agreement (the "Loan Agreement") between the Municipality and Northridge Properties of New Hope Limited Partnership (the "Company"), a Minnesota limited partnership. Proceeds of the Bonds will be used to refund the principal amount allocable to the Project (described below) of the outstanding Variable Rate Demand Rental Housing Revenue Bonds (Minnesota Multi -City Joint Housing Program), Series 1985 issued by the St. Paul Housing and Redevelopment Authority (the "St. Paul HRA"), the proceeds of which were used, among other things, to acquire, construct and equip a certain 129 -unit senior multifamily rental housing project, available for occupancy, in part, by low and moderate income families and located in the Municipality (the "Project"). Pursuant to the Loan Agreement, the Company is required to make monthly payments ("Loan Repayments"), sufficient if duly paid in full, to pay when due all scheduled principal of, premium, if any, and interest on the Bonds. The Bonds are secured by a pledge of the Loan M1:0141020.03 Repayments, together with other payments to be made by the Company under the Loan Agreement (other than certain indemnification and expense reimbursement payments). Subject to permitted encumbrances, the Bonds are further secured by a first mortgage lien on and a security interest in the Project pursuant to a Combination Mortgage, Security Agreement and Fixture Financing Statement (the "Mortgage") by the Company in favor of the Municipality, which Mortgage the Municipality will assign to the Trustee pursuant to a certain Assignment of Mortgage Agreement (the "Mortgage Assignment"). Under a certain Assignment of Leases and Rents (the "Rent Assignment") from the Company to the Municipality, the Company will assign to the Municipality all rents and leases for the use or occupation of the Mortgaged Property (as defined in the Mortgage). Pursuant to a certain Assignment of Assignment of Rents and Leases, the Municipality will assign its interest in the Rent Assignment (the "Assignment of Rent Assignment") to the Trustee. In order to comply with the provisions of Section 103(b)(4)(A) of the Internal Revenue Code of 1954, as amended, the Company, the St. Paul HRA and the Trustee entered into a certain Declaration of Restrictive Covenants dated as of May 1, 1985, to be amended by a certain First Amendment to Declaration of Restrictive Covenants, to be executed by the Company (as so amended, the "Declaration"), for the purpose of creating certain restrictions relating to low and moderate income tenants and the use of the Project. Under the terms of a Continuing Disclosure Agreement between the Company and the Trustee (the "Continuing Disclosure Agreement"), the Company will undertake certain ongoing reporting requirements. All capitalized terms used and not defined herein shall have the meaning assigned in the Official Statement. 2. Representations and Warranties of the Company. The Company represents and warrants to the Underwriter as follows: (a) The Company is a duly formed and validly existing limited partnership, in good standing under the laws of the State of Minnesota, with full power and authority to own its properties and conduct its operations, all as described in the Official Statement. The Company is conducting its business in substantial compliance with all applicable and valid laws, rules, regulations and restrictions of each jurisdiction where it owns or leases substantial property or where it transacts material business. (b) The Company has full power and authority to execute, deliver and perform the Loan Agreement, the Mortgage, the Rent Assignment, the Declaration, and this Bond Purchase Agreement (collectively, the "Company Documents") and all other documents, instruments and certificates of the Company executed or delivered in connection therewith on or prior to the date of issuance and delivery of the Bonds (the "Closing Date"). (c) Assuming due authorization, execution and delivery by any other parties thereto, each of the Company Documents (when executed and delivered by the Company) shall have been duly and validly authorized, executed and delivered and constitute a valid MI:0141020.03 -- 2 and binding obligation of the Company, enforceable in accordance with its terms, except to the extent limited by any future proceedings applicable to such party under bankruptcy, reorganization or other laws of general application relating to or affecting the enforcement of creditors' rights or principles of equity. (d) The execution, delivery and performance of the Company Documents by the Company shall not violate, conflict with or result in (after notice, lapse of time, or otherwise) a breach , default, creation of a lien (other than as contemplated herein) or an acceleration of any performance under the partnership agreement of the Company or any law, statute, ordinance, regulation, decree, order, agreement, contract or instrument of any nature whatsoever to which the Company is a party or to which the Company or any of its properties are subject. (e) The Company is not in violation of, conflict with or default under any law, statute, ordinance, regulation, decree, order, agreement, contract or instrument of any nature whatsoever to which it is a parry or to which the Company or any of its properties are subject, other than violations or defaults which separately and collectively would have no material adverse effect on the financial condition of the Company, the ability of the Company to perform its obligations under the Company Documents, or the security of the Bonds. (f) Except as may be disclosed in the Official Statement, neither the Company, nor any person controlling, controlled by or under control with the Company, either directly or indirectly, has defaulted in the payment of any material debt or material monetary guarantee within the ten (10) years immediately preceding the date hereof. In addition, the Company is not and has not been in default anytime after December 31, 1975, as to principal or interest: (i) with respect to an obligation issued by the Company or predecessor or successor of the Company; or (ii) with respect to an obligation guaranteed by the Company or predecessor or successor of the Company. (g) As of the Closing Date (i) there shall be no further approval, authorization, consent or other order of any public board or body required to be obtained for the execution and performance of the Company Documents by the Company; (ii) there shall be no default under any Company Documents by the Company; (iii) the Company shall have performed all obligations required under such documents to be performed by it on or before the Closing Date; and (iv) all representations and warranties of the Company given as of the date hereof shall be true as of the Closing Date. (h) There is no action, suit or proceeding at law or in equity to which the Company is a party or to which the Company's property is subject before or by any court or adjudicative authority, or agency which is pending or, to the best of the Company's knowledge, which is threatened, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity, security or enforceability of the Bonds, the financial condition or prospects of the Company, performance by the Company under the Company Documents or the operation of the Project. MI:0141020.03 -- 3 (i) Subsequent to the respective dates as of which information is given in the Official Statement and to and including the Closing Date, and except as set forth in or contemplated by the Official Statement, (i) there shall not have been any incurrence by the Company of any material liabilities or obligations, direct or contingent, except in the ordinary course of business, or the entrance by the Company into any material transaction not in the ordinary course of business, (ii) there shall not have been any material increase in the long-term debt of the Company, (iii) there shall not have been any material adverse change in the business or the financial position or results of operations of the Company, (iv) there shall not have been any loss or damage to the properties of the Company sustained which materially and adversely affects the operations, financial condition or prospects of the Company and (v) there shall have been no legal or governmental proceedings instituted or threatened affecting the Company or the transactions contemplated by this Bond Purchase Agreement which are material to the transactions contemplated herein or any representations made herein. 0) During the five (5) years preceding the date hereof, no partner, or present officer or director of a partner, has been indicted, charged, or convicted with respect to any felony. (k) The Company has obtained all requisite and material approvals of the State and other federal, state, regional and local governmental bodies for the operation of the Project and the offer and sale of the Bonds, and the lending of the proceeds thereof to the Company (provided no representation is provided as to compliance with the Blue Sky laws hereinafter defined), and the Project is in compliance with all applicable federal, state or local zoning, subdivision, environmental, pollution control and building laws, regulations, codes, ordinances and orders, except where non-compliance would have no material adverse effect on the financial condition or prospects of the Company or the operation or value of the Project. (1) Neither the City nor any council member of the City has any personal interest in the Project or the terms of the financing evidenced by the Bonds and the Municipality Documents. (m) The Company has, and will have as of the Closing Date, good and marketable fee simple title to the Project, free from any encumbrances other than Permitted Encumbrances as defined in the Mortgage. (n) All information concerning the Company, its partners or its properties (including the Project) contained in the Official Statement is true and accurate in all material respects as of its date and the date hereof. Further, all financial projections, if any, contained in the Official Statement are numerically accurate and, to the best of its knowledge, based on reasonable assumptions. (o) As of the date thereof and hereof, in so far as it relates to the Company, its partners or its properties (including the Project) (collectively, the "Company Information"), the Official Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make M1:0.141020.03 -- 4 the statements therein, in light of the circumstances under which they are made, not misleading. (p) The Preliminary Official Statement relating to the Bonds, dated June 20, 1996 (the "POS") was "deemed final" by the Company within the meaning of Rule 15c2- 12 promulgated under the Securities and Exchange Act of 1934, as amended ("Rule 15c2-12"). (q) The information supplied by the Company to bond counsel with respect to the tax-exempt status of the Bonds is and shall be correct and complete in all material respects. (r) The Underwriter may rely upon all representations and warranties of the Company contained in this Bond Purchase Agreement or any Company Document; and all such representations shall be true and correct as of the Closing Date. 3. Representations and Warranties of the Underwriter. The Underwriter hereby represents that it has full power and authority to enter into this Bond Purchase Agreement, and that, assuming due authorization, execution and delivery by any other parties hereto, this Bond Purchase Agreement shall be a binding obligation of the Underwriter enforceable in accordance with its terms, except to the extent limited by any future proceedings applicable under bankruptcy, reorganization or other laws of general application relating to or affecting the enforcement of creditors' rights or principles of equity. 4. Municipality's Representations and Warranties. The Municipality makes the following representations and warranties: (a) The Municipality is a municipal and political subdivision duly organized and existing under the Constitution and laws of the State of Minnesota. (b) The Loan Agreement, the Indenture, the Mortgage, the Mortgage Assignment, the Rent Assignment, the Assignment of Rent Assignment and this Bond Purchase Agreement (collectively the "Municipality Documents") have been duly authorized and executed by all the necessary action of the Municipality and, when executed by all parties thereto, will be valid and binding obligations of the Municipality according to their terms. (c) There is no action, suit or proceeding at law or in equity to which the Municipality is a party before or by any court, public board or body pending or, to the best of the Municipality's knowledge, threatened against the Municipality wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or security of the Bonds or the Municipality Documents. (d) The execution, delivery and performance of the Bonds and the Municipality Documents will not conflict with or result in the breach of any terms or provisions of or constitute a default under any agreement, indenture, mortgage, deed of trust, indebtedness, lease or other instrument to which the Municipality is a party. M1:0141020.03 -- 5 (e) Neither the City nor any council member of the City has any personal interest in the Project or the terms of the financing evidenced by the Bonds and the Municipality Documents. (f) Since December 31, 1975, the Municipality has not defaulted in the payment of principal of or interest on any debt or other obligation of the Municipality to which is pledged the full faith and credit, taxes or any public funds of the Municipality, except no representation is made with respect to bonds intended to be paid solely from payments made by conduit borrowers. S. Covenants. The Company covenants that: (a) The Company will provide or cause to be provided sufficient copies of the final Official Statement to the Underwriter in adequate time to enable the Underwriter to comply with its responsibilities under Rule 15c2-12. (b) If at any time for a period of six (6) months immediately following conclusion of the "underwriting period" (within the meaning of Rule 15c2-12), any event occurs as a result of which the Official Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or to cause the Official Statement to fail to comply with any state securities registration ("Blue Sky") laws, and if the Company acquires knowledge of such event the Company will promptly notify the Underwriter and Municipality thereof and will provide information necessary to effect the preparation of amended or supplemented information which will correct such untrue statement or omission or cause compliance with such Blue Sky laws. (c) Upon the Underwriters reasonable request, the Company will provide all necessary information supplemental to the Official Statement and take any other reasonable action which, in the reasonable opinion of the Underwriter, may be reasonably necessary or advisable in connection with the resale of the Bonds during the initial offering period. (d) The Company shall refrain from taking any action or knowingly permitting any action to be taken with regard to which the Company or any of its partners, employers or agents may exercise control that results in the inclusion of interest on the Bonds in gross income for federal income tax purposes. (e) The Company will endeavor in good faith in cooperation with the Underwriter to provide all information and documentation necessary to comply with the Blue Sky law requirements of every state in which the Bonds are to be offered. (f) Upon the request of the Underwriter, the Company shall furnish to the Underwriter, so long as the Bonds remain outstanding, all reports, if any, of any party, filed by the Company with the Securities and Exchange Commission and copies of all M1:0141020.03 -- 6 reports and financial statements famished by the Company to the Municipality or Trustee pursuant to the provisions of the Company Documents. 6. Compensation. On the Closing Date the Company shall cause to be paid to the Underwriter an underwriting fee in immediately available funds in an amount equal to 2.25% of the face amount of the Bonds. At the option of the Underwriter, such fee may be reflected in whole or in part by a discount to the purchase price for the Bonds referred below, but only to the extent approved by bond counsel. On the Closing Date the Company shall also cause to be paid all out-of-pocket expenses reasonably incurred and related to the execution and performance of this Bond Purchase Agreement and to the delivery of the Bonds to the Underwriter, including, but not limited to, the fees and expenses of bond counsel, counsel for the Underwriter, all printing and reproduction costs related to the Bonds and the offering and sale of the Bonds, and all Blue Sky fees and expenses, accounting and appraisal fees, title insurance, Municipality's fees and recording fees. 7. 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, and subject to Section 6, the Underwriter agrees to purchase and the Municipality agrees to sell and deliver the Bonds at a price equal to one hundred percent (1001/o) of the aggregate principal amount of the Bonds, plus accrued interest from the date thereof to the Closing Date. Payment for the Bonds shall be made by wire transfer in immediately available funds to the order of the Trustee, at the corporate trust office of the Trustee, at or before 11:30 a.m. local time, on July 11, 1996, or at such other place and at such other time or date as may be agreed upon by appropriate officers of the Company and the Underwriter, against delivery of the Bonds to the Underwriter. 8. Conditions of Underwriter's Obligations. The obligation of the Underwriter to purchase and pay for the Bonds on the Closing Date shall be subject to the following conditions: (a) On or prior to the Closing Date, all representations and warranties of the Company shall be true and correct and the Company shall have performed all of its obligations hereunder theretofore to be performed. (b) On the Closing Date, there shall be delivered to the Underwriter, in form and substance satisfactory to the Underwriter, those items enumerated in Schedule I attached hereto and made a part hereof. (c) The Bonds, the Company Documents, the Municipality Documents, the Official Statement, and all other documents for the issue, purchase, sale and security of the Bonds, in form and substance satisfactory to the Underwriter, shall have been duly authorized, executed and delivered by the respective parties thereto and shall be in full force and effect. (d) 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 and related security instruments shall be exempt from qualification under the Trust Indenture Act of 1939, as amended. M1:0141020.03 - 7 ( (e) No order suspending the sale of the Bonds in any jurisdiction in which a sale is proposed or in the State of Minnesota shall have been issued on or prior to the Closing Date and be continuing, and no proceedings for that purpose either shall have been instituted and shall be continuing or, to the knowledge of the Municipality, the Company or the Underwriter, shall be contemplated. If any condition in this Section is not satisfied prior to the Closing Date, this Bond Purchase Agreement may be terminated by the Underwriter by notice in writing or by telegram to the Company and the Municipality. The Underwriter may waive in writing compliance with any one or more of the foregoing conditions or extend the time for their performance. 9. Indemnification. To the extent permitted by law, the Company agrees to indemnify and hold harmless the Municipality and the Underwriter and, any of their officers, employees, agents or attorneys, and each person, if any, who controls the Municipality or the Underwriter within the meaning of Section 15 of the Securities Act of 1933, as amended, against any and all losses, claims, damages, liabilities or expenses of any nature whatsoever, including, but not limited to, attorneys' fees, caused by any untrue or misleading statement, or alleged untrue or misleading statement, of a material fact relative to the Company Information contained in the Official Statement or the POS, or the omission or alleged omission of any material fact relative to the Company Information from the Official Statement or POS, necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Promptly after receipt by the parties to be indemnified of notice of the commencement of any action in respect of which indemnity may be sought under this Section, such person shall notify the party or parties against whom such indemnification may be sought in writing of the commencement thereof and subject to the provisions hereinafter stated, such indemnifying party shall assume the defense of such action (including employment of counsel, who shall be counsel reasonably satisfactory to the applicable indemnified parties and the payment of expenses), insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against such party or parties. In the event that any indemnified party or parties shall determine, in the exercise of their reasonable judgment, that there exists a conflict of interest by reason of having a common counsel with the indemnifying party, or with any other indemnified party, or if the indemnifying party elects not to defend the action with respect to any or all indemnified parties, then each such indemnified party may employ separate counsel satisfactory to the indemnifying party to represent or defend it in any such action or proceeding in which it may become involved or is named as defendant and the indemnifying party will pay as incurred the fees and disbursements of such counsel. No party shall be liable to indemnify any person for any settlement of any aforementioned action affected without the consent of the party. 10. Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in Section 9 is applicable but for any reason is held to be unavailable, to the extent permitted by law the Company and the Underwriter M1:0141020.03 -- 8 (but not the Municipality) shall contribute to the aggregate losses, claims, damages, expenses and liabilities referred to in Section 9 (but after deducting any contribution received by the Company from persons who control the Company within the meaning of the Securities Act of 1933, as amended) to which the Company and the Underwriter may be subject in such proportions that the Underwriter is responsible for that portion represented by the percentage that the Underwriting fee set forth herein bears to the aggregate face amount of the Bonds and the Company 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 (within the meaning of Section I I(f) of the Securities Act of 1933, as amended) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person, if any, who controls the Underwriter within the meaning of the Securities Act of 1933, as amended, shall have the same rights to contribution as the Underwriter, and each person, if any, who controls the Company, subject to clause (i) and (ii) of this paragraph, shall have the same rights of contribution as the Company. Any parry entitled to contribution, after receipt of notice of commencement of any action, suit or proceeding against such parry in respect of which a claim for contribution may be sought, will promptly notify all other parties hereto, but the omission to do so shall not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have hereunder or otherwise under this Section. No parry shall be liable for contribution with respect to any action or claim settled without its consent. 11. Representations and Agreements to Survive Sale and Payment. Except as the context otherwise requires, all representations, warranties and agreements contained in this Bond Purchase Agreement shall be deemed to be representations, warranties and agreements of the parties hereto at the Closing Date, notwithstanding the nondelivery for any reason of any certificate required to be delivered hereunder; and such representations, warranties and agreements of the parties, including the indemnity and contribution agreements contained in Sections 9 and 10 hereof, shall remain operative and in full force and effect regardless of any investigation made by the Underwriter or by any indemnified party, and shall survive the sale of and any payment for the Bonds. 12. Termination of this Bond Purchase Agreement. This Bond Purchase Agreement may be terminated at any time prior to the Closing Date by the Underwriter if, in the reasonable judgment of the Underwriter, the market price of the Bonds would be materially adversely affected or it is impractical to offer the Bonds for sale or to enforce contracts made by the Underwriter for the resale of the Bonds agreed to be purchased hereunder by reason of: (a) pending or threatened litigation, legal action or other governmental or municipal proceeding or legislation before either the House of Representatives or the United States Senate (or a committee thereof) which, if adversely determined or passed into law, as the case may be, would adversely affect the exclusion from gross income of interest on the Bonds, (b) any action having been taken by the President of the United States, the Treasury Department of the United States or the Internal Revenue Service of the United States, or any decision having been rendered by the United States Tax Court or any Court established under Article III of the Constitution, having the effect of imposing, directly or indirectly, federal income taxation upon interest received on obligations of the general character of the Bonds, (c) trading in securities on the New York Stock Exchange or the American Stock Exchange having been suspended or limited or minimum prices having been M1:0141020.03 - 9 suspended, limited or established on either such Exchange, (d) a banking moratorium having been declared by either federal or applicable state authorities, (e) an outbreak of major hostilities or other national or international calamity having occurred, (f) any action having been taken by any government in respect of its legislative or monetary affairs which, in the opinion of the Underwriter, has a material adverse effect on the United States' securities markets or the market for the Bonds, or (g) general political, economic and market conditions which, in the opinion of the Underwriter, are not satisfactory to permit the sale of the Bonds. If this Bond Purchase Agreement is terminated for any reason whatsoever other than due to breach by the Underwriter, the Company shall be liable (provided that none of the partners of the Company shall be personally liable) for all costs and expenses set forth in Section 6 except the Underwriting fee to the Underwriter. Notwithstanding any election hereunder or any termination of this Bond Purchase Agreement and whether or not this Bond Purchase Agreement is otherwise carried out, the provisions of Sections 9 and 10 shall not in any way be affected by such election or termination hereunder or by the failure to carry out the terms of this Bond Purchase Agreement or any part hereof. 13. Bond Offering by Underwriter. The Underwriter proposes to offer the Bonds for public or private sale (and may sell to selected dealers and special purchasers) as set forth in the Official Statement. Concessions from the offering price may be allowed to selected dealers and special purchasers. 14. Notices. All notices provided for in this Bond Purchase Agreement shall be made in writing either (a) by actual delivery of the notice into the hands of the parties entitled thereto, or (b) by the mailing of the notice in the United States mails to the address as stated below (or at such other address as may have been designated by written notice), of the party entitled thereto, by certified or registered mail, return receipt requested. The notice shall be deemed to be received (a) in case of actual delivery on the date of its actual receipt by the party entitled thereto, and (b) in case of mailing on the date of deposit in the United States mail, postage prepaid. All communications hereunder, except as herein otherwise specifically provided, shall be in writing and mailed or delivered: If to the Underwriter Dougherty Dawkins, Inc. 4300 Norwest Center 90 South Seventh Street Minneapolis, Minnesota 55402 Attn: Public Finance Department If to the Company Northridge Properties of New Hope Limited Partnership 5430 Boone Avenue New Hope, Minnesota 55428 Attn: Charles T. Thompson, President/CEO M1:0141020.03 -- 10 If to the Municipality City of New Hope, Minnesota 4401 Xylon Avenue North New Hope, Minnesota 55428-4898 Attn: City Clerk 15. Miscellaneous. (a) This Bond Purchase Agreement shall be governed by, subject to and construed in accordance with the laws of the State of Minnesota; (b) if any portion of this Bond Purchase Agreement shall be held invalid or inoperative, then, so far as is reasonable and possible (i) the remainder of this Bond Purchase Agreement shall be considered valid and operative, and (ii) effect shall be given to the intent manifested by the portion held invalid or inoperative; (c) this Bond Purchase Agreement may be executed in a number of identical counterparts, each of which shall be deemed to be an original, but all of which constitute, collectively, one and the same agreement (but in making proof of this Bond Purchase Agreement, it shall not be necessary to produce or account for more than one such counterpart); (d) this Bond Purchase Agreement may not be modified or amended except by written agreement executed by all of the parties hereto; (e) whenever the context so requires, the masculine shall include the feminine and neuter, and the singular shall include the plural, and conversely; (f) the parties hereto covenant and agree that they will execute such other and further instruments and documents as are or may become necessary or convenient to effectuate and carry out this Bond Purchase Agreement; (g) the captions used in this Bond Purchase Agreement are for convenience only and shall not be construed in interpreting this Bond Purchase Agreement; (h) this Bond Purchase Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors, legal representatives, heirs and assigns; (i) time shall be of the essence of this Bond Purchase Agreement; 0) this Bond Purchase Agreement contains the entire understanding between the parties and supersedes any prior understandings or written or oral agreements between them respecting the subject matter hereof. If the foregoing correctly sets forth the understanding among the Underwriter, the Municipality and the Company, then the Municipality and the Company should so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among all such parties and the Underwriter. Very truly yours, DOUGHERTY DAWKINS, INC. By - — Its0- M1:0141020.03 -- 11 THE FOREGOING SETS FORTH THE UNDERSTANDING OF THE UNDERSIGNED: NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED HIP By dRA By Its General Partnelf [Signature Page to Bond Purchase Agreement] M1:0141020.03 -- 12 CITY OF NEW HOPE, MINNESOTA B eJ It Mayor Its Acting City Manager [Signature Page to Bond Purchase Agreement] mn:0141020.02 -- 13 SCHEDULEI to Bond Purchase Agreement (Items to be Furnished At or Prior to the Closing Date) (i) such documents and certificates as the Underwriter or its counsel may reasonably require in order to evidence the accuracy, completeness or satisfaction of any of the representations, warranties or contained in the Bond Purchase Agreement; (n) an opinion of Bond Counsel, as to the validity and tax-exempt nature of the Bonds, together with a supplemental opinion of Bond Counsel substantially in form and substance satisfactory to the Underwriter, (iii) an opinion of counsel for the Company substantially in the form of Exhibit A; (iv) an opinion of Underwriter's counsel addressed to the Underwriter in a form and substance satisfactory to the Underwriter; (v) a consent from Larson, Allen, Weishair & Co., certified public accountants, in Minneapolis, to the use of their auditor's report in the Official Statement and to the references to it in the Official Statement; (vi) evidence of the creation and perfection of the various security interests purported to be created by the documents herein referenced; (vii) evidence of insurance required by the Mortgage; (viii) a compilation of financing statements ("UCC search") on file with the Secretary of State of Minnesota indicating that the security interest created by the Mortgage will have priority, upon execution, satisfactory to the Underwriter, (ix) a certificate of good standing of the Company and a certificate of limited partnership, each certified by the proper authorities of the State of Minnesota and dated within five days of the Closing Date; (x) a copy of the partnership agreement of the Company, certified as true and correct by the General Partner; (xi) if requested by the Underwriter, a list of all tenants in the Project, the amount of rent payable by each and the remaining lease term with respect to each, identifying the unit leased by each tenant, together with an example of the form of tenant lease for the Project, all certified as accurate by the General Partner and by the manager of the Project; (xii) a policy of title insurance (or binder therefor), dated as of the Closing Date, stating that the Company is fee owner of the land on which the Project is located (the "Land") and that the Mortgage is a valid first lien on the Land and the Project, subject only to Permitted Encumbrances, as defined in the Mortgage. The description of the Land therein shall conform to the legal description of the Land contained in the survey described below, and the policy shall have such endorsements as shall have been requested by the Underwriter prior to the date of the Bond Purchase Agreement; MI:0141020.03 B-2 (xiil) evidence reasonably satisfactory to the Underwriter that the improvements and the Land comply in all respects with all applicable building, zoning, planned unit development, subdivision, platting, environmental protection and land use ordinances, laws, regulations and requirements, and all restrictions or requirements in any prior conveyance, together with assignments thereof as may be required by the Underwriter securing performance of the Company's obligations under the Loan Agreement, the Mortgage and related documents, such evidence to include a letter from the Municipality as to satisfactory zoning of the improvements and the Land in compliance with other applicable requirements; (mv) a survey of the Land prepared by a registered land surveyor containing a legal description of the Land conforming to the legal description contained in the title opinion and the Mortgage, detailing all easements, encroachments, and utility rights of way upon the Land, showing the location of adjoining public streets so as to show affirmatively rights of ingress and egress to and from the Land, and indicating that the locations of the building comprising the Project are within the boundary lines of the Land. The survey shall bear a proper surveyor's certificate and shall state that the survey and certificate run to the benefit of the Trustee and the applicable title insurance company; (xv) payment (or evidence acceptable to the Underwriter that payment has been made), in immediately available funds, of all fees required to be paid on the Closing Date, including the premium for the title opinion, and the fees and expenses incurred by the Underwriter; (xvi) a written environmental site assessment or report ("Environmental Assessment") addressed to the Underwriter, or accompanied by a letter advising the Underwriter it may rely upon such opinion as though addressed to it, setting forth the results of an investigation of the Land and showing that no hazardous substance is present above, on, in or under the Land, including an historical investigation of the uses and ownership of the Land, contacts with appropriate governmental agencies, soil tests, chemical tests, and such other tests and analyses (hereafter collectively referred to as "Tests") as are appropriate, conducted by a competent environmental engineer or consultant that is acceptable to the Underwriter and is licensed, bonded and insured in accordance with all applicable statutes, ordinances, codes and regulations, and all reports, data and other information produced in connection with the Tests; the Environmental Assessment shall also specify whether or not any remedial action or environmental assessment, study or statement with respect to the Land is required by any applicable law, statute, ordinance or governmental regulation or advisable under commercially reasonable environmental due diligence procedures; if such an assessment, study or statement is so required or recommended, the Company shall provide a copy thereof to the Underwriter; (xvii) evidence of flood insurance or evidence satisfactory to the Underwriter that the Project is not in a flood plain; (xviii) a certificate of the Municipality as to absence of litigation, authority to enter Municipality Documents, and other matters; and (xix) a certificate of the Company as to use of the proceeds of the Prior Bonds. M1:0141020.03 B-3 EXHIBIT A (Form of Opinion of Counsel to the Company) 1996 Faegre & Benson LLP 2200 Norwest Center 90 South Seventh Street Minneapolis, MN 55402 Dougherty Dawkins, Inc. 4300 Norwest Center 90 South Seventh Street Minneapolis, Minnesota 55402 Ladies and Gentlemen: We have acted as counsel for Northridge Properties of New Hope Limited Partnership (the "Company"), a Minnesota limited partnership, in connection with the issuance by the City of New Hope, Minnesota (the 'Municipality") of its Multifamily Housing Refunding Revenue Bonds (Chardon Court Project) , Series 1996 in the aggregate principal amount of $ and are rendering this opinion as required by the Bond Purchase Agreement, dated 1996 (the `Bond Purchase Agreement"), from Dougherty Dawkins, Inc., as underwriter thereunder (the "Underwriter") and accepted by the Municipality and the Company. We have examined the original, certified copies or copies otherwise identified to our satisfaction as being true copies of the following: a. the certificate of limited partnership and the limited partnership agreement of the Company as presently in effect (the "Organizational Documents"); b. the Loan Agreement dated as of 1996 (the "Loan Agreement") between the Municipality and the Company, relating to the Project described therein (the "Project"); C. the Combination Mortgage, Security Agreement and Fixture Financing Statement, dated as of 1996 (the "Mortgage") between the Municipality and the Company; d. the Assignment of Leases and Rents, dated as of March 1, 1996 (the "Rent Assignment") from the Company to the Municipality (the "Trustee"); e. the Declaration of Restrictive Covenants dated as of May 1, 1985, as amended by the First Amendment to Declaration of Restrictive Covenants, executed by the Company, dated as of 1 1996 (the "Declaration"); M1:0141020.03 134 f. the Preliminary Official Statement dated , 1996, and the final Official Statement, each relating to the Bonds (the "Official Statement"); g. the Bond Purchase Agreement; and such other documents and records as we have deemed relevant and necessary as a basis for the opinion set forth herein. Based on such examination and pertinent law, to the best of our knowledge, we are of the opinion that: 2. The Company is a duly organized and validly existing limited partnership under the laws of the state of Minnesota, and the Company is qualified to do business in the state of Minnesota. To the best of our knowledge, the Company is conducting its business in material compliance with all applicable and valid laws, rules, regulations and restrictions of the jurisdictions where it owns or leases substantial property or where it transacts material intrastate or interstate business. 3. The Company has full power and authority to execute and deliver the Loan Agreement, the Mortgage, the Rent Assignment, the Declaration, the Bond Purchase Agreement and the other documents or certificates executed by the Company and delivered on the Closing Date , as defined in the Bond Purchase Agreement, in connection with the issuance of the Bonds (collectively, the "Company Documents") and to carry out the terms thereof. 4. The Company Documents have been duly and validly authorized, executed and delivered by the Company and, assuming the due execution and delivery by the other parties to such documents, such documents are in full force and effect and are valid and binding instruments of the Company enforceable in accordance with their respective terms, except to the extent enforceability is limited by any future proceedings with respect to the Company under bankruptcy, reorganization or other laws, decisions and equitable principles of general application relating to or affecting the enforcement of creditors' rights generally. 5. The execution, delivery and performance of the Company Documents by the Company will not or conflict with or result in, with the passage of time, with notice or otherwise, a violation of any provision of or in default under the Organizational Documents or, to the best of our knowledge, after appropriate inquiry under the circumstances, any indenture, mortgage, deed of trust, lease, evidence of indebtedness, agreement, instrument, judgment, decree, order, statute, rule, regulation or restriction to which the Company is currently a party or by which the Company is or its properties are currently bound or subject. 6. No fiuther approval, authorization, consent or other order of any public board or body not heretofore obtained (other than the authorization of the Municipality and the compliance with any applicable securities laws to which no opinion is expressed) is legally required for the transactions by the Company contemplated by the Bond Purchase Agreement or the Official Statement. 7. To the best of our knowledge, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or threatened against or affecting the Company, which, if determined adversely to the Company would have a material adverse effect on the transactions contemplated by the Bond Purchase Agreement or performance under the Company Documents. M1:0141020.03 B-5 8. To the best of our knowledge, the Company has obtained all requisite approvals of the State and other federal, state, regional and local governmental bodies and the Project is in compliance with applicable federal, state or local zoning, subdivision, environmental, pollution control and building laws, regulations, codes, ordinances and orders. 9. To the best of our knowledge, the information contained in the Official Statement regarding the Company and its properties is complete, true and correct. Nothing has come to our attention which leads us to believe that the Official Statement as of the date thereof or hereof contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 10. To the best of our knowledge, the Company is not in violation of or default under any law, ordinance, regulation, decree, order, agreement or instrument of any nature whatsoever to which it is a party or to which the Company or any of its properties are subject, or to the best of our knowledge, any statute, rule or regulation to which it is subject or by which its property is bound, other than violations or defaults which separately and collectively would have no material adverse effect on the financial condition of the Company, the ability of the Company to perform its obligations under the Company Documents, or the security of the Bonds. We hereby consent to the references to us in the Official Statement. Very truly yours, M1:0141020.03 B-6 COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT from NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP as Mortgagor to CITY OF NEW HOPE, MINNESOTA as Mortgagee Dated as of June 1, 1996 (THIS COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, AND CREATES SECURITY INTERESTS IN FIXTURES) This instrument was drafted by: Dorsey & Whitney LLP Pillsbury Center South 220 South Sixth Street Minneapolis, Minnesota 55402 The interest of the City of New Hope, Minnesota in this Combination Mortgage, Security Agreement and Fixture Financing Statement has been assigned to Norwest Bank Minnesota, National Association, as Trustee under an Indenture of Trust dated as of June 1, 1996, between the City of New Hope, Minnesota, and Norwest Bank Minnesota, National Association, pursuant to an Assignment of Mortgage Agreement, dated as of June 1, 1996, between the City of New Hope, Minnesota and Norwest Bank Minnesota, National Association, as Trustee. r TABLE OF CONTENTS (Not a part of this Combination Mortgage, Security Agreement and Fixture Financing Statement) Page PARTIES........................................................ RECITALS....................................................... ARTICLE I -DEFINITIONS, EXHIBITS AND GENERAL ARTICLE III -REPRESENTATIONS, COVENANTS, PERMITTED PROVISIONS .................................. 1-1 Section 1.1. Definitions .................................... 1-1 Section 1.2. Exhibits ....................................... 1-3 Section 1.3. Rules of Interpretation ......................... 1-3 ARTICLE II -MORTGAGE AND SECURITY INTEREST .............. 2-1 Section 2.1. Mortgage and Security Interest .................. 2-1 Section 2.2. Payments and Performances Secured ............. 2-3 Section 2.3. Remedies Upon Event of Default ................ 2-3 Section 2.4. Right of Entry .................................. 2-5 Section 2.5. Maximum Principal Amount Secured ........... 2-5 ARTICLE III -REPRESENTATIONS, COVENANTS, PERMITTED ARTICLE IV -RELEASE OF MORTGAGED PROPERTY, EASEMENTS, TIE-IN WALLS, ADDITION OF IMPROVEMENTS TO LIEN OF MORTGAGE ......... 4-1 Section 4.1. Release of Land ................................ 4-1 Section 4.2. Grant of Easements, Liens, Etc ................... 4-2 -i- ENCUMBRANCES, HAZARDOUS MATERIALS AND LIMITATION OF LIABILITY OF PARTNERS 3-1 Section 3.1. Warranty of Title and Instruments of Further Assurance ........................... 3-1 Section 3.2. Performance of Covenants ...................... 3-1 Section 3.3. Permitted Encumbrances ....................... 3-1 Section 3.4. Liens and Encumbrances ........................ 3-2 Section 3.5. Permitted Contests ............................. 3-3 Section 3.6. Hazardous Materials ........................... 3-3 Section 3.7. Limitation of Liability of Partners of Company .................................. 3-4 Section 3.8. Compliance With Other Laws and Restrictions ... 3-4 ARTICLE IV -RELEASE OF MORTGAGED PROPERTY, EASEMENTS, TIE-IN WALLS, ADDITION OF IMPROVEMENTS TO LIEN OF MORTGAGE ......... 4-1 Section 4.1. Release of Land ................................ 4-1 Section 4.2. Grant of Easements, Liens, Etc ................... 4-2 -i- Section 4.3. Addition of Improvements to Lien of Mortgage.................................... 4-2 Section 4.4. Tie -In Walls ................................... 4-3 ARTICLE V -THE MORTGAGEE .................................. 5-1 Section 5.1. Right of Inspection ............................. 5-1 Section 5.2. Right of Mortgagee To Pay Taxes and Other Charges ........................... 5-1 Section 5.3. Mortgagee Protected in Relying Upon Resolutions, Etc . ............................. 5-1 Section 5.4. Reimbursement of Mortgagee ................... 5-1 ARTICLE VI -MISCELLANEOUS .................................. 6-1 Section 6.1. Recording ..................................... 6-1 Section 6.2. Opinion of Counsel to Recording ................ 6-1 Section 6.3. Binding Effect .................................. 6-1 Section 6.4. Amendments .................................. 6-1 Section 6.5. Use of Mortgaged Property ...................... 6-1 Section 6.6. Severability .................................... 6-2 Section 6.7. Notices ........................................ 6-2 Section 6.8. Execution Counterparts ......................... 6-2 Section 6.9. This Instrument a Fixture Financing Statement ................................... 6-3 SIGNATURES................................................... 6-4 ACKNOWLEDGMENTS .......................................... 6-5 EXHIBIT A - Legal Description of Land ............................ A-1 EXHIBIT B - Permitted Encumbrances ............................ B-1 THIS COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT, dated as of June 1, 1996, from Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership organized and existing under the laws of the State of Minnesota (the Company), to the City of New Hope, Minnesota, a Minnesota municipal corporation (the City). WITNESSETH WHEREAS, pursuant to an Indenture of Trust, dated as of the date hereof (the Indenture) between the City and Norwest Bank Minnesota, National Association, as trustee (the Trustee) the City has issued its $5,000,000 Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 (the Series 1996 Bonds), maturing finally on June 1, 2026, pursuant to Minnesota Statutes, Chapter 462C, as amended (the Act) for the purpose of refunding bonds issued by the Housing and Redevelopment Authority of the City of St. Paul, Minnesota under the Act to finance the construction and equipping of a multifamily rental housing development containing 129 housing units; and WHEREAS, the City has, by the Indenture, pledged and assigned to the Trustee all of its right, title and interest in the Loan Agreement dated as of the date hereof between the City and the Company (except for certain rights to payment of administrative and legal expenses and indemnification), including, but not limited to, the Loan Repayments, in order to secure the full and prompt payment of the principal of, premium, if any, and interest on the Bonds thereunder; and WHEREAS, the City will assign this Combination Mortgage, Security Agreement and Fixture Financing Statement to the Trustee by a separate Assignment of Mortgage Agreement, dated as of the date hereof between the City and the Trustee, and subsequent to such Assignment the City shall have no further liability or obligation hereunder. NOW, THEREFORE, THIS COMBINATION MORTGAGE, SECURITY AGREEMENT AND FIXTURE FINANCING STATEMENT FURTHER WITNESSETH: ARTICLE I DEFINITIONS, EXHIBITS AND GENERAL PROVISIONS Section 1.1. Definitions. The terms defined in this Section 1.1 shall for all purposes of this Mortgage have the meanings herein specified, unless the context clearly otherwise requires: Agreement: the Loan Agreement, dated as of the date hereof, between the City and the Company, as the same may from time to time be amended or supplemented in accordance with the provisions thereof and of the Indenture; Architect: means a person or firm which is a registered architect in the State of Minnesota and is retained by the Company; Assignment of Rents: the Assignment of Rents and Leases, dated as of the date hereof, from the Company to the City; Bonds: the Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 issued by the City pursuant to the Indenture; CCty: the City of New Hope, Minnesota, its successors and assigns; Company: Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership, and any permitted successor or assignee under the Agreement; Company Certificate or Company Request: a written certificate or request from the Company duly executed by a Company Representative; Company Representative: a person designated to act on behalf of the Company as evidenced by a Company Certificate furnished to the City and the Trustee containing the specimen signature of such person and signed for the Company by a general partner; such Company Certificate may designate one or more alternate Company Representatives; Default: any event which is, or after notice or lapse of time or both would be, an event of default under the Agreement; Event of Default: any event defined as such in Section 9.01 of the Agreement; Improvements: those certain buildings and all other facilities, structures, improvements and fixtures located on the Land, including any facilities, structures, improvements or fixtures hereafter located or constructed thereon; 1-1 Indenture: the Indenture of Trust, dated as of the date hereof between the City and the Trustee, as the same may from time to time be amended or supplemented in accordance with the provisions of the Indenture; Land: the real estate described in Exhibit A hereto, and any real estate or undivided interest therein included within the lien of this Mortgage pursuant to Article IV hereof, but excluding any real estate released from the lien of this Mortgage pursuant to the terms of the Agreement and this Mortgage; Loan Repayments: the payments required to be made by the Company pursuant to Section 4.02 of the Agreement; Mortgage: this Combination Mortgage, Security Agreement and Fixture Financing Statement, including any amendment hereof or supplement hereto entered into in accordance with the provisions hereof and of the Indenture; Mortgagee: the City or any assignee of its interest in the Mortgage, including the Trustee; Mortgaged Property: the properties, real, personal and mixed, described in Section 2.1 hereof, as they may at any time exist other than any property released from this Mortgage; Net Proceeds: with respect to any insurance payment or condemnation award, the amount remaining therefrom after payment of all expenses (including attorneys' and any extraordinary fee or expenses of the Mortgagee or the Company) incurred in the collection thereof; hereof; Permitted Encumbrances: those encumbrances set forth in Section 3.3 Project: the Land, the Project Equipment and the Improvements; Project Equipment: all items of machinery, furniture, equipment and other personal property now owned or hereafter acquired by the Company, including the proceeds therefrom, other than such items of machinery, furniture, equipment and other personal property which are disposed of by the Company and replaced with similar items; Registered Land Surveyor: a person engaged in the profession of surveying land and licensed in the State of Minnesota, whether or not employed by, or in any way affiliated with, the Mortgagee or the Company; IVA Trustee: Norwest Bank Minnesota, National Association, a national banking association and its successors and assigns hereunder. Section 1.2. Exhibits. Attached to and by reference made a part of this Mortgage, is Exhibit A, the legal description of the Land and Exhibit B, a list of Permitted Encumbrances in addition to items listed in Section 3.3 hereof. Section 1.3. Rules of Interpretation. (1) This Mortgage shall be interpreted in accordance with and governed by the laws of the State of Minnesota. (2) The words "herein," "hereof," "hereunder' and words of similar import, without reference to any particular article, section or subdivision, refer to this Mortgage as a whole rather than to any particular article, section or subdivision hereof. (3) Any terms not defined herein but defined in the Agreement or the Indenture shall have the same meaning herein unless the context hereof requires otherwise. (4) The Table of Contents and headings of articles and sections herein are for convenience only and are not a part of this Mortgage. (5) Unless the context hereof clearly requires otherwise, the singular shall include the plural and vice versa, and the masculine shall include the feminine and vice versa. (6) Unless the context hereof clearly requires otherwise, "or" is not intended to be exclusive, but is intended to permit either or both of the alternatives so conjoined. (7) Any capitalized term not defined herein shall have the meaning assigned to such term in the Indenture. 1-3 ARTICLE R MORTGAGE AND SECURITY INTEREST Section 2.1. Mortgage and Security Interest. The Company, in consideration of the making of the Loan, the issuance and sale of the Bonds and other good and lawful consideration, the receipt of which is hereby acknowledged, and to secure, and as security for the observance and performance by the Company of each of its covenants and obligations under the Agreement and this Mortgage, by these presents does hereby sell, mortgage, convey, grant, assign, transfer, pledge, set over and confirm unto the Mortgagee and its successors and assigns forever, with power of sale, and does hereby grant a lien and security interest in, all and singular the following described premises and property: (a) All right, title and interest of the Company in that real estate, lying and being in the County of Hennepin, State of Minnesota, hereinafter described in Exhibit A hereto and made a part hereof as though set forth in full herein; (b) All buildings, structures, improvements, fixtures and appurtenances now standing, or at any time hereafter constructed or placed upon the Land or any part thereof, including all right, title and interest of the Company in and to all building material and plants of every kind and nature whatsoever on said premises or in any improvement now or hereafter standing on said real estate or any part thereof; (c) The reversion or reversions, remainder or remainders, in and to the Land and each and every part thereof, together with the entire interest of the Company in and to all and singular the tenements, hereditaments, easements, rights, privileges and appurtenances to said real estate belonging or in any wise appertaining thereto; (d) All rights, title, and interest of the Company in and to any streets, ways or alleys adjoining the Land or any part thereof, and all the estate, right, title, interest, claim or demand whatsoever of the Company, either in law or in equity in possession or expectancy, of, in and to the Land; (e) All and singular the goods, equipment, machinery and any and all properties of whatever sort, real, personal or mixed, constituting the Project Equipment, subject to the operation of the Uniform Commercial Code; (f) Any and all claims made for the damage of or destruction to all or any part of the Project under the policies of insurance required of the Agreement, and any and all awards or compensation made by any governmental or other lawful authority for the taking or damaging by 2-1 eminent domain of the whole or any part of the Project, including any awards for a temporary taking, change of grade of streets, or taking of access; (g) All proceeds from any property described in clauses (a) through (f) above and any and all other property of every name and nature from time to time hereafter by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or transferred, as and for additional security hereunder, by the Company or by anyone in its behalf or with its written consent to the Mortgagee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof; TO HAVE AND TO HOLD, all and singular, the Mortgaged Property and the rights and privileges hereby granted, mortgaged, conveyed, assigned and pledged, by the Company or intended so to be, unto the Mortgagee and its successors and assigns forever, in trust, nevertheless, with power of sale; SUBJECT, NEVERTHELESS, to Permitted Encumbrances; PROVIDED, NEVERTHELESS, and these presents are upon the express condition, that if the Company, its successors or assigns, shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Mortgage and the Agreement to be kept, performed and observed by them, and shall pay or make provision for payment to the Mortgagee all the sums of money due or to become due it in accordance with the terms and provisions of the Agreement, the Assignment of Rents and this Mortgage, and if the Bonds and the interest thereon are fully paid in accordance with their terms and the Indenture discharged, then these presents and the estate, lien, security interests and rights hereby granted shall cease, determine and become void, and thereupon the Mortgagee, on payment of its lawful charges and disbursements then unpaid, on demand of the Company and upon the payment of the cost and expenses thereof, shall duly execute, acknowledge and deliver to the Company such instruments of satisfaction or release or termination in respect of the Mortgaged Property as may be necessary or proper to discharge this Mortgage of record, and if necessary shall grant, reassign and deliver to the Company, its permitted successors or assigns, all and singular the property and interest by it hereby granted, conveyed, mortgaged and assigned, and all substitutes therefor, or any part thereof, not previously disposed of or released as in the Agreement provided; otherwise this Mortgage shall be and remain in full force. AND IT IS HEREBY COVENANTED, DECLARED AND AGREED by and between the parties hereto that the Mortgaged Property is to be held and applied, subject to the further covenants, agreements and conditions set forth in the Agreement and herein. 2-2 Section 2.2. Payments and Performances Secured. This Mortgage shall cover and secure: (A) Payment of the principal of, redemption premium, if any, and interest on the Bonds and payment of all other indebtedness incurred under the Indenture; (B) Payment of any and all indebtedness incurred pursuant to the Agreement, together with any renewals or extensions thereof, including but not limited to, the Loan and all Loan Repayments; (C) Any present or future demands of any kind or nature which the Mortgagee may have against the Company under or pursuant to the Agreement, the Assignment of Rents or this Mortgage, whether absolute or contingent, whether due or not, whether otherwise secured or not, or whether existing at the time of the execution of this Mortgage, or arising thereafter; and (D) Performance of each covenant, agreement or condition of the Company set forth in the Agreement, the Assignment of Rents and this Mortgage. Section 2.3. Remedies Upon Event of Default. If one or more Events of Default shall have occurred and be continuing, the Trustee shall be entitled to exercise any or all of the remedies set forth or provided in the Agreement, the Assignment of Rents or the Indenture, including, but not limited to, petitioning a court of competent jurisdiction for the appointment of a receiver to take possession of and manage and operate the assets of the Company for the benefit of the Holders of the Bonds then Outstanding, and including, but not limited to, declaring all outstanding indebtedness under the Agreement immediately due and payable without notice. The Mortgagee is hereby authorized and empowered to foreclose this Mortgage by judicial proceedings or to sell the Mortgaged Property at public auction and convey the same to the purchaser in fee simple in accordance with the statute, and to apply the money arising from such sale against all sums secured hereby, with interest and all legal costs and charges of such foreclosure and the maximum attorney's fee permitted by law, which costs, charges and fees the Company agrees to pay. Without limitation as to the foregoing, upon the occurrence and continuation of an Event of Default the Mortgagee shall have the right to proceed to protect and enforce its rights by a suit or suits in equity or at law, either for the specific performance of any covenant or agreement contained herein or in the Agreement, the Assignment of Rents or this Mortgage, or in aid of the execution of any power herein or therein granted, or for the foreclosure of this Mortgage, or for 2-3 the enforcement of any other appropriate legal or equitable remedy, and in addition the Company authorizes the Mortgagee to sell the Mortgaged Property at public auction and convey the same to the purchaser in fee simple, as provided by law, the Company to remain liable for any deficiency. Said sale may be as one tract or otherwise, at the sole option of Mortgagee. The Company agrees that, for the purpose of Minnesota Statutes, Section 580.08, the Mortgaged Property is a single tract. Further, the Mortgagee, in exercising its rights hereunder, shall also have, without limitation, all of the rights and remedies provided by the Minnesota Uniform Commercial Code including the right to proceed under the Uniform Commercial Code provisions governing default as to any fixtures, Project Equipment or other personal property which may be included in the Mortgaged Property separately from the real estate included therein, or to proceed as to all of the Mortgaged Property in accordance with its rights and remedies in respect of said real estate. If the Mortgagee should elect to proceed separately as to such fixtures, Project Equipment or other personal property, the Company agrees to make such fixtures, Project Equipment or other personal property available to the Mortgagee at a place or places acceptable to the Mortgagee, and if any notification of intended disposition of any of such fixtures, Project Equipment or other personal property is required by law, such notification shall be deemed reasonably and properly given if mailed at least ten (10) days before such disposition in the manner below provided. In case of any sale of the Mortgaged Property pursuant to any judgment or decree of any court or otherwise in connection with the enforcement of any of the terms of this Mortgage, the Mortgagee, its successors or assigns, or the Holder of any of the Bonds then Outstanding (whether or not then in default) may become the purchaser, and for the purpose of making settlement for or payment of the purchase price, shall be entitled to turn in and use the Bonds and claims for interest matured and unpaid thereon, together with additions to the mortgage debt, if any, accrued in order that there may be credited thereon the sums payable out of the net proceeds of such sale to the Holder of such Bonds and claims for interest and additions to the mortgage debt, if any, as his ratable share of such net proceeds; and thereupon such purchaser shall be credited on account of such purchase price with the portion of such net proceeds that shall be applicable to the payment of, and shall have been credited upon, the Bonds and claims for interest and additions to the mortgage debt so used. Each and every power or remedy herein specifically given shall be in addition to every other power or remedy, existing or implied, given or now or hereafter existing at law or in equity, and each and every power and remedy herein specifically given or otherwise so existing may be exercised from time to time and as often and in such order as may be deemed expedient by Mortgagee and the exercise or the beginning of the exercise of one power or remedy shall not be deemed a waiver of the right to exercise at the same time or thereafter any other power or remedy. No delay or omission of the Mortgagee in the exercise of any right or power accruing hereunder shall impair any such right or power or be construed to be a waiver of any Default or acquiescence therein. Section 2.4 Right of Entry. If the Mortgagee exercises one of the remedies provided for in Section 2.3 hereof, pursuant to a foreclosure of this Mortgage, the Mortgagee may then or at any time thereafter take complete and peaceful possession of the Project or any portion thereof, with or without process of law, and may remove all persons therefrom, and the Company covenants in any such event peacefully and quietly to yield up and surrender the Project or such portion thereof to the Mortgagee. Section 2.5 Maximum Principal Amount Secured. The maximum principal amount of indebtedness secured by this Mortgage at any one time, excluding advances made by the Mortgagee in protection of the Mortgaged Property or the lien of this Mortgage, shall be $5,000,000. ARTICLE III REPRESENTATIONS, COVENANTS, PERMITTED ENCUMBRANCES, HAZARDOUS MATERIALS AND LIMITATION OF LIABILITY OF PARTNERS OF COMPANY Section 3.1. Warranty of Title and Instruments of Further Assurance. The Company hereby represents, warrants, covenants and agrees that it is and will continue to be the lawful owner of the Mortgaged Property, and that it has good, right and lawful authority to convey, mortgage and grant a lien and security interest in the Mortgaged Property to the Mortgagee and that the title, lien and security interest hereby conveyed is and will forever be free, clear and unencumbered, subject, however, only to the Permitted Encumbrances. The Company covenants and agrees to warrant and defend, subject to Permitted Encumbrances, its good and merchantable title to the Mortgaged Property, and its good, right and lawful authority to grant a lien and security interest in the Mortgaged Property, and to assign its interest in the Rents, to the Mortgagee. The Company will do, execute, acknowledge and deliver all and every further act, deed, conveyance, transfer and assurance necessary or proper for the carrying out more effectively of the purpose of this Mortgage and, without limiting the foregoing, for conveying, mortgaging, assigning and confirming unto the Mortgagee, subject to Permitted Encumbrances, all of the Mortgaged Property, or property intended so to be, whether now owned or hereafter acquired, including, without limitation, the preparation, execution and filing of any documents, such as financing statements and continuation statements, deemed advisable by the Mortgagee for maintaining the lien and security interest hereof on and in any property included in the Mortgaged Property. Section 3.2. Performance of Covenants. The Company covenants and warrants that the Agreement, the Assignment of Rents and this Mortgage have been validly executed and delivered and are valid and enforceable obligations of the parties thereto in accordance with the terms thereof and hereof; that this Mortgage, the Assignment of Rents, the Agreement and the performance or observance by the Company of any of the matters or things in this Mortgage, the Assignment of Rents and the Agreement do not contravene any covenant in any indenture or agreement affecting the Company; and that the Company will faithfully perform at all times any and all of its covenants, undertakings, stipulations and provisions contained in the Agreement, the Assignment of Rents and this Mortgage. Section 3.3. Permitted Encumbrances. The Permitted Encumbrances are as follows: 3-1 (a) liens for taxes and special assessments which are not then delinquent, or if then delinquent are being contested in accordance with Section 3.5 hereof; (b) utility, access and other easements and rights-of-way, restrictions, restrictive covenants and exceptions that the Company certifies to the Mortgagee will not materially interfere with or materially impair, or are necessary for, the operation of the Project, or if it is not being operated, the operation for which it was designed or last modified; (c) any mechanic's, laborer's, materialmari s, supplier's, or vendor's lien or right in respect thereof if payment is not yet due under the contract in question or if such lien is being contested in accordance with Section 3.5 hereof; (d) such minor defects, irregularities, encumbrances, easements, rights-of-way and clouds on title as normally exist with respect to properties similar in character to the Land and do not materially impair the property affected thereby for the purpose for which it was intended; (e) zoning laws; (f) liens arising in connection with workers' compensation, unemployment insurance, taxes, assessments, statutory obligations or liens, social security legislation, undetermined liens and charges incidental to construction, or other similar charges arising in the ordinary course of operation and not overdue or, if overdue, being contested in a permitted contest; (g) right of tenants in the Project; and (h) easements, restrictions or encumbrances shown on Exhibit B hereto. Section 3.4. Liens and Encumbrances. The Company represents and warrants that, as of the date of execution of this Mortgage, there exists no lien, charge or encumbrance, other than Permitted Encumbrances, on the Mortgaged Property, prior to this Mortgage. Except as otherwise permitted by the provisions of this Mortgage, the Company will not create or suffer to be created any prior lien, encumbrance or charge upon the Mortgaged Property other than Permitted Encumbrances and, subject to the provisions of Section 3.5 hereof relating to permitted contests, will satisfy or cause to be discharged, or will make adequate provision to satisfy and discharge, all lawful claims and demands for labor, materials, supplies or other items which, if not satisfied, might by law become a lien upon the Mortgaged Property; provided that liens for labor or materials arising by operation of statutory law shall not be within the purview of this Section 3.4 if, when such liens shall be perfected, the Company shall cause them to be promptly discharged. If any such lien shall be filed or asserted against the Mortgaged Property by reason of work, labor, services or materials supplied or claimed to have been supplied, the Company shall, subject to the provisions of Section 3.5 hereof relating to permitted contests, forthwith cause the same to be discharged of record, or effectively prevent the enforcement and collection thereof against the Mortgaged Property by contest, payment, deposit, bond, order of court or otherwise. Nothing contained in this Section 3.4 shall be construed as modifying or affecting the rights of the Company granted in Section 3.5 or Section 4.4 hereof. Section 3.5. Permitted Contests. The Company shall not be required to pay any tax, charge, assessment or imposition referred to in the Agreement, nor to remove any lien, charge or encumbrance required to be removed under Section 3.4 hereof, so long as the Company shall in good faith and at its own expense contest the same or validity thereof by appropriate legal proceedings, which shall operate to prevent the collection thereof or other realization thereon and the sale or forfeiture of the Mortgaged Property or any part thereof to satisfy the same; provided, that during such contest the Company shall, at the option of the Mortgagee, provide security reasonably satisfactory to the Mortgagee assuring the discharge of the Company's obligation for such taxes, assessments, charges or liens and of any additional charge, penalty or expense arising from or incurred as a result of such contest; and provided further, that if at any time payment of any such taxes, assessments or charges, or discharge of such liens, shall become necessary to prevent the delivery of a tax deed conveying the Mortgaged Property or any portion thereof, or to prevent the sale or the forfeiture of the Mortgaged Property or any part thereof, because of nonpayment, the Company shall pay the same, or discharge the same using appropriate legal proceedings in sufficient time to prevent the delivery of such tax deed or such sale or forfeiture. Section 3.6. Hazardous Materials. The Company covenants, warrants and represents to the Mortgagee, its successors and assigns, (i) that it has not used or permitted and will not use or permit the Mortgaged Property to be used, whether directly or through contractors, agents or tenants, and to the best of the Company's knowledge and except as disclosed to the Mortgagee in writing, the Mortgaged Property has not at any time been used for the generating, transporting treating, storage, manufacture, emission of, or disposal of any dangerous, toxic or hazardous pollutants, chemical wastes or substances as defined in the Federal Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"), or the Federal Resource Conservation and Recovery Act of 1976 ("RCRA"), or the Minnesota Environmental Response and Liability Act, Minnesota Statutes, Chapter 115A ("MERLA"), or any other federal, state or local environmental laws, statutes, regulations, requirements and ordinances ("Hazardous Materials"); (ii) that there 3-3 have been no investigations or reports involving the Company or the Mortgaged Property by any governmental authority which in any way pertain to Hazardous Materials; (iii) that the operation of the Mortgaged Property has not violated and is not currently violating any federal, state or local law, regulation, ordinance or requirement governing Hazardous Materials; (iv) that the Mortgaged Property is not listed in the United States Environmental Protection Agency's National Priorities List of Hazardous Waste Sites nor any other list, schedule, log, inventory or record of Hazardous Materials or hazardous waste sites, whether maintained by the United States Government or any other state or local agency; and (v) to the Company's knowledge that the Mortgaged Property does not contain any formaldehyde, urea or asbestos, except as may have been disclosed in writing to the Mortgagee by the Company at the time of execution and delivery of this Mortgage. The Company agrees to indemnify and reimburse the Mortgagee, its successors and assigns, for any breach of these representations and warranties and from any loss, damage, expense or cost arising out of or incurred by the Mortgagee which is a result of a breach, misstatement of or misrepresentation of the above covenants, representations and warranties, together with all attorneys' fees incurred in connection with the defense of any action against the Mortgagee arising out of the above. These covenants, representations and warranties are for the benefit of the Mortgagee and shall be deemed to survive termination of this Mortgage. Section 3.7. Limitation of Liabilities of Partners of the Company. There shall be no personal liability hereunder of the general or limited partners of the Company. The personal liability of the Company and its partners shall be limited to the assets of the Company, the Project and any collateral securing the Agreement, including without limitation, this Mortgage and the Assignment of Rents, and any and all funds held by or on behalf of the Trustee for the benefit of the bondholders. Notwithstanding the foregoing, the general partners of the Company shall be liable personally for any distributions of profits and loss from the Company made during the pendency of an Event of Default under this Agreement. In addition, the general partners of the Company shall be liable personally for any losses suffered by the Bondholders as a direct result of any intentional waste of all or any portion of the Project; any intentional misapplication of insurance or condemnation proceeds; or any fraud or false representation by the Company in the Official Statement or in any other materials delivered to the Bondholders in connection with the execution and delivery of the Bonds. Section 3.8. Compliance With Other Laws and Restrictions. The Company shall comply with all present and future laws, statutes, ordinances, codes, rules, regulations and requirements of any governmental authority having or claiming jurisdiction with reference to the Mortgaged Property and the manner of leasing, using, operating or maintaining the same, including but not limited to the provisions of Minnesota Statutes Section 504.18, Subdivision 1, and Section 504.20, as now existing or as hereafter amended, if applicable, and with all private 3-4 covenants and restrictions, if any, affecting the title to the Mortgaged Properties, or any thereof. 3-5 ARTICLE IV RELEASE OF MORTGAGED PROPERTY, EASEMENTS, TIE-IN WALLS, ADDITION OF IMPROVEMENTS TO LIEN OF MORTGAGE Section 4.1. Release of Land. In addition to the rights granted to the Company elsewhere in this Article IV, the Company shall have the right, at any time and from time to time, to obtain a release from the lien of this Mortgage of any part of the Land not containing any permanent structure necessary for the total operating unity and efficiency of the Project (as determined by a Company Representative) and the Mortgagee shall, from time to time, release from the lien of this Mortgage such real property, but only upon receipt by the Mortgagee of the following: A. A Company Request for such release; B. A Company Certificate, signed also as to clause (1) of this subsection by a Registered Land Surveyor, stating or setting forth in substance as follows: (1) the quantity of the Land to be released; (2) that the property to be released either (i) is not needed for the operation of the Project for the purpose for which it was intended or (ii) is to be improved for use in the business of the Company; and, in either case, is not necessary for the total operating unity and efficiency of the Project; (3) that the release will not impair the structural integrity of the Mortgaged Property or the usefulness of the Mortgaged Property for these purposes and will not inhibit adequate means of ingress to or egress from the Project; (4) that no default under the Agreement has occurred which has not been cured; and (5) that all conditions precedent herein provided for related to such release have been complied with; C. A survey prepared by a Registered Land Surveyor describing and showing the Land, after giving effect to such release and describing the portion of the Land to be released; D. Evidence that the Land after giving effect to such release constitutes a separate parcel for conveyance and real estate tax purposes in conformance with all applicable zoning, subdivision laws, ordinances, codes and regulations. 4-1 E. An Opinion of Counsel, stating that the certificates, opinions and other instruments and cash which have been or are therewith delivered to and deposited with the Mortgagee conform to the requirements of this Section 4.1 and that, upon the basis of such application, the property may be lawfully released from the lien of this Mortgage and that all conditions precedent herein provided for relating to such release have been complied with. F. An endorsement to the Mortgagee's title insurance policy issued to the Mortgagee with respect to the Mortgage. In connection with any such release the Mortgagee shall execute any plat relating to the Land after giving effect to such release and the Land to be released. Section 4.2. Grant of Easements. Liens, Etc. The Company may at any time or times grant to itself or others easements, licenses, rights-of-way and other rights or privileges in the nature of easements with respect to the Land, free from the lien of this Mortgage, or the Company may release existing easements, licenses, rights-of-way and other rights or privileges, with or without consideration, and the Mortgagee will execute and deliver any instrument necessary or appropriate to confirm and grant or release any such easement, license, right-of-way or privilege; provided, however, that prior to any such grant or release, there shall have been supplied to the Mortgagee a Company Certificate: (a) stating that such grant or release is not detrimental to the proper operation of the Project; and (b) stating that such grant or release will not materially impair the operating unity or the efficiency of the Project on such Land or materially and adversely affect the character thereof. Section 4.3. Addition of Improvements to Lien of Mortgagee. All buildings, structures or improvements which may be acquired or constructed by the Company subsequent to the date hereof and which are located on the Land, and all property of every kind or nature added to or installed in any Improvement, structure or improvement located on the Land after the date hereof shall, immediately upon the acquisition thereof by the Company, and without any further conveyance or assignment, become subject to the mortgage, lien and security interest of this Mortgage. Nevertheless, the Company, in accordance with the provisions of Section 3.1 hereof, will do, execute, acknowledge and deliver, all and every such further acts, conveyances and assurances as the Mortgagee shall require for accomplishing the purposes of this Section 4.3. 4-2 Section 4.4. Tie -In Walls. The Company may, at its own expense, (a) connect or "tie-in" walls (including use of existing walls for the support of future adjacent buildings) and utilities and other facilities located on the Land to other structures erected on the Land or on real property adjacent to or near the Land or partly on such adjacent real property and partly on the Land, or (b) in connection with the expansion or improvement of any building on the Land, tear down any wall of such building and build an addition to such building (either on the Land or on real property adjacent thereto or partly on such adjacent real property and partly on the Land); provided, however, that, prior to any such expansion, addition, improvement, tearing down or connection with the "tie- in" walls, utilities and other facilities, the Company shall have delivered to the Mortgagee a certification of an Architect as to the total costs of such expansion or improvement and a certification of the Company that the Company has sufficient funds on hand to complete such expansion or improvement, and the Mortgagee shall have approved the same in writing based on a certification and/or opinion of an Architect that the same will not impair the structural integrity, operating unity and the efficiency of the Improvements on the Land or adversely affect the character thereof, and based on an Opinion of Counsel stating that all party -wall agreements, easements, cross -easements or other instruments relating to such expansion, addition, improvement, tearing down or connection with the "tie-in" walls, utilities and other facilities, which are necessary or desirable to define the relative rights of the owners and encumbrancers of the same therein, and to fully preserve the security hereof, have been duly executed, delivered and recorded, to which Opinion of Counsel copies of all such instruments shall be attached. The Mortgagee shall join in any such party -wall agreements, easements, cross -easements or other agreements, to the extent necessary to effect the purpose of this Section 4.4. 991 ARTICLE V THE MORTGAGEE Section 5.1. Right of Inspection. At any and all reasonable times after notice reasonable in the circumstances, the Mortgagee and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right to inspect fully any and all of the property herein conveyed, including all books, papers and records of the Company pertaining to the Mortgaged Property, and to take such memoranda from and in regard thereto as may be desired. Section 5.2. Right of Mortgagee To Pay Taxes and Other Charges. In case any tax, assessment or governmental or other charge upon any part of the Mortgaged Property or any insurance premium with respect thereto is not paid, to the extent, if any, that the same is legally payable, the Mortgagee may pay such tax, assessment, governmental charge or premium after written notice to the Company, without prejudice, however, to any rights of the Mortgagee hereunder arising in consequence of such failure. Any amount at any time so paid under this Section 5.2, with interest thereon from the date of payment at an annual rate equal to two percent (2%) in excess of the published prime rate of interest of Norwest Bank Minnesota, National Association, or such higher lawful annual rate as the Company may have approved in writing, shall be repaid to the Mortgagee upon demand, and shall become so much additional indebtedness secured by this Mortgage, and the same shall be given a preference in payment over principal of or interest on the Bonds, but the Mortgagee shall be under no obligation to make any such payment. Section 5.3. Mortgagee Protected in Relying Upon Resolutions, Etc. The resolutions, orders, requisitions, opinions, certificates and other instruments provided for in this Mortgage may be accepted by the Mortgagee as conclusive evidence of the facts and conclusions stated therein. Section 5.4. Reimbursement of Mortgagee. If any action or proceeding be commenced (except an action to foreclose this Mortgage), to which action or proceeding the Mortgagee is made a party, or in which it becomes necessary, in the opinion of the Mortgagee, to defend or uphold the lien of this Mortgage or to protect the Mortgaged Property or any part thereof, all sums paid by the Mortgagee to establish or defend the rights and lien of this Mortgage or to protect the Mortgaged Property or any part thereof after giving written notice of such actions to the Company (including attorneys' fees, and costs and allowances), and whether suit be brought or not, shall be paid, upon demand, to Mortgagee by the Company, together with interest at an annual rate equal to two percent (2%) in excess of the published prime rate of interest of Norwest Bank Minnesota, National Association or such higher lawful annual rate as the Company may have approved in writing, and any 5-1 such sum or sums and the interest thereon shall be secured hereby prior to the Bonds. ARTICLE VI MISCELLANEOUS Section 6.1. Recording. The Company will cause this Mortgage and all supplements hereto and any other instruments of further assurances, to be promptly recorded, filed and registered, and at all times to be recorded, filed and registered, in such manner and in such places as may be required by law to preserve and protect fully the rights of the Mortgagee hereunder as to the Mortgaged Property. Section 6.2. Opinion of Counsel to Recording. The Company will furnish to the Mortgagee promptly after the execution and delivery of each supplemental instrument of further assurance to this Mortgage, an Opinion of Counsel stating that, in the opinion of such Counsel (which may be based upon information furnished by a title abstract company or by a title insurance company as to recording and a title insurance policy or commitment therefor), this Mortgage, or such supplemental instrument of further assurance has been properly recorded, filed or registered, or has been received for recording, filing or registration in each requisite jurisdiction, so as to make effective the lien intended to be created by this Mortgage and reciting the details of such actions, including the date or dates of such recording, filing or registration or receipt for recording, filing or registration, or state that in the opinion of such Counsel, no such action is necessary to make such lien effective. Section 6.3. Binding Effect. All terms, covenants, conditions and agreements of the Company contained herein or set forth in the Agreement shall be binding upon the Company and its permitted successors and assigns, and every covenant, condition and agreement herein contained or set forth in the Agreement in favor of the Mortgagee shall apply to and inure to the benefit of the Mortgagee and its successors or assigns. This Mortgage is expressly made subject to all terms, conditions, covenants and agreements set forth in the Agreement. Section 6.4. Amendments. Except as provided in Article IV hereof and in the Agreement, this Mortgage may be amended only in accordance with the provisions of the Indenture. Section 6.5. Use of Mortgaged Property. It is recognized by the parties hereto that unless and until an Event of Default shall have occurred under Section 9.01 of the Agreement and the Mortgagee shall have exercised one of its remedies under Section 2.3 hereof, the Company shall have the unencumbered right to the use of the Mortgaged Property in the ordinary course of its business, subject only to the covenants, conditions and agreements contained in the Agreement and the Assignment of Rents. 6-1 Section 6.6. Severability. If any provision of this Mortgage shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions or in all cases because it conflicts with any provisions or any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or paragraphs in this Mortgage contained shall not affect the remaining portions of this Mortgage or part thereof. Section 6.7. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when mailed by registered or certified mail, postage prepaid, with proper address as indicated below. The Company, the City and the Trustee may, by written notice given by each to the others, designate any other address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Mortgage. Until otherwise provided by the respective parties, all notices, certificates and communications to each of them shall be addressed as follows: To the City: City of New Hope City Hall 4401 Xylon Avenue North New Hope, Minnesota 55428 Attn: City Manager To the Company: Northridge Properties of New Hope Limited Partnership c/o North Ridge Care Center 5430 Boone Avenue North New Hope, Minnesota 55428 Attn: Charles T. Thompson To the Trustee: Norwest Bank Minnesota, National Association 6th and Marquette Avenue Minneapolis, Minnesota 55479-0069 Attn: Corporate Trust Department Section 6.8. Execution Counterparts. This Mortgage may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 6-2 Section 6.9. This Instrument a Fixture Financing Statement. This instrument shall be deemed to be a Fixture Financing Statement within the meaning of the Minnesota Uniform Commercial Code and for such purpose the following information is set forth: a. Name and address record owner of real estate described in Exhibit A b. Name and address of Secured Party: c. Description of the types or items of property covered by this Financing Statement: d. Description of real estate to which the collateral is attached or upon which it is located: Northridge Properties of New Hope Limited Partnership c/o North Ridge Care Center 5430 Boone Avenue North New Hope, Minnesota 55428 Attn: Charles T. Thompson City of New Hope 4401 Xylon Avenue North New Hope, Minnesota 55428 Attn: City Manager See Section 2.1 hereof See Exhibit A hereto Some of the above-described collateral is or is to become fixtures upon the real estate described upon Exhibit A hereto, and this Financing Statement is to be filed for record in the real estate records of Hennepin County, Minnesota. 6-3 IN WITNESS WHEREOF, NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP has caused these presents to be signed in its name and on its behalf by its duly authorized general partner; and to evidence its acceptance of the mortgage, lien and security interests created hereby and the other terms set forth herein, the CITY OF NEW HOPE, MINNESOTA, has caused these presents to be signed in its name and behalf by its duly authorized representatives, all as of the day and year first written above. NORTH RIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP By Charles P. Thom son Its General Partner CITY OF NEW HOPE, MINNESOTA f Its Ma And A��'�`� • 1 \� ©\\\�� `' Its Acting City Manager STATE OF MINNESOTA) COUNTY OF PfWltVl N../I) ss. On this �day of, 1996, before me, the undersigned, personally appeared Charles P. Thompson known to me to be a general partner of Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership, and who acknowledged that such partnership executed the foregoing instrument. TAh1q�n�qu. ATHEiil,WE NUTZMANN 3Y <'S�'V lY "rIWC,MINNE80TA r {ssme Exp;resJen. 31, 2000 VN/VWV ■ STATE OF MINNESOTA) )SS. COUNTY OF ) Notary Public On this day of 1996, before me, the undersigned, personally appeared Edward J. Erickson and Kirk McDonald known to me to be the Mayor and Acting City Manager respectively of the City of New Hope, Minnesota, Minnesota municipal corporation, and who acknowledged that such corporation executed the foregoing instrument. ■ STEVEN A.SONDRALL (NOtari 1 NOTARY PUBLIC -MINNESOTA NENNEPIN COUNTY My Commission Expires Jan. 31, 2000 V x 6-5 :�2z=(7 , _di� Notary Public EXHIBIT A Legal Description of the Land Lot 1, Block 1, Charlie Thompson Addition, according to the plat thereof on file and of record in the office of the Registrar of Titles in and for Hennepin County, Minnesota. A-1 EXHIBIT B List of Permitted Encumbrances in Addition to Items Listed in Section 3.3 1. Drainage and utility easement(s) as shown on the recorded Plat of Charlie Thompson Addition. 2. Easement for Water Main purposes acquired by the CIty of New Hope as evidenced by Document No. 660737. 3. Restriction and storm sewer easement contained in Quit Claim Deed from the Housing and Redevelopment Authority in and for the City of New Hope dated May 16, 1985, filed May 29, 1985, as Document No. 1647819. 4. Highway easement(s) over a portion of subject premises in favor of County of Hennepin, as created in Document No. 2377790. 5. Terms and conditions of Redevelopment Agreement dated as of January 30, 1985. 6. Terms and conditions of Assessment Agreement and Assessor's Certification dated as of January 30, 1985, recorded and filed May 29, 1985, as Document No. 1647818. 7. Terms and Conditions of Declaration of Restrictive Covenants dated as of May 1, 1985 from Northridge Properties of New Hope Limited Partnership. 8. Terms and Conditions of Declaration of Restrictive Covenants dated as of June 1, 1996 from Northridge Properties of New Hope Limited Partnership. 9. Assignment of Rents. M1 ASSIGNMENT OF MORTGAGE AGREEMENT between CITY OF NEW HOPE, MINNESOTA and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee Dated as of June 1, 1996 This instrument was drafted by Dorsey & Whitney LLP 220 South Sixth Street Minneapolis, Minnesota 55402 THIS ASSIGNMENT OF MORTGAGE AGREEMENT, dated as of June 1, 1996, between the CITY OF NEW HOPE, MINNESOTA, a Minnesota municipal corporation organized and existing under the Constitution and laws of the State of Minnesota (the "Assignor"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States, as Trustee under the Indenture of Trust (hereinafter referred to with any successor trustee, as the "Assignee"). WITNESSETH WHEREAS, the Assignor will issue and deliver its Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996, in the aggregate principal amount of $5,000,000, maturing and payable in full on or before June 1, 2026 (hereinafter referred to, the 'Bonds"), under and pursuant to Minnesota Statutes, Chapter 462C, as amended, and an Indenture of Trust, dated as of June 1, 1996 (the "Indenture"), between the Assignor and the Assignee; and WHEREAS, the Assignor will loan the proceeds of the Bonds to Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (with any permitted successor under the Loan Agreement hereinafter referred to, the "Company") pursuant to a Loan Agreement, dated as of June 1, 1996, between the Assignor and the Company; and WHEREAS, by the Loan Agreement, the Company has covenanted, among other things, to make Loan Repayments (as defined therein), sufficient to pay the principal of, premium, if any, and interest on the Bonds when due; and WHEREAS, the Company, to secure its obligations under the Loan Agreement has executed a Combination Mortgage, Security Agreement and Fixture Financing Statement, dated as of June 1, 1996 (the "Mortgage"), granting to the Assignor a mortgage lien on and security interest in certain real and personal property as therein specified, including the real property in Hennepin County, Minnesota, the legal description of which appears on Exhibit A hereto, and which is hereby incorporated herein by reference; and WHEREAS, the Mortgage was duly filed for record in the office of the Registrar of Titles of Hennepin County, Minnesota, on the _ day of 1996, as Document No. ; and WHEREAS, the Assignor has, by the Indenture, pledged and granted to the Assignee a security interest in all of the Assignor's rights, title and interests in the Loan Agreement (except certain rights to payment of administration and legal expenses and indemnification), including, but not limited to, such Loan Repayments, and the Mortgage in order to secure, inter alfa, the full and prompt payment of the principal of, premium, if any, and interest on the Bonds. i.- NOW, THEREFORE, the Assignor, in consideration of the purchase of the Bonds by the Holders thereof, from time to time, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and as security for the payment of the principal of, premium, if any, and interest on the Bonds and the performance of the provisions of the Indenture and such other agreements as are specified by the Mortgage, does hereby sell, assign, transfer and set over to the Assignee and its successors as trustee under the Indenture, all of its right, title and interest in and to the Mortgage, together with all right and interest in the land therein described, and to the debt thereby secured (including the Loan Agreement (other than amounts payable to the Assignor under Sections 4.03, 7.04 and 9.05 thereof) and the other obligations therein specified), and hereby constitutes and appoints the Assignee its attorney irrevocable to collect and receive such debt, and to foreclose, enforce and satisfy the Mortgage the same as it might or could have done were these presents not executed but at the cost and expense of the Assignee as provided in the Indenture. IN WITNESS WHEREOF, the CITY OF NEW HOPE, MINNESOTA, has caused these presents to be signed in its name and on its behalf by its authorized officers, all as of the day and year first written above. CITY OF NEW HOPE, MINNESOTA ByZ2=1(iJeL1— . Mayor And -' \1P \ \� + Acting City Manager -2- STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) ti On this '--day of 1996, before me, a notary public in and for said county and state, personally ap eared Edward J. Erickson and Kirk McDonald, known to me to be the Mayor and Acting City Manager, respectively, of the CITY OF NEW HOPE, MINNESOTA, the municipal corporation that executed the foregoing instrument. N WITN.�'S'S HEREOF, seal this day of Lj L1 1996. u 11 ti.. I have hereunto set my hand and official Notary Public rti STEVEN A. SONORALL (NOTARI A4P;ARYPUBLIC•MINNESOTA HENNEPIN COUNTY My Commission Expires Jan.31, 2000 • a -3- EXHIBIT A LEGAL DESCRIPTION OF THE LAND Lot 1, Block 1, Charlie Thompson Addition, according to the plat thereof on file and of record in the office of the Registrar of Titles in and for Hennepin County. A-1 ASSIGNMENT OF RENTS AND LEASES from NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP to CITY OF NEW HOPE, MINNESOTA Dated as of June 1, 1996 This Instrument Drafted By: Dorsey & Whitney LLP Pillsbury Center South 220 South Sixth Street Minneapolis, Minnesota 55402 The interest of the City of New Hope, Minnesota in this Assignment of Rents and Leases has been assigned to Norwest Bank Minnesota, National Association, as Trustee under an Indenture of Trust dated as of June 1, 1996, between the City of New Hope, Minnesota and Norwest Bank Minnesota, National Association, pursuant to an Assignment of Assignment Rents and Leases, dated as of June 1, 1996, between the City of New Hope, Minnesota and Norwest Bank Minnesota, National Association, as Trustee. ASSIGNMENT OF RENTS AND LEASES THIS ASSIGNMENT OF RENTS AND LEASES (Assignment of Rents) is made as of the 1st day of June, 1996, by Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the Obligor), to the City of New Hope, Minnesota, a Minnesota municipal corporation (the Assignee). WITNESSETH: WHEREAS, the Obligor is the owner of certain real estate located in the County of Hennepin, State of Minnesota, described in Exhibit A hereto and incorporated herein by reference (the Land); and WHEREAS, the Assignee has agreed to issue its Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996, of even date herewith (the Bonds), in the principal amount of $5,000,000 pursuant to Minnesota Statutes, Chapter 462C, and an Indenture of Trust, of even date herewith (the Indenture), between the City and Norwest Bank Minnesota, National Association (the Trustee); and WHEREAS, the Assignee has agreed to loan the proceeds of the Bonds to the Obligor pursuant to a Loan Agreement of even date herewith, between the Assignee and the Obligor (the Loan Agreement), which proceeds will be applied and disbursed in accordance with the provisions of the Loan Agreement and the Indenture to refund a portion of the Variable Rate Demand Rental Housing Development Revenue Bonds (Minnesota Multi -City Joint Rental Housing Program), Series 1985 of the Housing and Redevelopment Authority of the City of St. Paul, Minnesota, which were used to finance a portion of the cost of the acquisition of the Land and the construction and equipping of a 129 -unit multifamily rental housing development thereon (the Improvements); and WHEREAS, to secure payment of the Bonds and amounts payable under the Loan Agreement, the Obligor has executed and delivered to the Assignee a Combination Mortgage, Security Agreement and Fixture Financing Statement, of even date herewith (the Mortgage), the lien of which extends to the Land, the Improvements and certain fixtures and Project Equipment (as defined in the Mortgage) owned by the Obligor and now or hereafter located on the Land _. (hereinafter collectively referred to as the Mortgaged Property); and WHEREAS, the Obligor has entered into and may, from time to time hereafter, during such time as the indebtedness secured hereby remains outstanding, enter into leases, licenses or other agreements concerning possession of all or any part of the Mortgaged Property (all of which leases and agreements whether currently in existence or hereafter entered into are collectively referred to herein as the Leases) with various persons or entities (the Lessees) pursuant to which the Obligor is entitled to rents, revenues, issues, profits or other renumeration (the Rents); and WHEREAS, the original purchaser of the Bonds has required the execution of this Assignment of Rents as a condition of purchasing the Bonds. NOW, THEREFORE, in consideration of the premises, and in further consideration of the sum of One Dollar ($1.00) paid by the Assignee to the Obligor, the receipt and sufficiency of which is hereby acknowledged, the Obligor does hereby grant, transfer and assign to the Assignee all of the Obligor's right, title and interest in and to the Leases, together with any and all security deposits made thereunder and all extensions, modifications and renewals, if any, thereof and any guarantees of the Lessee's obligations under any thereof. In addition to the foregoing, the Obligor does further hereby grant, transfer and assign to the Assignee all of the Rents, now or hereafter accruing or owing under the Leases or otherwise as a result of any use, possession, occupancy or operation of the Mortgaged Property or any part thereof, whether accruing before or after foreclosure of the Mortgage or during the period of redemption thereof. The Leases and Rents are being hereby granted, transferred and assigned for the purpose of securing the following obligations (hereinafter collectively referred to as the Obligations Secured Hereby): 1. Payment of all indebtedness evidenced by the Bonds (including any extensions or renewals thereof); 2. Payment of all sums, with interest thereon, becoming due and payable pursuant to the covenants and agreements contained herein and in the Bonds, the Loan Agreement, the Indenture and the Mortgage; and 3. Performance and discharge of each and every obligation, covenant and agreement of the Obligor contained herein and in the Loan Agreement, the Indenture and the Mortgage. AND TO PROTECT THE SECURITY OF THIS ASSIGNMENT, THE OBLIGOR AGREES: A. Performance of Leases. To abide by, perform and discharge faithfully each and every obligation, covenant and agreement under the Leases to be performed by the lessor thereunder; to observe and comply with all provisions of law applicable to the operation and ownership of the Mortgaged Property, including, without limitation, all applicable provisions of Minnesota Statutes, Section 504.20, with respect to any security deposits received by it, and all covenants and obligations required of it by the provisions of Minnesota Statutes, Section 504.18, Subdivision 1; to enforce or secure the substantial performance of each and every obligation, covenant, condition and agreement of the Leases to be performed by the Lessees; not -2- to borrow against, pledge or assign any Rents, ,or to waive, excuse, condone or in any manner release or discharge any of the Lessees of or from the obligations, covenants, conditions and agreements by the Lessees to be performed under the Leases, including the obligation to pay the rental called for thereunder in the manner and at the place and time specified therein; and not to terminate the Leases or accept a surrender thereof except by reason of the expiration of the stated term of the Leases unless such termination or surrender is in the ordinary course of business and the Obligor determines that it is in the best interests of the Obligor and the holders of the Bonds to terminate any such Leases or accept a surrender thereof. B. Protect Security. At the Obligor's sole cost and expense, to appear in and defend any action or proceeding arising under, growing out of or in any manner connected with the Leases or the obligations, duties or liabilities of the Obligor and the Lessees, and to pay all costs and expenses of the Assignee, including attorneys' fees in a reasonable sum, in any such action or proceeding in which the Assignee must appear. The Obligor represents and warrants that it is now and will be the absolute owner of the Leases with full right and title to assign the same and the Rents; that there is no outstanding assignment or pledge of the Leases or of the Rents; that no Rents have been or will in the future be waived, anticipated, discounted, compromised or released unless the Obligor determines that it is in the best interests of the Obligor and the holders of the Bonds to do so; and that the Lessees have no defenses, setoffs or counterclaims against the Obligor. The Obligor agrees to use its best efforts to keep the Mortgaged Property fully leased at rentals equivalent to or greater than rentals achieved from comparable low and moderate multifamily housing project properties. C. Present Assignment of Rents. This Assignment of Rents shall constitute an actual and present assignment; provided that the Obligor shall have the right to collect, but not more than 30 days before due and payable, all of the Rents, and to retain, use and enjoy the same unless and until a default shall occur in the payment or performance of the Obligations Secured Hereby. D. Remedies. Upon or at any time after default by the Obligor in the payment or performance of any Obligations Secured Hereby, and if such default is continuing, the Assignee may, at its option, without notice: 1. In the name, place and stead of the Obligor, (i) enter upon, manage and operate the Mortgaged Property, or retain the services of an independent contractor to manage and operate the same; (ii) make, enforce, modify and accept surrender of the Leases; (iii) obtain or evict tenants, collect, sue for, fix or modify rentals and enforce all rights of the Obligor under the Leases; and (iv) perform any and all other acts that may be necessary or proper to protect the security of this Assignment of Rents. -3- 2. Apply for, and the Obligor hereby consents to, the appointment of a receiver of the Mortgaged Property, whether or not proceedings for the foreclosure of the Mortgage have been commenced, and if such proceedings have been commenced, whether or not a foreclosure sale has occurred. The exercise of any of the foregoing rights or remedies shall not cure or waive any default under the Bonds, the Loan Agreement, the Indenture or the Mortgage, or invalidate any act done by virtue of such default. E. Application of Rents. All Rents collected by the Assignee, if any, shall be held and applied in the following order: 1. To payment of all reasonable fees of the receiver, if one shall be appointed, approved by the Court; 2. To the repayment when due of all tenant security deposits, with interest thereon, pursuant to the provisions of Minnesota Statutes, Section 504.20; 3. To payment when due of all delinquent or current real estate taxes and special assessments payable with respect to the Mortgaged Property, or the periodic escrow for the payment of said taxes or special assessments; 4. To payment when due of all premiums for the insurance required by the provisions of the Mortgage or the Loan Agreement, or the periodic escrow for the payment of said premiums; 5. To payment of expenses incurred for normal maintenance of the Mortgaged Property; 6. To payment of expenses incurred by the Assignee or its agents for the management and operation of the Mortgaged Property, including the cost of any independent contractor retained by the Trustee to manage and operate the Mortgaged Property; 7. Any excess amounts remaining after the above payments shall be paid to the Trustee in payment of the Obligations Secured Hereby in the order of application provided in the Indenture. The rights and powers of the Assignee under this Assignment of Rents, and the application of the Rents pursuant to this paragraph E, shall continue and remain in full force and effect until all Obligations Secured Hereby are paid in full, both before and after commencement of any action or procedure to foreclose the Mortgage, after the foreclosure sale of the Mortgaged Property in connection with the foreclosure of the Mortgage, and until expiration of the period of redemption from any such In j foreclosure sale, whether or not any deficiency from the unpaid balance of the Obligations Secured Hereby exists after such foreclosure sale. F. No Liability for Assignee. Notwithstanding any of the other provisions of this Assignment of Rents, the Assignee shall not be obligated to perform or discharge, nor does it hereby undertake to perform or discharge, any obligation, duty or liability under the Leases; nor shall this Assignment of Rents operate to place responsibility for the control, care, management or repair of the Mortgaged Property upon the Assignee; nor shall it obligate the Assignee to carry out any of the terms and conditions of the Leases; nor shall it operate to make the Assignee responsible or liable for any waste committed on the Mortgaged Property by the Lessees or any other party, or for any dangerous or defective condition of the Mortgaged Property, or for any negligence in the management, upkeep, repair or control of the Mortgaged Property resulting in loss or injury or death to any tenant, licensee, employee or stranger. G. Obligor To Hold the Assignee Harmless. The Obligor shall and does hereby agree to indemnify and to hold the Assignee harmless of and from any and all liability, loss or damage which it may or might incur under a Lease or under or by reason of this Assignment of Rents and of and from any and all claims and demands whatsoever which may be asserted against it by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements contained in the Leases unless such liability, loss or damage results from the negligence of the Assignee or its agents. Should the Assignee incur such liability, loss or damage under any Lease or under or by reason of this Assignment of Rents, or in the defense of any such claims or demands, the amount thereof, including costs, expenses, and reasonable attorneys' fees, shall be secured hereby, and the Obligor shall reimburse the Assignee therefor immediately upon demand. H. Specific Assignment of Leases. The Obligor covenants and agrees promptly upon request of the Trustee, to transfer and assign to the Assignee any specific Leases of all or any part of the Mortgaged Property upon the same terms and conditions as are herein contained. I. Remedies Not Exclusive. This Assignment of Rents shall in no way operate to prevent the Assignee from pursuing any remedy which it now has or hereafter may have under the terms and conditions of.the Mortgage, the Loan Agreement, the Bonds or any other instrument securing the same, or by law, but shall be deemed an additional remedy and shall be cumulative with the remedies granted therein. J. Authorization to Lessees. The Lessees are hereby irrevocably authorized and directed to recognize the claims of the Assignee, or its assigns, WI hereunder without investigating the reason for any action taken by the Assignee, or the validity or the amount of indebtedness owing to the Assignee, or the existence of any default under the Bonds, the Loan Agreement, the Indenture or the Mortgage or under or by reason of this Assignment of Rents, or the application of the Rents to be made by the Assignee. The Obligor hereby irrevocably directs and authorizes the Lessees, upon receipt of written notice by the Assignee that it is exercising its rights under this Assignment of Rents, to pay to the Assignee all sums due under the Leases and consents and directs that said sums shall be paid to the Assignee without the necessity for a judicial determination that a default has occurred hereunder or under the Bonds, the Mortgage, the Indenture or the Loan Agreement, or that the Assignee is entitled to exercise its rights hereunder, and to the extent such sums are paid to the Trustee, the Obligor agrees that the Lessees shall have no further liability to the Obligor for the same. The sole signature of the Assignee shall be sufficient for the exercise of any rights under this Assignment of Rents and the written receipt of the Assignee for any sums received shall be a full discharge and release therefor to the Lessees. The Obligor hereby agrees to execute all notices or other documents reasonably requested by the Trustee to carry out the intent of the foregoing. K. Notices. All notices, demands or other communications which are required or permitted to be given or served by either party hereunder shall be deemed given when deposited in the United States mail, registered or certified, postage prepaid, addressed to such party at the address for such party provided in the Indenture. L. Successors and Assigns. This Assignment of Rents and each and every covenant, agreement and other provision hereof shall be binding upon the Obligor and its successors and assigns, including, without limitation, each and every record owner of the Mortgaged Property or any other person having an interest therein, and shall inure to the benefit of the Assignee and its successors and assigns. M. Governing Law. This Assignment of Rents is made and executed in the State of Minnesota and shall be governed by the laws of such State with respect to procedures and remedies available to the Trustee in the event of a default. It is the intention of the parties hereto that this Assignment of Rents shall confer upon the Assignee the fullest rights, remedies and benefits available pursuant to Minnesota Statutes, Sections 576.01 and 559.17. N. Severability. If any term, condition or provision of this Assignment of Rents or the application thereof to any person or circumstances shall, to any extent, be held to be invalid or unenforceable, the remainder thereof and the application of such term, provision or condition to persons or circumstances other than those as to whom it shall be held invalid or unenforceable shall not be affected thereby, and this Assignment of Rents and all the terms, provisions and conditions in hereof shall, in all other respects, continue to be effective and to be complied with to the full extent permitted by law. O. No Mortgagee in Possession. Nothing herein contained, and no action taken pursuant to this Assignment of Rents, shall be construed as constituting the Assignee as a "Mortgagee in Possession." P. Recitals. The recitals set forth above are made a part hereof. Q. Definitions. Unless a contrary meaning is clearly expressed, terms used herein shall have the meaning given them in the Mortgage, the Loan Agreement or the Indenture. R. Trustee Attorney -in -Fact. The Obligor hereby irrevocably appoints the Assignee as its agent and attorney-in-fact to execute and deliver during the term of this Assignment such further instruments as the Assignee may deem necessary to make this Assignment effective. S. Limitation on Partners' Liability. There shall be no personal liability hereunder of the general or limited partners of the Obligor. The personal liability of the Obligor and its partners shall be limited to the assets of the Obligor, the Improvements and any collateral securing the Loan Agreement, including without limitation, the Mortgage and this Assignment of Rents, and any and all funds held by or on behalf of the Trustee for the benefit of the bondholders. Notwithstanding the foregoing, the general partners of the Obligor shall be liable personally for any distributions of profits and loss from the Company made during the pendency of an Event of Default under this Agreement. In addition, the general partners of the Obligor shall be liable personally for any losses suffered by the Bondholders as a direct result of any intentional waste of all or any portion of the Improvements; any intentional misapplication of insurance or condemnation proceeds; or any fraud or false representation by the Obligor in the Official Statement or in any other materials delivered to the Bondholders in connection with the execution and delivery of the Bonds. T. Release. The Assignee shall, at the cost and expense of the Obligor, release this Assignment of Rents by proper instrument upon payment, performance and discharge of all obligations secured hereby. Upon any release of any part of the Land from the lien of the Mortgage pursuant to Section 4.1 of the Mortgage, the Assignee shall release such part of the Land from the lien of the Assignment of Rents. -7- IN WITNESS WHEREOF, the Obligor has executed and the Trustee has accepted this Assignment of Rents and Leases as of the date first above written. NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP By Charles P. Thompson, Its general partner IM Accepted: in CITY OF NEW HOPE, MINNESOTA By ' Its MayKr And Its Acting City Manager STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was day ofozli 11" 1996, by Charles P. Northri ge Pr erties of New Hope Limit partnership. -,'ATHERINE NUT MAW NESOT" d�)TRRYRY >SIBLIC MINNESOTA �Xwes Jan. 31.2000 STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) acknowledged before me on this/ Thompson, a general partner of ed Partnership, a Minnesota limited Notary Public pW- T1}e foregoing instrument was acknowledged before me on this / ' day of L: 1996, by Edward J. Erickson, the Mayor and Kirk McDonald, the Acting City Manager of the City of New Hope, Minnesota, a Minnesota municipal corporation, on behalf of said corporation. Notary Public -10- Exhibit A Legal Description of the Land Lot 1, Block 1, Charlie Thompson Addition, according to the plat thereof on file and of record in the office of the Registrar of Titles in and for Hennepin County, Minnesota. A-1 ASSIGNMENT OF ASSIGNMENT OF RENTS AND LEASES between CITY OF NEW HOPE, MINNESOTA and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee Dated as of June 1, 1996 This instrument was drafted by Dorsey & Whitney LLP 220 South Sixth Street Minneapolis, Minnesota 55402 THIS ASSIGNMENT OF ASSIGNMENT OF RENTS AND LEASES, dated as of June 1, 1996, between the CITY OF NEW HOPE, MINNESOTA, a Minnesota municipal corporation organized and existing under the Constitution and laws of the State of Minnesota (the "Assignor"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States, as Trustee under the Indenture of Trust (hereinafter referred to with any successor trustee, as the "Assignee"). WITNESSETH WHEREAS, the Assignor will issue and deliver its Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996, in the aggregate principal amount of $5,000,000, maturing and payable in full on or before June 1, 2026 (hereinafter referred to, the 'Bonds"), under and pursuant to Minnesota Statutes, Chapter 462C, as amended, and an Indenture of Trust, dated as of June 1, 1996 (the "Indenture"), between the Assignor and the Assignee; and WHEREAS, the Assignor will loan the proceeds of the Bonds to Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (with any permitted successor under the Loan Agreement hereinafter referred to, the "Company") pursuant to a Loan Agreement, dated as of June 1, 1996, between the Assignor and the Company; and WHEREAS, by the Loan Agreement, the Company has covenanted, among other things, to make Loan Repayments (as defined therein), sufficient to pay the principal of, premium, if any, and interest on the Bonds when due; and WHEREAS, the Company, to secure its obligations under the Loan Agreement has executed an Assignment of Rents and Leases, dated as of June 1, 1996 (the "Assignment of Rents"), assigning to the Assignor the Company's interest in certain Leases and Rents (as defined in its Assignment of Rents with regard to a 129 - unit rental housing development located on real property in Hennepin County, Minnesota, the legal description of which appears on Exhibit A hereto, and which is hereby incorporated herein by reference; and WHEREAS, the Assignment of Rents was duly filed for record in the office of the Registrar of Titles of Hennepin County, Minnesota, on the _ day of 1996, as Document No. : and WHEREAS, the Assignor has, by the Indenture, pledged and granted to the Assignee a security interest in all of the Assignor's rights, title and interests in the Loan Agreement (except certain rights to payment of administration and legal expenses and indemnification), including, but not limited to, such Loan Repayments, and the Assignment of Rents in order to secure, inter alia, the full and prompt payment of the principal of, premium, if any, and interest on the Bonds. NOW, THEREFORE, the Assignor, in consideration of the purchase of the Bonds by the Holders thereof, from time to time, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and as security for the payment of the principal of, premium, if any, and interest on the Bonds and the performance of the provisions of the Indenture and such other agreements as are specified by the Assignment of Rents, does hereby sell, assign, transfer and set over to the Assignee and its successors as trustee under the Indenture, all of its right, title and interest in and to the Assignment of Rents, together with all right and interest in the land therein described, and to the debt thereby secured (including the Loan Agreement (other than amounts payable to the Assignor under Sections 4.03, 7.04 and 9.05 thereof) and the other obligations therein specified), and hereby constitutes and appoints the Assignee its attorney irrevocable to collect and receive such debt, and to foreclose, enforce and satisfy the Assignment of Rents the same as it might or could have done were these presents not executed but at the cost and expense of the Assignee as provided in the Indenture. IN WITNESS WHEREOF, the CITY OF NEW HOPE, MINNESOTA, has caused these presents to be signed in its name and on its behalf by its authorized officers, all as of the day and year first written above. CITY OF NEW HOPE, MINNESOTA 1b 4 s- —� Mayor d� Acting City Manager -2- STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) /�� e On this �— day of k 1996, before me, a notary public in and for said county and state, persona ly a eared Edward J. Erickson and Kirk McDonald, known to me to be the Mayor and Acting City Manager, respectively, of the CITY OF NEW HOPE, MINNESOTA, the municipal corporation that executed the foregoing instrument. "- WITNJ HEREOF, I have hereunto set my hand and official seal this 'day of _�1996. Notary Public ■■ (NOTAL _ �,jEVEN A. SONDRALL T YPUBLIC-MINNESOTA HENNEPIN COUNTY My Commission Expires Jan. 31, 2000 w r -3- EXHIBIT A LEGAL DESCRIPTION OF THE LAND Lot 1, Block 1, Charlie Thompson Addition, according to the plat thereof on file and of record in the office of the Registrar of Titles in and for Hennepin County. A-1 DEBT SUBORDINATION AGREEMENT This Agreement, dated as of July 1, 1996, is made by North Ridge Care Center, Inc., a Minnesota corporation (the "Creditor"), for the benefit of Norwest Bank Minnesota, National Association (the "Trustee"), as trustee under an Indenture of Trust, dated as of June 1, 1996, pursuant to which the City of New Hope, Minnesota (the "Municipality") will issue its Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996. The Municipality proposes to make a loan (the "Loan") of the proceeds of the Bonds (hereinafter defined) to Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Company"), pursuant to a Loan Agreement dated as of June 1, 1996 (the "Loan Agreement"). The Company's obligation to repay the Loan will be secured by a mortgage lien, subject to permitted encumbrances, on and a security interest in the Project pursuant to a Combination Mortgage, Security Agreement and Fixture Financing Statement (the "Mortgage") dated as of June 1, 1996 by the Company in favor of the Municipality. The Mortgage will be assigned and pledged to the Trustee by the Municipality for the security of the Bonds. The Creditor has made or may make loans or grant other financial accommodations to the Company. As a condition to the issuance of the Bonds and the loan of the proceeds thereof to the Company, the underwriter for the Bonds has required that the Creditor subordinate the payment of any and all indebtedness of the Company to the Creditor with respect to Creditor's loans and other financial accomodations to the payment of any and all indebtedness of the Company to the Trustee. Assisting the Company in obtaining the Loan and the subordination pursuant to the terms of this Agreement are in the Creditor's best interest. ACCORDINGLY, in consideration of the Loan and other loans or financial accommodations that may hereafter be made by the Municipality for the benefit of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Creditor hereby agrees as follows: below: Definitions. As used herein, the following terms have the meanings set forth "Bonds" means the Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 and issued by the City of New Hope, Minnesota, any other bonds issued pursuant to the Indenture or any supplement thereto, and any bonds or other obligations issued to refund in whole or part such bonds or issued as part of a series of refundings of such bonds. "Company Default" means a Default or Event of Default as defined in the Loan Agreement or any other agreement or instrument evidencing, governing, or issued in connection with the Bonds, or any default under or breach of any such agreement or instrument. "Subordinated Indebtedness" means each and every debt, liability and obligation of every type and description which the Company may now or at any time hereafter owe to the Creditor, whether such debt, liability or obligation now exists or is hereafter created or incurred, and whether it is or may be direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or joint, several or joint and several. "Trustee Indebtedness" means the Bonds, the Loan Agreement, the Mortgage, and any other agreement or instrument evidencing, governing, or issued in connection with the Bonds. 2. Subordination. The payment of all of the Subordinated Indebtedness is hereby expressly subordinated to the extent and in the manner hereinafter set forth to the payment in full of the Trustee Indebtedness; and regardless of any priority otherwise available to the Creditor by law or by agreement, the Trustee shall hold a first security interest in all collateral securing payment of the Trustee Indebtedness (the "Collateral"), and any security interest claimed therein (including any proceeds thereof) by the Creditor shall be and remain fully subordinate for all purposes to the security interest of the Trustee therein for all purposes whatsoever. 3. Payments. Until all of the Trustee Indebtedness has been paid in full, the Creditor shall not, without the Trustee's prior written consent, demand, receive or accept any payment (whether of principal, interest or otherwise) from the Company in respect of the Subordinated Indebtedness, or exercise any right of or permit any setoff in respect of the Subordinated Indebtedness, except that the Creditor may accept payments of principal and interest required with respect to any Subordinated Indebtedness, so long as no Company Default has occurred and is continuing or will occur as a result of or immediately following any such payment, to the extent that the payment thereof does not and will not cause a Company Default to occur. 4. Receipt of Prohibited Payments. If the Creditor receives any payment on the Subordinated Indebtedness that the Creditor is not entitled to receive under the provisions of this Agreement, the Creditor will hold the amount so received in trust for the Trustee and will forthwith turn over such payment to the Trustee in the form received (except for the 2 endorsement of the Creditor where necessary) for application to then -existing Trustee Indebtedness (whether or not due), in such manner of application as the Trustee may deem appropriate. If the Creditor exercises any right of setoff which the Creditor is not permitted to exercise under the provisions of this Agreement, the Creditor will promptly pay over to the Trustee, in immediately available funds, an amount equal to the amount of the claims or obligations offset. If the Creditor fails to make any endorsement required under this Agreement, the Trustee, or any of its officers or employees or agents on behalf of the Trustee, is hereby irrevocably appointed as the attorney-in-fact (which appointment is coupled with an interest) for the Creditor to make such endorsement in the Creditor's name. 5. Action on Subordinated Debt. The Creditor will not commence any action or proceeding against the Company to recover all or any part of the Subordinated Indebtedness, or join with any creditor (unless the Trustee shall so join) in bringing any proceeding against the Company under any bankruptcy, reorganization, readjustment of debt, arrangement of debt receivership, liquidation or insolvency law or statute of the federal or any state government, or take possession of, sell, or dispose of any Collateral, or exercise or enforce any right or remedy available to the Creditor with respect to any such Collateral, except to the extent of any deficiency in payment remaining after the Creditor has made a good faith effort to pursue and exhaust all other remedies available to it at law or equity. The Creditor hereby represents that it shall not release, at any time, directly or indirectly, any security (other than the Collateral) or guarantee that secures payment of the Subordinated Indebtedness. 6. Foreclosure of Collateral. Notwithstanding any security interest now held or hereafter acquired by the Creditor, the Trustee may take possession of, sell, dispose of, and otherwise deal with all or any part of the Collateral, and may enforce any right or remedy available to it with respect to the Collateral, all without notice to or consent of the Creditor except as specifically required by applicable law. The Trustee shall have no duty to preserve, protect, care for, insure, take possession of, collect, dispose of, or otherwise realize upon any of the Collateral, and in no event shall the Trustee be deemed the Creditor's agent with respect to the Collateral. All proceeds received by the Trustee with respect to any Collateral may be applied, first, to pay or reimburse the Trustee for all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee in connection with the collection of such proceeds, and, second, to any indebtedness secured by the Trustee's security interest in that Collateral in any order that it may choose. 7. Bankruptcy and Insolvency. In the event of any receivership, insolvency, — bankruptcy, assignment for the benefit of creditors, reorganization or arrangement with creditors, whether or not pursuant to bankruptcy law, the sale of all or substantially all of the assets of the Company, dissolution, liquidation or any other marshaling of the assets or liabilities of the Company, the Creditor will file all claims, proofs of claim or other instruments of similar character necessary to enforce the obligations of the Company in respect of the Subordinated Indebtedness and will hold in trust for the Trustee and promptly pay over to the Trustee in the form received (except for the endorsement of the Creditor where necessary) for application to the then -existing Trustee Indebtedness, any and all moneys, dividends or other assets received in any such proceedings on account of the Subordinated Indebtedness, unless and until the Trustee Indebtedness has been paid in full. If the Creditor shall fail to take any such action, the Trustee, as attorney-in-fact for the Creditor, may take such action on the Creditor's behalf. The Creditor hereby irrevocably appoints the Trustee, or any of its officers or employees on behalf of the Trustee, as the attomey-in-fact for the Creditor (which appointment is coupled with an interest) with the power but not the duty to demand, sue for, collect and receive any and all such moneys, dividends or other assets and give acquittance therefor and to file any claim, proof of claim or other instrument of similar character, to vote claims comprising Subordinated Indebtedness to accept or reject any plan of partial or complete liquidation, reorganization, arrangement, composition or extension and to take such other action in the Trustee's own name or in the name of the Creditor as the Trustee may deem necessary or advisable for the enforcement of the agreements contained herein; and the Creditor will execute and deliver to the Trustee such other and further powers -of -attorney or instruments as the Trustee may request in order to accomplish the foregoing. 8. Restrictive Legend, Transfer of Subordinated Indebtedness. The Creditor will cause all notes, bonds, debentures or other instruments evidencing the Subordinated Indebtedness or any part thereof to contain a specific statement thereon to the effect that the indebtedness thereby evidenced is subject to the provisions of this Agreement, and the Creditor will mark its books conspicuously to evidence the subordination effected hereby. At the request of the Trustee, the Creditor shall deposit with the Trustee all of the notes, bonds, debentures or other instruments evidencing the Subordinated Indebtedness, which notes, bonds, debentures or other instruments may be held by the Trustee so long as any Trustee Indebtedness remains outstanding. Without the prior written consent of the Trustee, the Creditor will not assign, transfer or pledge to any other person any of the Subordinated Indebtedness or agree to a discharge or forgiveness of the same so long as there remains outstanding any of the Trustee Indebtedness. 9. Continuing Effect. This Agreement shall constitute a continuing agreement of subordination, and the Trustee may, without notice to or consent by the Creditor, modify any term of the Trustee Indebtedness in reliance upon this Agreement. Without limiting the generality of the foregoing, the Trustee may, at any time and from time to time, subject to the provisions of the Loan Agreement and the Indenture, either before or after receipt of any such notice of revocation, without the consent of or notice to the Creditor and without incurring responsibility to the Creditor or impairing or releasing any of the Trustee's rights or any of the Creditor's obligations hereunder: (a) change the interest rate or change the amount of payment or extend the time for payment or renew or otherwise alter the terms of any Trustee Indebtedness or any instrument evidencing the same in any manner; M (b) sell, exchange, release or otherwise deal with any property at any time securing payment of the Trustee Indebtedness or any part thereof; (c) release anyone liable in any manner for the payment or collection of the Trustee Indebtedness or any part thereof; (d) exercise or refrain from exercising any right against the Company or any other person (including the Creditor); and (e) apply any sums received by the Trustee, by whomsoever paid and however realized, to the Trustee Indebtedness in such manner as the Trustee shall deem appropriate. 10. No Commitment. None of the provisions of this Agreement shall be deemed or construed to constitute or imply any commitment or obligation on the part of the Trustee to make any future loans or other extensions of credit or financial accommodations to the Company. 11. Notice. All notices and other communications hereunder shall be in writing and shall be (i) personally delivered, (ii) transmitted by registered mail, postage prepaid, or (iii) transmitted by telecopy, in each case addressed to the party to whom notice is being given at its address as set forth below: If to the Creditor: North Ridge Care Center, Inc. 5430 Boone Avenue North New Hope, Minnesota 55428 Attention: Charles T. Thompson, President/CEO Fax: (612) 536-0324 If to the Trustee: Norwest Bank Minnesota, National Association 12th Floor Northstar Center 608 Second Avenue Minneapolis, MN 55479-0069 Attention: Polly Berquist, Corporate Trust Officer Fax: (612) 667-9825 or at such other address as may hereafter be designated in writing by that party. All such notices or other communications shall be deemed to have been given on (i) the date received if delivered personally, (ii) the date of posting if delivered by mail, or (iii) the date of transmission if delivered by telecopy. 12. Conflict in Agreements. If the subordination provisions of any instrument evidencing Subordinated Indebtedness conflict with the terms of this Agreement, the terms of this Agreement shall govern the relationship between the Trustee and the Creditor. 13. No Waiver. No waiver shall be deemed to be made by the Trustee of any of its rights hereunder unless the same shall be in writing signed on behalf of the Trustee, and each such waiver, if any, shall be a waiver only with respect to the specific matter or matters to which the waiver relates and shall in no way impair the rights of the Trustee or the obligations of the Creditor to the Trustee in any other respect at any time. 14. Governing Law, Consent to Jurisdiction and Venue,• Waiver of Jury Trial. This Agreement shall be governed by and construed in accordance with the substantive laws (other than conflict laws) of the State of Minnesota. Each parry consents to the personal jurisdiction of the state and federal courts located in the State of Minnesota in connection with any controversy related to this Agreement, waives any argument that venue in any such forum is not convenient, and agrees that any litigation initiated by either of them in connection with this Agreement shall be venued in either the District Court of Hennepin County, Minnesota, or the United States District Court, District of Minnesota, Fourth Division. The parties waive any right to trial by jury in any action or proceeding based on or pertaining to this Agreement. 15. Binding Effect, Acceptance. This Agreement shall be binding upon the Creditor and the Creditor's successors and assigns and shall inure to the benefit of the Trustee and its participants, successors and assigns irrespective of whether this or any similar agreement is executed by any other creditor of the Company. Notice of acceptance by the Trustee of this Agreement or of reliance by the Trustee upon this Agreement is hereby waived by the Creditor. 16. Miscellaneous. The paragraph headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. IN WITNESS WHEREOF, the Creditor has executed this Agreement as of the date and year first above -written. NORTH RIDGE CARE CENTER, INC. 0 Acknowledgment by Company WITH RESPECT TO THE ABOVE SUBORDINATION AGREEMENT, THE COMPANY HEREBY: (1) acknowledges receipt of a copy thereof, (2) agrees to all of the terms and provisions thereof, (3) agrees to and with the Trustee that it shall make no payment on the Subordinated Indebtedness that the Creditor would not be entitled to receive under the provisions of the Agreement, and (4) agrees that any such payment will constitute a default under the Trustee Indebtedness. NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP A Its General Partner Mh0142192.03 E� STATE OF MINNESOTA Fling t' `1 v;; UCC -1 FINANCING STATEMENT Officer s c jI� 1 5 IN f•.; y. a 6 , ,u, This statement is presented for filing pursuant to Minnesota Uniform Commercial Code Minnesota Statutes Chapter 336.9-402 (Type in Black Ink) �.•5r-�" Debtor - Last Name I First Name I Middle Social Security # I Mailing Address City I State ; . I Zip Code Individual Debtor - Last Name I First Name I Middle I. Social Security # I Mailing Address City I State I Zip Code 3. Business Debtor - Name Northridee PTODerties of Nev Rnno T.imif-ad Pnrtnnrah4 Fed. ID # Mailing Address Attn: Charles T. Thompson 41-1520724 c/o North Ride Care Center. City of Financing is presented to a Filing Officer pursuant to the _ State Zip Code New Hope Uniform Commercial Code. The Secured Party certifies that rQ C: Cc ` Attn: Jerome P. Gilligan 4. Secured Party Name the Secured Party no longer claims a security interest under 5. Assignee of Secured Party City of New Hoe Norwest Bank Minnesota. National Annoriatinn Mailing Address Minneapolis, MN 55402 Mailing Address '401 % lon Avenue North Sixth and Marquette •Y State Zip Code City State Zip Code New Hoe MN 1 55428 Minneapolis 1 55479 o. IRIS nnancing statement covers the following types or items of property. (If crops are covered describe the real estate and list the name of record owner.) - Any and all right, title and interest of the Debtor in and to all existing and future Leases, as described in that certain Assignment of Rents and Leases, dated as of June 1, 1996, given by the Debtor to the Secured Party, and all proceeds therefrom. Any and all items of fixtures and Project Equipment as defined in that certain Combination Mortgage, Security Agreement and Fixture Financing Statement, dated as of June 1, 1996, given by the Debtor to the Secured Party, and all proceeds theredf:-+,Sgpr of the above-described items are or are to become fixtures located on the real property situated in Hennepin County, Minnesota and described in Lot 1, Block 1, Charlie Thompson Addition, according to the plat thereof on file andsof record in the office of the Registrar of Titles in and for Hennepin County, 244uesota. a" L [.7 ' .- Debtor is a transmitting utility as defined by Minnesota Statutes Chapter 336.9-105 h^ I t: t -- RETURN ACKNOWLEDGEMENT COPY TO: (name and address) TERMINATION STATEMENT: This statement of Termination of Financing is presented to a Filing Officer pursuant to the _ L, )c_ "Dorsey b Whitney LLP Uniform Commercial Code. The Secured Party certifies that rQ C: Cc ` Attn: Jerome P. Gilligan the Secured Party no longer claims a security interest under - o�.: 220 South Sixth Street the financing statement bearing the file number shown above. g g Minneapolis, MN 55402 By: (Signature of Secured Party or Assignee of Record. Must be signed) Please do not type outside the bracketed area. Date: I — (06920819 Rev. 5/93) Standard Form Approved by Secretary of State (?) m irxa OFFiC rl %O:=V AC^:F =f..: EF STATE OF MINNESOTA Filing UCC -1 FINANCING STATEMENT officer This statement is presented for filing pursuant to Minnesota Uniform Commercial Code Minnesota Statutes Chapter 336.9-402 -" t(Type in Black Ink) 1. Individual Debtor - Last Name I First Name I Middle I. Social Security # I Mailing Address City _ I State I Zip Code 2. Individual Debtor - Last Name I First Name I Middle I. Social Security # I Mailing Address City I State I Zip Code Business Debtor - Name ity of New Hope Fed -6008870 Mailing Address 4401 %ylon Avenue North City New Hope State MN Zip Code 55428 q Secured Party. Name Norwest Bank Minnesota, National Association 5. Assignee of Secured Party Mailing Address Mailing Address ixtand Marquette ity State Zip Code City State Zip Code Minneapolis MN 55479 6. This financing statement covers the following types or items of property. (If crops -are covered describe the real estate and listthe name of record owner.) Chattel paper and contract rights consisting of all of the rights, title and interest of the Debtor in, to and under that certain Loan Agreement (the "Loan Agreement"), dated as of June 1, 1996, by and between the Debggr and Northridge 4roperties of New Hope Limited Partnership, a Minnesota limited partnership (the "Partnership"), and all proceeds thereof, inlcuding the loan repayments and other income therefrom, but excluding any amounts payable to the Debtor under Sections 4.03, 7.04 or 9.05 of the Loan Agreement. Debtor is a transmitting utility as defined by Minnesota Statutes Chapter 336.9-105 V: -RETURN ACKNOWLEDGEMENT COPY TO: (name and address) TERMINATION STATEMENT: This statement of Termination .a -- of Financing is presented to a Filing Officer pursuant to the :a -Dorsey 6 Whitney LLP y- Uniform Commercial Code. The Secured Party certifies that W ,Attn: Jerome P. Gilligan the Secured Party no longer claims a security interest under a'220 South Sixth Street the financing statement bearing the file number shown above. _Minneapolis, MN 55402 By: (Signature of Secured Party or Assignee of Record. Must be signed) Please do not type outside the bracketed area. Date: (06920819 Rev. 5/93) Standard Farm Approved b, Secretary of State (3) riUNG CFFICLIR COPY ACKNOWLEDGCUMt_: -, SUBORDINATION AGREEMENT This Agreement is made effective as of the 1st day of J u N� 1996, by and between the NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY (the "EDA") to and for the benefit of NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee (the "Trustee") under an Indenture of Trust, dated as of -�u�e 1, 1996 (the "Indenture"), between the City of New Hope, Minnesota (the "City"), and the Trustee. Recitals The Housing and Redevelopment Authority in and for the City of New Hope, Minnesota (the "HRA"), has entered into a 1984 Redevelopment Agreement, dated January 30, 1985 (the "Redevelopment Agreement"), with Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Company"), and Charles P. Thompson and Mary Jane Thompson. The Redevelopment Agreement provides for the construction by the Company of an apartment rental housing project (the "Building") on property described in Exhibit A attached hereto and made a part hereof (the "Land"). The HRA has assigned all of its interests in and to the Redevelopment Plan 82-1 within which the Land is located to the EDA, and such assignment by the HRA to the EDA included all of the rights of the HRA under the Redevelopment Agreement. There is to be issued under the Indenture, the Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 of the City (the "Bonds"), in the principal amount of $ S;OW/UZ-V , the proceeds of which are to be loaned to the Company pursuant to a Loan Agreement, dated as of _J u n z 1, 1996 (the "Loan Agreement"), between the City and the Company and used by the Company to prepay the Developer Loan, as defined in the Redevelopment Agreement, which financed the acquisition, construction and equipping of the Building. The payment of the principal of, premium, if any, and interest on the Bonds and obligations of the Company arising under the Loan Agreement are secured by a Combination Mortgage, Security Agreement and Fixture Financing Statement, dated as of 1, 1996 (the "Mortgage") from the Company to the City which was recorded in the office of the Registrar of Titles in and for Hennepin County, Minnesota as Document No. and an Assignment of Rents and Leases, dated as of 1, 1996 (the "Assignment") from the Company to the City which was recorded in the Registrar of Titles in and for Hennepin County, Minnesota as Document No. . The City has assigned all of its interest in the Mortgage to the Trustee pursuant to an Assignment of Mortgage Agreement between the City and the Trustee, which was recorded in the office of the Registrar of Titles in and for Hennepin County, Minnesota as Document No. and the City has assigned all of its interest in the Assignment to the Trustee pursuant to an Assignment of Rents and Leases between the City and the Trustee which was recorded in the office of the Registrar of Titles in and for Hennepin County, Minnesota as Document No. The original purchaser of the Bonds has required as a condition to its purchase of the Bonds that the EDA execute a Subordination Agreement whereby the EDA fully subordinates all rights and interests of the EDA in or to the Land, the Building and all rights appurtenant thereto (collectively referred to as the "Premises") of any kind whatsoever under the Redevelopment Agreement, to the lien of the Mortgage, the Assignment and any other lien or security at any time hereafter acquired by the Trustee in all or any portion of the Premises to secure the payment of principal of, premium, if any, and interest on the Bonds (collectively the "Bond Security Documents"). Accordingly, the EDA and the Trustee hereby agree as follows: 1. The EDA acknowledges and agrees that all rights and interests of the EDA in or to the Premises under the Redevelopment Agreement are hereby made and shall be fully subordinate and subject to the respective liens of the Bond Security Documents, all with the same force and effect as if the Bond Security Documents were executed, delivered and recorded, and all financial accommodations secured thereby were fully funded, prior to imposition of the restricting covenants and limitations imposed upon the Premises pursuant to the Redevelopment Agreement. 2. The EDA acknowledges receipt of copies of the Mortgage, the Assignment, the Indenture and Loan Agreement. 3. If, following any Event of Default under any of the Bond Security Documents, the Trustee accepts a deed to the Premises from the Company, the EDA agrees that upon the recording of such deed all rights and interest of the EDA in and to the Premises, whether under the Redevelopment Agreement or otherwise, including but not limited to the restrictive covenants therein contained, shall be automatically null and void without need for the execution or recording of any other document. 4. The EDA represents to the Trustee that the making, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the EDA and this Agreement, when executed, shall be the valid and binding obligation of the EDA, enforceable in accordance with its terms. 5. The EDA and the Trustee acknowledge that the Trustee is not a party to the Redevelopment Agreement and that this Agreement contains the entire agreement between the EDA and the Trustee with respect to any rights or obligations either might otherwise have with respect to each other under the Redevelopment Agreement, and that this Agreement may be amended only in writing signed by both parties hereto. By executing and delivering this Agreement, the Trustee shall not incur any obligations to the EDA of any kind whatsoever, except those expressly set forth herein, and the Trustee may administer its obligations under the Indenture with respect to the Bonds in such manner as it shall deem appropriate. 6. The EDA agrees that the Trustee may, at any time, and from time to time, extend the maturity, modify the interest rate or agree to alter any of the terms of payment of any indebtedness secured by the Bond Security Documents, or release parties liable for payment thereof, or alter or amend or waive any of the terms and provisions of the Bond Security Documents in any way, all without any notice to or consent of the EDA. 7. This Agreement does not in any manner affect the rights and interests of the EDA or City in and to the Premises under the Assessment Agreement dated as of January 30,1985, recorded in the office of the Registrar of Titles in and for Hennepin County, Minnesota, as Document No. /6 Ll7'j�-l% 8. This Agreement shall be binding upon and inure to the benefit of the EDA and the Trustee and their respective successors and assigns. Executed as of the day and year first above written. NEW HOPE ECONOMIC DEVELOP ENT AUTHORITY By oec.J Its Pr sident t And Its Execut' e Direct STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN ) VA The foregoing istrument was acknowle,V bef�eme this day of 1996, by �� riZ�CSfr1 and respectively, of the New Hope Economic Development Authority, a public body corporate and public, on behalf of such agency. VALERIE J. LEONE ammNEsoa Notary Publ c my comoftw9 JenuM 81, 2000 c:\wp5l\cnh\chardan.sub EXHIBIT A Legal Description of the Land Lot 1, Block 1, Charlie Thompson Addition, according to the plat thereof on file and of record in the office of the Registrar of Titles in and for Hennepin County, Minnesota. A-1 CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the "Disclosure Agreement") dated as of June 1, 1996 is executed and delivered by NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, in Minneapolis, Minnesota, as trustee (the "Trustee"), and NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP, a Minnesota limited partnership (the "Company"), all for the benefit of the registered owners from time to time of $5,000,000 City of New Hope, Minnesota Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 (the "Bonds"). The Bonds are being issued pursuant to an Indenture of Trust, dated as of June 1, 1996 (the "Indenture"), between the City of New Hope, a political subdivision of the State of Minnesota (the "Municipality") and the Trustee. The proceeds of the Bonds will be loaned to the Company pursuant to a Loan Agreement (the "Loan Agreement") dated as of June 1, 1996 between the Company and the Municipality. Pursuant to the Loan Agreement, the Company will agree to make payments in amounts and at times sufficient to provide for the prompt payment of principal of, premium, if any, and interest on the Bonds when due. It is agreed as follows: SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered for the benefit of the Bondholders and in order to assist the Participating Underwriter in complying with Rule 15c2 -12(b)(5) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement that is not required by proper rules of grammar to be capitalized (unless otherwise defined in this Agreement), the following capitalized terns shall have the meanings which follow: "Annual Report" shall mean, with respect to each Reporting Party, a document or set of documents which contains (or includes by reference as provided herein) substantially all material financial information and operating data with respect to such Reporting Party as described in Appendix A hereto. "Annual Report Date" means, for each year during the term hereof, that date so designated in Appendix A hereto; provided, that if the last day of a Reporting Party's fiscal year changes, the Annual Report Date for such Reporting Party shall thereafter be six months after the last day of the Reporting Party's fiscal year. "Business Day" means any day other than a Saturday, Sunday, legal holiday or a day on which the Trustee or banking institutions in Minneapolis, Minnesota are authorized or required by law to close. M1:0I409I9.01 "Disclosure Representative" shall mean, with respect to each Reporting Party, the person so identified in Section 14 hereof, or such other officer or employee as the Reporting Party shall designate in writing to the Trustee from time to time. "Dissemination Agent" shall mean any Dissemination Agent designated in writing by the Company which has filed with the Trustee a written acceptance of such designation. "GAAP" shall mean generally accepted accounting principles, promulgated by the Financial Accounting Standards Board, as in effect from time to time. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. "Material", with respect to information, shall mean information as to which a substantial likelihood exists that a reasonably prudent investor would attach importance thereto in deciding to buy or sell a Bond or, if not disclosed, would significantly alter the total information otherwise available to an investor from the Official Statement, information disclosed hereunder, or information generally available to the public. Notwithstanding the foregoing, "Material" information includes information that would be deemed "material" for purposes of the purchase or sale of a Bond within the meaning of applicable federal securities laws, as interpreted at the time of discovery of the information. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. "Official Statement" shall mean the Official Statement, dated July 1, 1996, relating to the Bonds, as amended or supplemented to the date of issuance of the Bonds. "Participating Underwriter" shall mean Dougherty Dawkins, Inc., or any other original underwriter of the Bonds required to comply with the Rule in connection with the offering of the Bonds. "Reporting Party" shall mean, subject to release as provided in Section 6 hereof, the Company, together with any successor or assign as provided in Section 6 hereof. "Repository" shall mean each National Repository and each State Repository. "Rule" shall mean Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, as the same may be amended from time to time. M1:0140919.01 2 "State Repository" shall mean any public or private repository or entity, if any, designated by the State of Illinois as a state repository for the purpose of the Rule. SECTION 3. Provision of Annual Report. (a) Not later than the applicable Annual Report Date of each year, each Reporting Party shall, or shall cause the Dissemination Agent to, provide its Annual Report to each Repository. Not later than fifteen (15) Business Days prior to said date, each Reporting Party shall provide its Annual Report to the Dissemination Agent, if any, and the Trustee (if the Trustee is not the Dissemination Agent). In each case, the Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross- reference other information as provided in Section 4 of this Disclosure Agreement. (b) If the Dissemination Agent has not received a copy of an Annual Report by fifteen (15) Business Days prior to the Annual Report Date of any year, the Dissemination Agent shall contact the appropriate Reporting Party to determine if such Reporting Party is in compliance with subsection (a) of this section. (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the Repositories by the Annual Report Date in any year, the Dissemination Agent shall send a notice to each Repository to that effect, and stating the date, if known, by which the applicable Reporting Party expects to provide the Annual Report. (d) The Reporting Party shall (or shall cause the Dissemination Agent to): (i) determine prior to each Annual Report Date the name and address of each National Repository and each State Repository, if any; and (ii) file a report with the other Reporting Parties, if any, and (if the Dissemination Agent is not the Trustee) the Trustee certifying that the Annual Reports have been provided pursuant to this Disclosure Agreement, stating the date they were provided and listing all the Repositories to which they were provided. (iii) file promptly with each Repository any audited financial statements required to be provided pursuant to Section 4(c) herein. SECTION 4. Content of Annual Reports. (a) Each Reporting Party's Annual Report shall contain (or incorporate by reference as described below) the information described in Appendix A attached hereto. (b) Any or all of the items listed in Appendix A may be incorporated by reference from other documents, including official statements or prospectuses of debt issues of the M1:0140919.01 3 Reporting Party or related entities, which have been submitted to each of the Repositories or to the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available at the Municipal Securities Rulemaking Board. The Reporting Party shall clearly identify in the Annual Report each document incorporated by reference. (c) All financial statements required to be in an Annual Report shall be prepared in accordance with GAAP, or reconciled with GAAP when non -GAAP principles are followed. If the financial statements provided as part of an Annual Report are unaudited, the applicable Reporting Party shall provide, or cause the Dissemination Agent to provide, when and if available, audited financial statements to each Repository. (d) If any of the information listed in Appendix A can no longer be generated because the operations of the Reporting Party have changed or been discontinued, such information need no longer be provided if the Reporting Party includes in its Annual Report a statement to such effect; provided however, if such operations have been replaced by other operations of the Reporting Party in respect of which data is not included in Appendix A and the Reporting Party determines that certain specified data regarding such replacement operations would be Material, then, from and after such determination, the Annual Report shall include such additional specified data regarding the replacement operations. (e) If the information to be provided in an Annual Report is changed or this Agreement is amended as permitted by this Section 4 or by Section 8 hereof, then the Reporting Party shall include in the next Annual Report to be delivered, to the extent necessary, an explanation of the reasons for the amendment and the effect of any change in the type of financial information or operating data provided. SECTION 5. Reporting of Significant Events. (a) This Section 5 shall govern the giving of notices of the occurrence of any of the following events: I . Principal and interest payment delinquencies. 2. Non-payment related defaults. 3. Unscheduled draws on the debt service reserves reflecting financial difficulties. 4. Unscheduled draws on credit enhancements reflecting financial difficulties. 5. Substitution of credit or liquidity providers, or their failure to perform. M1:0140919.01 4 Bonds. Bonds. 6. Adverse tax opinions or events affecting the tax-exempt status of the 7. Modifications to the rights of Bondholders. 8. Bond calls. 9. Defeasance of the Bonds or any portion thereof. 10. Release, substitution or sale of property securing repayment of the 11. Rating changes. (b) Whenever any Reporting Party obtains knowledge of the occurrence of a Listed Event, unless pursuant to a notice from the Trustee under subsection (c) of this Section 5, the Reporting Party shall as soon as possible notify the Trustee in writing of such occurrence. (c) The Trustee shall, within one (1) Business Day after obtaining actual knowledge of the occurrence of any of the Listed Events, inform the Disclosure Representative of the Reporting Parties and the Dissemination Agent of the event, and request that the Company promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (d) based on the Company's determination as to whether the event is Material. (d) If the Dissemination Agent has been instructed by the Company to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the Repositories. Notwithstanding the foregoing, notice of the occurrence of a Listed Event described in subsection (a) (1), (3), (4), (5), (8) or (9) shall be given to the Repositories promptly by the Dissemination Agent unless the Company gives the Dissemination Agent, within three (3) Business Days after the Dissemination Agent obtains actual knowledge of the occurrence of such Listed Event, affirmative instructions not to disclose such occurrence. SECTION 6. Termination of Reporting Obligation. The Reporting Parties' obligations under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. The obligations of any Reporting Party under this Disclosure Agreement shall also terminate upon the release of the obligation of such Reporting Party to pay any amounts due or to become due with respect to the Bonds; provided that if such release occurs because of any assignment of the obligation to pay amounts due or to become due with respect to the Bonds, the Reporting Party to be released shall first require such assignee to assume the obligations of such Reporting Party hereunder. M1:0140919.01 5 SECTION 7. Dissemination Agreement. The Company may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Company may elect not to appoint or engage a Dissemination Agent, in which event, the Company shall be responsible for performing, or causing to be performed, all duties hereunder assigned to the Dissemination Agent. SECTION 8. Amendment. The parties hereto may only amend this Disclosure Agreement (including Appendix A) pursuant to a written instrument executed by all parties hereto (and the Trustee shall not unreasonably withhold its agreement to any such amendment); provided that such amendment is accompanied by an opinion of counsel expert in federal securities laws, acceptable to all parties hereto, to the effect that: (i) such amendment (a) is made in connection with a change in circumstances that arises from a change in law or regulation or a change in the identity, nature or status of a Reporting Party or the type of business conducted by a Reporting Party, or (b) is required by, or better complies with, the provisions of the Rule; (ii) this Agreement as so amended would have complied with the requirements of the Rule at the time of the primary offering of the Bonds, giving effect to any change in circumstances applicable under clause (i)(a) and assuming that the Rule as in effect and interpreted at the time of the amendment was in effect at the time of the primary offering; and (iii) such amendment does not materially impair the interest of the holders of the Bonds under the Rule. Any amendment pursuant to this Section 8 may be made without notice to or consent of the holders of the Bonds. The Disseminating Agent shall be informed immediately of any amendment to this Agreement. If an amendment is made regarding the accounting principles to be followed in preparing the financial statements, the Annual Report for the year in which the change is made should present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison should include a qualitative discussion of the differences in the accounting principles and the affect of the change in the accounting principles on the presentation of the financial information. To the extent reasonably feasible, the comparison should also be quantitative. The Disseminating Agent shall send a notice of the change in accounting principles to the Repositories. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent a Reporting Party from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If a Reporting Party chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Reporting Party shall have no obligation under this Agreement to M1:0140919.01 6 update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of a Reporting Party or the Trustee to comply with any provision of this Disclosure Agreement, upon receipt by the Trustee of satisfactory indemnifications from, and at the request of, the Holders of at least 50% aggregate principal amount of Outstanding Bonds, the Trustee shall, or any Bondholder may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Reporting Party, Dissemination Agent, or Trustee, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Mortgage, Note or the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of a Reporting Party, the Dissemination Agent, or the Trustee to comply with this Disclosure Agreement shall be an action to compel specific performance. SECTION 11. Duties Immunities and Liabilities of Trustee and Dissemination Agent. Article IX of the Indenture is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Company agrees to indemnify and save harmless the Dissemination Agent, its officers, directors, employees, and agents, against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the Company under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Reporting Parties, the Trustee, the Dissemination Agent, the Participating Underwriter and the Holders from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 13. Counterparts. This Disclosure 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 14. Notices. All notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered personally or by mail to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement and addressed as set forth below or telecopied to the telecopier number of the recipient, with confirmation of transmission, indicated below: M1:0140919.01 7 6 AND (a) If to the Company, at: Northridge Properties of New Hope Limited Partnership 5430 Boone Avenue New Hope, Minnesota 55428 Attention: Charles T. Thompson, as Disclosure Representative Judith Gartner Orbovich & Gartner 710 N.C.L. Tower 445 Minnesota Street St. Paul, Minnesota 55101 Telecopy: (612) 224-4697 (b) If to Trustee, at Norwest Bank Minnesota, National Association 6th and Marquette Minneapolis, Minnesota 55479-0069 Attention: Corporate Trust Department Telecopy: (612) 667-9825 IN WITNESS WHEREOF the parties hereto have hereunto set their hands as of the date first set forth above. M1:0140919.01 NORTHRIDGE PROPERTIES OF NEW HOPE LIMITEEDnPARTNERSHIP By Its Q N NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By C Yea ' Authorized O er [Signature Page to Continuing Disclosure Agreement] M1:0140919.01 APPENDIX A ANNUAL REPORT INFORMATION THE COMPANY The Annual Report of the Company shall consist of annual financial statements of the Company, and operating data and financial information regarding the operations of the Company, including rental rates and historic occupancy rates of the Project (as defined in the Official Statement). Such information shall be presented in a manner consistent with the Official Statement. The Annual Report Date of the Company will be June 30, 1997 and each June 30 thereafter subject to modification as provided in the Disclosure Agreement. Mh0140919.01 10 PRELIMINARY OFFICIAL STATEMENT DATED JUNE 20, 1996 REFUNDING ISSUE NOT RATED In the opinion of Dorsey & Mimey LLP, Minneapolis, Minnesota, Bond Counsel, except as described under "TAX MATTERS" herein, assuming continued compliance of the Project with requirements for "residential rental property" under Section 103(b)(4)(A) of the Internal Revenue Code of 1954, as amended (the "1954 Code "), under existing law, interest on the Bonds is not includable in gross income for federal S income tax purposes or in taxable net income of individuals, estates or trusts for Minnesota income tax purposes, except for the interest on any Bond for any period during which such Bond is held by a "substantial user" of the Project or a "related person, " as such terms are used in the 1954 Code. Interest on the Bonds is includable in taxable income of corporations and financial institutions for purposes of the Minnesota 8 franchise tax. Interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum tax applicable to all taxpayers or the Minnesota alternative minimum tax applicable to individuals, but is includable in adjusted current earnings for the purpose of 'a determining alternative minimum taxable income of corporations for purposes of the federal alternative minimum tax imposed on corporations. 'B For a more detailed description of the tax status of the interest on the Bonds, Bond Counsel's opinion with respect thereto and certain income tax d consequences of Bond ownership, see "TAX MATTERS" herein. 0:9$5,000,000* City of New Hope, Minnesota Multifamily Housing Refunding Revenue Bonds (Chardon Court Project) Series 1996 ao Dated: June 1, 1996 Due: As shown below e��°- The Bonds offered hereby are limited obligations of the City of New Hope, Minnesota, payable solely from amounts described .� d herein, and do not constitute general obligations, a pledge of the full faith and credit or, within the meaning of any Constitutional or „ statutory limitations, any debt of the Municipality. The Bonds are not secured by or payable from any taxes, revenues or assets of the Municipality except for the Municipality's interest in the Loan Agreement, the Mortgage,the Assi Assignment and amounts held pursuant to o'B � P Y PA8 r 8 2 n.g the Indenture as described herein. Undefined capitalized terms used on this cover are defined in the text hereof or Appendix B. S Pursuant to the Loan Agreement, all proceeds of the Bonds will be loaned by the Municipality to Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Company"), to cause a refunding of the Refunded Bonds, the proceeds of which ° i financed the acquisition, construction and equipping of a 129 -unit multifamily rental housing development designed for the elderly known as �.5 "Chardon Court" (the "Project"). The Bonds will be payable from the moneys held for the payment thereof by Norwest Bank Minnesota, gg National Association as Trustee under the Indenture, including amounts held in the Reserve Fund and Loan Repayments to be made by the Company under the Loan Agreement. The Bonds will be secured by a mortgage lien on and security interest in the Project and an assignment of $ ° S all rents, revenues and profits of the Project. �.� The Bonds are hereby offered for purchase by investors solely in Book -Envy Form. Therefore, all Bonds will be issued as fully registered bonds without coupons, registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), to whom all g Payments and notices with respect to the Bonds will be made. As long m the Bonds are so registered they will be in Book -Entry Form and u� _a purchasers of Bonds will not receive actual Bond certificates. Instead purchasers of Bonds will become the beneficial owners of the such Bonds, o with such ownership (including ownership for all tax purposes) evidenced solely in the Book -Entry System records maintained by DTC and «, ,e certain Participants (and Indirect Participants) who participate with DTC in maintaining the Book -Entry System. While the Bonds are in Book - Entry Form, the Municipality may treat DTC as the sole owner of such Bonds for all purposes. See "BOOK -ENTRY SYSTEM." Purchasers of Bonds in book -entry form will be entitled to receive payments, notices and transfers with respect to such Bonds only in accordance with �+ 3 procedures provided for by DTC and the participants through the Book -Entry System, for which the Municipality assumes no responsibility. hg 3 Ownership of Bonds in Book -Entry Form of any maturity may be purchased and transferred in principal amounts of $5,000 or any integral pS5 multiple thereof. Interest on the Bonds is due and payable December 1, 1996 and semiannually thereafter on each June 1 and December 1. s V O 'O $ AN INVESTMENT IN THE BONDS IS SUBJECT TO CERTAIN RISKS. See "BONDHOLDERS' RISKS" herein. 9 E � Subject to earlier redemption and prepayment as described herein under the caption "THE BONDS," the Bonds shall bear interest and �.^ mature as follows: MATURITY SCHEDULE �. Primo Interest Principal Interest Maturity Date Amount Rate Maturity Date Amount Rate �a .o $ _% Term Bonds Due June 1, _ Term Bonds Due June 1, _ y Price of AH Bonds: 100% (Plus Accrued Interest from June 1, 1996) 9 The Bonds are subject to redemption, including sinking fund redemption of the Term Bonds, and prepayment prior to maturity as E.9 described under the caption "THE BONDS—Redemption or Prepayment Prior to Maturity" herein. fi ° The Bonds are offered, subject to prior sale, when, as and if accepted by the Underwriter named below and subject to an opinion as to W validity and tax exemption by Dorsey & Whitney LLP, Minneapolis, Minnesota, Bond Counsel, the approval of certain matters solely for the benefit of the Underwriter by Faegre & Benson LLP, Minneapolis, Minnesota, as its counsel, and certain other conditions. It is expected that delivery of the Bonds will be made to The Depository Trust Company on or about , 1996, against payment therefore. DOUGHERTY DAWKINS, INC. The date of this Preliminary Official Statement is June 20, 1996 * Preliminary; subject to change. THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION BY REASON OF THE PROVISIONS OF SECTION 3(A)(2) OF THE SECURITIES ACT OF 1933, AS AMENDED. THE REGISTRATION OR QUALIFICATION OF THESE SECURITIES UNDER THE SECURITIES OR BLUE SKY LAWS OF THE STATES IN WHICH THEY HAVE BEEN REGISTERED OR QUALIFIED, AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES, SHALL NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THESE SECURITIES OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. TABLE OF CONTENTS Page SUMMARYINFORMATION.................................................................................................... i INTRODUCTORY STATEMENT.............................................................................................. 1 BONDHOLDERS' RISKS........................................................................................................ 3 THEBONDS........................................................................................................................ 6 BOOK -ENTRY SYSTEM......................................................................................................... 9 DEBT SERVICE SCHEDULE.................................................................................................. 10 SECURITYFOR THE BONDS................................................................................................ 11 THEMUNICIPALITY........................................................................................................... 13 ESTIMATED SOURCES AND USES OF FUNDS......................................................................... 13 THE COMPANY AND THE PROJECT...................................................................................... 14 FINANCIAL STATEMENTS................................................................................................... 14 ENFORCEABILITY OF OBLIGATIONS.................................................................................... 14 TAXMATTERS................................................................................................................... 14 APPROVAL OF LEGAL PROCEEDINGS................................................................................... 16 UNDERWRITING................................................................................................................ 16 CONTINUING DISCLOSURE................................................................................................. 16 CERTAIN STATE SECURITIES LAWS CONSIDERATIONS.......................................................... 17 MISCELLANEOUS.............................................................................................................. 18 APPENDIX A: The Project and the Company............................................................................ A-1 APPENDIX B: Definitions of Certain Terms and Summary of the Principal Documents .........................B-1 Definitions of Certain Terms The Loan Agreement The Indenture The Mortgage The Assignment The Declaration APPENDIX C: Financial Statements of the Company................................................................... C-1 No person has been authorized by the Municipality or the Underwriter to give any information regarding the Bonds, the Company, the Project, the offering contained herein or related matters, or to make any representations other than those contained in this Official Statement; and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which it is unlawful for any person to make such offer or solicitation. Except for information under the heading "The Municipality," the information set forth herein has been provided by or on behalf of the Company. Neither the Municipality nor the Underwriter makes any guarantee as to the accuracy or completeness of such information, and its inclusion herein is not to be construed as a representation of any nature whatsoever by the Underwriter or the Municipality. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement at any time nor any sale made hereunder creates any implication that the information herein is correct as of any time subsequent to its date. SUMMARY INFORMATION The following is a summary of certain information contained in this Official Statement. The summary is not comprehensive or complete and is qualified in its entirety by reference to the remainder of the Official Statement. Undefined capitalized terms used below not customarily capitalized are defined in Appendix B hereto or elsewhere in this Official Statement. The Bonds ......................... $5,000,000* Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 to be issued by the City of New Hope, Minnesota (the "Municipality") in denominations of $5,000 principal amount or any integral multiple thereof. See "THE BONDS." Book -Entry System .............. The Bonds are being offered only in Book -Entry Form. The Bonds will be fully registered as to principal and interest in the name of Cede & Co. as nominee of The Depository Trust Company ("DTC"). Subject to certain exceptions described herein all payments, notices or transfers of Bonds in Book -Entry Form will be made pursuant to the Book -Entry System maintained by DTC and certain Participants, and no investor will receive, hold or deliver any Bond certificates as long as the Depository or any successor securities depository is the registered owner of the Bonds. See "THE BOOK -ENTRY SYSTEM." Redemption and Prepayment. The Bonds are subject to redemption and prepayment prior to maturity, as more fully described herein under the caption "THE BONDS --Redemption or Prepayment Prior to Maturity," as follows: (a) optional redemption at the direction of the Company in whole or in part on any Business Day on or after June 1, 2001 at the redemption price or prices set forth herein, (b) mandatory redemption due to a Determination of Taxability, (c) optional redemption due to the occurrence of certain events such as Project casualty or condemnation, and (d) mandatory redemption of Term Bonds due to the operation of a mandatory sinking fund. See "THE BONDS -- Redemption or Prepayment Prior to Maturity." The Project; Use of Proceeds. Proceeds of the Bonds will be loaned to the Company (described below) and used to cause the refunding of the 1985 Bonds allocable to the acquisition, construction and equipping of a 129 -unit elderly multifamily rental housing project (the "Project") owned by the Company in the Municipality and required to be available for occupancy, in part, by low and moderate income persons. See "SOURCES AND USES OF FUNDS," Appendix A: "THE PROJECT," and Appendix B: "THE DECLARATION." The Company ..................... The Company is Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership organized in 1985 for the sole purpose of owning and operating the Project. The general partners of the Company are Charles T. Thompson, M. Melinda Pattee, Charles P. Thompson, and Dr. James J. Pattee. See Appendix A: "THE COMPANY." The Company's obligations with respect to the repayment of the Bonds are non-recourse to the partners of the Company and their property. Upon any occurrence of an Event of Default, recourse will be available only as against the assets of the Company (which will be comprised primarily of the Project). Preliminary; subject to change. Security for the Bonds ......... The Bonds are intended to be paid primarily from monthly Loan Repayments to be made by the Company under the Loan Agreement. For the further security of the Bonds, the Company will grant a first mortgage lien on, security interest in, and assignment of leases and rents of the Project, subject to certain Permitted Encumbrances. The Bonds are also to be secured by a Reserve Fund created under the Indenture and held by the Trustee. The Bonds are not general obligations of the Municipality and are not payable from any taxes, revenues or assets of the Municipality, except for the Municipality's interest in the Loan Agreement, the Mortgage, the Assignment and amounts held pursuant to the Indenture. See "SECURITY FOR THE BONDS." Trustee ............................. Norwest Bank Minnesota, National Association, a national banking association in Minneapolis, Minnesota. Investment Considerations .... An investment in the Bonds involves certain risks, including, but not limited to, those discussed under "BONDHOLDERS' RISKS." Historic Pro Forma Coverage The table below shows the debt service coverage provided from "Net Income Available for Debt Service," derived from the audited financial statements of the Company, but adjusted to assume that the Bonds, rather than the Refunded Bonds, had been outstanding for the years shown. See "THE PROJECT -- Operating History and Pro Forma Data" and "BONDHOLDERS' RISKS -- Nature of Pro Forma Debt Service Data." Net Income (Loss) Plus: Dept. & Amort. Interest(l) Less Gain from Asset Sale Net Income Available for Debt Service Pro Forma Debt Service(l)(2)** Pro Forma Debt Service Coverage on Bondst3l** FISCAL YEARS ENDED DECEMBER 31 1993 1994 1995 $(99,649) $(138,616)* $(28,256) 191,706 176,588 174,565 458,644 454,588 451,957 4.650 0 0 $546,051 $492,560 JL5 266 $417,150 1.31 $417,150 $417,150 1.18 1.43 * The increase in 1994 is generally attributable to non-recurring expenses for painting and caulking in the approximate amount of $76,000. ** Preliminary; subject to change. (1) Excludes interest on certain subordinated debt owed to an affiliate of the Company of $38,779, $37,689 and $36,897 for 1993, 1994 and 1995, respectively. (2) Equal to maximum annual debt service on the Bonds, assuming a weighted average interest rate of 7.34%. Does not include principal and interest payments on certain other debt which the Company owes to an affiliate. See Appendix A: "THE COMPANY -- Related Party Transactions." (3) Reflects solely a mathematical computation of the calculated Net Income Available for Debt Service divided by the stated Pro Forma Debt Service. OFFICIAL STATEMENT $5,000,000" CITY OF NEW HOPE, MINNESOTA MULTIFAMILY HOUSING REFUNDING REVENUE BONDS (CHARDON COURT PROJECT) SERIES 1996 INTRODUCTORY STATEMENT The following is a brief introduction as to certain matters discussed elsewhere in this Official Statement and is qualified in its entirety as to such matters by such discussion and the text of the actual documents described or referenced. Any capitalized term not customarily capitalized is used with the meaning assigned in Appendix B or in the Loan Agreement, the Indenture or other document with respect to which the term is used. Any definition of a term contained in the text hereof that is defined in Appendix B is defined in the text only for ease of reference, and is qualified in its entirety by the definition in Appendix B. The Appendices hereto are an integral part of this Official Statement and each potential investor should review the Appendices in their entirety. General This Official Statement provides information regarding the above -captioned bonds (the "Bonds") to be issued by the City of New Hope (the "Municipality") under Minnesota Statutes, Chapter 462C (the "Act") pursuant to an Indenture of Trust (the "Indenture") between the Municipality and Norwest Bank Minnesota, National Association (the "Trustee"). See Appendix B: "THE INDENTURE." The Bonds are being issued to finance the repayment within 90 days of the date of issuance of the Bonds a portion (the `Refunded Bonds") of certain Variable Rate Demand Rental Housing Revenue Bonds (Minnesota Multi -City Joint Housing Program), Series 1985 (the "1985 Bonds"). The 1985 Bonds were issued by the St. Paul Housing and Redevelopment Authority (the "St. Paul HRA") pursuant to a Joint Powers Agreement with the City of New Hope and certain other public bodies for the purpose of financing a loan to a certain financial institution, which was required in turn to fund loans to certain developers for the financing of certain housing developments. The Refunded Bonds relate to the portion of the 1985 Bonds allocable to a loan to Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Company") that financed the acquisition, construction and equipping of the Company's 129 -unit elderly -oriented multifamily rental housing development known as "Chardon Court" in the Municipality (the "Project"). The Project is situated as part of a campus (the "North Ridge Campus") with a nearby nursing home and assisted living facility, providing a continuum of living and care options for the elderly. The nursing home and assisted living facility are owned by an affiliate of the Company. See "SOURCES AND USES OF FUNDS," "THE COMPANY AND THE PROJECT," Appendix A: "THE COMPANY" and "Appendix A: "THE PROJECT." Loan of Bond Proceeds; Mortgage Proceeds of the Bonds will finance a loan (the "Loan") to the Company pursuant to the Loan Agreement, under which the Company will agree to make monthly payments ("Loan Repayments") which, if fully and promptly paid, will be sufficient to pay when due the scheduled principal of and •Preliminary; subject to change. interest on the Bonds. See Appendix B: "THE LOAN AGREEMENT." The Company's obligations under the Loan Agreement to make such Loan Repayments and to fund redemption of the Bonds upon a Determination of Taxability (as defined in Appendix B) are recourse solely to the Company and its assets, not to the partners of the Company or the assets of the partners. Pursuant to the Indenture, the Municipality will pledge to the Trustee, for the benefit of the holders of the Bonds, all of its interest in the Loan Agreement (other than certain indemnification and expense reimbursement payments) to secure payment of the principal of, premium, if any, and interest on the Bonds. Pursuant to a Combination Mortgage, Security Agreement and Fixture Financing Statement (the "Mortgage"), to be executed by the Company in favor of the Municipality (with an assignment to the Trustee), the payment of the principal of, premium, if any, and interest on the Bonds will be secured by a mortgage lien on and security interest in the Project, subject to certain Permitted Encumbrances described in the Mortgage. See Appendix B: "THE MORTGAGE." In addition, the Bonds will be secured by an assignment of leases and rents of the Project pursuant to an Assignment of Rents and Leases (the "Assignment"). See Appendix B: "THE ASSIGNMENT." Reserve Fund On the closing date for the issuance of the Bonds, an amount equal to $210,000 (the "Reserve Requirement") will be deposited in the Reserve Fund created pursuant to the Indenture. See "SECURITY FOR THE BONDS -- Reserve Fund." Repair and Replacement Reserve Fund The Company is required to make monthly payments, commencing July 20, 1996, for deposit to the Repair and Replacement Reserve Fund created by the Indenture in amounts equal to $2,000, subject to certain limitations more fully explained under "SECURITY FOR THE BONDS -- Repair and Replacement Reserve Fund." Amounts in the Repair and Replacement Reserve Fund may be used solely to pay certain listed capital repairs or to pay Bonds upon any occurrence of an acceleration of the Bonds as a result of an Event of Default. See "SECURITY FOR THE BONDS -- Repair and Replacement Reserve Fund." Rental Housing Requirements The Project must be occupied or available for occupancy in part by persons of low and moderate income within the meaning of Section 103(b)(4)(A) of the Internal Revenue Code of 1954, as amended (the "1954 Code"). Pursuant to a Declaration of Restrictive Covenants from the Company to the Trustee (the "Declaration"), twenty percent (20%) of the units must be held available for persons whose incomes (adjusted for family size) do not exceed eighty percent (80%) of the median annual income of the Minneapolis/St. Paul metropolitan area (not adjusted for family size). For the foregoing purposes, eighty percent of the current median annual income in the Minneapolis/St. Paul metropolitan area is 43,680. The Declaration provides for the continued use of the Project as a residential rental project in conformance with certain requirements of the 1954 Code and is recorded as a lien against the real estate on which the Project is located. See Appendix B: "THE DECLARATION." Bondholders' Risks Certain risks associated with an investment in the Bonds are discussed under "BONDHOLDERS' RISKS." -2- Miscellaneous This Official Statement (including the Appendices hereto) contains descriptions of, among other matters, the Loan Agreement, the Indenture, the Mortgage, the Assignment, the Declaration, the Municipality, the Project, the Company and the Bonds. Such descriptions and information do not purport to be comprehensive or definitive. All references to documents described herein are qualified in their entirety by reference to such documents, copies of which are available for inspection at the principal corporate trust office of the Trustee in Minneapolis, Minnesota. BONDHOLDERS' RISKS No person should purchase any Bonds without carefully reviewing the following information, which summarizes some, but not all, of the risk factors that should be carefully considered before such purchase. Limited Obligations; Non -Recourse The Bonds and the interest thereon are special, limited obligations of the Municipality and do not constitute a general obligation of the Municipality, the State of Minnesota or any political subdivision thereof. No Holder of the Bonds may compel the exercise of the taxing power of the Municipality, the State of Minnesota or any political subdivision thereof to pay the principal of premium, if any, or interest due on the Bonds. The Bonds do not evidence a debt of the Municipality within the meaning of any constitutional or statutory provision. The Municipality is obligated to make payments on the Bonds only to the extent it receives Loan Repayments from the Company as required under the Loan Agreement or as amounts available therefore pursuant to the Indenture. Dependence on Project Revenues The payment of principal of, premium if any and interest on the Bonds is intended to be derived solely from payments of the Company under the Loan Agreement. No recourse or liability against the partners of the Company or their assets is created by the Loan Agreement. Consequently, upon any occurrence of an Event of Default, recourse will be available only as against the assets of the Company. The Company has no significant assets other than the Project and the revenues derived therefrom. If the Project does not generate sufficient revenues from its operations, it is unlikely the Company will have other resources to make payments under the Mortgage necessary to pay in full all principal of premium, if any, and interest on the Bonds when due. The ability of the Company to make Loan Repayments will therefore depend on the ability of the Company to maintain sufficient tenant occupancy in the Project and to charge and collect sufficient rents and other charges. Historic occupancy and operating results of the Project are no guarantee or assurance as to future occupancy or operations of the Project. See Appendix A: "THE PROJECT" for information about the operating history of the Project. The adequacy of future revenues of the Project to provide for all Project operating requirements, including payment of debt service, will be subject to various future events or conditions which cannot be accurately predicted, and which may be beyond the control of the Company, including, but not limited to, the risks of inadequate occupancy; increased real estate taxes; increased -3- operating, maintenance or repair costs; and an inability to maintain or raise rental rates or other charges because of (i) inadequate incomes of tenants or prospective tenants, (ii) insufficient tenant demand, (iii) new or existing competition from other housing or health care facilities, including owner occupied housing and homecare programs, (iv) decline in the attractiveness of the Project's amenities or location, (v) inferior management or maintenance, (vi) general or local economic conditions, (vii) requirements with respect to the Declaration, or (viii) other factors. Pursuant to the Declaration, the Company and any successor owner or lessor of the Project are subject to certain restrictions concerning the use of the Project. Among other things, the Project must be used, during the period specified in the Declaration, as a residential rental Project, and at least 20% of the units in the Project must be occupied by or held available for individuals or families of low or moderate income whose income does not exceed 80% of the median gross income of the Minneapolis/St. Paul metropolitan area. See Appendix B: "THE DECLARATION." Liquidity The Company's current assets have been less than current liabilities as of year end for more than the last three years. In significant part this condition reflects the Company's policy to apply cash not needed for operations to the repayment of certain outstanding subordinated demand debt owing to a related party of the Company (as of December 31,-1995, $462,000 was due on debt incurred in 1987 and $18,348 was due on debt incurred in 1994). The debt incurred in 1987 reflects amounts needed during initial leaseup and commencement of operations, and the debt incurred in 1994 arose primarily because of approximately $76,000 of capital costs incurred in repainting and caulking the exterior of the Project. See Appendix A: "THE COMPANY -- Related Party Transactions." To date the Company has not been required to utilize any line of credit or similar source of outside liquidity from any unrelated party, but has borrowed from North Ridge Care Center, Inc., a related party. Damage or Destruction Although the Company will be required to obtain certain insurance as set forth in the Loan Agreement, there can be no assurance that the Project will not suffer losses for which insurance cannot be or has not been obtained or that the amount of any such loss, or the period during which the Project cannot generate revenues, will not exceed the coverage of such insurance policies. Related Party Transactions and Potential Conflicts Some or all of the partners of the Company have financial interests in other facilities located on the North Ridge Campus which provide facilities for the elderly and which do not provide security for the Bonds. Additionally, North Ridge Care Center, Inc., owned by certain partners of the Company, provides all staffing for the Project. Further, certain financial support has been provided by the partners or an affiliate in the form of subordinated debt. Conflicts of interest in allocating financial resources, time or residents between the Project and other facilities may arise. However, a purpose of the Project has been to provide a continuum of living options on a coordinated basis to the elderly. See Appendix A: "THE PROJECT --The North Ridge Campus" and Appendix A: "THE COMPANY -- Related Party Transactions." Competition The Company believes that the Project currently has limited competition within its primary market area from other multifamily rental projects oriented to independent elderly persons. However, -4- elderly housing facilities have been overbuilt in the past in a number of other markets in the Minneapolis/St. Paul metropolitan area. Additionally, with an increasingly larger anticipated elderly population, increased competition can be expected in almost all markets through the construction of new facilities or the conversion or reorientation of others. Competition for the Project's tenants is based on price, location, services, and the availability of alternative living arrangements. See Appendix A: "THE PROJECT -- Competition and Marketing." Value of Mortgaged Property The obligations of the Company under the Loan Agreement to repay the Loan (whether by acceleration or otherwise) are recourse only against the Company and its assets. The sole assets of the Company are the Project and revenues derived therefrom. Attempts to foreclose the Project under the Mortgage may be met with protracted litigation and/or bankruptcy proceedings, which proceedings cause delays. See "ENFORCEABILITY OF OBLIGATIONS." Thus, there can be no assurance that upon the occurrence of a default under the Loan Agreement, the Trustee will be able to obtain possession of the Project and generate revenue therefrom in a timely fashion. Furthermore, there can be no assurance that the Project, if sold upon default under the Loan Agreement and foreclosure of the Mortgage, would realize an amount sufficient to pay all Bonds and accrued interest thereon. Nature of Pro Forma Debt Service Data Certain historical operating results of the Company and computed pro forma debt service coverage are provided herein in a table under "SUMMARY INFORMATION" and in Appendix A: "THE PROJECT -- Operating History and Pro Forma Data." The pro forma debt service coverage so reflected is merely a mathematical computation based on the data therein disclosed and represents no assurance or guarantee as to the future sufficiency of income of the Company to meet its obligations, including debt service requirements on the Bonds. Effect of Federal Bankruptcy Laws on Security for the Bonds Bankruptcy proceedings and equitable principles may delay, modify, limit or otherwise adversely affect the enforcement of Bondholders' rights or collection of principal of or interest on the Bonds. Notwithstanding that repayment of the Bonds is secured by an assignment of leases and a lien on the Mortgaged Property, a bankruptcy of the Company could impose significant risks of delay, limitation or modification of the Bondholders' rights against the Company. These risks include, without limitation, the risk that the interest rate on and repayment and other terms of the Bonds could be modified in bankruptcy proceedings, and, if the value of the collateral for the Bonds, as determined by a court of competent jurisdiction, is less than the full amount due on the Bonds, the Bonds may not be repaid in full. See "ENFORCEABILITY OF OBLIGATIONS." Tax Exemption The tax-exempt status of the interest on the Bonds is conditioned upon the Company complying with the requirements of the Act, the Internal Revenue Code, as amended, and applicable Treasury Regulations as they relate to the Bonds. Certain of these requirements relating to renting units of the Project to persons of low and moderate income are included in the Declaration. Failure of the Company to comply with the terms and conditions of the Loan Agreement, the Indenture, the Declaration and other documents as described herein may result in the loss of the tax-exempt status of the interest on the Bonds retroactive to the date of issuance of the Bonds. See "TAX MATTERS." Owners of Bonds will not receive any additional interest to compensate them for federal income taxes, -5- interest and penalties which may be assessed with respect to such interest. The Bonds are subject to mandatory redemption without premium upon a Determination of Taxability. There can be no assurance, however, that sufficient moneys would be available in such event to redeem the Bonds. If interest on the Bonds should become subject to federal income taxation, the market for and value of the Bonds would be adversely affected. See "TAX MATTERS." Lack of Secondary Market The Underwriter expects to effect secondary market trading in the Bonds. The Underwriter will not, however, be obligated to make a market in the Bonds or purchase Bonds upon request. It is not expected that an active trading market for the Bonds will develop and, particularly because the Bonds are unrated, liquidity of the Bonds may be limited. Adverse developments, including insufficient cash flow from the Project, may have an unfavorable effect upon the price for the Bonds in the secondary market or upon a Bondholder's ability to sell the Bonds. Absence of Rating The Bonds have not received a credit rating from any organization engaged in the business of publishing such ratings and, due to the risks associated with an investment in the Bonds, the Company believes that a rating considered to be "investment grade" could not presently be obtained for the Bonds. Typically, in contrast to rated bonds, unrated bonds lack liquidity in the secondary market. As a result of the foregoing, the Bonds are believed to bear interest at higher rates than would prevail for bonds with comparable maturities and redemption provisions that have investment grade ratings. Nevertheless, Bonds should not be purchased by any investor who, because of financial condition, investment policies or otherwise, does not desire to assume, or have the ability to bear, the risks inherent in an investment in the Bonds. THE BONDS Interest Rate; Maturity; Payment The Bonds are being issued as of the date and in the aggregate principal amounts and with the maturities and interest rates set forth on the cover hereof. Interest will be payable semiannually on each June 1 and December 1 (each an "Interest Payment Date") commencing December 1, 1996, calculated on the basis of a 360 -day year with twelve months of thirty days. The ownership of any bonds offered hereby will be beneficial ownership and not record ownership so long as the Bonds are held in book -entry form. While in such form, the Bonds will be registered in the name of Cede & Co., as nominee for the Depository Trust Company. See "BOOK - ENTRY SYSTEM." The Bonds will be issued as fully registered bonds without interest coupons in the denomination of $5,000 or whole multiples thereof. Bonds will be payable as to principal, whether upon maturity or redemption, at the principal corporate trust office of the Trustee designated on the cover hereof. If any payment of interest or principal is due on a day that is not a business day, payment will be required to be made on the next succeeding business day with the same effect as if paid when otherwise due. Interest shall be payable by check or draft of the Trustee mailed on the Interest Payment Date to the persons who were registered owners thereof as of the fifteenth day of the F-1 month immediately preceding the Interest Payment Date; provided, however, that payment of interest to persons who are holders of record of at least $1,000,000 principal amount of Bonds shall be made, upon appropriate instruction from the holder, by wire transfer. Exchange; Transfer The Bonds will be transferable and exchangeable for other denominations only upon the books of the Trustee and only upon presentation and surrender of such Bonds, together with an executed assignment or other acceptable transfer instrument, subject to the payment of any cost, tax or charge that may be imposed in connection therewith. Bonds called for redemption will not be required to be transferred or exchanged by the Trustee. Replacement If any Bond is mutilated, lost, stolen or destroyed, the Municipality may execute and the Trustee may authenticate and deliver, subject to the provisions of the Indenture, a new Bond of like date, maturity and denomination. In the case of a lost, stolen or destroyed Bond, the Municipality and Trustee may require satisfactory evidence and indemnification. In the case of a mutilated Bond, such mutilated Bond shall first be surrendered to the Trustee. For every such exchange of Bonds, the Trustee may charge the owner of such Bond the Trustee's reasonable fees and expenses with respect to the exchange. Redemption or Prepayment Prior to Maturity Mandatory Sinking Fund Redemption. The Bonds maturing on and are subject to mandatory sinking fund redemption, in part, at the principal amount thereof plus accrued interest as follows: Sinking Fund Redemption Date Stated Maturity Sinking Fund Redemption Date Stated Maturity Bonds Maturing Sinking Fund Sinking Fund Principal Amount Redemption Date Bonds Maturing Sinking Fund Sinking Fund Principal Amount Redemption Date Sinking Fund Principal Amount Sinking Fund Principal Amount Optional Redemption. On and after June 1, 2001, all Bonds are subject to redemption and prepayment prior to maturity upon request of the Company and deposit of funds therefor, in whole on -7- any date or in part on any Interest Payment Date, at their principal amount, plus accrued interest to the redemption date plus a redemption premium expressed as a percentage of principal redeemed as follows: Redemption Record Premium June 1, 2001 through May 31, 2002 2% June 1, 2002 through May 31, 2003 1 % June 1, 2003 and thereafter None Optional Redemption due to Casualty or Condemnation. All Bonds are subject to redemption and prepayment prior to maturity at any time, in whole but not in part, at the principal amount thereof, plus accrued interest to the redemption date, upon the optional prepayment by the Company of amounts payable under the Loan Agreement in the event that (a) all or substantially all the Project has been damaged or destroyed to such extent that in the reasonable opinion of the Company, the repair and restoration is economically not practicable or cannot be accomplished within ninety days; or (b) there occurs the condemnation of all or substantially all the Project or the taking by eminent domain of such use or control of the Project as to render it unsatisfactory to the Company for its intended use for a period of time longer than ninety days, all as further explained in Appendix B: "THE LOAN AGREEMENT -- Company Options." Mandatory Redemption Upon Determination of Taxability. Upon the occurrence of a Determination of Taxability (as defined in Appendix B), all Bonds are subject to mandatory redemption and prepayment prior to maturity on the first Interest Payment Date for which notice can be given after the date upon which the Trustee receives written notice of Determination of Taxability, at their principal amount plus accrued interest to the redemption date. Selection of Bonds for Partial Redemption. If Bonds are to be redeemed in part pursuant to a redemption as provided herein, the maturity of the Bonds to be redeemed shall be selected at the option of the Company in any priority and the redemption of Bonds within a maturity shall be determined in such manner as the Trustee in its discretion may decide, each portion of $5,000 principal amount being counted as one Bond for this purpose. If a portion of a Bond having a principal amount of more than $5,000 shall be called for redemption, a new registered Bond in principal amount equal to the unredeemed portion thereof shall be issued to the holder upon the surrender thereof. Notice of Redemption; Payment. With respect to any redemption the Trustee is required to cause notice of the redemption to be mailed to the registered owner of each Bond to be redeemed (whether in whole or in part), by registered or certified mail, not less than thirty (30) days prior to the redemption date. Failure to receive a notice, or any defect in any such notice, shall not affect the validity of any proceedings for the redemption of any Bonds. Acceleration Upon Event of Default. Upon an Event of Default under the Indenture, the Trustee may declare the principal amount of the Bonds immediately due and payable. See Appendix B: "THE INDENTURE -- Default and Remedies." 12 BOOK -ENTRY SYSTEM The Depository Trust Company ("DTC"), New York, NY, will act as the securities depository for the Bonds. The Bonds will be fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee), with one Bond certificate issued for all Bonds. 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 "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("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 such Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participant 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 will not receive certificates representing their ownership interest 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 & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds on deposit; DTC's records reflect only the identity of the Direct Participants to whose account 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 & Co. 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 issue to be redeemed. M Neither DTC nor Cede & Co. will consent or vote with respect to Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Trustee as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'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 Repayments on the Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on a payable 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 the payable date. Repayments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is 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 or the Municipality, 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 DTC, and the disbursement of such payment to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Municipality or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds are required to be printed and delivered. The Company may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered. The information in this section concerning DTC and DTC's Book -Entry System has been obtained from sources that the Company believes to be reliable, but the Company takes no responsibility for the accuracy thereof. DEBT SERVICE SCHEDULE The following is a projected schedule of debt service for the Bonds: Year Ending Bond Principal Bond Interest Total Payments -10- SECURITY FOR THE BONDS Limited Obligations; No Pledge of Taxing Authority The Bonds are limited obligations of the Municipality and will not constitute or give rise to a pecuniary liability of the Municipality or the State of Minnesota, or any subdivision thereof, or a charge against their respective general credit or taxing powers. No holder of a Bond will have the right to demand payment of the principal thereof or premium, if any, or interest thereon out of any funds to be raised from taxation or from any sources of revenue other than those expressly pledged to the payment of the Bonds. Loan Repayments Under the Indenture, the Municipality has pledged its interest in the Loan Agreement (including the amounts payable thereunder to the Municipality by the Company, but excluding certain rights to payment of fees, expenses and indemnification) to the Trustee to secure the Bonds. The amounts payable under the Loan Agreement as Loan Repayments are payable directly to the Trustee and will be sufficient, if paid promptly and in full, to make all repayments of principal of and premium, if any, and interest on the Bonds as the same become due, at maturity, upon redemption and prepayment or otherwise. The Trustee will be authorized to exercise the rights of the Municipality and to enforce the obligations of the Company under the Loan Agreement. The Loan Agreement is a recourse obligation of the Company; however, the Loan Agreement is nonrecourse to the partners of the Company; thus, no personal liability is created against the partners of the Company or any of their assets. Upon any occurrence of an Event of Default, recourse will be available only as against the assets of the Company (which will be comprised primarily of the Project). See Appendix B: "THE LOAN AGREEMENT." Reserve Fund On the closing date for the issuance of the Bonds, an amount equal to $210,000 (the "Reserve Requirement") will be deposited in the Reserve Fund created pursuant to the Indenture. Amounts held in the Reserve Fund may be used by the Trustee to pay principal of or interest on the Bonds if amounts available therefor in the Bond Fund (where Loan Repayments are deposited) are insufficient for such purpose. Amounts in the Reserve Fund may be invested in Permitted Investments as defined in the Indenture, but all investments must mature or be callable at the option of the holder no later than the next Interest Payment Date. See Appendix B: "THE INDENTURE -- Reserve Fund." In accordance with the Loan Agreement, the Company is required to deposit amounts in the Reserve Fund sufficient to cause amounts therein to equal the Reserve Requirement, if at any time amounts in the Reserve Fund are less than the Reserve Requirement. Mortgage and Assignment Under the Mortgage, the Company will grant the Municipality a mortgage lien on, and security interest in, the Mortgaged Property. As security for the Bonds, the Municipality will assign all its interest in the Mortgage to the Trustee. The Mortgaged Property includes, in general, the land and buildings of the Project and furniture, fixtures and equipment and other tangible property owned by the Company and located at the Project. See Appendix B: "THE MORTGAGE." The lien of the -11- Mortgage is subject to Permitted Encumbrances, which include liens for taxes and special assessments not yet delinquent, and may include noninterfering utility and access easements or other encumbrances. In the event taxes or special assessments are not paid, liens for such unpaid amounts would be prior to the lien of the Mortgage. Pursuant to the Assignment, the Company will assign all leases and rents of the Project to the Municipality, which will assign such Assignment to the Trustee, as security for the Bonds. See Appendix B: "THE ASSIGNMENT." Repair and Replacement Reserve Fund The Trustee shall maintain a Repair and Replacement Reserve Fund established under the Indenture. Commencing July 20, 1996, and on the twentieth day of each month thereafter, the Company shall pay the Trustee $2,000 for deposit to the Repair and Replacement Reserve Fund. Except upon the occurrence of an Event of Default and the acceleration of payment on the Bonds, amounts may be withdrawn from the Repair and Replacement Reserve Fund only upon request of the Company for the payment of costs for the complete replacement of the roof on the Project, installation of a new boiler to replace the boiler in the Project, installation of new air conditioning units in the Project or the painting and caulking of the entire exterior of the building. See Appendix B: "THE INDENTURE -- Repair and Replacement Reserve Fund." Special Covenant In the Loan Agreement the Company agrees to charge and collect, subject to restrictions imposed by law, such rents and fees such that Net Income Available for Debt Service (as defined in Appendix B) in each fiscal year of the Company will be at least 110% of the debt service on the Bonds during such fiscal years. Notwithstanding the foregoing, if the Company cannot charge and collect as required above, no Event of Default will occur so long as (i) the Company promptly employs an independent Management Consultant to make recommendations and (ii) to the fullest extent feasible, the Company follows the recommendations of the Management Consultant. See Appendix B: "THE LOAN AGREEMENT -- Rates and Charges; Retention of Management Consultant." Defeasance Upon certain terms and conditions specified in the Indenture, the Bonds or portions thereof will be deemed to be paid and the security provided in the Indenture and the Mortgage may be discharged prior to maturity or redemption thereof upon the provision for payment of such Bonds in the manner set forth in the Indenture. In that case, such Bonds will be secured solely by the cash or securities deposited with the Trustee. Additional Indebtedness No additional bonds are permitted to be issued under the Indenture, and no liens other than Permitted Encumbrances on the Project are permitted. Limitations on Payments to Affiliates Pursuant to the Loan Agreement, the Company agrees that no amounts will be paid or property transferred to any person who is an Affiliate of the Company in consideration of any property or services provided by the Affiliate that exceed in value that which would be paid or transferred if such person had not been an affiliate. Notwithstanding the foregoing, subject to the Subordination Agreement, payments may be made by the Company on loans and advances from North Ridge Care -12- Center, Inc., and so long as no Event of Default under the Loan Agreement has occurred and is continuing, and so long as no Event of Default shall result therefrom, property or amounts may be distributed by the Company to partners or owners of the Company in respect of their partnership or ownership interest, but solely upon their agreement to return such distribution if it should be required for the Company to avoid an Event of Default under the Loan Agreement within two years following such distribution. For purposes of this section, `Affiliate" means any person who, with respect to a second person, directly or indirectly controls, is controlled by, or is under common control with the second person (or any ancestor, descendant, sibling or spouse). THE MUNICIPALITY The Municipality is a municipal corporation and political subdivision of the State of Minnesota, duly authorized and existing under and pursuant to the Constitution and laws of the State of Minnesota, and is authorized to issue the Bonds pursuant to the Act. The Act authorizes the Municipality to issue the Bonds, loan the proceeds thereof to the Company to refinance the Refunded Bonds, and to receive a pledge of revenues in accordance with the terms of the Loan Agreement and as provided in the Indenture. ESTIMATED SOURCES AND USES OF FUNDS* Following are the approximate expected sources and uses of proceeds in connection with the issuance of the Bonds: Sources Bond Proceeds $5,000,000 Reserve Fund for Refunded Bonds 515.00 Total $5,515,000 Uses Escrow Deposit' $4,831,892 Debt Service Reserve Fund 210,000 Deposit to Bond Fund 33,019 Issuance Costsz 169,550 Funds to Company 268,539 Deposit to Repair & Replacement Reserve Fund 2,000 Total $5,515,000 * Preliminary; subject to change. ' Sufficient, together with investment earnings, to pay principal of and a premium on the Refunded Bonds no later than 90 days after the issuance of the Bonds, together with interest on the Refunded Bonds to such date. Amounts will be applied to reimburse a draw on a letter of credit securing the Refunded Bonds. 2 Includes Underwriting fee, legal fees, and other costs associated with the issuance of the Bonds and refunding of the Refunded Bonds. -13- THE COMPANY AND THE PROJECT The Company is a Minnesota limited partnership organized in 1985 for the sole purpose of owning and operating the Project. The partners of the Company are Charles T. Thompson, a 5% general partner and 50% limited partner, M. Melinda Pattee, a 5% general partner and a 50% limited partner, Charles P. Thompson, a 45% general partner, and Dr. James J. Pattee, a 45% general partner. For additional information on the Company, see Appendix A -- "THE COMPANY." The Project is a 129 -unit residential rental facility for the elderly and is located at 5700 Boone Avenue North in New Hope, Minnesota, a suburb of Minneapolis. For additional information on the Project, see Appendix A -- "THE PROJECT." FINANCIAL STATEMENTS The audited financial statements for the Project for the years ended December 31, 1995, 1994 and 1993 attached as Appendix C to the Official Statement, have been audited by Larson, Allen, Weishair & Co., LLP, in Minneapolis, Minnesota (the "Accounting Firm"), as set forth in their report appearing therein. Also included in Appendix C to the Official Statement are the unaudited financial statements for the Project for the four-month period ended April 30, 1996, prepared by the Company without the Accounting Firm providing compilation, review or audit services. ENFORCEABILITY OF OBLIGATIONS On the date of issuance of the Bonds, Dorsey & Whitney LLP, as Bond Counsel, shall deliver their opinion, dated the date thereof, that the Bonds, the Loan Agreement and the Indenture are valid and legally binding agreements of the Municipality. Orbovich & Gartner Chartered, St. Paul, Minnesota, counsel to the Company, will issue opinions to the effect that the Loan Agreement, the Mortgage, the Assignment and the Declaration are valid and legally binding agreements of the Company. The foregoing opinions will be generally qualified to the extent that the enforceability of the respective instruments may be limited by laws, decisions and equitable principles affecting remedies and by bankruptcy or insolvency or other laws, decisions and equitable principles affecting creditors' rights generally. While the Bonds are secured or payable pursuant to the Loan Agreement, the Indenture, the Mortgage and the Assignment, the practical realization of payment from any security will depend upon the exercise of various remedies specified in the respective instruments. These and other remedies are dependent in many respects upon judicial action, which is subject to discretion and delay. Accordingly, the remedies specified in the above documents may not be readily available or may be limited. TAX MATTERS Tax Exemption In the opinion of Dorsey & Whitney LLP, Minneapolis, Minnesota, Bond Counsel, based upon federal and Minnesota laws, regulations, rulings and decisions in effect on the date of delivery of the Bonds, the interest on the Bonds is not includable in gross income for federal income tax purposes or in taxable net income of individuals, estates or trusts for Minnesota income tax -14- purposes, except for interest on any Bond during any period while it is held by 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. Interest on the Bonds is not an item of tax preference for purposes of the federal or Minnesota alternative minimum taxes, but such interest is includable in adjusted current earnings for the purpose of determining the alternative minimum taxable income of corporations for purposes of the federal alternative minimum tax imposed on corporations. The opinion set forth in the first sentence of this paragraph is subject to the requirement that the Project complies with the requirements of Section 103(b)(4)(A) of the 1954 code and that the Trustee, the Municipality, and the Company comply 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 be (or continue to be) excluded from gross income for federal income tax purposes. Failure to comply with such requirements could cause the interest on the Bonds to be so included in gross income for federal and Minnesota income tax purposes retroactive to the date of issuance of the Bonds. The Trustee, the Municipality, and the Company have covenanted under the Indenture, the Loan Agreement and the Declaration to comply with such requirements. The 1995 Minnesota Legislature has adopted a bill which includes a statement of the Legislature's intent that interest on obligations of Minnesota government units and Indian tribes be includable in taxable net income of individuals, estates, and trusts for Minnesota income tax purposes in the event that a court determines that Minnesota's exemption of such interest on Minnesota bonds unlawfully discriminates against interstate commerce because Minnesota taxes interest on obligations of governmental issuers located in other states. This provision would apply to taxable years beginning 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 Company cannot predict the likelihood that interest on the Bonds would become taxable under this provision. Related Federal Tax Considerations Interest on the Bonds is includable in the adjusted current earnings of corporations for purposes of determining the environmental tax imposed upon corporations by Section 59A of the Code. Interest on the Bonds may be included in the income of a foreign corporation for purposes of the branch profits tax imposed by Section 884 of the Code. Deductions for losses incurred by property and casualty insurance companies must be reduced by 15% of the interest received or accrued on the bonds. In addition to the collateral tax consequences set forth above, prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations may result in federal income tax consequences to individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax- exempt obligations. Certain corporations may have a tax imposed on passive income, including tax- exempt interest, such as interest on the Bonds. Prospective purchasers of the Bonds should consult their tax advisors as to the applicability and impact of these and other potential collateral tax consequences of owning and disposing of the Bonds. 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 -15- INCLUSION OF SOCIAL SECURITY OR OTHER RETIREMENT PAYMENTS IN TAXABLE INCOME, THE DISALLOWANCE OF DEDUCTIONS FOR CERTAIN EXPENSES ATTRIBUTABLE TO THE BONDS AND STATE OR LOCAL RULES. APPROVAL OF LEGAL PROCEEDINGS Legal matters incident to the issuance of the Bonds and with regard to the exclusion from gross income of interest on the Bonds under existing laws are subject to the approving legal opinion of Dorsey & Whitney LLP, Minneapolis, Minnesota, as Bond Counsel. Certain legal matters will be passed on for the Company by its counsel, Orbovich & Gartner Chartered, St. Paul, Minnesota. The Underwriter has been represented in connection with the issuance of the Bonds by Faegre & Benson LLP, Minneapolis, Minnesota. Any one or more of the legal counsel providing services in connection with this offering may in the future provide services to any one or more parties with an interest in this offering, including parties that are different from the party or parties represented by such counsel in this offering. UNDERWRITING The Bonds are being purchased from the Municipality by Dougherty Dawkins, Inc. of Minneapolis, Minnesota as an underwriter (the "Underwriter"). The Underwriter has agreed to purchase the Bonds from the Municipality and will receive a discount or commission of $ subject to the terms of a Bond Purchase Agreement between the Municipality, the Company and the Underwriter. In addition, the Company has agreed to pay certain out-of-pocket expenses and other expenses incurred by the Underwriter in connection with the issuance of the Bonds. The Bond Purchase Agreement provides that the Underwriter shall purchase all of the Bonds, if any are purchased, and that the obligation to make such purchase is subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The initial public offering prices set forth on the cover page hereof may be changed from time to time by the Underwriter. The Company has agreed under the Bond Purchase Agreement to indemnify the Underwriter and the Municipality against certain liabilities, including certain liabilities under the federal and state securities laws. CONTINUING DISCLOSURE Pursuant to a Continuing Disclosure Agreement, the Company will agree to provide, on or before June 30 of each year commencing June 30, 1997 (the "Annual Report Date"), annual reports to the Trustee, each Nationally Recognized Municipal Securities Information Repository and any State Repository (collectively, the "Repositories"), as designated for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 ("Rule 15c2-12"). Each annual report of the Company shall consist of (a) the annual financial statements of the Company and (b) information regarding the operations of the Project, including rental rates, historic occupancy rates, and the existing long-term debt of the Company. The Company will agree in the Continuing Disclosure Agreement to provide timely notice to each Repository of any of the events listed below, unless the listed event is deemed not to be material by the Company. The following events are subject to disclosure: i. Delinquency in payment when due of any principal of or interest on the Bonds. -16- ii. Occurrence of any nonpayment Event of Default under the Indenture or Loan Agreement as defined in each such instrument. iii. Unscheduled draws on the Debt Service Reserve Fund reflecting financial difficulties. iv. Unscheduled draws on credit enhancements reflecting financial difficulties (the Bonds have no third party credit enhancement). Substitution of credit or liquidity providers, or their failure to perform (the Bonds have no third party liquidity provider or credit enhancement). vi. Adverse tax opinions or events affecting the tax-exempt status of the Bonds. vii. Modifications to the rights of Bondholders. viii. Bond calls. ix. Defeasance of the Bonds or any portion thereof. X. Release, substitution or sale of property securing repayment of the Bonds. xi. Rating changes (the Bonds will not be rated). If the Trustee is unable to verify that an Annual Report has been provided to the Repositories by the Annual Report Date in any year, the Dissemination Agent will send a notice to each Repository to that effect, and stating the date, if known, by which the applicable Reporting Party expects to provide the Annual Report. CERTAIN STATE SECURITIES LAWS CONSIDERATIONS The offering of the Bonds is to be undertaken only in those jurisdictions in which such offering may be lawfully made in accordance with the relevant provisions of all applicable state and federal securities laws. Under rules adopted by the Minnesota Department of Commerce, an investment in or purchase of the Bonds by a Minnesota purchaser is considered suitable for such purchaser only if the purchaser has a minimum annual gross income of $30,000 and a net worth of $30,000, or in the alternative, a net worth of $75,000. Net worth is determined exclusive of home, home furnishings and automobiles. The following statements are made for the purpose of obtaining an exemption from registration pursuant to section 517.051(1), Florida Statutes. The Company has not defaulted in the payment of any debt, security or other obligation to which the Company is a primary obligor or guarantor. The Municipality has not defaulted in the payment of any debt or security obligations for which funds of the Municipality are pledged. It is not necessary to make disclosure about possible defaults with respect to certain securities constituting `conduit' revenue obligations secured by a pledge of repayments from a third party (to whom the proceeds of the obligations are loaned) and in certain cases other collateral provided by or on behalf of such third party. The Municipality is not obligated with respect to such securities beyond the pledged revenues. Thus, any default with respect to such conduit securities is immaterial to a potential investor in the Bonds offered hereby. -17- MISCELLANEOUS The foregoing summaries do not purport to be comprehensive or definitive and all references to the documents summarized are qualified in their entirety by reference to each such document. All references to the Bonds are qualified in their entirety by reference to the forms thereof and the information with respect thereto included in the aforesaid documents. Copies of these documents are available for inspection during the period of the offering at the offices of the Underwriter in Minneapolis, Minnesota, and thereafter at the principal office of the Trustee. The Municipality has not participated in the preparation of this Official Statement and has not reviewed or approved any information or statements contained in this Official Statement or the appendices hereto and assumes no responsibilities for the sufficiency, completeness or accuracy of the same. -18- APPENDIX A THE PROJECT AND THE COMPANY A-1 Appendix A THE PROJECT General General. The Project is a residential rental facility for the elderly known as "Chardon Court" containing 129 apartment units, in a single building, located in the Municipality. The Project, which opened for occupancy in 1985, contains a total of approximately 120,000 square feet. Location. The Project is located at 5700 Boone Avenue North in New Hope, Minnesota, a suburb of Minneapolis. The Project is located on 4.3 acres, one block from a 559 -bed nursing home ("North Ridge Care Center") and a 205 -unit assisted living and congregate housing facility ("North Ridge Apartments"), owned and operated by North Ridge Care Center, Inc., a Minnesota corporation ("North Ridge Care Center, Inc."). Together, the Project, North Ridge Care Center and North Ridge Apartments create a campus (the "North Ridge Campus") of approximately 15 acres in a residential and light industrial neighborhood approximately 15 miles from the Minneapolis business core. Physical Description. The Project is a six -story structure of tip -up precast concrete construction, with a stucco exterior and a gravel -on -membrane flat roof. The Project contains 129 apartment units designed to encourage independent living and an active lifestyle for older adults. Each unit of the Project is designed with the needs of the elderly in mind, with 112 of the apartments being one -bedroom units. Five apartments are one -bedroom with a den; six apartments are one -bedroom modified for handicapped persons; and six apartments contain two bedrooms. Each unit is equipped with standard amenities: individually controlled heating, wall -mounted air-conditioning units, a storage closet, and several appliances, including electric range and hood fan, refrigerator, and dishwasher; also included are mini -blinds, bathing facilities (including handicapped -accessible shower units), and quality floor coverings (including ceramic tile in the bathrooms, vinyl flooring in the kitchen and carpeting throughout the rest of the unit). In addition, each apartment has convenient access to elevators, laundry facilities and trash chutes. Health and safety features are included in each unit to assist independent living, including an "I'm OK" system and an emergency response system (monitored 24 hours a day, seven days a week), handicap access in designated apartments, easy access to kitchen cabinets and storage closets, safety grab bars in tub/shower units, and electrical outlets positioned at a height that minimizes bending. Building safety and security are enhanced by a security system, a monitored smoke and fire alarm system and a sprinkler system. The Project contains a community room and a dining room, with a lounge on each floor. The tenants may access a redwood deck and patio when weather permits. The Project also contains a mail room, two elevators and several garden plots. Tubrooms are available for use by the tenants. For an additional fee, tenants may park in the underground heated garage in one of 40 stalls. Visitors may park in one of 21 stalls in a surface -level parking area in front of the building. There are an additional 6 stalls behind the building for vans and employees. Although no independent evaluation has been conducted, the Company believes that the Project (including all major structural, heating and roofing systems) is in good physical condition and repair throughout. The Company expended approximately $76,000 in 1994 for repainting and caulking of the exterior of the Project. Staff and Services. The Company employs no staff of its own. Instead, all staffing at the Project is provided by employees of North Ridge Care Center, Inc. pursuant to a Management Agreement and practice. See "Management" in this Appendix. A full-time apartment manager is on-site daily. Additionally, tenants have available the services of a secretary, business office personnel, and security and maintenance personnel. A-2 Tenants of the Project are eligible to receive the following services and benefits included in the monthly rent: blood pressure check and nurse consultant; planned daily activities, including exercise programs, bible studies, crafts, and musical groups; garden plots; tenants' meetings; health presentations; shopping trips, provided twice weekly; weekly consultations of a Marquette Bank representative, located at the Marquette Bank in the North Ridge Care Center; interior maintenance, including painting, heating repairs, plumbing repairs and appliance repairs; volunteer opportunities; an "I'm OK system" which is checked daily; weekly transportation to North Ridge Care Center; and regularly scheduled van outings. Additional on-site services which can be arranged on a fee-for-service basis include the following: nursing services in the tenants' apartments including RN visits, lab arrangement follow up, and medication visits (offered by North Ridge Home Health, a licensed division of North Ridge Care Center, Inc.); companion and homemaker services; and housekeeping and laundry. The following services located at North Ridge Care Center are also available for tenants of the Project on a fee-for-service basis, with transportation to North Ridge Care Center provided twice each week at no charge: physical, occupational and speech therapy; CareBreak adult day care; a beauty and barber shop; and dentist, podiatrist and optometrist offices. Other services located on the North Ridge Campus include a pharmacy/gift shop and a bank. Tenants may also choose a noon meal served in the congregate dining room of the Project, with the meals being prepared at North Ridge Apartments and delivered for consumption on the Project's premises for fees not exceeding costs. Additionally, optional evening meals are served Monday through Saturday at the Project; tenants can choose either a three -meal or six -meal plan. Tenants. Pursuant to a Declaration of Restrictive Covenants between the St. Paul HRA, the Trustee, and the Company (the "Declaration"), twenty percent (20%) of the units must be held available for persons whose incomes (not adjusted for family size) do not exceed eighty percent (80%) of the area median income of the Minneapolis/St. Paul metropolitan area. For the foregoing purposes, eighty percent of the current median annual income in the Minneapolis/St. Paul metropolitan area is $43,680. The Company believes that the primary service area for tenants in the Project is the northwestern portion of Hennepin County, including the communities of New Hope, Plymouth, Maple Grove, Brooklyn Park, Crystal, Robbinsdale and Brooklyn Center. The secondary service area extends approximately 10 miles beyond that of the primary service area and includes the western suburbs of Hennepin County. In 1995, the average age of the Project tenants was 81.7. Occupancy. Occupancy in a housing project for older adults changes as tenants become older and more in need of assistance with their daily activities. Typically, a waiting list of between 5 and 20 persons exists for the Project. Since 1990, average occupancy rates have been as follows: Occupancy Rates of the Project Year Percent Occupied 1990 96.10% 1991 96.10% 1992 93.43% 1993 91.41%* 1994 94.73% 1995 97.86% TO 3/31/96 97.66% A-3 * A number of factors contributed to lower occupancy rate in 1993. Based on information available to the Company, almost 40 percent of vacating tenants transferred to facilities providing a higher level of care, with 87.5 percent of those remaining on the North Ridge Campus (moving to either North Ridge Apartments, its Personal Care Suites, or North Ridge Care Center); and approximately 40 percent of the vacating tenants moved to apartments with lower rental rates. Additionally, several tenants moved to a new elderly complex, Waterford in the Park Apartments, which opened at 6216 Louisiana Avenue in Brooklyn Park July of 1993 with initial rent concessions. See "Competition," "Turnover," and "Rent." Turnover. Set forth below for the following years are the number of times units changed tenants. In connection with each change, the Company repaints the walls, cleans the carpet, and repairs any damage. * The higher rate of turnover for the Project was due to a combination of tenants transferring to higher care units (approximately 40%) and tenants moving to lower cost apartments. In 1994, 52 percent required a higher level of care. Project Management is unable to predict from year to year what percentage of tenants will require a higher level of care. Rent. Tenants of the Project pay rent each month on a month-to-month basis. Rent includes several services provided by employees of North Ridge Care Center, Inc., as well as central heating and garbage pick- up. Telephone, electricity and cable television are billed separately. See this Appendix: "THE PROJECT -- Staff and Services." The following chart sets forth the rental rates since the Project was opened in 1985. The Company believes its rental rates compare favorably with comparable elderly housing in the Minneapolis -St. Paul greater metropolitan area. See this Appendix: "THE PROJECT -- Competition and Marketing." Turnover, 1991 - 1995 Historic Rental Rates of the Project Transfer: 1991 1992 1993 1994 1995 to North Ridge Care Center 9 10 11 9 9 to North Ridge Apartments 1 2 2 3 0 to other apartments 4 1 16 8 4 to other catered living 0 0 1 0 0 to other care centers 3 2 1 7 2 out of state 0 1 2 2 1 to five with family 0 2 1 1 3 death 5 5 5 3 6 to Personal Care Suites 0 0 1 0 1 bought house/lake home 1 1 1 3 2 Total Turnover 23 24 41 36 28 Percentaee of Total Units 17.83% 18.60% 31.78%* 27.91% 21.71% * The higher rate of turnover for the Project was due to a combination of tenants transferring to higher care units (approximately 40%) and tenants moving to lower cost apartments. In 1994, 52 percent required a higher level of care. Project Management is unable to predict from year to year what percentage of tenants will require a higher level of care. Rent. Tenants of the Project pay rent each month on a month-to-month basis. Rent includes several services provided by employees of North Ridge Care Center, Inc., as well as central heating and garbage pick- up. Telephone, electricity and cable television are billed separately. See this Appendix: "THE PROJECT -- Staff and Services." The following chart sets forth the rental rates since the Project was opened in 1985. The Company believes its rental rates compare favorably with comparable elderly housing in the Minneapolis -St. Paul greater metropolitan area. See this Appendix: "THE PROJECT -- Competition and Marketing." A-4 Historic Rental Rates of the Project 1985-87 1988-90 1991-92 1993-94 1995 1996 1 BR $495 $525 $550 $575 $585 $590 1 BR w/Den $675 $700 $725 $750 $765 $775 1 BR -Handicapped $550 $550 $575 $600 $610 $610 2 BR $725 $750 $775 $800 $815 $825 Heated Garage $ 25 $ 25 $ 30 $ 30 $ 30 $ 30 A-4 Competition and Marketing Competition. In the Company's opinion, the Project's primary service area currently provides a limited number of independent living projects for the elderly, and the Company believes that its monthly rental rates at the Project are competitive with the other similar housing for the elderly within the primary service area. See `BONDHOLDERS' RISKS --Competition." Set forth below is selected information comparing the Project with certain competitors in the Project's primary service area. This information has been internally prepared by the Company based on telephone interviews with the listed facilities' staff, without independent verification. A number of such facilities required debt restructuring in the past. A-5 Apartment Rental Rates Survey As of February 19, 1996 Facility and Location Rental Rates # Units Selected Services Included Chardon Court (The Project) 1 BR (645 sq. ft.) - $590 129 units [See description above] 2 BR (1,036 sq. ft.) - $825 Copperfield 1 BR (625 & 658 sq. ft.) - $795 157 units Okay check 4200 -40th Ave. N. 2 BR (868 & 920 sq. ft.) - $995 Van for grocery shopping twice a week Robbinsdale Full-time activity director Maranatha Place 1 BR (634 to 659 sq. ft.) - $760 58 units Bus for shopping and events 5415 -69th Ave. N. 2 BR (898 sq. ft.) - $965 Continental breakfast Brooklyn Center 2 BR with 2 Baths - $980 Part-time activity person No deposit, no lease Secured building Housekeeping once a week (clean bathroom and kitchen floor) All utilities except phone Earle Brown Commons 1 BR (600 to 627 sq. ft.) - 140 units Secured building 6100 Summit Drive N. $575 to $625 Bus for shopping and events Brooklyn Center 2 BR (850 sq. ft.) - $730 Full-time activity director 1 BR & Den (725 to 850 sq. ft.) - On-site caretakers $680 to $730 Garage St. Therese New Hope 1 BR (590 sq. ft.) - $760 220 units Full-time activity staff 8008 Bass Lake Road 2 BR (860 sq. ft.) - $985 Pull cords New Hope $500 entrance fee (recently down "Frn okay" from $1,500) refundable until Bus for grocery shopping and some occupant moves into unit activities 24-hour security day nurses Maid service every two weeks (vacuum, clean bathroom, wipe up kitchen) North Ridge Apartments 1 BR (590 sq. ft.) - $830 205 units Full-time activity staff 5500 Boone Ave. N. 2 BR (900 sq. ft.) - $1,070 "I'm okay" New Hope Emergency call Quarterly housekeeping All utilities except phone 24-hour security Bus for grocery and other shopping Callibre Chase 1 BR (797 to 897 sq. ft.) - 79 units Caretakers in building 6315 -55th Ave. S. $617 to $622 Garage Crystal 2 BR (1,003 to 1,062 sq. ft.) - Secured building $707 to $742 $400.00 deposit refundable Waterford 1 BR (800 sq. ft.) - $540 144 units Manager oversees activities 6216 Louisiana Ave. 2 BR (1,035 sq. ft.) - $640 Caretakers maintain common areas Brooklyn Park $300 deposit Secured building Detached garage A-6 Two additional housing projects that may compete with the Project are currently under construction or development. In Maple Grove, an 88 -unit project targeted to elderly persons with modest incomes is expected to be opened in October, 1996, with tentative monthly rents at $475 to $595 for one -bedroom units (including heat). In Osseo, a 29 congregate unit and 30 assisted -living unit facility is under development. The Project faces direct competition from elderly independent living multifamily rental housing facilities. Additionally, tenants of the Project have a wide range of housing alternatives, ranging from rental apartments for general occupancy to single family residences. Marketing. Marketing of the Project consists of placing advertisements in various local newspapers and apartment journals, holding "open houses" and receiving resident and business referrals. The Company also prepares and distributes brochures and flyers describing the Project. Management Since completion, the Project has been managed formally or informally by North Ridge Care Center, Inc. On September 30, 1995, the management arrangement was formalized in a Management Agreement, pursuant to which North Ridge Care Center, Inc. was appointed the agent of the Company for the purpose of operating the Project. See this Appendix: "THE COMPANY-- North Ridge Care Center, Inc." The Management Agreement has an initial term of one year, and will renew automatically from year to year unless any party gives a termination notice to the other no later than 30 days before such anniversary date. Additionally, the Management Agreement can be terminated at any time by any party upon 90 days' notice. Under the Management Agreement, the Company is required to pay to North Ridge Care Center, Inc. a management fee equal to $4,250 per month, adjusted annually to reflect the actual costs of providing such services. The Company is required to pay all expenses incurred by North Ridge Care Center, Inc. under the Management Agreement, including without limitation, direct compensation and fringe benefits for North Ridge Care Center, Inc.'s employees, consultants and independent contractors. Compensation and benefits charges are allocated to the Project according to time spent working on Project matters. Operating History and Pro Forma Data Set forth below, derived from unaudited and audited financial statements of the Company, is selected financial data showing operating results and computed pro forma debt service coverage for the Project for the years ended December 31, 1991, 1992, 1993, 1994, and 1995, together with certain unaudited data for the four-month periods ended April 30, 1995 and 1996. A-7 Northridge Properties of New Hope Financial Information Expenses Operating Expenses 364,117 Fiscal Years Ended 12/31 381,260 4 Months Ended 4/30 396,538 1991 1992 1993 1994 1995 1995 1996 488,854 unaudited unaudited audited audited audited unaudited unaudited Revenues: 58,142 58,114 Amortization Elderly Housing Revenue $864,172 $854,027 $854,989 $879,220 $922,765 $301,591 $309,504 Meals Revenue 54,602 51,846 41,843 46,137 48,556 15,968 17,694 Other Services Revenue 9,307 35,646 18,539 8,063 16,737 5,356 6,587 Interest Income 55,289 49,914 50,719 48,721 43,643 13,549 13,755 Gain on Sale of Property 0 0 4.650 0 0 0 0 Total Revenues $983,370 $991,433 $970,740 $982,141 $1.031.701 $336,464 $347,540 Expenses Operating Expenses 364,117 394,726 381,260 451,892* 396,538 136,197 159,889 Interest 522,109 504,154 497,423 492,277 488,854 164,222 162,022 Depreciation and 196,642 195.712 191,706 176,588 174.565 58,142 58,114 Amortization Total Expenses $1,082,868 $1,094,592 $1,070,389 $1,120,757 $1,059,957 $358,560 $380,025 Net Income (Loss): $(99,498) $(103,159) $(99,649) $(138,616) $(28,256) $(22,096) $(32,485) Plus: Depreciation & 196,642 195,712 191,706 176,588 174,565 58,142 58,114 Amortization Interests') 522,109 504,154 458,644 454,588 451,957 164,222 162,022 Less Gain from Asset Sale 0 0 4,650 0 0 0 0 Net Income Available for 619 25359$ 6,707546 051 492 560598 266 1290 268 ILE 651 Debt Service Pro Forma Debt $417,150 $417,150 $417,150 $417,150 $417,150 NA NA Servicesl)srt** Pro Forma Debt Service 1.48 1.43 1.31 1.18 1.43 NA NA Coverage on Bonds (3)** * The increase in 1994 is generally attributable to non-recurring expenses for painting and caulking in the approximate amount of $76,000. ** Preliminary; subject to change. (1) Excludes interest on certain subordinated debt owed to an affiliate of the Company of $38,779, $37,689 and $36,897 for 1993, 1994 and 1995, respectively. (2) Equal to maximum annual debt service on the Bonds, assuming a weighted average interest rate of 7.34%. Does not include principal and interest payments on certain other debt which the Company owes to an affiliate. See Appendix A: "THE COMPANY -- Related Party Transactions." (3) Reflects solely a mathematical computation of the calculated Net Income Available for Debt Service divided by the stated Pro Forma Debt Service. The North Ridge Campus Including the Project, North Ridge Care Center, Inc. provides choices for the elderly requiring a range of health care needs, from independent living to a care center. The 15 -acre North Ridge Campus encompasses the following "continuum" of care: Chardon Court. Chardon Court (the Project) offers maximum independence combined with security and easy access to health services. North Ridge Apartments. North Ridge Apartments consists of a four-story, 180 -unit apartment complex providing a combination of independence with added security and care. Additional features (in comparison with the Project) include evening meals in a congregate dining room, 24-hour security, an "I'm OK" system and an emergency response system, scheduled daily activities, home care services, and enclosed access to beauty and barber shop, bank, and pharmacy. Personal Care Suites. North Ridge Apartments also includes 25 "Personal Care Suites" for assisted living, which is a step between independent apartment living and the routine and supervision provided in the Care Center. Features include private living quarters with half bath and storage space, meals served in the dining area, assistance with bathing and dressing, and a 24-hour nurse on call at all times. North Ridge Care Center. North Ridge Care Center is a 559 -bed licensed and certified skilled -nursing facility divided into several areas each staffed and managed as an independent unit. Some of the units specialize in providing care for residents with complex medical needs, including subacute care and dementia. Since 1966, North Ridge Care Center has served more than 7,000 elderly persons. North Ridge Care Center is also one of the largest licensed for-profit nursing homes in the State of Minnesota. North Ridge Home Health, a division of North Ridge Care Center, Inc., also offers home health services, tailored to fit individual needs, to the tenants of the Project and North Ridge Apartments. North Ridge Home Health is licensed by the Minnesota Department of Health. Other services on the North Ridge Campus include physical, occupational and speech therapy departments; various amenities including a beauty/barber shop, a pharmacy/gift shop, a bank and a dental office; regularly scheduled visits by a podiatrist and an optometrist; and access to dry-cleaning, laundry, transportation and grocery/dairy services. North Ridge Care Center, Inc., with approximately 940 full-time and part-time employees, is one of the largest employers in the Municipality. NONE OF THE FOREGOING FACILITIES OR OPERATIONS, OTHER THAN THE PROJECT, SECURES OR IN ANY MANNER IS OBLIGATED FOR THE PAYMENT OF THE BONDS OR INTEREST THEREON. THE COMPANY General Northridge Properties of New Hope Limited Partnership (the "Company") was organized in 1985 under the laws of the State of Minnesota as a limited partnership for the purpose of developing, constructing, owning, and operating a rental housing facility to be occupied principally by elderly persons. See this Appendix: "THE PROJECT." The Company has four general partners, two of whom are also limited partners. The principal business offices of the Company are located at 5430 Boone Avenue, New Hope, Minnesota 55428 and its telephone number is (612) 536-7000. The Company has, and expects to have, no material assets other than its interest in the Project, revenues derived therefrom, and funds held by the Trustee pursuant to the Indenture. Immediately following issuance of the Bonds, the Company will have no material liabilities other than the amounts owning under the Loan Agreement, the indebtedness to North Ridge Care Center, Inc. described above, and liabilities incurred in the ordinary course of the operation of the Project. A-9 Payment obligations of the Company under the Loan Agreement are recourse only to the Company and its assets, but not to the partners or their assets. The Loan Agreement permits the transfer of the Project under certain circumstances to certain qualified transferees, as long as any new owner assumes the obligations of the Company under the Loan Agreement, the Declaration, the Mortgage and the Assignment, the Company remains fully obligated and responsible under the Loan Agreement and the Trustee is furnished an opinion of Bond Counsel. General Partners of the Company Information about the general partners of the Company is as follows: Charles T Thompson, 39, is a five percent (5%) general partner and a fifty percent (50%) limited partner of the Company and the chief executive officer and president of North Ridge Care Center, Inc., which position he has held since 1995. From 1979 to 1987, Mr. Thompson was comptroller of North Ridge Care Center, Inc., during which time he managed the planning, financing and construction of elderly housing as well as additions and renovations to the nursing home. As a licensed nursing home administrator, Mr. Thompson serves as administrator of the nursing home from 1988 through 1994. Mr. Thompson received a B.S. in Business Administration from Northern Arizona University in 1975 and participated in the University of Minnesota Graduate Program in Public Health for Long Term Care in 1979 and 1980. He is a member of the board of directors of Marquette Banks Northwest Area, the board of directors of Senior Outreach Services, Inc., and North Memorial Medical Ethics Board. M. Melinda Pattee, 46, is a five percent (5%) general partner and fifty percent (50%) limited partner of the Company and the Secretary/Treasurer of North Ridge Care Center, Inc.. She has been the Administrator of North Ridge Care Center since 1995. From 1978 to 1985, Ms. Pattee was an occupational therapist at the nursing home, from 1985 to 1986 she was the special projects coordinator, and from 1986 through 1994, she was the director of supportive services, in which position her responsibilities included managing the operations of the nursing home. Ms. Pattee is a graduate of the College of St. Catherine, from which she received a B.A. in occupational therapy. She is a licensed nursing home administrator, having done her course work for such licensure at the University of Minnesota. She is a member of the TwinWest Chamber Foundation Advisory Board, Northwest YMCA Advisory Board, Women's Health Leadership Trust, and Independent School District 281, Highview Alternative High School Advisory Board. Charles P. Thompson, 65, is a forty-five percent (45%) general partner of the Company and until 1995 was the chief executive officer of North Ridge Care Center, Inc.. Mr. Thompson has received numerous honors, including entrepreneur of the year in 1991 from the TwinWest Chamber of Commerce, WCCO Good Neighbor Award, also in 1991, and the New Hope Mayor's Outstanding Achievement Award in 1994. In 1995 he received special recognition from the Northwest Hennepin Human Service Council. Mr. Thompson holds a degree in pharmacy from the University of Minnesota and from 1953 to 1971 was an owner of Medical Center Pharmacy. He has also been on the board of directors of numerous organizations, including Marquette Bank New Hope, North Hennepin Community College Foundation, and Presidents Club, University of Minnesota. James J. Pattee, M.D., 71, is a forty-five percent (45%) general partner of the Company and an assistant professor, Department of Family Practice and Community Health, University of Minnesota Medical School. A 1953 graduate of Creighton University Medical School, Dr. Pattee began active practice as a family physician in 1954. From 1966 to 1994, he served as Medical Director of North Ridge Care Center, and from 1976 to 1987, he was coordinator of the Geriatric Program at the University of Minnesota Medical School. His many past and present professional associations include the Aging Committee of the American Medical Association, member and Diplomat of the American Academy of Family Physicians, Certification by the American Board of Family Physicians, American Medical Association Representative, Joint Commission on A-10 Accreditation of Hospitals, Professional and Technical Advisory Committee on Long -Term Care, and Board of Directors, American Geriatric Society. From 1988 through 1995, Dr. Pattee has served as program chairperson for fifteen sessions of Medical Directors Training Course. He is currently a member of the American Medical Directors Certification Council, which approves applications to become Certified Medical Directors. He has published more than 35 articles and books and has made well over 100 presentations on medical and geriatric care topics. In 1995 Dr. Pattee spoke at six workshops and gave five lectures on a variety of health care and geriatric issues at Ain Shams University, Cairo, Egypt. North Ridge Care Center, Inc. On September 30, 1995, two of the general partners of the Company, Charles T. Thompson and M. Melinda Pattee, who together owned 30% of the shares of North Ridge Care Center, Inc., purchased the remaining 70% from Charles P. Thompson and James J. Pattee, respectively, making them the sole owners and sole directors of North Ridge Care Center, Inc., which owns North Ridge Apartments and North Ridge Care Center. Under the Management Agreement dated as of the same date, the Company pays North Ridge Care Center, Inc. a management fee of $4,250 per month, which amount is to be adjusted annually to reflect the actual costs of the services provided thereunder. See this Appendix: "THE PROJECT -- Management." Related Party Transactions At December 31, 1995 and 1994, the Company owed approximately $480,000 and $531,000, respectively, on unsecured demand notes (the "Notes") bearing interest at rates ranging from 6.5% to 8%. Historically, payments of principal have been made at the discretion of management. The Company recorded $36,897, $37,689 and $38,779, respectively, in interest expense on notes payable to related parties for the years ended December 31, 1995, 1994, and 1993. In accordance with a Subordination Agreement dated as of July 1, 1996 among the Company, North Ridge Care Center, Inc. and the Trustee, the Notes will be subordinated to the lien of the Mortgage and payment of the Bonds. North Ridge Care Center, Inc. may make principal and interest payments on the Notes as long as those payments do not result in an Event of Default. Additionally, during 1995, 1994 and 1993, the Company paid $33,100, $28,700 and $28,800, respectively, for management fees due to North Ridge Care Center, Inc. See this Appendix: "THE PROJECT -- Management." North Ridge Care Center, Inc. is reimbursed for any transportation or meal services it provides to the tenants of the Project. A-11 (This page has been left blank intentionally.) APPENDIX B DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF PRINCIPAL DOCUMENTS DEFINITIONS OF CERTAIN TERMS In addition to the terms defined elsewhere in the Official Statement, the following terms shall have the meanings set forth below: Code: the Internal Revenue Code of 1986, as amended. Determination of Taxability: the issuance of a statutory notice of deficiency by the Internal Revenue Service, or a ruling of the National Office or any District Office of the Internal Revenue Service, or a final decision of a court of competent jurisdiction which holds in effect that the interest payable on any Bond is includable in the gross income of an owner of such Bond for federal income tax purposes (other than an owner who is a "substantial user" of the Project or a "related person" as such terms are defined in Section 103(b)(13) of the 1954 Code), if the period, if any, for contest or appeal of such action, ruling or decision by the Company or any Bondholder has expired without any such contest or appeal having been properly instituted by the Company or a Bondholder; provided, that the Company has been given notice of and the right to participate in such proceedings to the extent provided in, and in accordance with, the provisions of the Loan Agreement and the Indenture, and provided further that no such contest or appeal may be undertaken by the Company unless it first delivers to the Trustee an opinion of Bond Counsel dated as of a then current date to the effect that interest payable on the Bonds is not includable in gross income of the owner of the Bonds for federal income tax purposes (other than an owner who is a "substantial user' or "related person" as such terms are defined in Section 103(b)(13) of the 1954 Code). Governmental Obligations: (a) direct general obligations of, or obligations the prompt payment of the principal of and the interest on which is fully and unconditionally guaranteed by, the United States of America, (b) obligations the payment of the principal of, premium, if any, and interest on which is fully guaranteed as a full faith and credit obligation of the United States of America, and (c) certificates or other evidence of ownership in principal to be paid or interest to accrue on a pool of obligations of the type described in (a) or (b) above, which obligations are held by a custodian (any obligation described in (a) or (b) above may be issued or held in book entry form on the books of the Department of Treasury of the United States of America). Land: the real estate subject to the lien of the Mortgage, but excluding any real estate released from the lien of the Mortgage pursuant to the terms of the Mortgage. Management Consultant: an independent firm which is a professional management consultant with respect to operation of senior rental housing developments which is selected by the Company and which has the skill and experience necessary to render the particular report required by the Loan Agreement. Mortgaged Property: the properties subject to the lien of the Mortgage, other than property released from the lien of the Mortgage. Mortgagee: the Municipality or any assignee of its interest in the Mortgage, including the Trustee. IN Net Income Available for Debt Service: for any period of calculation the total operating revenue of the Project, including interest earnings on amounts in the Reserve Fund for such period, over expenses of operation of the Project, to which shall be added depreciation, amortization and interest expense on the Bonds, to the extent included in expenses of operation of the Project, and from which shall be excluded any extraordinary items and any gain or loss resulting from either extinguishment of indebtedness or the sale, exchange or other disposition of assets. Outstanding: when used with reference to Bonds, as of the date of determination, all Bonds authenticated and delivered under the Indenture, except: (A) Bonds theretofore canceled by the Trustee or delivered to the Trustee canceled or for cancellation; (B) Bonds deemed paid as described in "The Indenture—Discharge of Lien" in this Appendix A; rI (C) Bonds in lieu of which other Bonds shall have been authenticated and delivered pursuant to the Indenture; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Bonds have given any request, demand, authorization, direction, notice, consent or waiver under this Indenture, Bonds owned by the Municipality or the Company (or a "related person' as defined in Section 147(a) of the Code) shall be disregarded and deemed not to be Outstanding, except that in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which the Trustee knows to be so owned shall be disregarded. Permitted Investments: (i) Government Obligations, (ii) obligations issued or guaranteed as to principal and interest by any agency or person controlled or supervised by and acting as an instrumentality of the United States of America, pursuant to authority granted by the Congress of the United States of America, (iii) obligations of the Government National Mortgage Association (including participation certificates issued by such Association), and the Federal National Mortgage Association (including participation certificates issued by such Association), (iv) interest-bearing deposit accounts (which may be represented by certificates of deposit, time deposit open account agreements or other deposit instruments) in national or state banks (including, without limitation, the Trustee) which deposits are either fully insured by the Federal Deposit Insurance Corporation or are with banks rated "AA," "A-1" or "P-1" by Moody's or Standard & Poors, (v) bankers' acceptances drawn on and accepted by national or state banks (including, without limitation, the Trustee) rated "AA," "A-1" or "P-1" by Moody's or S&P, (vi) notes or commercial paper rated in the highest rating category by Moody's or Standard & Poors, (vii) shares of investment companies (or cash equivalent investments) which are authorized to invest only in assets or securities described in (i), (ii) or (iii) above, (viii) repurchase agreements with financial institutions fully secured by securities described in (i), (ii) or (iii) above, provided that such securities securing repurchase agreements shall be in the possession of the Trustee or a third party (other than the other party to such repurchase agreement) acting solely as agent for the Trustee, and (ix) investment agreements with banks which meet the rating criteria set forth in (iv) above or investment agreements with non-bank financial institutions of which (a) all of the unsecured, direct long-term debt which is rated by a Rating Agency in one of the two highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) for obligations of that nature; or (b) if such non-bank financial institutions have no outstanding long-term debt which is rated, all of the short-term debt which is rated by Standard & Poor's and Moody's is rated the highest rating category (without regard to any refinement or gradation EISA of rating category by numerical modifier or otherwise) assigned to short-term indebtedness by such Rating Agencies. Each Permitted Investment shall mature no later than the next Interest Payment Date or shall be capable of being sold or liquidated on or prior to such Interest Payment Date at the option of the Trustee at a price of not less than the principal amount thereof plus accrued interest. Project Equipment: all items of machinery, furniture, equipment and other personal property so owned or hereafter acquired by the Company, including the proceeds therefrom, other than such items of machinery, furniture, equipment and other personal property which are disposed of by the Company and replaced with similar items. Reserve Requirement: IM THE LOAN AGREEMENT The following is a summary of certain provisions of the Loan Agreement and is qualified in its entirety by reference to the Loan Agreement. Refunding of the Refunded Bonds The Loan Agreement provides that the Municipality will issue the Bonds and that the proceeds will be lent to the Company to pay a portion of the cost of redemption of the Refunded Bonds. Sale of Project Title to the Project will be and remain in the Company, and the Municipality, the Trustee and the Bondholders will have no interest therein except those interests therein granted to the Trustee and the Bondholders by the Mortgage and the Assignment. The Company may sell the Project or enter into a master lease of the Project, or any part thereof, for any lawful purpose provided that (a) no such sale or lease shall be inconsistent with the provisions of the Loan Agreement, the Mortgage, the Assignment or the Indenture; (b) the Company shall remain fully responsible for its obligations under the Loan Agreement and the Mortgage; (c) no purchaser or lessee may utilize a substantial portion of the Project for an activity that would not qualify as a "multifamily housing development' under the Act; (d) any purchaser shall assume all of the obligations of the Company under the Loan Agreement, the Declaration, the Mortgage and the Assignment and shall have a net worth of at least $2,000,000 and experience in owning or operating at least one senior rental housing development which is similar in operation to the Project; and (e) there shall be furnished to the Trustee an opinion of Bond Counsel to the effect that the excludability of interest on the Bonds from gross income will not be adversely affected by such sale or lease. Loan Agreement Term and Payments The term of the Loan Agreement commences on the date of issuance of the Bonds and extends to June 1, . unless sooner terminated in accordance with the provisions thereof. The Company agrees to repay the loan made by the Municipality with interest by making monthly Loan Repayments to the Trustee. The Loan Repayments are scheduled to be sufficient, in the aggregate, to pay in full when due all the Bonds from time to time outstanding, including the total principal and interest becoming due and payable on the Bonds to the respective dates of payment thereof whether at, before or after their stated maturity. In addition, the Company agrees to pay interest on overdue installments of principal and (to the extent lawful) interest on the loan at the rates bome by the Bonds as to which such installments are overdue. The Company further agrees to pay all reasonable fees and expenses of the Trustee for services rendered under the Indenture and make the required deposits to the Repair and Replacement Reserve Fund. The Company's obligations to make Loan Repayments under the Loan Agreement are unconditional. Limitation on Liability of Partners There shall be no personal liability of the general or limited partners of the Company under the Loan Agreement, Mortgage or Assignment except as hereinafter set forth. The personal liability of the Company and its partners shall be limited to the assets of the Company, the Project and any collateral securing the Loan Agreement, including without limitation, the Mortgage and the Assignment, and any and all funds held by or on behalf of the Trustee for the benefit of the bondholders. Notwithstanding the foregoing, the general partners of the Company shall be liable personally for any M1 J distributions of profits and loss from the Company made during the pendency of an Event of Default under the Agreement. In addition, the general partners of the Company shall be liable personally for any losses suffered by the Bondholders as a direct result of any intentional waste of all or any portion of the Project; any intentional misapplication of insurance or condemnation proceeds; or any fraud or false representation by the Company in this Official Statement or in any other materials delivered to the Bondholders in connection with the original issuance of the Bonds. Special Covenants of the Company Indemnification. The Company will indemnify and save harmless the Municipality and its officers, agents and employees from and against any and all losses, costs, charges, expenses, judgments and liabilities incurred by it or them in connection with the Project or the transactions contemplated by the Loan Agreement and the Indenture, including but not limited to, the issuance and sale of the Bonds. Existence. The Company will agree to maintain its existence as a Company organized under the laws of the State of Minnesota throughout the term of the Loan Agreement and agree not to wind up or otherwise dispose of all or substantially all of its assets; provided that the Company may sell or otherwise transfer to another Person all or substantially all of it assets as an entirety and thereafter wind up (and be discharged from liability under the Loan Agreement) if the transferee Person assumes in writing all of the obligations of the Company under the Loan Agreement and any sale of the Project complies with the provisions of the Loan Agreement with respect to sale of the Project. See "Sale of Project" above. So long as the Company is the owner of the Project the general partners in the Company as of the date of the Loan Agreement or their lineal descendants shall own at least two-thirds of the general partnership voting interests in the Company. The general partners of the Company as of the date of the Loan Agreement are Charles T. Thompson, Charles P. Thompson, James J. Patee, M.D. and M. Melinda Pattee. Rates and Charges; Retention of Management Consultant If the Net Income Available for Debt Service of the Company for any fiscal year is less than 110% of the debt service on the Bonds during such fiscal year, then the Company will promptly employ a Management Consultant to review and analyze the financial statements for the Company and the Project, inspect the Project, its operation and administration and submit to the Company and the Trustee a written report, and make such recommendations as to the operation and administration of the Project as such Management Consultant deems appropriate, including any recommendation as to a revision of the rents and fees of the Project or the methods of operation thereof. The Company will consider any recommendations by the Management Consultant and, to the fullest extent feasible, to adopt and carry out such recommendations. So long as the Company is otherwise in full compliance with its obligations under the Loan Agreement, including following, to the fullest extent feasible, the recommendations of the Management Consultant, it shall not constitute an event of default under the Loan Agreement that the Net Income Available for Debt Service of the Company for any fiscal year of the Company is less than 110% of the debt service on the Bonds for such fiscal year. Project Maintenance and Taxes The Company will be obligated to, at its own expense, keep the Project in good repair and operating condition and in as safe condition as its operations will reasonably permit, making all repairs thereto and renewals and replacements thereof which may be necessary for this purpose, in the reasonable judgment of the Company, so that the Project will remain suitable for its intended use. The ffm Company will agree to pay all taxes, assessments, utility charges and other governmental charges imposed upon or against the Project. Modifications The Company may from time to time make any additions, modifications, substitutions, deletions, or improvements to the Project that it may deem desirable for its purposes; provided, however, that no addition, modification, substitution, deletion or improvement shall be made in such a manner or to such an extent as to (1) cause the interest on the Bonds (in the hands of any person who is not a "substantial user' of the Project or a "related person') to become includible in gross income for purposes of federal income taxation, (2) adversely and materially affect the operating efficiency of the Project, or (3) materially impair the value of the Project. Casualty or Condemnation If, while any of the Bonds remain outstanding, part or all of the Project is taken by eminent domain or destroyed or damaged, unless the Company exercises its option to accelerate repayment of the loan and to direct the redemption of all outstanding Bonds (see "Company Options" below), the Company will replace, repair, rebuild or restore the Project to substantially the same condition as existed before such taking or event causing damage or destruction. Insurance The Company is obligated to procure and maintain continuously in effect with respect to the Project policies of insurance against such risks and in such amounts, with such deductible provisions, as are customary for a prudent owner of property of the type and size comparable to the Project. Without limiting the generality of the foregoing provision, the Company is specifically required to maintain the following insurance: (A) Direct damage insurance covering the following risks of loss (i) Fire, (ii) Extended Coverage Perils, (iii) Vandalism and Malicious Mischief, (iv) Boiler Explosion (but only if boilers are present), (v) Water Damage, (vi) Demolition Cost, (vii) Debris Removal, and (viii) Collapse, in an amount equal to the full replacement value of the building, but in no event less than the principal amount of the Outstanding Bonds. ("Full replacement value" shall include the actual replacement cost of the building (exclusive of foundations, footings, architectural, engineering, legal, and administrative fees) and contents therein, without deduction for depreciation.) Coverage on any portion of the Project ME during construction thereof shall be maintained on a completed value basis during the course of construction. "Full replacement value' shall be determined at least once every three years by an appraisal or report from an appraiser or reputable insurance consultant selected by the Company. A copy of such appraisal or report shall be furnished to the Trustee by the Company. The policies required by this paragraph (A) shall either be subject to no co-insurance or contain an agreed amount clause. (B) General liability insurance against liability for injuries to or death of any person or damage to or loss of property arising out of or in any way relating to the condition of the Project or any part thereof, in an amount not less than $3,000,000 for all personal injuries, deaths and property damage resulting from any one accident on a combined single -limit basis; provided that the requirements of this paragraph (B) with respect to the amount of insurance may be satisfied by an excess coverage policy. (C) Workers' compensation insurance or qualified self-insurance against liability for compensation under the Workers' Compensation Act now or hereafter enacted in Minnesota to cover all persons employed by the Company and to cover liability for compensation under any such act. (D) Business interruption insurance or loss of rental income insurance in an amount adequate to make all loan repayments payable under the Loan Agreement for a period of not less than twelve (12) months after the date of damage to or destruction of the Project. All insurance required above shall be effective under a valid and enforceable policy or policies issued by an insurer of recognized responsibility licensed to do business in the State of Minnesota having a Best's Insurance Guide rating of at least "A". Company Options The Company has the option to prepay the loan in full and to direct the Municipality to call for redemption and prepayment all outstanding Bonds if (a) all or substantially all of the Project is damaged or destroyed to such extent that, in the reasonable opinion of the Company, the repair and restoration is economically not practicable or cannot be accomplished within ninety days, (b) there occurs the condemnation of all or substantially all of the Project or the taking by eminent domain of such use or control of the Project as to render it unsatisfactory for its intended use for longer than ninety days, or (c) as a result of changes in legislation or regulations the obligations of the Company under the Loan Agreement become unenforceable or impossible to perform in accordance with the intent and purposes of the parties as expressed in the Loan Agreement. Tax Exemption The Company will be obligated to observe and cause to be observed applicable provisions of the 1954 Code and the Code and the regulations thereunder to the end of preserving the exemption from federal income taxation of interest on the Bonds. In the event that interest on the Bonds becomes includable in gross income for purposes of federal income taxation, and if the Company has been given written notice of and the opportunity to participate in any proceedings relating thereto to the extent discussed above, the Company shall prepay all Loan Repayments and cause the Trustee to redeem the Bonds in whole, without premium, in accordance with the Indenture. The Company will not contest any action or decision described in the definition of Determination of Taxability unless the Company first delivers to the Trustee an opinion of nationally recognized bond counsel dated as of a then current date to the effect that interest payable on the Bonds is not includible in gross income of the Holder of the Bonds for federal income tax purposes (other than an owner who is a "substantial user" of the Project or a "related person" as such terms are defined in Section 103(b)(13) of the 1954 Code). See "THE BONDS—Redemption Prior to Maturity—Mandatory Redemption Upon Determination of Taxability.") Events of Default The following are "Events of Default' under the Loan Agreement: (a) failure by the Company to make any Loan Repayments when due and continuation of such default for five days after written notice from the Trustee, or until the next interest payment date, whichever is sooner; (b) failure by the Company to pay when due any of the other amounts required to be paid under the Loan Agreement or the Mortgage and continuation of such default for thirty days after written notice is given to the Company by the Municipality or the Trustee; (c) failure by the Company to observe and perform, for reasons other than the current pendency of a force majeure, any other covenant, condition or agreement on its part under the Loan Agreement, the Declaration, the Assignment or the Mortgage for a period of thirty days after written notice is given to the Company by the Municipality or the Trustee, or for such longer period of up to one hundred eighty days as may be reasonably necessary to remedy such default, provided that the Company is proceeding with reasonable diligence to remedy the default; provided that if such default cannot be remedied with reasonable diligence by the Company within such one hundred eighty days, then for such longer period as the Municipality and the Trustee shall approve in writing, which approval shall not be unreasonably withheld; (d) certain events of dissolution, liquidation, bankruptcy or reorganization involving the Company; and (e) any representation or warranty made by the Company in the Loan Agreement or in the Mortgage, or by an officer or representative of the Company in any document or certificate furnished to the Trustee in connection therewith or pursuant thereto, shall prove at any time to be incorrect or misleading in any material respect as of the date made. Remedies Whenever any Event of Default under the Loan Agreement has happened and is subsisting, the Municipality, with the prior written consent of the Trustee, may: (i) declare all installments of the loan for the remainder of the term of the Loan Agreement (being an amount equal to that necessary to pay in full all Outstanding Bonds, assuming acceleration of the Bonds under the Indenture, and to pay all other indebtedness under the Indenture) to be immediately due and payable by the Company; and (ii) take whatever action at law or equity may appear necessary to enforce the performance and observance of any obligation, agreement or covenant of the Company under the Loan Agreement. Upon any Event of Default the Trustee may exercise any and all rights of the Municipality unless the Municipality has already given notice of its intent to exercise one or more remedies. RM Amendments Except as otherwise provided in the Loan Agreement or in the Indenture, subsequent to the initial issuance of the Bonds and before the Indenture is satisfied and discharged in accordance with its terms, the Loan Agreement may not be effectively amended, changed, modified, altered or terminated by the Municipality and the Company without the written consent of the Trustee. Pursuant to the provisions of the Indenture, the consent of the holders of not less than a majority in aggregate principal amount of all Bonds then outstanding is also required for any such amendment, change or modification of the Loan Agreement except for amendments, changes or modifications which may be required or permitted (1) by the provisions of the Loan Agreement, the Mortgage, the Declaration, the Assignment or the Indenture, (2) for the purpose of curing any ambiguity or formal defect or omission, (3) so as more precisely to identify additional property which may be acquired or to substitute or add additional property pursuant to the Loan Agreement, the Declaration, the Assignment or the Mortgage, (4) to add to the covenants of the Company or to surrender any right or power conferred upon the Company, or (5) in connection with any other change therein which, in the judgment of the Trustee, is not to the prejudice of the Trustee or the Bondholders. THEINDENTURE The following is a summary of certain provisions of the Indenture and is qualified in its entirety by reference to the Indenture. Pledge and Assignment The Municipality pledges and assigns to the Trustee in trust all rights, interest and privileges of the Municipality in, to and under the Loan Agreement, including the Loan Repayments, but excluding its rights to payment of fees, expenses and indemnification. Among other covenants made by it, the Municipality has agreed that it will defend its right to the payment of amounts due from the Company under the Loan Agreement, for the benefit of the holders of the Bonds, against the claims and demands of all persons whomsoever. Bond Fund Upon receipt of the proceeds of the Bonds, the Trustee will deposit any accrued interest in the Bond Fund. Thereafter the Trustee will deposit in the Bond Fund each of the periodic Loan Repayments, any interest on Loan Repayments not paid when due and any other money paid to the Trustee under the Loan Agreement or the Indenture for credit or transfer to the Bond Fund. Money in the Bond Fund will be used and withdrawn by the Trustee solely to pay interest on the Bonds as it becomes due and payable; to pay the principal amount of the Bonds at their respective stated maturities; or to redeem Bonds in accordance with the call provisions described above. Property Insurance and Award Fund In the event of condemnation of or damage to all or any part of the Project, the Net Proceeds of a condemnation award or claim for fire and extended coverage insurance on the Project, if in excess of $75,000, are to be paid to the Trustee for credit to the Property Insurance and Award Fund. If the conditions for extraordinary redemption of the Bonds are satisfied and the Company directs such redemption, the Trustee will apply the amounts in the Property Insurance and Award Fund towards such redemption. In every other case, amounts in the Property Insurance and Award Fund will be disbursed by the Trustee to pay the costs of restoration of the Project. J Reserve Fund Upon issuance of the Bonds, the trustee for the Refunded Bonds will transfer the amount of $ from the reserve fund established in connection with the Refunded Bonds to the Reserve Fund. All earnings from investment of the Reserve Fund shall be transferred to the Bond Fund; provided that at the time of such transfer the balance in the Reserve Fund is not less than the Reserve Requirement. The Trustee will transfer necessary amounts from the Reserve Fund to the Bond Fund if on any payment date there are insufficient funds on hand in the Bond Fund to pay principal of, premium, if any, and interest on the Bonds. Rebate Fund Under the Loan Agreement the Company is required to make deposits into the Rebate Fund in amounts equal to the amount of rebatable arbitrage, if any, which is from time to time required to be paid to the United States under Section 148 of the Code as a condition of maintaining the tax-exempt status of the interest borne by the Bonds. Amounts held in the Rebate Fund, together with investment earnings thereon, are to be paid to the United States at the times and in the amounts required by the Code. Such funds do not secure the Bonds. Repair and Replacement Reserve Fund Commencing on July 20, 1996, and on the twentieth day of each month thereafter, the Company shall deposit with the Trustee the sum of $2,000 for deposit in the Repair and Replacement Reserve Fund. Monies in the Repair and Replacement Reserve Fund shall, to the extent herein provided, be disbursed by the Trustee to and at the written request of the Company and used by the Company to pay for the complete replacement of the roof on the Project, installation of a new boiler to replace the boiler in the Project, installation of new air conditioning units in the Project or the painting and caulking of a substantial portion of the exterior of the building. Monies in the Repair and Replacement Reserve Fund may not be used for any other purpose, except to the extent applied to pay principal and interest on the Bonds upon the occurrence of an Event of Default under the Indenture and the acceleration of the principal of the Outstanding Bonds. Investment of Funds Any money held as part of established funds under the Indenture will be invested or reinvested by the Trustee, as specified by the Company, in Permitted Investments. However, no investment is to be made by the Trustee in such a manner as to cause the Bonds to be considered arbitrage bonds pursuant to Section 148 of the Code. Discharge of Lien The Indenture will be discharged if: (1) the Municipality pays or causes to be paid to the Trustee, for the holders of the Bonds, the principal and interest to become due thereon at the times and in the manner stipulated in the Indenture; (2) the Municipality keeps, performs and observes its covenants and promises in the Bonds and in the Indenture; and J have been paid. (3) all fees and expenses of the Trustee required by the Indenture to be paid Bonds are deemed paid within the meaning of the Indenture if sufficient cash is deposited with the Trustee to pay such Bonds and the interest thereon in full to their respective maturity dates or to an earlier date on which such Bonds may have been called for redemption or if there is irrevocably deposited in escrow with the Trustee cash and/or Governmental Obligations, in such amount, bearing interest at such rates and maturing on such dates as shall be sufficient, with any cash also so deposited, to provide amounts sufficient to pay all principal and interest due on the Bonds to their stated maturity dates or to an earlier date upon which they are to be called for redemption. Default and Remedies Any of the following events shall be an "Event of Default" under the Indenture: (1) default in the due and punctual payment of any interest on any Bond; (2) default in the due and punctual payment of the principal of any Bond, whether at the stated maturity thereof or at the date fixed for redemption thereof, or upon the maturity thereof by declaration; (3) default in the due and punctual payment of any other money required to be paid to the Trustee under the provisions of the Indenture and failure to remedy such default within thirty days after written notice given pursuant to the terms of the Indenture; (4) default in the performance or observance of any other covenants, agreements or conditions on the part of the Municipality in the Indenture or in the Bonds and failure to remedy such default within thirty days after notice thereof pursuant to the Indenture or for such longer time as the Trustee shall agree in writing or as may be reasonably necessary to remedy such default provided that the Municipality is proceeding with reasonable diligence to remedy the default; or (5) any Event of Default under the Loan Agreement. Upon the occurrence of any Event of Default, the Trustee may, and upon the written request of the holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then outstanding shall, declare the principal amount of all Outstanding Bonds immediately due and payable. The Trustee may also pursue any available remedy by suit at law or in equity to enforce the covenants of the Municipality in the Indenture, including, without limitation, any remedy of a secured party under the Minnesota Uniform Commercial Code, foreclosure and mandamus, and including such appropriate judicial proceedings as the Trustee deems most effective to protect and enforce, or aid in the protection or enforcement of, the covenants and agreements in the Indenture, the Mortgage, the Assignment and the Loan Agreement. Upon the occurrence of any Event of Default under the Loan Agreement the Trustee may enforce any and all rights of the Municipality thereunder and any and all of the Trustee's rights under the Mortgage and the Assignment. Upon the request of the holders of not less than twenty-five percent (25%) in aggregate principal amount of the outstanding Bonds and a satisfactory indemnity bond, the Trustee shall exercise such one or more of the rights and powers conferred by the Indenture, the Assignment or the Mortgage as the Trustee, being advised by counsel, deems most expedient in the interests of the Bondholders; provided, however, that the Trustee may decline to comply with any such request if advised by its B-11 counsel that the action so requested may not lawfully be taken or if the Trustee in good faith determines that such action would be unjustly prejudicial to Bondholders not parties to the request. Holders of twenty-five percent (25%) in aggregate principal amount of the Bonds then outstanding may, under certain conditions, 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; provided that such direction is not otherwise than in accordance with the provisions of law and the Indenture, the Trustee does not determine that the action so directed would be unjustly prejudicial to the Bondholders not taking part in such direction, and the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Rights and Remedies of Bondholders No Holder of any Bond may institute any suit, action or proceeding to enforce the Indenture unless an Event of Default arises and the Trustee receives the requisite request and notice from the Bondholders, is given an indemnity bond and thereafter fails or refuses to institute the action. The foregoing will not impair the right of any Bondholder to enforce the payment of the principal of and interest on his Bond at and after maturity thereof, or the obligation of the Municipality to pay the principal of and interest on each of the Bonds at the time and place, from the source and in the manner expressed in the Bonds. Waiver of Events of Default Upon certain conditions, the Trustee may in its discretion waive any Event of Default under the Indenture and rescind any declaration of acceleration of principal, and shall waive an Event of Default upon written request of the Holders of twenty-five percent (25%) in aggregate principal amount of all the Bonds outstanding; provided that there may not be waived any Event of Default in the payment of the principal of or interest on the Bonds, unless prior to such waiver or rescission such default is fully cured. Supplemental Indentures The Trustee and the Municipality may from time to time enter into supplemental indentures without consent of or notice to the Holders of the Bonds for any one of the following purposes: (1) to cure any ambiguity or formal defect or omission in the Indenture or in any supplemental indenture; (2) to grant to or confer upon the Trustee for the benefit of the Holders of the Bonds any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Bondholders or the Trustee; (3) to describe or identify more precisely any part of the trust estate or to subject to the lien and pledge of the Indenture additional revenues, properties or collateral; (4) to evidence the appointment of a separate trustee or a co -trustee or the succession of a new Trustee under the Indenture; (5) to modify, eliminate or add to the provisions of the Indenture to such extent as is necessary to effect the qualification of the Indenture under the Trust OVA Indenture Act of 1939, as then amended, or under any similar federal statute hereafter enacted, and to add to the Indenture certain other provisions as may be expressly permitted by said Trust Indenture Act of 1939; or (6) to make any other change in the Indenture which, in the judgment of the Trustee, is not to the prejudice of the Trustee or the Bondholders. Exclusive of supplemental indentures for the purposes set forth in the preceding paragraph, with the consent of the holders of not less than a majority in aggregate principal amount of the Bonds then outstanding, and not otherwise, the Trustee shall join with the Municipality in the execution of such other supplemental indentures as are deemed necessary and desirable for the purpose of modifying, altering, amending, adding to or rescinding any of the terms or provisions of the Indenture or any supplemental indenture, except no such supplemental indenture shall permit or be construed to permit, without the consent of the holders of all outstanding Bonds: (1) an extension of the maturity of the principal of or the interest on any Bond; (2) a reduction in the principal amount of any Bond or redemption premium, if any, or the rate of interest thereon; (3) a privilege or priority of any Bond or Bonds over any other Bond or Bonds; (4) a reduction in the aggregate principal amount of the Bonds required for consent of such supplemental indenture; (5) the creation of any lien ranking prior to or on a parity with the lien of the Indenture on the trust estate or any part thereof, except as thereinbefore expressly permitted; (6) the deprivation of the holder of any Bond then outstanding of the lien thereby created on the trust estate; or (7) the modification of any of the requirements of the Indenture relating to supplemental indentures. THE MORTGAGE The following is a summary of certain provisions of the Mortgage and is qualified in its entirety by reference to the Mortgage. Mortgage and Security Interest By the Mortgage, the Company will grant to the Mortgagee a mortgage on, and security interest in, the site of the Project and the improvements and fixtures thereon and a security interest in the Project Equipment as security for the payment of the principal of, redemption premium, if any, and interest on the Bonds and performance of the Company's obligations under the Loan Agreement, Assignment and Mortgage. The lien of the Mortgage will attach to any future improvement on the Land. B-13 Release of Mortgaged Property The Company may obtain a release from the lien of the Mortgage for any part of the Land that does not contain any permanent structure upon the satisfaction of certain conditions including certification by the Company that the release of such land will not impair the structural integrity or usefulness of the Mortgaged Property or limit access to the Project. Grant of Easements, Liens, Etc The Partnership may at any time or times grant to itself or others easements, licenses, rights-of-way and other rights or privileges in the nature of easements with respect to the Land, free from the lien of the Mortgage, or the Company may release existing easements, licenses, rights-of-way and other rights or privileges, with or without consideration, and the Trustee will execute and deliver any instrument necessary or appropriate to confirm and grant or release any such easement, license, right-of-way or privilege; provided, however, that prior to any such grant or release, there shall have been supplied to the Trustee a certification of the Company that such grant or release is not detrimental to the proper operation of the Project, and that such grant or release will not materially impair the operating unity or the efficiency of the Project or materially and adversely affect the character thereof. Tie -In Walls The Company may, at its own expense (a) connect or "tie-in" walls (including use of existing walls for the support of future adjacent buildings) and utilities and other facilities located on the Land to other structures erected on the Land or on real property adjacent to or near the Land or partly on such adjacent real property and partly on the Land, or (b) in connection with the expansion or improvement of any building on the Land, tear down any wall of such building and build an addition to such building (either on the Land or on real property adjacent thereto or partly on such adjacent real property and partly on the Land); provided, however, that, prior to any such expansion, addition, improvement, tearing down or connection with the "tie-in" walls, utilities and other facilities, the Company shall have delivered to the Mortgagee a certification of an architect as to the total costs of such expansion or improvement and a certification of the Company that the Company has sufficient funds on hand to complete such expansion or improvement and the Mortgagee shall have approved the same in writing based on a certification and/or opinion of an architect that the same will not impair the structural integrity, operating unity and the efficiency of the improvements on the Land or adversely affect the character thereof, and on an opinion of counsel stating that all party -wall agreements, easements, cross -easements or other instruments relating to such expansion, addition, improvement, tearing down or connection with the "tie-in" walls, utilities and other facilities, which are necessary or desirable to define the relative rights of the owners and encumbrances of the same therein, and to fully preserve the security of the Mortgage, have been duly executed, delivered and recorded. Environmental Matters Under the Mortgage the Company covenants, warrants and represents to the Trustee, its successors and assigns, (i) that it has not used and will not use the Mortgaged Property, and has not permitted and will not permit the Mortgaged Property to be used, whether directly or through contractors, agents or tenants, and to the best of the Company's knowledge and except as disclosed to the Trustee in writing, the Mortgaged Property has not at any time been used for the generating, transporting treating, storage, manufacture, emission of, or disposal of any dangerous, toxic or hazardous pollutants, chemical wastes or substances as defined in the Federal Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"), or the Federal Resource B-14 Conservation and Recovery Act of 1976 ("RCRA"), or the Minnesota Environmental Response and Liability Act, Minnesota Statutes, Chapter 115A ("MERLA"), or any other federal, state or local environmental laws, statutes, regulations, requirements and ordinances ("Hazardous Materials"); (ii) that there have been no investigations or reports involving the Company or the Mortgaged Property by any governmental authority which in any way pertain to Hazardous Materials; (iii) that the operation of the Mortgaged Property has not violated and is not currently violating any federal, state or local law, regulation, ordinance or requirement governing Hazardous Materials; (iv) that the Mortgaged Property is not listed in the United States Environmental Protection Agency's National Priorities List of Hazardous Waste Sites nor any other list, schedule, log, inventory or record of Hazardous Materials or hazardous waste sites, whether maintained by the United States Government or any other state or local agency; and (v) to the Company's knowledge that the Mortgaged Property does not contain any formaldehyde, urea or asbestos, except as may have been disclosed in writing to the Trustee by the Company at the time of execution and delivery of this Mortgage. The Company agrees to indemnify and reimburse the Trustee, its successors and assigns, for any breach of these representations and warranties and from any loss, damage, expense or cost arising out of or incurred by the Trustee which is a result of a breach, misstatement of or misrepresentation of the above covenants, representations and warranties, together with all attorneys' fees incurred in connection with the defense of any action against the Trustee arising out of the above. Events of Default and Remedies Any Event of Default under the Loan Agreement will constitute an Event of Default under the Mortgage. Upon the occurrence and continuation of an Event of Default the Trustee shall have the right to proceed to enforce its rights by suit in equity or at law, either for specific performance or for the foreclosure of the Mortgage, or for the enforcement of any other appropriate legal or equitable remedy. The Company authorizes the Trustee to sell the Mortgaged Property at public auction and to convey the same to the purchaser in fee simple, the Company to remain liable for any deficiency. Further, the Trustee shall have all of the rights and remedies provided in the Uniform Commercial Code including the right to proceed under the Uniform Commercial Code provisions governing default as to the personal property included in the Mortgaged Property separately from the real estate included therein, or to proceed as to all of the Mortgaged Property in accordance with its rights and remedies in respect of said real estate. THE ASSIGNMENT The following is a summary of certain provisions of the Assignment and is qualified in its entirety by reference to the Assignment. The Company will grant, transfer and assign to the Trustee, its successors and assigns, all of its right, title and interest in and to all leases and tenancies governing all or any part of the Project, together with any and all security deposits made thereunder and all extensions, modifications and renewals of any thereof and any guarantees of the tenants' obligations under any thereof. The Company will further grant, transfer and assign to the Trustee all of the rents, income, issues and profits now or hereafter accruing or owing from such leases and the Project or any part thereof, whether occurring before or after foreclosure of the Mortgage or during the period of redemption therefrom. All of said leases and rentals are granted, transferred and assigned for the purpose of securing payment of all indebtedness evidenced by the Loan Agreement and all other sums secured by the Mortgage and performance and discharge of each and every obligation, covenant and agreement of the Company contained in the Assignment and in the Loan Agreement and the Mortgage. B-15 Upon or at any time during the continuance of an Event of Default under the Loan Agreement, the Trustee may exercise its rights under the Mortgage, or the Trustee may, at its option, without further notice, either in person or by agent, with or without bringing an action or proceeding, or by a receiver or trustee to be appointed by a court, enter upon, take possession of, maintain, manage and operate the Project, either with or without taking possession of the Project, in its own name sue for or otherwise collect and receive all rentals, and apply the same as required by laws. THE DECLARATION The following is a summary of certain provisions of the Declaration and is qualified in its entirety by reference to the Declaration. Section 103(b)(4)(A) of the 1954 Code, which applied to the Project and the Bonds, provides that interest on certain governmental obligations, substantially all (90% or more) of the net proceeds of which are to be used to provide for a project for "residential rental property," shall be excluded from gross income of the holder thereof for purposes of federal income taxation if at all times during the Qualified Project Period (as defined below), twenty percent (20%) or more of the residential units in the Project are occupied by tenants whose adjusted family income is 80% or less of the median income for the Minneapolis/ Saint Paul Metropolitan Statistical Area as determined by the United States Department of Housing and Urban Development ("Median Income"), without adjustment for family size. Tenants meeting the foregoing income requirements are referred to in this summary as "Low Income Tenants." Section 1.103-8(b) of the Income Tax Regulations (the "Regulations") sets forth certain requirements for compliance with Section 103(b)(4)(A) of the 1954 Code. The Regulations require, among other things, that (1) the twenty percent (20%) Low Income Tenant occupancy requirement must be met on a continuous basis during the Qualified Project Period (as defined below), and (2) as long as any Bonds are outstanding, all of the units in the Project must be rented or available for rental to the general public on a continuous basis. Under the Regulations, the failure to satisfy the Rental Housing Requirements (as defined below) of the 1954 Code and the Regulations with respect to the Project may, unless corrected within a reasonable period (i.e., not less than sixty days) after such noncompliance is first discovered or should have been discovered by the exercise of reasonable diligence, cause the loss of the tax-exempt status of the Bonds as of the date of their original issue, irrespective of the date such noncompliance actually occurred. The Company has executed and caused to be recorded the Declaration as covenants and restrictions running with the land on which the Project is located. In order to satisfy the rental housing requirements of the 1954 Code and the Regulations (collectively, the 'Rental Housing Requirements") the Company has covenanted in the Declaration to comply with certain provisions therein regarding the operation and occupancy of the Project. The Declaration will be recorded and filed in the appropriate land records office in Hennepin County, Minnesota, and will bind the Company and its successors and assigns, including all subsequent owners of the Project or any part thereof. The provisions of the Declaration are intended to insure compliance with the Rental Housing Requirements and will remain in effect for the Qualified Project Period. The Declaration will, however, terminate with respect to the Project in the event of an involuntary loss of the Project, including the substantial destruction of the Project (unless the Project is restored), provided the Bonds are redeemed. The Declaration provides as follows with respect to the Rental Housing Requirements: am J (a) That the Qualified Project Period will commence on the date that ten percent (10%) of the residential units in the Project are first occupied, and will terminate on the later of (a) the date which is 10 years after fifty percent (50%) of the units in the Project are first occupied, (b) the date which is one-half the term of the obligation with the longest maturity in the Bond issue (including any refunding issue) after the date on which any unit in the Project is first occupied, or (c) the date on which any assistance provided under Section 8 of the United States Housing Act of 1937 terminates. The Qualified Project Period with respect to the Project has commenced. (b) All of the residential units in the Project will remain available for occupancy on a rental basis until the later of the expiration of the Qualified Project Period or the date on which no Bonds remain Outstanding. (c) As required by the Regulations, during the Qualified Project Period, twenty percent (20%) of the residential units in the Project must be occupied at all times or held for occupancy by persons or families whose adjusted family income at the time of their initial occupancy is equal to or less than eighty percent (80%) of the Median Income for the Minneapolis/St. Paul Standard Metropolitan Statistical Area, as determined by the United States Department of Housing and Urban Development. Each tenant's adjusted family income shall be determined in a manner consistent with income determinations under Section 8 of the United States Housing Act of 1937, as amended. (d) The twenty percent (20%) of the units in the Project required to be occupied by Low Income Tenants will be substantially similar to all other residential units in the Project, and the Low Income Tenants will enjoy equal access to all common facilities included in the Project. (e) The Company will report and certify its compliance with the Rental Housing Requirements as required by the Declaration, such reports and certifications to be submitted at the times required to the Trustee. (f) The adjusted family income of each Low Income Tenant will be verified by obtaining an income certification statement for such tenant. If the Company violates the Rental Housing Requirements, the Trustee may exercise whatever remedies may then be available in law or equity, including specifically the right to compel compliance with the Rental Housing Requirements by an action for specific performance. The Company must comply with certain other requirements of tax-exempt financing as well as the foregoing covenants with respect to the Rental Housing Requirements. B-17 (This page has been left blank intentionally.) APPENDIX C FINANCIAL STATEMENTS OF THE COMPANY C-1 NORTHRIDGE PROPERTIES OF NEW HOPE DBA: CHARDON COURT FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT DECEMBER 31, 1995, 1994 AND 1993 TABLE OF CONTENTS Independent Auditors Report Balance Sheets December 31, 1995, 1994 and 1993 Statements of Operations For the Years Ended December 31, 1995, 1994 and 1993 Statements of Changes in Partners' Deficit For the Years Ended December 31, 1995, 1994 and 1993 Statements of Cash Flows For the Years Ended December 31, 1995, 1994 and 1993 Notes to Financial Statements PAGE 1 2 3 4 5 6-9 A LARSON Nes ALLEN ' I I 1®WEISHAIR & CO. CENTMED Fustic AcCOUNLSNTS Partners Northridge Properties of New Hope dba: Chardon Court New Hope, Minnesota We have audited the accompanying balance sheets of Northridge Properties of New Hope dba: Chardon Court as of December 31, 1995, 1994 and 1993, and the related statements of operations, changes in partners' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Northridge Properties of New Hope dba: Chardon Court as of December 31, 1995, 1994 and 1993, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Minneapolis, Minnesota April 24, 1996 (1) NG. , HRIDGE PROPERTIES OF NEW HO! DBA: CHARDON COURT BALANCE SHEETS DECEMBER 31, 1995, 1994, AND 1993 ASSETS CURRENT ASSETS Cash Receivables and Other Assets Current Portion of Assets Whose Use is Limited Total Current Assets ASSETS WHOSE USE IS LIMITED Reserve Fund Pledge Account Security Deposits Total Assets Whose Use is Limited Less: Current Portion of Assets Whose Use is Limited Non -Current Assets Whose Use is Limited PROPERTY AND EQUIPMENT Land Land Improvements Buildings Equipment Furniture and Carpet Total Less: Accumulated Depreciation Total Property and Equipment (Net) OTHER ASSETS Unamortized Financing Costs Total Assets LIABILITIES AND PARTNERS' DEFICIT CURRENT LIABILITIES Current Maturities - Long -Term Debt Accounts Payable Accrued Real Estate Taxes Accrued Interest Security Deposits Total Current Liabilities 1995 1994 1993 $ 59,711 11,902 116,587 $ 188,200 $ 500,000 45,203 71,384 $ 616,587 116,587 $ 500,000 $ 421,493 25,037 4,899,772 28,688 179,822 $ 5,554,812 1,639,998 $ 3,914,814 $ 51,967 7,452 110,613 $ 170,032 $ 500,000 42,215 68,398 $ 610,613 110,613 $ 500,000 $ 421,493 25,037 4,899,772 28,688 179,822 $ 5,554,812 1,495,318 $ 4,059,494 $ 41,092 $ 70,976 $ 4,644,106 $ 55,530 27,756 179,449 44,222 70,360 $ 377,317 $ 56,505 14,592 98,713 $ 169,810 $ 500,000 32,640 66,073 $ 598,713 98,713 $ 500,000 $ 421,493 25,037 4,893,306 28,688 179,822 $ 5,548,346 1,348,615 $ 4,199,731 $ 100,861 S 4,800,502 $ 4,970,402 $ 55,530 23,554 179,909 68,318 69,820 $ 397,131 $ 55,530 24,016 179,878 71,446 64,111 $ 394,981 LONG-TERM DEBT (Net of Current Maturities Shown Above) 4,813,170 4,870,788 4,914,001 OTHER LIABILITIES Notes Payable - Related Party 480,348 531,056 521,277 Total Liabilities $ 5,670,835 $ 5,798,975 $ 5,830,259 PARTNERS' DEFICIT Contribution in Aid of Construction $ 1,466,720 $ 1,466,720 $ 1,466,720 Partners' Deficit (from Page 4) (2,493,449) (2,465,193) (2,326,577) Total Partners' Deficit $ (1,026,729) $ (998,473) $ (859,857) Total Liabilities and Partners' Deficit See accompanying Notes to Financial Statements. $ 4,644,106 (2) $ 4,800 502 $ 4,970402 it 9 - �'•� •- •' •_.- Z*VVE 91121110121=1 FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 REVENUES Elderly Housing Revenue Meals Revenue Other Services Revenue Interest Income Gain on Sale of Properly Total Revenues OPERATING EXPENSES Management Fees Meals Contracted Services Insurance Marketing Telephone Administrative Expenses Utilities Purchased Services - Maintenance Repairs Supplies Real Estate Taxes Total Operating Expenses 1995 $ 922,765 48,556 16,737 43,643 1994 879,220 46,137 8,063 48,721 $ 1,031,701 $ 982,141 $ 33,045 38,212 17,033 16,012 3,819 3,303 8,415 61,923 13,450 7,921 11,005 182,400 $ 396,538 INCOME BEFORE DEPRECIATION, AMORTIZATION, ANDINTEREST $ DEPRECIATION AND AMORTIZATION INTEREST NET LOSS See accompanying motes to Financial Statements. 635,163 174,565 $ 26,400 32,528 4,937 17,534 8,617 3,332 5,711 65,323 13,349 86,475 7,806 179,880 $ 451,892 1993 $ 854,989 41,843 18,539 50,719 4,650 $ 970,740 S 29,195 33,105 12,642 18,648 5,156 3,282 7,377 59,217 14,599 15,441 11,264 171,334 $ 381,260 530,249 $ 589,480 176,588 488,854 492,277 $ (28,256) (3) $ (138,616) i'[ iMDIy 497,423 $ (99,649) NG_ _, HRIDGE PROPERTIES OF NEW Hd DBA: CHARDON COURT STATEMENTS OF CHANGES IN PARTNERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 PARTNERS' DEFICIT - DECEMBER 31 ,1992 Net Loss for Year ended December 31, 1993 PARTNERS' DEFICIT - DECEMBER 31. 1993 Net Loss for Year ended December 31, 1994 PARTNERS' DEFICIT- DECEMBER 31. 1994 Net Loss for Year ended December 31, 1995 PARTNERS' DEFICIT - DECEMBER 31, 1995 See accompanying Notes to Financial Statements. GENERAL LIMITED NET PARTNERS' PARTNERS' PARTNERS' DEFICIT EQUITY DEFICIT $ (2,227,928) $ 1,000 $ (2,226,928) (99,649) — (99,649) $ (2,327,577) $ 1,000 $ (2,326,577) (138,616) — (138,616) $ (2,466,193) $ 1,000 $ (2,465,193) (28,256) — (28,256) 1 (2,494,449) $ 1,000 1 (2,493,449) (4) NC HRIDGE PROPERTIES OF NEW HO' DBA: CHARDON COURT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property and Equipment 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES $ (9,210) Proceeds from Sale of Property Cash Received from Services $ 984,851 $ 934,475 $ 916,400 Cash Paid to Supplier (211,178) (266,388) (219,892) Interest Paid (512,950) (495,405) (474,082) Interest Received 43,643 48,721 50,719 Real Estate Taxes Paid (182,860) (179,849) (173,642) Net Cash Provided by Operating Activities $ 121,506 $ 41,554 $ 99,503 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property and Equipment $ - $ (6,213) $ (9,210) Proceeds from Sale of Property Cash Provided by Operating Activities: - - Depreciation and Amortization 23,775 Payment of Principal and Interest from Reserve Funds 191,706 507,298 - 496,794 (4,650) 514,164 Net Receipts (Payments) to Security Deposit Escrow 7,140 (2,448) Increase(Decrease)in Accounts Payable 3,384 (1,263) (23,949) Interest Income Reinvested in Reserve Fund (25,439) (40,870) 21,033 (47,357) $ 121,506 $ (49,010) Payments of Operating Cash into Reserve Fund (469,416) (459,037) (456,966) Net Cash Used by Investing Activities $ (5,436) $ (12,429) $ (1,196) CASH FLOWS FROM FINANCING ACTIVITIES Principal Payments of Long -Term Debt $ (57,618) $ (43,213) $ (57,618) Principal Payments of Related Party Notes Payable (50,708) (30,000) (35,585) Proceeds from Borrowing - Related Party - 39,550 Net Cash Used by Financing Activities $ (108,326) $ (33,663) $ (93,203) INCREASE (DECREASE) IN CASH $ 7,744 $ (4,538) $ 5,104 Cash - Beginning 51,967 56,505 51,401 CASH - ENDING $ 59 711 $ 51,967 $ 56,505 RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net Loss (Page 3) $ (28,256) $ (138,616) $ (99,649) Adjustment to Reconcile Net Loss to Net Cash Provided by Operating Activities: Depreciation and Amortization 174,565 176,588 191,706 Gain on Sale of Property - - (4,650) (Increase) Decrease in Other Assets (4,449) 7,140 (5,495) Increase(Decrease)in Accounts Payable 5,085 (1,263) (3,442) (Decrease) Increase in Accrued Expenses (25,439) (2,295) 21,033 Net Cash Provided by Operating Activities $ 121,506 $ 41,554 $ 99,503 See accompanying Notes to Financial Statements (5) NORTHRIDGE PROPERTIES OF NEW HOPE DBA: CHARDON COURT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Operations Northridge Properties of New Hope (a Limited Partnership) dba: Chardon Court (Chardon Court) owns and operates a 129 -unit elderly housing facility in New Hope, Minnesota. Occupancy percentages were 97.9%, 94.7% and 91.4% for the years ended December 31, 1995, 1994 and 1993, respectively. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Depreciation Property and equipment are depreciated by the straight-line method over their estimated useful lives, which are 35 years for buildings, 31 years 6 months for land improvements and 8 years for equipment, furniture and carpet. Income Taxes A partnership is not taxed as a separate entity; rather, the portion of income or loss derived by each partner is included in the partner's individual income tax return. Therefore, no provision for income taxes is included in these financial statements. Unamortized Financing Costs Unamortized financing costs relating to the issuance of the 1985 note payable are being amortized over the approximate 12 year term of the note payable, which is due and payable in 1997. Assets Whose Use is Limited Assets whose use is limited include cash deposits held by trustees under various mortgage agreements and security deposits of residents. (6) Description Security 1995 1994 1993 Note Payable - AmerUs Sank, Due April 1997 Variable Interest Rate 6.2 % - 9.2% See Below $ 4,868,700 $ 4,926,318 $ 4,969,531 Less: Current Maturities 55,530 55,530 55,530 Long -Term Debt $ 4,813,170 $ 4,870,788 $ 4,914,001 Maturity Requirements on long-term debt are as follows: Year Ending December 31, 1996 1997 Total Amount $ 55,530 4,813,170 $ 4,868,700 On May 1, 1985 the Housing and Development Authority of the City of St. Paul, Minnesota (the issuer) along with other Minnesota municipalities, including the City of New Hope, entered into a joint powers agreement to adopt and implement a rental housing development bond pool program, under which the issuer would make a loan to AmerUs Bank (currently the financial institution) to enable the financial institution to make mortgage loans to provide financing for multifamily rental residential developments to be occupied partially by persons of low income. Under this joint powers agreement the issuer issued Variable Rate Demand Rental Housing Development Bonds, Series 1985-A (Minnesota Multi -City Rental Housing Program in the amount of $37,100,000. These funds were loaned to AmerUs Bank who in tum loaned the funds through developer notes to various developers. On May 1, 1985, Chardon Court was issued a developer note from AmerUs Bank in the amount of $5,200,000. The note was issued to finance the construction of a 129 -unit elderly housing facility. The note has a variable interest rate that will not exceed 9.2% nor be less than 6.2% per annum. Chardon Court has granted a security interest to AmerUs Bank. All payments of principal and interest of the developer note are made by AmerUs Bank from funds transferred to the Pledge Account. The provisions of the developer note contain restrictive covenants pertaining to financial and operational requirements of Chardon Court. (7) lIReStw Nr- THRIDGE PROPERTIES OF NEW HOr'c DBA: CHARDON COURT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 LONG-TERM DEBT (CONTINUED) Reserve Fund The Reserve Fund has been established to provide a reserve for payment of principal and interest on the note payable in the event the Partnership's principal and interest payments are insufficient to meet debt service requirements. Interest earned on the Reserve Fund is transferred into the Pledge Account by the Trustee. Pledge Account The Pledge Account was established for Chardon Court to deposit monthly amounts necessary to pay semi-annual principal and interest on the note payable. Fair Value It is not practicable to determine the fair value of the long-term debt as a reasonable estimate could not be made without incurring excessive costs. NOTE 3 RELATED PARTY TRANSACTIONS North Ridge Care Center, Inc. (North Ridge), a corporation, is owned 100% by two of the partners of Chardon Court. North Ridge owns and operates a 559 -bed licensed nursing facility, a 130 -unit congregate housing facility and a 25 -unit assisted living facility for the elderly in New Hope, Minnesota. During the years ended December 31, 1995, 1994, and 1993, Chardon Court purchased/incurred the following expenses at cost from North Ridge: 1994 $ 26,400 32,528 37,689 4,386 $ 101,003 1993 $ 29,195 33,105 38,779 12,642 $ 113,721 Chardon Court has borrowed funds from North Ridge for the initial completion of the project's construction and ongoing operations. The borrowings are made under notes payable with principal payments payable at the discretion of Chardon Court as cash is available. The following is a description of the notes and the principal outstanding at December 31, 1995, 1994 and 1993: 1995 Management Fees $ 33,045 Meals 38,212 Interest Expense 36,897 Contracted Services 14,430 Total $ 122,584 1994 $ 26,400 32,528 37,689 4,386 $ 101,003 1993 $ 29,195 33,105 38,779 12,642 $ 113,721 Chardon Court has borrowed funds from North Ridge for the initial completion of the project's construction and ongoing operations. The borrowings are made under notes payable with principal payments payable at the discretion of Chardon Court as cash is available. The following is a description of the notes and the principal outstanding at December 31, 1995, 1994 and 1993: (8) Original Interest Date of Note Amount Rate 1995 1994 1993 January 1987 $ 462,000 7.41 % $ 462,000 $ 462,000 $ 462,000 May 1988 70,000 7.5 0 29,506 59,277 May 1994 2,500 6.5 2,500 2,500 0 May 1994 4,050 6.5 4,050 4,050 0 October 1994 33,000 6.5 11,798 33,000 0 Total $ 480,348 $ 531,056 $ 521,277 (8) NL HRIDGE PROPERTIES OF NEW HC DBA: CHARDON COURT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 All net income (loss) other than from the sale or exchange of the property is allocated to the general partners. Allocation of net income (loss) from sale or exchange of the property is allocated 10% to the general partners and 90% to the limited partners. Distributions of available cash is allocated 10% to the general partners and 90% to the limited partners. NOTE 5 CONTRIBUTION IN AID OF CONSTRUCTION In 1985, the City of New Hope, Minnesota issued and sold General Obligation Tax Increment Bonds and contributed a portion of the proceeds to Chardon Court as an incentive to construct an elderly housing facility in the city. Chardon Court has no direct obligation to pay the bonds. The funds contributed from the City of New Hope were used to finance the land acquisition and the development of the land into an elderly housing facility as follows: Cost of the Land $ 440,000 Interest Reduction Program 931,940 Utilities and Miscellaneous Land Improvements 94,780 Total Contribution in Aid of Construction $ 11466,720 (9) NORTHRIDGE PROPERTIES OF NEW HOPE DBA: CHARDON COURT BALANCE SHEETS APRIL 30, 1996 AND 1995 UNAUDITED APRIL 30, APRIL 30, 1996 1995 ASSETS CURRENT ASSETS Cash $100,552 $92,935 Security Deposits 72,489 69,167 Receivables and Other Assets 28,495 9,912 Total Currents Assets - 201,536 172,014 PROPERTY AND EQUIPMENT ------------ ------------ Land 421,493 421,493 Land Improvements 25,037 25,037 Buildings 4,899,772 4,899,772 Equipment 28,688 28,688 Furniture and Carpet 179,822 179,822 Total 5,554,812 5,554,812 Less: Accumulated Depreciation 1,688,150 1,543,498 Total Property and Equipment (Net) 3,866,662 4,011,314 OTHER ASSETS Bond Reserve Fund 500,000 500,000 Pledge Account 49,518 100,697 Unamortized Bond Costs 32,098 61,015 Total Other Assets 581,616 661,711 Total Assets 4,649,813 4,845,040 LIABILITIES AND PARTNERS' DEFICIT LIABILITIES 10,000 10,000 Bonds Payable 4,811,083 4,926,318 Notes payable - Related Party 480,348 521,056 Accounts Payable 159,270 152,876 Accrued Real Estate Taxes 149,573 149,279 Accrued Interest 36,222 43,429 Security Deposits 69,068 68,158 Activity Fund 3,463 4,492 Total Liabilities -------------- 5,709,026 ------------- 5,865,608 PARTNERS' DEFICIT General Partners' Capital 10,000 10,000 Limited Partners' Capital 1,000 1,000 Contributed Capital 1,466,720 1,466,720 General Partners' Deficit (2,536,933) (2,498,288) Total Partners' Deficit --------------- - (1,059,213) --------------- ---------- (1,020,568) Total Liabilities and Partners' Deficit 4,649,813 ---------- ---------- ------------ 4,845,040 ---------- ---------- NORTHRIDGE PROPERTIES OF NEW HOPE DBA: CHARDON COURT STATEMENTS OF OPERATIONS FOUR MONTHS ENDED APRIL 30, 1996 AND 1995 UNAUDITED REVENUES Rent Meals Interest Other Total Revenues EXPENSES Operating Expenses Interest Depreciation and Amortization Total Expenses NET LOSS STATEMENTS OF PARTNERS' DEFICIT GENERAL; PARTNERS' DEFICIT - DECEMBER 31, 1995 and 1994 Net Loss April 30, 1996 and 1995 GENERAL PARTNERS' DEFICIT APRIL 30, APRIL 30, 1996 1_995 $309,504 $301,591 17,694 15,968 13,755 13,549 6,587 5,356 347,540 336,465 159,889 136,197 162,022 164,222 58,114 58,142 ---------- 380,025 ------------- 358,560 ($32,485) ($22,095) ---------- ---------- ---------- ---------- ($2,504,448) (32,485) ($2,536,933) ($2,476,193) (22,095) ($2,498,288) LIMITED PARTNERS' EQUITY $1,000 $1,000 -------------------- -------------------- REFUNDING ISSUE NOT RATED In the opinion of Dorsey & whimry LLP, Minneapolis, Minnesota, Bond Counsel, except as described under "TAX MATTERS" herein, assuming continued compliance of the Project with requirements for "residential rental property" under Section 103(b)(4) (A) of the Internal Revenue Code of 1954, as amended (the "1954 Code "), under existing law, interest on the Bonds is not includable in gross income for federal income tax purposes or in taxable net income of individuals, estates or trusts for Minnesota income tax purposes, except for the interest on any Bond for any period during which such Bond is held by a "substantial user" of the Project or a "related person,' m such terms are used in the 1954 Code. Interest on the Bonds is includable in taxable income of corporations and financial instipaiona for purposes of the Minnesota franchise tax. Interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum tax applicable to all unpayers or the Minnesota alternarive minimum tax applicable to individuals, but is includable in adjusted current earnings for the purpose of determining allernative minimum taxable income of corporations for purposes of the federal alternative minimum tax imposed on corporations. For a more detailed description of the tax status of the interest on the Bonds, Bond Counsel's opinion with respect thereto and certain income tax consequences of Bond ownership, see "TAX MATI&RS" herein. $5,000,000 City of New Hope, Minnesota Multifamily Housing Refunding Revenue Bonds (Chardon Cont Project) Series 1996 Dated: June 1, 19% Due: As shown below The Bonds offered hereby are limited obligations of the City of New Hope, Minnesota, payable solely from amounts described herein, and do not constitute general obligations, a pledge of the full faith and credit or, within the meaning of any Constitutional or statutory limitations, any debt of the Municipality. The Bonds are not secured by or payable from any taxes, revenues or assets of the Municipality except for the Municipality's interest in the Loan Agreement, the Mortgage, the Assignment and amounts held pursuant to the Indenture as described herein. Undefined capitalized terms used on this cover are defined in the text hereof or Appendix B. Pursuant to the Loan Agreement, all proceeds of the Bonds will be loaned by the Municipality to Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Company"), to cause a refunding of the Refunded Bonds, the proceeds of which financed the acquisition, construction and equipping of a 129 -unit multifamily rental housing development designed for the elderly known as "Chardon Court" (the "Project"). The Bonds will be payable from the moneys held for the payment thereof by Norwest Bank Minnesota, National Association as Trustee under the Indenture, including amounts held in the Reserve Fund and Loan Repayments to be made by the Company under the Loan Agreement. The Bonds will be secured by a mortgage lien on and security interest in the Project and an assignment of all rents, revenues and profits of the Project. The Bonds are hereby offered for purchase by investors solely in Book -Entry Form. Therefore, all Bonds will be issued as fully registered bonds without coupons, registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), to whom all payments and notices with respect to the Bonds will be made. As long as the Bonds are so registered they will be in Book -Entry Form and Purchasers of Bonds will not receive actual Bond certificates. Instead purchasers of Bonds will become the beneficial owners of the such Bonds, with such ownership (including ownership for all tax purposes) evidenced solely in the Book -Entry System records maintained by DTC and certain Participants (and Indirect Participants) who participate with DTC in maintaining the Book -Entry System. While the Bonds are in Book - Entry Form, the Municipality may treat DTC as the sole owner of such Bonds for all purposes. See "BOOK -ENTRY SYSTEM." Purchasers of Bonds in book -entry form will be entitled to receive payments, notices and transfers with respect to such Bonds only in accordance with procedures provided for by DTC and the participants through the Book -Entry System, for which the Municipality assumes no responsibility. Ownership of Bonds in Book -Entry Form of any maturity may be purchased and transferred in principal amounts of $5,000 or any integral multiple thereof. Interest on the Bonds is due and payable December 1, 1996 and semiannually thereafter on each June 1 and December 1. AN INVESTMENT IN THE BONDS IS SUBJECT TO CERTAIN RISKS. See "BONDHOLDERS' RISKS" herein. Subject to earlier redemption and prepayment as described herein under the caption "THE BONDS," the Bonds shall bear interest and mature as follows: MATURITY SCHEDULE Maturity Date Princr al Interest Maturity Date Principal Interest June 1Amount Rate June 1 Amount Rate 1997 $60,000 4.50% 2004 $85,000 6.25% 1998 60,000 5.00% 2005 90,000 6.40% 1999 65,000 5.25% 2006 95,000 6.50% 2000 70,000 5.50% 2007 105,000 6.60% 2001 70,000 5.75% 2008 110,000 6.70% 2002 75,000 6.00% 2009 120,000 6.75% 2003 80,000 6.10% 2010 125,000 6.80% $600,000 7.00% Term Bonds Due June 1, 2014 $3,190,000 7.25% Term Bonds Due June 1, 20Zt; Price of All Bonds: 100% (Plus Accrued Interest from June 1, 1996) The Bonds are subject to redemption, including sinking fund redemption of the Term Bonds, and prepayment prior to maturity as described under the caption "THE BONDS—Redemption or Prepayment Prior to Maturity" herein. The Bonds are offered, subject to prior sale, when, as and if accepted by the Underwriter named below and subject to an opinion as to validity and tax exemption by Dorsey & Whiney LLP, Minneapolis, Minnesota, Bond Counsel, the approval of certain matters solely for the benefit of the Underwriter by Faegre & Benson LLP, Minneapolis, Minnesota, m its counsel, and certain other conditions. It is expected that delivery of the Bonds will be made to The Depository Trust Company on or about July 11, 1996, against payment therefore. DOUGHERTY DAwKiNs. INC. The date of this Official Statement is July 1, 1996 THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION BY REASON OF THE PROVISIONS OF SECTION 3(A)(2) OF THE SECURITIES ACT OF 1933, AS AMENDED. THE REGISTRATION OR QUALIFICATION OF THESE SECURITIES UNDER THE SECURITIES OR BLUE SKY LAWS OF THE STATES IN WHICH THEY HAVE BEEN REGISTERED OR QUALIFIED, AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES, SHALL NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THESE SECURITIES OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. TABLE OF CONTENTS Page SUMMARY INFORMATION.................................................................................................... i INTRODUCTORY STATEMENT.............................................................................................. 1 BONDHOLDERS' RISKS........................................................................................................ 3 THEBONDS........................................................................................................................ 6 BOOK -ENTRY SYSTEM......................................................................................................... 9 DEBT SERVICE SCHEDULE.................................................................................................. 11 SECURITY FOR THE BONDS................................................................................................ 12 THEMUNICIPALITY........................................................................................................... 14 ESTIMATED SOURCES AND USES OF FUNDS......................................................................... 15 THE COMPANY AND THE PROJECT...................................................................................... 15 FINANCIALSTATEMENTS................................................................................................... 15 ENFORCEABILITY OF OBLIGATIONS.................................................................................... 16 TAXMATTERS................................................................................................................... 16 APPROVAL OF LEGAL PROCEEDINGS................................................................................... 17 UNDERWRITING................................................................................................................ 18 CONTINUING DISCLOSURE................................................................................................. 18 CERTAIN STATE SECURITIES LAWS CONSIDERATIONS.......................................................... 19 MISCELLANEOUS.............................................................................................................. 19 APPENDIX A: The Project and the Company............................................................................ A-1 APPENDIX B: Definitions of Certain Terms and Summary of the Principal Documents .........................B -I Definitions of Certain Terms The Loan Agreement The Indenture The Mortgage The Assignment The Declaration APPENDIX C: Financial Statements of the Company................................................................... CA No person has been authorized by the Municipality or the Underwriter to give any information regarding the Bonds, the Company, the Project, the offering contained herein or related matters, or to make any representations other than those contained in this Official Statement; and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which it is unlawful for any person to make such offer or solicitation. Except for information under the heading "The Municipality," the information set forth herein has been provided by or on behalf of the Company. Neither the Municipality nor the Underwriter makes any guarantee as to the accuracy o - completeness of such information, and its inclusion herein is not to be construed as a representation of a.. nature whatsoever by the Underwriter or the Municipality. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement at any time nor any sale made hereunder creates any implication that the information herein is correct as of any time subsequent to its date. 0M SUMMARY INFORMATION The following is a summary of certain information contained in this Official Statement. The summary is not comprehensive or complete and is qualified in its entirety by reference to the remainder of the Official Statement. Undefined capitalized terms used below not customarily capitalized are defined in Appendix B hereto or elsewhere in this Official Statement. The Bonds ......................... $5,000,000 Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 to be issued by the City of New Hope, Minnesota (the "Municipality") in denominations of $5,000 principal amount or any integral multiple thereof. See "THE BONDS." Book -Entry System .............. The Bonds are being offered only in Book -Entry Form. The Bonds will be fully registered as to principal and interest in the name of Cede & Co. as nominee of The Depository Trust Company ("DTC"). Subject to certain exceptions described herein all payments, notices or transfers of Bonds in Book -Entry Form will be made pursuant to the Book -Entry System maintained by DTC and certain Participants, and no investor will receive, hold or deliver any Bond certificates as long as the Depository or any successor securities depository is the registered owner of the Bonds. See "THE BOOK -ENTRY SYSTEM." Redemption and Prepayment. The Bonds are subject to redemption and prepayment prior to maturity, as more fully described herein under the caption "THE BONDS --Redemption or Prepayment Prior to Maturity," as follows: (a) optional redemption at the direction of the Company in whole or in part on any Business Day on or after June 1, 2001 at the redemption price or prices set forth herein, (b) mandatory redemption due to a Determination of Taxability, (c) optional redemption due to the occurrence of certain events such as Project casualty or condemnation, and (d) mandatory redemption of Term Bonds due to the operation of a mandatory sinking fund. See "THE BONDS -- Redemption or Prepayment Prior to Maturity." The Project; Use of Proceeds. Proceeds of the Bonds will be loaned to the Company (described below) and used to cause the refunding of the 1985 Bonds allocable to the acquisition, construction and equipping of a 129 -unit elderly multifamily rental housing project (the "Project") owned by the Company in the Municipality and required to be available for occupancy, in part, by low and moderate income persons. See "SOURCES AND USES OF FUNDS," Appendix A: "THE PROJECT," and Appendix B: "THE DECLARATION." The Company ..................... The Company is Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership organized in 1985 for the sole purpose of owning and operating the Project. The general partners of the Company are Charles T. Thompson, M. Melinda Pattee, Charles P. Thompson, and Dr. James J. Pattee. See Appendix A: "THE COMPANY." The Company's obligations with respect to the repayment of the Bonds are non-recourse to the partners of the Company and their property. Upon any occurrence of an Event of Default, recourse will be available only as against the assets of the Company (which will be comprised primarily of the Project). Security for the Bonds ......... The Bonds are intended to be paid primarily from monthly Loan Repayments to be made by the Company under the Loan Agreement. For the further security of the Bonds, the Company will grant a first mortgage lien on, security interest in, and assignment of leases and rents of the Project, subject to certain Permitted Encumbrances. The Bonds are also to be secured by a Reserve Fund created under the Indenture and held by the Trustee. The Bonds are not general obligations of the Municipality and are not payable from any taxes, revenues or assets of the Municipality, except for the Municipality's interest in the Loan Agreement, the Mortgage, the Assignment and amounts held pursuant to the Indenture. See "SECURITY FOR THE BONDS." Trustee ............................. Norwest Bank Minnesota, National Association, a national banking association in Minneapolis, Minnesota. Investment Considerations .... An investment in the Bonds involves certain risks, including, but not limited to, those discussed under "BONDHOLDERS' RISKS." Historic Pro Forma Coverage The table below shows the debt service coverage provided from "Net Income Available for Debt Service," derived from the audited financial statements of the Company, but adjusted to assume that the Bonds, rather than the Refunded Bonds, had been outstanding for the years shown. See "THE PROJECT -- Operating History and Pro Forma Data" and "BONDHOLDERS' RISKS -- Nature of Pro Forma Debt Service Data." FISCAL YEARS ENDED DECEMBER 31 1993 1994 1995 Net Income (Loss) $(99,649) $(138,616)* $(28,256) Plus: Dept. & Amort. 191,706 176,588 174,565 Interesto) 458,644 454,588 451,957 Less Gain from Asset Sale 4.650 0 0 Net Income Available for $546,051 $492,560 598 266 Debt Service Pro Forma Debt $409,875 $409,875 $409,875 Service(i)(2) Pro Forma Debt Service 1.33 1.20 1.46 Coverage on Bonds (3) * The increase in 1994 is generally attributable to non-recurring expenses for painting and caulking in the approximate amount of $76,000. (1) Excludes interest on certain subordinated debt owed to an affiliate of the Company of $38,779, $37,689 and $36,897 for 1993, 1994 and 1995, respectively. (2) Equal to maximum annual debt service on the Bonds, assuming a weighted average interest rate of 7.34%. Does not include principal and interest payments on certain other debt which the Company owes to an affiliate. See Appendix A: "THE COMPANY -- Related Party Transactions." (3) Reflects solely a mathematical computation of the calculated Net Income Available for Debt Service divided by the stated Pro Forma Debt Service. OFFICIAL STATEMENT $5,000,000 CITY OF NEW HOPE, MINNESOTA MULTIFAMILY HOUSING REFUNDING REVENUE BONDS (CHARDON COURT PROJECT) SERIES 1996 INTRODUCTORY STATEMENT The following is a brief introduction as to certain matters discussed elsewhere in this Official Statement and is qualified in its entirety as to such matters by such discussion and the text of the actual documents described or referenced. Any capitalized term not customarily capitalized is used with the meaning assigned in Appendix B or in the Loan Agreement, the Indenture or other document with respect to which the term is used. Any definition of a term contained in the text hereof that is defined in Appendix B is defined in the text only for ease of reference, and is qualified in its entirety by the definition in Appendix B. The Appendices hereto are an integral part of this Official Statement and each potential investor should review the Appendices in their entirety. General This Official Statement provides information regarding the above -captioned bonds (the "Bonds") to be issued by the City of New Hope (the "Municipality") under Minnesota Statutes, Chapter 462C (the "Act") pursuant to an Indenture of Trust (the "Indenture") between the Municipality and Norwest Bank Minnesota, National Association (the "Trustee"). See Appendix B: "THE INDENTURE." The Bonds are being issued to finance the repayment within 90 days of the date of issuance of the Bonds a portion (the "Refunded Bonds") of certain Variable Rate Demand Rental Housing Revenue Bonds (Minnesota Multi -City Joint Housing Program), Series 1985 (the "1985 Bonds"). The 1985 Bonds were issued by the St. Paul Housing and Redevelopment Authority (the "St. Paul HRA") pursuant to a Joint Powers Agreement with the City of New Hope and certain other public bodies for the purpose of financing a loan to a certain financial institution, which was required in turn to fund loans to certain developers for the financing of certain housing developments. The Refunded Bonds relate to the portion of the 1985 Bonds allocable to a loan to Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Company") that financed the acquisition, construction and equipping of the Company's 129 -unit elderly -oriented multifamily rental housing development known as "Chardon Court" in the Municipality (the "Project"). The Project is situated as part of a campus (the "North Ridge Campus") with a nearby nursing home and assisted living facility, providing a continuum of living and care options for the elderly. The nursing home and assisted living facility are owned by an affiliate of the Company. See "SOURCES AND USES OF FUNDS," "THE COMPANY AND THE PROJECT," Appendix A: "THE COMPANY" and "Appendix A: "THE PROJECT." Loan of Bond Proceeds; Mortgage Proceeds of the Bonds will finance a loan (the "Loan") to the Company pursuant to the Loan Agreement, under which the Company will agree to make monthly payments ("Loan Repayments") which, if fully and promptly paid, will be sufficient to pay when due the scheduled principal of and -1- interest on the Bonds. See Appendix B: "THE LOAN AGREEMENT." The Company's obligations under the Loan Agreement to make such Loan Repayments and to fund redemption of the Bonds upon a Determination of Taxability (as defined in Appendix B) are recourse solely to the Company and its assets, not to the partners of the Company or the assets of the partners. Pursuant to the Indenture, the Municipality will pledge to the Trustee, for the benefit of the holders of the Bonds, all of its interest in the Loan Agreement (other than certain indemnification and expense reimbursement payments) to secure payment of the principal of, premium, if any, and interest on the Bonds. Pursuant to a Combination Mortgage, Security Agreement and Fixture Financing Statement (the "Mortgage"), to be executed by the Company in favor of the Municipality (with an assignment to the Trustee), the payment of the principal of, premium, if any, and interest on the Bonds will be secured by a mortgage lien on and security interest in the Project, subject to certain Permitted Encumbrances described in the Mortgage. See Appendix B: "THE MORTGAGE." In addition, the Bonds will be secured by an assignment of leases and rents of the Project pursuant to an Assignment of Rents and Leases (the "Assignment"). See Appendix B: "THE ASSIGNMENT." Reserve Fund On the closing date for the issuance of the Bonds, an amount equal to $205,000 (the "Reserve Requirement") will be deposited in the Reserve Fund created pursuant to the Indenture. See "SECURITY FOR THE BONDS -- Reserve Fund." Repair and Replacement Reserve Fund The Company is required to make monthly payments, commencing July 20, 1996, for deposit to the Repair and Replacement Reserve Fund created by the Indenture in amounts equal to $2,000, subject to certain limitations more fully explained under "SECURITY FOR THE BONDS -- Repair and Replacement Reserve Fund." Amounts in the Repair and Replacement Reserve Fund may be used solely to pay certain listed capital repairs or to pay Bonds upon any occurrence of an acceleration of the Bonds as a result of an Event of Default. See "SECURITY FOR THE BONDS -- Repair and Replacement Reserve Fund." Rental Housing Requirements The Project must be occupied or available for occupancy in part by persons of low and moderate income within the meaning of Section 103(b)(4)(A) of the Internal Revenue Code of 1954, as amended (the "1954 Code"). Pursuant to a Declaration of Restrictive Covenants from the Company to the Trustee (the "Declaration"), twenty percent (20%) of the units must be held available for persons whose incomes (adjusted for family size) do not exceed eighty percent (80%) of the median annual income of the Minneapolis/St. Paul metropolitan area (not adjusted for family size). For the foregoing purposes, eighty percent of the current median annual income in the Minneapolis/St. Paul metropolitan area is 43,680. The Declaration provides for the continued use of the Project as a residential rental project in conformance with certain requirements of the 1954 Code and is recorded as a lien against the real estate on which the Project is located. See Appendix B: "THE DECLARATION." -2- Bondholders' Risks Certain risks associated with an investment in the Bonds are discussed under "BONDHOLDERS' RISKS." Miscellaneous This Official Statement (including the Appendices hereto) contains descriptions of, among other matters, the Loan Agreement, the Indenture, the Mortgage, the Assignment, the Declaration, the Municipality, the Project, the Company and the Bonds. Such descriptions and information do not purport to be comprehensive or definitive. All references to documents described herein are qualified in their entirety by reference to such documents, copies of which are available for inspection at the principal corporate trust office of the Trustee in Minneapolis, Minnesota. BONDHOLDERS' RISKS No person should purchase any Bonds without carefully reviewing the following information, which summarizes some, but not all, of the risk factors that should be carefully considered before such purchase. Limited Obligations; Non -Recourse The Bonds and the interest thereon are special, limited obligations of the Municipality and do not constitute a general obligation of the Municipality, the State of Minnesota or any political subdivision thereof. No Holder of the Bonds may compel the exercise of the taxing power of the Municipality, the State of Minnesota or any political subdivision thereof to pay the principal of premium, if any, or interest due on the Bonds. The Bonds do not evidence a debt of the Municipality within the meaning of any constitutional or statutory provision. The Municipality is obligated to make payments on the Bonds only to the extent it receives Loan Repayments from the Company as required under the Loan Agreement or as amounts available therefor pursuant to the Indenture. Dependence on Project Revenues The payment of principal of, premium if any and interest on the Bonds is intended to be derived solely from payments of the Company under the Loan Agreement. No recourse or liability against the partners of the Company or their assets is created by the Loan Agreement. Consequently, upon any occurrence of an Event of Default, recourse will be available only as against the assets of the Company. The Company has no significant assets other than the Project and the revenues derived therefrom. If the Project does not generate sufficient revenues from its operations, it is unlikely the Company will have other resources to make payments under the Mortgage necessary to pay in full all principal of premium, if any, and interest on the Bonds when due. The ability of the Company to make Loan Repayments will therefore depend on the ability of the Company to maintain sufficient tenant occupancy in the Project and to charge and collect sufficient rents and other charges. Historic occupancy and operating results of the Project are no guarantee or assurance as to future occupancy or operations of the Project. See Appendix A: `THE PROJECT" for information about the operating history of the Project. -3- The adequacy of future revenues of the Project to provide for all Project operating requirements, including payment of debt service, will be subject to various future events or conditions which cannot be accurately predicted, and which may be beyond the control of the Company, including, but not limited to, the risks of inadequate occupancy; increased real estate taxes; increased operating, maintenance or repair costs; and an inability to maintain or raise rental rates or other charges because of (i) inadequate incomes of tenants or prospective tenants, (ii) insufficient tenant demand, (iii) new or existing competition from other housing or health care facilities, including owner occupied housing and homecare programs, (iv) decline in the attractiveness of the Project's amenities or location, (v) inferior management or maintenance, (vi) general or local economic conditions, (vii) requirements with respect to the Declaration, or (viii) other factors. Pursuant to the Declaration, the Company and any successor owner or lessor of the Project are subject to certain restrictions concerning the use of the Project. Among other things, the Project must be used, during the period specified in the Declaration, as a residential rental Project, and at least 20% of the units in the Project must be occupied by or held available for individuals or families of low or moderate income whose income does not exceed 80% of the median gross income of the Minneapolis/St. Paul metropolitan area. See Appendix B: "THE DECLARATION." Liquidity The Company's current assets have been less than current liabilities as of year end for more than the last three years. In significant part this condition reflects the Company's policy to apply cash not needed for operations to the repayment of certain outstanding subordinated demand debt owing to a related party of the Company (as of December 31, 1995, $462,000 was due on debt incurred in 1987 and $18,348 was due on debt incurred in 1994). The debt incurred in 1987 reflects amounts needed during initial leaseup and commencement of operations, and the debt incurred in 1994 arose primarily because of approximately $76,000 of capital costs incurred in repainting and caulking the exterior of the Project. See Appendix A: "THE COMPANY -- Related Party Transactions." To date the Company has not been required to utilize any line of credit or similar source of outside liquidity from any unrelated party, but has borrowed from North Ridge Care Center, Inc., a related party. Damage or Destruction Although the Company will be required to obtain certain insurance as set forth in the Loan Agreement, there can be no assurance that the Project will not suffer losses for which insurance cannot be or has not been obtained or that the amount of any such loss, or the period during which the Project cannot generate revenues, will not exceed the coverage of such insurance policies. Related Party Transactions and Potential Conflicts Some or all of the partners of the Company have financial interests in other facilities located on the North Ridge Campus which provide facilities for the elderly and which do not provide security for the Bonds. Additionally, North Ridge Care Center, Inc., owned by certain partners of the Company, provides all staffing for the Project. Further, certain financial support has been provided by the partners or an affiliate in the form of subordinated debt. Conflicts of interest in allocating financial resources, time or residents between the Project and other facilities may arise. However, a purpose of the Project has been to provide a continuum of living options on a coordinated basis to the elderly. -4- See Appendix A: "THE PROJECT --The North Ridge Campus" and Appendix A: "THE COMPANY -- Related Party Transactions." Competition The Company believes that the Project currently has limited competition within its primary market area from other multifamily rental projects oriented to independent elderly persons. However, elderly housing facilities have been overbuilt in the past in a number of other markets in the Minneapolis/St. Paul metropolitan area. Additionally, with an increasingly larger anticipated elderly population, increased competition can be expected in almost all markets through the construction of new facilities or the conversion or reorientation of others. Competition for the Project's tenants is based on price, location, services, and the availability of alternative living arrangements. See Appendix A: "THE PROJECT -- Competition and Marketing." Value of Mortgaged Property The obligations of the Company under the Loan Agreement to repay the Loan (whether by acceleration or otherwise) are recourse only against the Company and its assets. The sole assets of the Company are the Project and revenues derived therefrom. Attempts to foreclose the Project under the Mortgage may be met with protracted litigation and/or bankruptcy proceedings, which proceedings cause delays. See "ENFORCEABILITY OF OBLIGATIONS." Thus, there can be no assurance that upon the occurrence of a default under the Loan Agreement, the Trustee will be able to obtain possession of the Project and generate revenue therefrom in a timely fashion. Furthermore, there can be no assurance that the Project, if sold upon default under the Loan Agreement and foreclosure of the Mortgage, would realize an amount sufficient to pay all Bonds and accrued interest thereon. Nature of Pro Forma Debt Service Data Certain historical operating results of the Company and computed pro forma debt service coverage are provided herein in a table under "SUMMARY INFORMATION" and in Appendix A: "THE PROJECT -- Operating History and Pro Forma Data." The pro forma debt service coverage so reflected is merely a mathematical computation based on the data therein disclosed and represents no assurance or guarantee as to the future sufficiency of income of the Company to meet its obligations, including debt service requirements on the Bonds. Effect of Federal Bankruptcy Laws on Security for the Bonds Bankruptcy proceedings and equitable principles may delay, modify, limit or otherwise adversely affect the enforcement of Bondholders' rights or collection of principal of or interest on the Bonds. Notwithstanding that repayment of the Bonds is secured by an assignment of leases and a lien on the Mortgaged Property, a bankruptcy of the Company could impose significant risks of delay, limitation or modification of the Bondholders' rights against the Company. These risks include, without limitation, the risk that the interest rate on and repayment and other terms of the Bonds could be modified in bankruptcy proceedings, and, if the value of the collateral for the Bonds, as determined by a court of competent jurisdiction, is less than the full amount due on the Bonds, the Bonds may not be repaid in full. See "ENFORCEABILITY OF OBLIGATIONS." -5- Tax Exemption The tax-exempt status of the interest on the Bonds is conditioned upon the Company complying with the requirements of the Act, the Internal Revenue Code, as amended, and applicable Treasury Regulations as they relate to the Bonds. Certain of these requirements relating to renting units of the Project to persons of low and moderate income are included in the Declaration. Failure of the Company to comply with the terms and conditions of the Loan Agreement, the Indenture, the Declaration and other documents as described herein may result in the loss of the tax-exempt status of the interest on the Bonds retroactive to the date of issuance of the Bonds. See "TAX MATTERS." Owners of Bonds will not receive any additional interest to compensate them for federal income taxes, interest and penalties which may be assessed with respect to such interest. The Bonds are subject to mandatory redemption without premium upon a Determination of Taxability. There can be no assurance, however, that sufficient moneys would be available in such event to redeem the Bonds. If interest on the Bonds should become subject to federal income taxation, the market for and value of the Bonds would be adversely affected. See "TAX MATTERS." Lack of Secondary Market The Underwriter expects to effect secondary market trading in the Bonds. The Underwriter will not, however, be obligated to make a market in the Bonds or purchase Bonds upon request. It is not expected that an active trading market for the Bonds will develop and, particularly because the Bonds are unrated, liquidity of the Bonds may be limited. Adverse developments, including insufficient cash flow from the Project, may have an unfavorable effect upon the price for the Bonds in the secondary market or upon a Bondholder's ability to sell the Bonds. Absence of Rating The Bonds have not received a credit rating from any organization engaged in the business of publishing such ratings and, due to the risks associated with an investment in the Bonds, the Company believes that a rating considered to be "investment grade" could not presently be obtained for the Bonds. Typically, in contrast to rated bonds, unrated bonds lack liquidity in the secondary market. As a result of the foregoing, the Bonds are believed to bear interest at higher rates than would prevail for bonds with comparable maturities and redemption provisions that have investment grade ratings. Nevertheless, Bonds should not be purchased by any investor who, because of financial condition, investment policies or otherwise, does not desire to assume, or have the ability to bear, the risks inherent in an investment in the Bonds. THE BONDS Interest Rate; Maturity; Payment The Bonds are being issued as of the date and in the aggregate principal amounts and with the maturities and interest rates set forth on the cover hereof. Interest will be payable semiannually on each June 1 and December 1 (each an "Interest Payment Date") commencing December 1, 1996, calculated on the basis of a 360 -day year with twelve months of thirty days. The ownership of any bonds offered hereby will be beneficial ownership and not record ownership so long as the Bonds are held in book -entry form. While in such form, the Bonds will be 0 registered in the name of Cede & Co., as nominee for the Depository Trust Company. See "BOOK - ENTRY SYSTEM." The Bonds will be issued as fully registered bonds without interest coupons in the denomination of $5,000 or whole multiples thereof. Bonds will be payable as to principal, whether upon maturity or redemption, at the principal corporate trust office of the Trustee designated on the cover hereof. If any payment of interest or principal is due on a day that is not a business day, payment will be required to be made on the next succeeding business day with the same effect as if paid when otherwise due. Interest shall be payable by check or draft of the Trustee mailed on the Interest Payment Date to the persons who were registered owners thereof as of the fifteenth day of the month immediately preceding the Interest Payment Date; provided, however, that payment of interest to persons who are holders of record of at least $1,000,000 principal amount of Bonds shall be made, upon appropriate instruction from the holder, by wire transfer. Exchange; Transfer The Bonds will be transferable and exchangeable for other denominations only upon the books of the Trustee and only upon presentation and surrender of such Bonds, together with an executed assignment or other acceptable transfer instrument, subject to the payment of any cost, tax or charge that may be imposed in connection therewith. Bonds called for redemption will not be required to be transferred or exchanged by the Trustee. Replacement If any Bond is mutilated, lost, stolen or destroyed, the Municipality may execute and the Trustee may authenticate and deliver, subject to the provisions of the Indenture, a new Bond of like date, maturity and denomination. In the case of a lost, stolen or destroyed Bond, the Municipality and Trustee may require satisfactory evidence and indemnification. In the case of a mutilated Bond, such mutilated Bond shall first be surrendered to the Trustee. For every such exchange of Bonds, the Trustee may charge the owner of such Bond the Trustee's reasonable fees and expenses with respect to the exchange. Redemption or Prepayment Prior to Maturity Mandatory Sinking Fund Redemption. The Bonds maturing on June 1, 2014 and June 1, 2026 are subject to mandatory sinking fund redemption, in part, at the principal amount thereof plus accrued interest as follows: Bonds Maturine June 1. 2014 Sinking Fund Sinking Fund Redemption Date Sinking Fund Redemption Date Sinking Fund June 1 Principal Amount June 1 Principal Amount 2011 $135,000 2013 $155,000 2012 145,000 2014* 165,000 Stated Maturity -7- Bonds Maturing June 1. 2026 Sinking Fund Sinking Fund Redemption Date Sinking Fund Redemption Date June 1 Principal Amount June 1 2015 2016 2017 2018 2019 2020 Stated Maturity $175,000 190,000 200,000 215,000 235,000 250,000 2021 2022 2023 2024 2025 2026* Sinking Fund Principal Amount $265,000 285,000 310,000 330,000 355,000 380,000 Optional Redemption. Bonds are each subject to redemption and prepayment, on or after June 1, 2001 in whole on any date or in part on any Interest Payment Date, and if in part a portion of the Bonds of each maturity in $5,000 principal amounts will be selected by the Trustee for redemption by lot or such other method as the Trustee deems fair such that following such partial redemption the annual principal and interest to come due on the Bonds on any future calendar year following such redemption will be substantially equal. Bonds redeemed pursuant to optional redemption will be redeemed at their principal amount and accrued interest plus a redemption premium, expressed as a percentage of principal amount, set forth in the following table for the designated redemption dates: Redemption Record Premium June 1, 2001 through May 31, 2002 2% June 1, 2002 through May 31, 2003 1 % June 1. 2003 and thereafter None Optional Redemption due to Casualty or Condemnation. All Bonds are subject to redemption and prepayment prior to maturity at any time, in whole but not in part, at the principal amount thereof, plus accrued interest to the redemption date, upon the optional prepayment by the Company of amounts payable under the Loan Agreement in the event that (a) all or substantially all the Project has been damaged or destroyed to such extent that in the reasonable opinion of the Company, the repair and restoration is economically not practicable or cannot be accomplished within ninety days; or (b) there occurs the condemnation of all or substantially all the Project or the taking by eminent domain of such use or control of the Project as to render it unsatisfactory to the Company for its intended use for a period of time longer than ninety days, all as further explained in Appendix B: "THE LOAN AGREEMENT -- Company Options." Mandatory Redemption Upon Determination of Taxability. Upon the occurrence of a Determination of Taxability (as defined in Appendix B), all Bonds are subject to mandatory redemption and prepayment prior to maturity on the first Interest Payment Date for which notice can be given after the date upon which the Trustee receives written notice of Determination of Taxability, at their principal amount plus accrued interest to the redemption date. Selection of Bonds for Partial Redemption. If less than all of the Outstanding Bonds are to be redeemed, except as provided above, the Trustee shall select by lot, or by such other method as the In Trustee deems fair, those to be redeemed from among the Bonds then subject to redemption, and for this purpose the Trustee shall treat each Bond as representing that number of Bonds which is obtained by dividing the principal amount of such Bond by $5,000. If a portion of a Bond having a principal amount of more than $5,000 shall be called for redemption, a new registered Bond in principal amount equal to the unredeemed portion thereof shall be issued to the holder upon the surrender thereof. Notice of Redemption; Payment. With respect to any redemption the Trustee is required to cause notice of the redemption to be mailed to the registered owner of each Bond to be redeemed (whether in whole or in part), by registered or certified mail, not less than thirty (30) days prior to the redemption date. Failure to receive a notice, or any defect in any such notice, shall not affect the validity of any proceedings for the redemption of any Bonds. Acceleration Upon Event of Default. Upon an Event of Default under the Indenture, the Trustee may declare the principal amount of the Bonds immediately due and payable. See Appendix B: "THE INDENTURE -- Default and Remedies." BOOK -ENTRY SYSTEM The Depository Trust Company ("DTC"), New York, NY, will act as the securities depository for the Bonds. The Bonds will be fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee), with one Bond certificate issued for all Bonds. 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 "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("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 such Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participant 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 will not receive certificates representing their ownership interest in Bonds, except in the event that use of the Book -Entry System for the Bonds is discontinued. la To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds on deposit; DTC's records reflect only the identity of the Direct Participants to whose account 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 & Co. 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 issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Trustee as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'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 Repayments on the Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on a payable 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 the payable date. Repayments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is 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 or the Municipality, 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 DTC, and the disbursement of such payment to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Municipality or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Bonds are required to be printed and delivered. The Company may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered. The information in this section concerning DTC and DTC's Book -Entry System has been obtained from sources that the Company believes to be reliable, but the Company takes no responsibility for the accuracy thereof. 10- DEBT SERVICE SCHEDULE The following is a schedule of debt service for the Bonds assuming no optional prepayments, and including sinking fund payments: Payment Date Principal and Interest Bond Year Total December 1, 1996 $173,895.00 June 1, 1997 233,895.00 $407,790.00 December 1, 1997 172,545.00 June 1, 1998 232,545.00 405,090.00 December 1, 1998 171,045.00 June 1, 1999 236,045.00 407,090.00 December 1, 1999 169,338.75 June 1, 2000 239,338.75 408,677.50 December 1, 2000 167,413.75 June 1, 2001 237,413.75 404,827.50 December 1, 2001 165,401.25 June 1, 2002 240,401.25 405,802.50 December 1, 2002 163,151.25 June 1, 2003 243,151.25 406,302.50 December 1, 2003 160,711.25 June 1, 2004 245,711.25 406,422.50 December 1, 2004 158,055.00 June 1, 2005 248,055.00 406,110.00 December 1, 2005 155,175.00 June 1, 2006 250,175.00 405,350.00 December 1, 2006 152,087.50 June 1, 2007 257,087.50 409,175.00 December 1, 2007 148,622.50 June 1, 2008 258,622.50 407,245.00 December 1, 2008 144,937.50 June 1, 2009 264,937.50 409,875.00 December 1, 2009 140,887.50 June 1, 2010 265,887.50 406,775.00 December 1, 2010 136,637.50 June 1, 2011 271,637.50 408,275.00 December 1, 2011 131,912.50 June 1, 2012 276,912.50 408,825.00 December 1, 2012 126,837.50 June 1, 2013 281,837.50 408,675.00 December 1, 2013 121,412.50 June 1, 2014 286,412.50 407,825.00 December 1, 2014 115,637.50 June 1, 2015 290,637.50 406,275.00 December 1, 2015 109,293.75 June 1, 2016 299,293.75 408,587.50 December 1, 2016 102,406.25 June 1, 2017 302,406.25 404,812.50 December 1, 2017 95,156.25 June 1, 2018 310,156.25 405,312.50 December 1, 2018 87,362.50 June 1, 2019 322,362.50 409,725.00 December 1, 2019 78,843.75 June 1, 2020 328,843.75 407,687.50 December 1, 2020 69,781.25 [Debt Service Table Continued on Next Page] -11- Payment Date Principal and Interest Bond Year Total June 1, 2021 334,781.25 404,562.50 December 1, 2021 60,175.00 June 1, 2022 345,175.00 405,350.00 December 1, 2022 49,843.75 June 1, 2023 359,843.75 409,687.50 December 1, 2023 39,606.25 June 1, 2024 368,606.25 407,212.50 December 1, 2024 26,643.75 June 1, 2025 381,643.75 408,287.50 December 1, 2025 13,775.00 June 1, 2026 393,775.00 407,550.00 SECURITY FOR THE BONDS Limited Obligations; No Pledge of Taxing Authority The Bonds are limited obligations of the Municipality and will not constitute or give rise to a pecuniary liability of the Municipality or the State of Minnesota, or any subdivision thereof, or a charge against their respective general credit or taxing powers. No holder of a Bond will have the right to demand payment of the principal thereof or premium, if any, or interest thereon out of any funds to be raised from taxation or from any sources of revenue other than those expressly pledged to the payment of the Bonds. Loan Repayments Under the Indenture, the Municipality has pledged its interest in the Loan Agreement (including the amounts payable thereunder to the Municipality by the Company, but excluding certain rights to payment of fees, expenses and indemnification) to the Trustee to secure the Bonds. The amounts payable under the Loan Agreement as Loan Repayments are payable directly to the Trustee and will be sufficient, if paid promptly and in full, to make all repayments of principal of and premium, if any, and interest on the Bonds as the same become due, at maturity, upon redemption and prepayment or otherwise. The Trustee will be authorized to exercise the rights of the Municipality and to enforce the obligations of the Company under the Loan Agreement. The Loan Agreement is a recourse obligation of the Company; however, the Loan Agreement is nonrecourse to the partners of the Company; thus, no personal liability is created against the partners of the Company or any of their assets. Upon any occurrence of an Event of Default, recourse will be available only as against the assets of the Company (which will be comprised primarily of the Project). See Appendix B: `THE LOAN AGREEMENT." Reserve Fund On the closing date for the issuance of the Bonds, an amount equal to $210,000 (the `Reserve Requirement") will be deposited in the Reserve Fund created pursuant to the Indenture. Amounts held in the Reserve Fund may be used by the Trustee to pay principal of or interest on the Bonds if amounts available therefor in the Bond Fund (where Loan Repayments are deposited) are insufficient for such purpose. Amounts in the Reserve Fund may be invested in Permitted Investments as defined in the Indenture, but all investments must mature or be callable at the option of the holder no later than the -12- next Interest Payment Date. See Appendix B: "THE INDENTURE -- Reserve Fund." In accordance with the Loan Agreement, the Company is required to deposit amounts in the Reserve Fund sufficient to cause amounts therein to equal the Reserve Requirement, if at any time amounts in the Reserve Fund are less than the Reserve Requirement. Mortgage and Assignment Under the Mortgage, the Company will grant the Municipality a mortgage lien on, and security interest in, the Mortgaged Property. As security for the Bonds, the Municipality will assign all its interest in the Mortgage to the Trustee. The Mortgaged Property includes, in general, the land and buildings of the Project and furniture, fixtures and equipment and other tangible property owned by the Company and located at the Project. See Appendix B: "THE MORTGAGE." The lien of the Mortgage is subject to Permitted Encumbrances, which include liens for taxes and special assessments not yet delinquent, and may include noninterfering utility and access easements or other encumbrances. In the event taxes or special assessments are not paid, liens for such unpaid amounts would be prior to the lien of the Mortgage. Pursuant to the Assignment, the Company will assign all leases and rents of the Project to the Municipality, which will assign such Assignment to the Trustee, as security for the Bonds. See Appendix B: "THE ASSIGNMENT." Repair and Replacement Reserve Fund The Trustee shall maintain a Repair and Replacement Reserve Fund established under the Indenture. Commencing July 20, 1996, and on the twentieth day of each month thereafter, the Company shall pay the Trustee $2,000 for deposit to the Repair and Replacement Reserve Fund. Except upon the occurrence of an Event of Default and the acceleration of payment on the Bonds, amounts may be withdrawn from the Repair and Replacement Reserve Fund only upon request of the Company for the payment of costs for the complete replacement of the roof on the Project, installation of a new boiler to replace the boiler in the Project, installation of new air conditioning units in the Project or the painting and caulking of the entire exterior of the building. See Appendix B: "THE INDENTURE -- Repair and Replacement Reserve Fund." Special Covenant In the Loan Agreement the Company agrees to charge and collect, subject to restrictions imposed by law, such rents and fees such that Net Income Available for Debt Service (as defined in Appendix B) in each fiscal year of the Company will be at least 110% of the debt service on the Bonds during such fiscal years. Notwithstanding the foregoing, if the Company cannot charge and collect as required above, no Event of Default will occur so long as (i) the Company promptly employs an independent Management Consultant to make recommendations and (ii) to the fullest extent feasible, the Company follows the recommendations of the Management Consultant. See Appendix B: "THE LOAN AGREEMENT -- Rates and Charges; Retention of Management Consultant." Defeasance Upon certain terms and conditions specified in the Indenture, the Bonds or portions thereof will be deemed to be paid and the security provided in the Indenture and the Mortgage may be discharged prior to maturity or redemption thereof upon the provision for payment of such Bonds in the manner set forth in the Indenture. In that case, such Bonds will be secured solely by the cash or securities deposited with the Trustee. -13- Additional Indebtedness No additional bonds are permitted to be issued under the Indenture, and no liens other than Permitted Encumbrances on the Project are permitted. Limitations on Payments to Affiliates Pursuant to the Loan Agreement, the Company agrees that no amounts will be paid or property transferred to any person who is an Affiliate of the Company in consideration of any property or services provided by the Affiliate that exceed in value that which would be paid or transferred if such person had not been an affiliate. Notwithstanding the foregoing, subject to the Subordination Agreement, payments may be made by the Company on loans and advances from North Ridge Care Center, Inc., and so long as no Event of Default under the Loan Agreement has occurred and is continuing, and so long as no Event of Default shall result therefrom, property or amounts may be distributed by the Company to partners or owners of the Company in respect of their partnership or ownership interest, but solely upon their agreement to return such distribution if it should be required for the Company to avoid an Event of Default under the Loan Agreement within two years following such distribution. For purposes of this section, "Affiliate" means any person who, with respect to a second person, directly or indirectly controls, is controlled by, or is under common control with the second person (or any ancestor, descendant, sibling or spouse). THE MUNICIPALITY The Municipality is a municipal corporation and political subdivision of the State of Minnesota, duly authorized and existing under and pursuant to the Constitution and laws of the State of Minnesota, and is authorized to issue the Bonds pursuant to the Act. The Act authorizes the Municipality to issue the Bonds, loan the proceeds thereof to the Company to refinance the Refunded Bonds, and to receive a pledge of revenues in accordance with the terms of the Loan Agreement and as provided in the Indenture. -14- ESTIMATED SOURCES AND USES OF FUNDS Following are the approximate expected sources and uses of proceeds required in connection with the issuance of the Bonds: Sources Bond Proceeds $5,000,000 Reserve Fund 515,000 Pledge Account for Prior Bonds 25.985 Total $5,540,985 Uses Escrow Deposit' $4,918,632 Debt Service Reserve Fund 205,000 Deposit to Bond Fund 32,505 Issuance Costs2 171,450 Funds to Company 211,398 Deposit to Repair & Replacement Reserve Fund 2A00 Total $5,540,985 Sufficient, ether with investment earnings, to pay principal of and a premium on the Refunded Bonds no later than 90 days after the issuance of the Bonds, together with interest on the Refunded Bonds to such date. Amounts will be applied to reimburse a draw on a letter of credit securing the Refunded Bonds. 2 Includes Underwriting fee, legal fees, and other costs associated with the issuance of the Bonds and refunding of the Refunded Bonds. THE COMPANY AND THE PROJECT The Company is a Minnesota limited partnership organized in 1985 for the sole purpose of owning and operating the Project. The partners of the Company are Charles T. Thompson, a 5% general partner and 50% limited partner, M. Melinda Pattee, a 5% general partner and a 50% limited partner, Charles P. Thompson, a 45% general partner, and Dr. James J. Pattee, a 45% general partner. For additional information on the Company, see Appendix A -- "THE COMPANY." The Project is a 129 -unit residential rental facility for the elderly and is located at 5700 Boone Avenue North in New Hope, Minnesota, a suburb of Minneapolis. For additional information on the Project, see Appendix A -- "THE PROJECT." FINANCIAL STATEMENTS The audited financial statements for the Project for the years ended December 31, 1995, 1994 and 1993 attached as Appendix C to the Official Statement, have been audited by Larson, Allen, Weishair & Co., LLP, in Minneapolis, Minnesota (the `Accounting Firm"), as set forth in their report appearing therein. -15- Also included in Appendix C to the Official Statement are the unaudited financial statements for the Project for the four-month period ended April 30, 1996, prepared by the Company without the Accounting Firm providing compilation, review or audit services. ENFORCEABILITY OF OBLIGATIONS On the date of issuance of the Bonds, Dorsey & Whitney LLP, as Bond Counsel, shall deliver their opinion, dated the date thereof, that the Bonds, the Loan Agreement and the Indenture are valid and legally binding agreements of the Municipality. Orbovich & Gartner Chartered, St. Paul, Minnesota, counsel to the Company, will issue opinions to the effect that the Loan Agreement, the Mortgage, the Assignment and the Declaration are valid and legally binding agreements of the Company. The foregoing opinions will be generally qualified to the extent that the enforceability of the respective instruments may be limited by laws, decisions and equitable principles affecting remedies and by bankruptcy or insolvency or other laws, decisions and equitable principles affecting creditors' rights generally. While the Bonds are secured or payable pursuant to the Loan Agreement, the Indenture, the Mortgage and the Assignment, the practical realization of payment from any security will depend upon the exercise of various remedies specified in the respective instruments. These and other remedies are dependent in many respects upon judicial action, which is subject to discretion and delay. Accordingly, the remedies specified in the above documents may not be readily available or may be limited. TAX MATTERS Tax Exemption In the opinion of Dorsey & Whitney LLP, Minneapolis, Minnesota, Bond Counsel, based upon federal and Minnesota laws, regulations, rulings and decisions in effect on the date of delivery of the Bonds, the interest on the Bonds is not includable in gross income for federal income tax purposes or in taxable net income of individuals, estates or trusts for Minnesota income tax purposes, except for interest on any Bond during any period while it is held by 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. Interest on the Bonds is not an item of tax preference for purposes of the federal or Minnesota alternative minimum taxes, but such interest is includable in adjusted current earnings for the purpose of determining the alternative minimum taxable income of corporations for purposes of the federal alternative minimum tax imposed on corporations. The opinion set forth in the first sentence of this paragraph is subject to the requirement that the Project complies with the requirements of Section 103(b)(4)(A) of the 1954 code and that the Trustee, the Municipality, and the Company comply 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 be (or continue to be) excluded from gross income for federal income tax purposes. Failure to comply with such requirements could cause the interest on the Bonds to be so included in gross income for federal and Minnesota income tax purposes retroactive to the date of issuance of the Bonds. The Trustee, the Municipality, and the Company have covenanted under the Indenture, the Loan Agreement and the Declaration to comply with such requirements. The 1995 Minnesota Legislature has adopted a bill which includes a statement of the Legislature's intent that interest on obligations of Minnesota government units and Indian tribes be -16- includable in taxable net income of individuals, estates, and trusts for Minnesota income tax purposes in the event that a court determines that Minnesota's exemption of such interest on Minnesota bonds unlawfully discriminates against interstate commerce because Minnesota taxes interest on obligations of governmental issuers located in other states. This provision would apply to taxable years beginning 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 Company cannot predict the likelihood that interest on the Bonds would become taxable under this provision. Related Federal Tax Considerations Interest on the Bonds is includable in the adjusted current earnings of corporations for purposes of determining the environmental tax imposed upon corporations by Section 59A of the Code. Interest on the Bonds may be included in the income of a foreign corporation for purposes of the branch profits tax imposed by Section 884 of the Code. Deductions for losses incurred by property and casualty insurance companies must be reduced by 15% of the interest received or accrued on the bonds. In addition to the collateral tax consequences set forth above, prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations may result in federal income tax consequences to individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations. Certain corporations may have a tax imposed on passive income, including tax-exempt interest, such as interest on the Bonds. Prospective purchasers of the Bonds should consult their tax advisors as to the applicability and impact of these and other potential collateral tax consequences of owning and disposing of the Bonds. 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 OR LOCAL RULES. APPROVAL OF LEGAL PROCEEDINGS Legal matters incident to the issuance of the Bonds and with regard to the exclusion from gross income of interest on the Bonds under existing laws are subject to the approving legal opinion of Dorsey & Whitney LLP, Minneapolis, Minnesota, as Bond Counsel. Certain legal matters will be passed on for the Company by its counsel, Orbovich & Gartner Chartered, St. Paul, Minnesota. The Underwriter has been represented in connection with the issuance of the Bonds by Faegre & Benson LLP, Minneapolis, Minnesota. Any one or more of the legal counsel providing services in connection with this offering may in the future provide services to any one or more parties with an interest in this offering, including parties that are different from the party or parties represented by such counsel in this offering. -17- UNDERWRITING The Bonds are being purchased from the Municipality by Dougherty Dawkins, Inc. of Minneapolis, Minnesota as an underwriter (the "Underwriter'). The Underwriter has agreed to purchase the Bonds from the Municipality and will receive a discount or commission of $112,500, subject to the terms of a Bond Purchase Agreement between the Municipality, the Company and the Underwriter. In addition, the Company has agreed to pay certain out-of-pocket expenses and other expenses incurred by the Underwriter in connection with the issuance of the Bonds. The Bond Purchase Agreement provides that the Underwriter shall purchase all of the Bonds, if any are purchased, and that the obligation to make such purchase is subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The initial public offering prices set forth on the cover page hereof may be changed from time to time by the Underwriter. The Company has agreed under the Bond Purchase Agreement to indemnify the Underwriter and the Municipality against certain liabilities, including certain liabilities under the federal and state securities laws. CONTINUING DISCLOSURE Pursuant to a Continuing Disclosure Agreement, the Company will agree to provide, on or before June 30 of each year commencing June 30, 1997 (the `Annual Report Date"), annual reports to the Trustee, each Nationally Recognized Municipal Securities Information Repository and any State Repository (collectively, the `Repositories"), as designated for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 ("Rule 15c2-12"). Each annual report of the Company shall consist of (a) the annual financial statements of the Company and (b) information regarding the operations of the Project, including rental rates, historic occupancy rates, and the existing long-term debt of the Company. The Company will agree in the Continuing Disclosure Agreement to provide timely notice to each Repository of any of the events listed below, unless the listed event is deemed not to be material by the Company. The following events are subject to disclosure: i. Delinquency in payment when due of any principal of or interest on the Bonds. ii. Occurrence of any nonpayment Event of Default under the Indenture or Loan Agreement as defined in each such instrument. iii. Unscheduled draws on the Debt Service Reserve Fund reflecting financial difficulties. iv. Unscheduled draws on credit enhancements reflecting financial difficulties (the Bonds have no third party credit enhancement). V. Substitution of credit or liquidity providers, or their failure to perform (the Bonds have no third party liquidity provider or credit enhancement). vi. Adverse tax opinions or events affecting the tax-exempt status of the Bonds. vii. Modifications to the rights of Bondholders. 18- viii. Bond calls. ix. Defeasance of the Bonds or any portion thereof. X. Release, substitution or sale of property securing repayment of the Bonds. xi. Rating changes (the Bonds will not be rated). If the Trustee is unable to verify that an Annual Report has been provided to the Repositories by the Annual Report Date in any year, the Dissemination Agent will send a notice to each Repository to that effect, and stating the date, if known, by which the applicable Reporting Party expects to provide the Annual Report. CERTAIN STATE SECURITIES LAWS CONSIDERATIONS The offering of the Bonds is to be undertaken only in those jurisdictions in which such offering may be lawfully made in accordance with the relevant provisions of all applicable state and federal securities laws. Under rules adopted by the Minnesota Department of Commerce and the Iowa Office of Commissioner of Insurance, an investment in or purchase of the Bonds by a Minnesota or Iowa purchaser is considered suitable for such purchaser only if the purchaser has a minimum annual gross income of $30,000 and a net worth of $30,000, or in the alternative, a net worth of $75,000. Net worth is determined exclusive of home, home furnishings and automobiles. The following statements are made for the purpose of obtaining an exemption from registration pursuant to section 517.051(1), Florida Statutes. The Company has not defaulted in the payment of any debt, security or other obligation to which the Company is a primary obligor or guarantor. The Municipality has not defaulted in the payment of any debt or security obligations for which funds of the Municipality are pledged. It is not necessary to make disclosure about possible defaults with respect to certain securities constituting "conduit" revenue obligations secured by a pledge of repayments from a third party (to whom the proceeds of the obligations are loaned) and in certain cases other collateral provided by or on behalf of such third party. The Municipality is not obligated with respect to such securities beyond the pledged revenues. Thus, any default with respect to such conduit securities is immaterial to a potential investor in the Bonds offered hereby. MISCELLANEOUS The foregoing summaries do not purport to be comprehensive or definitive and all references to the documents summarized are qualified in their entirety by reference to each such document. All references to the Bonds are qualified in their entirety by reference to the forms thereof and the information with respect thereto included in the aforesaid documents. Copies of these documents are available for inspection during the period of the offering at the offices of the Underwriter in Minneapolis, Minnesota, and thereafter at the principal office of the Trustee. The Municipality has not participated in the preparation of this Official Statement and has not reviewed or approved any information or statements contained in this Official Statement or the appendices hereto and assumes no responsibilities for the sufficiency, completeness or accuracy of the same. -19- (This page has been left blank intentionally.) THE PROJECT THE COMPANY A-1 Appendix A THE PROJECT General General. The Project is a residential rental facility for the elderly known as "Chardon Court" containing 129 apartment units, in a single building, located in the Municipality. The Project, which opened for occupancy in 1985, contains a total of approximately 120,000 square feet. Location. The Project is located at 5700 Boone Avenue North in New Hope, Minnesota, a suburb of Minneapolis. The Project is located on 4.3 acres, one block from a 559 -bed nursing home ("North Ridge Care Center") and a 205 -unit assisted living and congregate housing facility ("North Ridge Apartments"), owned and operated by North Ridge Care Center, Inc., a Minnesota corporation ("North Ridge Care Center, Inc."). Together, the Project, North Ridge Care Center and North Ridge Apartments create a campus (the "North Ridge Campus") of approximately 15 acres in a residential and light industrial neighborhood approximately 15 miles from the Minneapolis business core. Physical Description. The Project is a six -story structure of tip -up precast concrete construction, with a stucco exterior and a gravel -on -membrane flat roof. The Project contains 129 apartment units designed to encourage independent living and an active lifestyle for older adults. Each unit of the Project is designed with the needs of the elderly in mind, with 112 of the apartments being one -bedroom units. Five apartments are one -bedroom with a den; six apartments are one -bedroom modified for handicapped persons; and six apartments contain two bedrooms. Each unit is equipped with standard amenities: individually controlled heating, wall -mounted air-conditioning units, a storage closet, and several appliances, including electric range and hood fan, refrigerator, and dishwasher; also included are mini -blinds, bathing facilities (including handicapped -accessible shower units), and quality floor coverings (including ceramic tile in the bathrooms, vinyl flooring in the kitchen and carpeting throughout the rest of the unit). In addition, each apartment has convenient access to elevators, laundry facilities and trash chutes. Health and safety features are included in each unit to assist independent living, including an "I'm OK" system and an emergency response system (monitored 24 hours a day, seven days a week), handicap access in designated apartments, easy access to kitchen cabinets and storage closets, safety grab bars in tub/shower units, and electrical outlets positioned at a height that minimizes bending. Building safety and security are enhanced by a security system, a monitored smoke and fire alarm system and a sprinkler system. The Project contains a community room and a dining room, with a lounge on each floor. The tenants may access a redwood deck and patio when weather permits. The Project also contains a mail room, two elevators and several garden plots. Tubrooms are available for use by the tenants. For an additional fee, tenants may park in the underground heated garage in one of 40 stalls. Visitors may park in one of 21 stalls in a surface -level parking area in front of the building. There are an additional 6 stalls behind the building for vans and employees. Although no independent evaluation has been conducted, the Company believes that the Project (including all major structural, heating and roofing systems) is in good physical condition and repair throughout. The Company expended approximately $76,000 in 1994 for repainting and caulking of the exterior of the Project. Staff and Services. The Company employs no staff of its own. Instead, all staffing at the Project is provided by employees of North Ridge Care Center, Inc. pursuant to a Management Agreement and practice. See "Management" in this Appendix. A full-time apartment manager is on-site daily. Additionally, tenants have available the services of a secretary, business office personnel, and security and maintenance personnel. Tenants of the Project are eligible to receive the following services and benefits included in the monthly rent: blood pressure check and nurse consultant; planned daily activities, including exercise A-2 programs, bible studies, crafts, and musical groups; garden plots; tenants' meetings; health presentations; shopping trips, provided twice weekly; weekly consultations of a Marquette Bank representative, located at the Marquette Bank in the North Ridge Care Center; interior maintenance, including painting, heating repairs, plumbing repairs and appliance repairs; volunteer opportunities; an "I'm OK system" which is checked daily; weekly transportation to North Ridge Care Center; and regularly scheduled van outings. Additional on-site services which can be arranged on a fee-for-service basis include the following: nursing services in the tenants' apartments including RN visits, lab arrangement follow up, and medication visits (offered by North Ridge Home Health, a licensed division of North Ridge Care Center, Inc.); companion and homemaker services; and housekeeping and laundry. The following services located at North Ridge Care Center are also available for tenants of the Project on a fee-for-service basis, with transportation to North Ridge Care Center provided twice each week at no charge: physical, occupational and speech therapy; CareBreak adult day care; a beauty and barber shop; and dentist, podiatrist and optometrist offices. Other services located on the North Ridge Campus include a pharmacy/gift shop and a bank. Tenants may also choose a noon meal served in the congregate dining room of the Project, with the meals being prepared at North Ridge Apartments and delivered for consumption on the Project's premises for fees not exceeding costs. Additionally, optional evening meals are served Monday through Saturday at the Project; tenants can choose either a three -meal or six -meal plan. Tenants. Pursuant to a Declaration of Restrictive Covenants between the St. Paul HRA, the Trustee, and the Company (the "Declaration"), twenty percent (20%) of the units must be held available for persons whose incomes (not adjusted for family size) do not exceed eighty percent (80%) of the area median income of the Minneapolis/St. Paul metropolitan area. For the foregoing purposes, eighty percent of the current median annual income in the Minneapolis/St. Paul metropolitan area is $43,680. The Company believes that the primary service area for tenants in the Project is the northwestern portion of Hennepin County, including the communities of New Hope, Plymouth, Maple Grove, Brooklyn Park, Crystal, Robbinsdale and Brooklyn Center. The secondary service area extends approximately 10 miles beyond that of the primary service area and includes the western suburbs of Hennepin County. In 1995, the average age of the Project tenants was 81.7. Occupancy. Occupancy in a housing project for older adults changes as tenants become older and more in need of assistance with their daily activities. Typically, a waiting list of between 5 and 20 persons exists for the Project. Since 1990, average occupancy rates have been as follows: Occupancy Rates of the Project Year Percent Occupied 1990 96.10% 1991 96.10% 1992 93.43% 1993 91.41 %* 1994 94.73% 1995 97.86% TO 3/31/96 97.66% * A number of factors contributed to lower occupancy rate in 1993. Based on information available to the Company, almost 40 percent of vacating tenants transferred to facilities providing a higher level of care, with 87.5 percent of those remaining on the North Ridge Campus (moving to either North Ridge Apartments, its Personal Care Suites, or North Ridge Care Center); and approximately 40 percent of the vacating tenants moved to A-3 apartments with lower rental rates. Additionally, several tenants moved to a new elderly complex, Waterford in the Park Apartments, which opened at 6216 Louisiana Avenue in Brooklyn Park July of 1993 with initial rent concessions. See "Competition," "Turnover," and "Rent." Turnover. Set forth below for the following years are the number of times units changed tenants. In connection with each change, the Company repaints the walls, cleans the carpet, and repairs any damage. Turnover, 1991 - 1995 Transfer: 1991 1992 1993 1994 1995 to North Ridge Care Center 9 10 11 9 9 to North Ridge Apartments 1 2 2 3 0 to other apartments 4 1 16 8 4 to other catered living 0 0 1 0 0 to other care centers 3 2 1 7 2 out of state 0 1 2 2 1 to live with family 0 2 1 1 3 death 5 5 5 3 6 to Personal Care Suites 0 0 1 0 1 bought house/lake home 1 1 1 3 2 Total Turnover 23 24 41 36 28 Percentage of Total Units 17.83% 18.60% 31.78%* 27.91% 21.71% * The higher rate of turnover for the Project was due to a combination of tenants transferring to higher care units (approximately 40%) and tenants moving to lower cost apartments. In 1994, 52 percent required a higher level of care. Project Management is unable to predict from year to year what percentage of tenants will require a higher level of care. Rens. Tenants of the Project pay rent each month on a month-to-month basis. Rent includes several services provided by employees of North Ridge Care Center, Inc., as well as central heating and garbage pick- up. Telephone, electricity and cable television are billed separately. See this Appendix: "THE PROJECT -- Staff and Services." The following chart sets forth the rental rates since the Project was opened in 1985. The Company believes its rental rates compare favorably with comparable elderly housing in the Minneapolis -St. Paul greater metropolitan area. See this Appendix: "THE PROJECT -- Competition and Marketing." Competition and Marketing Competition. In the Company's opinion, the Project's primary service area currently provides a limited number of independent living projects for the elderly, and the Company believes that its monthly rental A-4 Historic Rental Rates of the Project 1985-87 1988-90 1991-92 1993-94 1995 1996 1 BR $495 $525 $550 $575 $585 $590 1 BR w/Den $675 $700 $725 $750 $765 $775 1 BR -Handicapped $550 $550 $575 $600 $610 $610 2 BR $725 $750 $775 $800 $815 $825 Heated Garage $ 25 $ 25 $ 30 $ 30 $ 30 $ 30 Competition and Marketing Competition. In the Company's opinion, the Project's primary service area currently provides a limited number of independent living projects for the elderly, and the Company believes that its monthly rental A-4 rates at the Project are competitive with the other similar housing for the elderly within the primary service area. See `BONDHOLDERS' RISKS -- Competition." Set forth below is selected information comparing the Project with certain competitors in the primary service area. This information has been internally prepared by the Company based on interviews with the listed facilities' staff, without independent verification. A number of such required debt restructuring in the past. [Remainder of Page Intentionally Blank] A-5 Project's telephone facilities Apartment Rental hates Survey As of February 19, 1996 Facility and Location Rental Rates # Units Selected Services Included Chardon Court (The Project) 1 BR (645 sq. ft.) - $590 129 units [See description above] 2 BR (1,036 sq. ft.) - $825 Copperfield 1 BR (625 & 658 sq. ft.) - $795 157 units Okay check 4200 -40th Ave. N. 2 BR (868 & 920 sq. ft.) - $995 Van for grocery shopping twice a week Robbinsdale Full-time activity director Maranatha Place 1 BR (634 to 659 sq. ft.) - $760 58 units Bus for shopping and events 5415 -69th Ave. N. 2 BR (898 sq. ft.) - $965 Continental breakfast Brooklyn Center 2 BR with 2 Baths - $980 Part-time activity person No deposit, no lease Secured building Housekeeping once a week (clean bathroom and kitchen floor) All utilities except phone Earle Brown Commons 1 BR (600 to 627 sq. ft.) - 140 units Secured building 6100 Summit Drive N. $575 to $625 Bus for shopping and events Brooklyn Center 2 BR (850 sq. ft.) - $730 Full-time activity director I BR & Den (725 to 850 sq. ft.) - On-site caretakers $680 to $730 Garage St. Therese New Hope 1 BR (590 sq. ft.) - $760 220 units Full-time activity staff 8008 Bass Lake Road 2 BR (860 sq. ft.) - $985 Pull cords New Hope $500 entrance fee (recently down "I'm okay" from $1,500) refundable until Bus for grocery shopping and some occupant moves into unit activities 24-hour security day nurses Maid service every two weeks (vacuum, clean bathroom, wipe up kitchen) North Ridge Apartments 1 BR (590 sq. ft.) - $830 205 units Full-time activity staff 5500 Boone Ave. N. 2 BR (900 sq. ft.) - $1,070 "I'm okay" New Hope Emergency call Quarterly housekeeping All utilities except phone 24-hour security Bus for grocery and other shopping Callibre Chase 1 BR (797 to 897 sq. ft.) - 79 units Caretakers in building 6315 -55th Ave. S. $617 to $622 Garage Crystal 2 BR (1,003 to 1,062 sq. ft.) - Secured building $707 to $742 $400.00 deposit refundable Waterford 1 BR (800 sq. ft.) - $540 144 units Manager oversees activities 6216 Louisiana Ave. 2 BR (1,035 sq. ft.) - $640 Caretakers maintain common areas Brooklyn Park $300 deposit Secured building Detached garage Two additional housing projects that may compete with the Project are currently under construction or development. In Maple Grove, an 88 -unit project targeted to elderly persons with modest incomes is expected A-6 to be opened in October, 1996, with tentative monthly rents at $475 to $595 for one -bedroom units (including heat). In Osseo, a 29 congregate unit and 30 assisted -living unit facility is under development. The Project faces direct competition from elderly independent living multifamily rental housing facilities. Additionally, tenants of the Project have a wide range of housing alternatives, ranging from rental apartments for general occupancy to single family residences. Marketing. Marketing of the Project consists of placing advertisements in various local newspapers and apartment journals, holding "open houses" and receiving resident and business referrals. The Company also prepares and distributes brochures and flyers describing the Project. Management Since completion, the Project has been managed formally or informally by North Ridge Care Center, Inc. On September 30, 1995, the management arrangement was formalized in a Management Agreement, pursuant to which North Ridge Care Center, Inc. was appointed the agent of the Company for the purpose of operating the Project. See this Appendix: "THE COMPANY-- North Ridge Care Center, Inc." The Management Agreement has an initial term of one year, and will renew automatically from year to year unless any party gives a termination notice to the other no later than 30 days before such anniversary date. Additionally, the Management Agreement can be terminated at any time by any party upon 90 days' notice. Under the Management Agreement, the Company is required to pay to North Ridge Care Center, Inc. a management fee equal to $4,250 per month, adjusted annually to reflect the actual costs of providing such services. The Company is required to pay all expenses incurred by North Ridge Care Center, Inc. under the Management Agreement, including without limitation, direct compensation and fringe benefits for North Ridge Care Center, Inc.'s employees, consultants and independent contractors. Compensation and benefits charges are allocated to the Project according to time spent working on Project matters. Operating History and Pro Forma Data Set forth below, derived from unaudited and audited financial statements of the Company, is selected financial data showing operating results and computed pro forma debt service coverage for the Project for the years ended December 31, 1991, 1992, 1993, 1994, and 1995, together with certain unaudited data for the four-month periods ended April 30, 1995 and 1996. 1:6 Northridge Properties of New Hope Financial Information Expenses Operating Expenses 364,117 Fiscal Years Ended 12/31 381,260 4 Months Ended 4/30 396,538 1991 1992 1993 1994 1995 1995 1996 488,854 unaudited unaudited audited audited audited unaudited unaudited Revenues: 58.142 58.114 Amortization Elderly Housing Revenue $864,172 $854,027 $854,989 $879,220 $922,765 $301,591 $309,504 Meals Revenue 54,602 51,846 41,843 46,137 48,556 15,968 17,694 Other Services Revenue 9,307 35,646 18,539 8,063 16,737 5,356 6,587 Interest Income 55,289 49,914 50,719 48,721 43,643 13,549 13,755 Gain on Sale of Property 0 0 4.650 0 0 0 0 Total Revenues $983,370 991 433 $970,740 $982,141 $1.031.701 $336,464 $347.540 Expenses Operating Expenses 364,117 394,726 381,260 451,892* 396,538 136,197 159,889 Interest 522,109 504,154 497,423 492,277 488,854 164,222 162,022 Depreciation and 196.642 195.712 191.706 176.588 174,565 58.142 58.114 Amortization Total Expenses $1.082.868 $1.094.592 $1.070.389 $1,120,757 $1.059.957 $358,560 380 025 Net Income (Loss): $(99,498) $(103,159) $(99,649) $(138,616) $(28,256) $(22,096) $(32,485) Plus: Depreciation & 196,642 195,712 191,706 176,588 174,565 58,142 58,114 Amortization Interest(l) 522,109 504,154 458,644 454,588 451,957 164,222 162,022 Less Gain from Asset Sale 0 0 4.650 0 0 0 0 Net Income Available for J619 25359$ 6'70754$ 6.051 492 560598 266 $200,268 IIAL651 Debt Service Pro Forma Debt $409,875 $409,875 $409,875 $409,875 $409,875 NA NA Service" )12) Pro Forma Debt Service 1.51 1.45 1.33 1.20 1.46 NA NA Coverage on Bonds (3) * The increase in 1994 is generally attributable to non-recurring expenses for painting and caulking in the approximate amount of $76,000 (1) Excludes interest on certain subordinated debt owed to an affiliate of the Company of $38,779, $37,689 and $36,897 for 1993, 1994 and 1995, respectively. (2) Equal to maximum annual debt service on the Bonds, assuming a weighted average interest rate of 7.34°%. Does not include principal and interest payments on certain other debt which the Company owes to an affiliate. See Appendix A: `THE COMPANY -- Related Party Transactions." (3) Reflects solely a mathematical computation of the calculated Net Income Available for Debt Service divided by the stated Pro Forma Debt Service. The North Ridge Campus Including the Project, North Ridge Care Center, Inc. provides choices for the elderly requiring a range of health care needs, from independent living to a care center. The 15 -acre North Ridge Campus encompasses the following `continuum" of care: Chardon Court. Chardon Court (the Project) offers maximum independence combined with security and easy access to health services. North Ridge Apartments. North Ridge Apartments consists of a four-story, 180 -unit apartment complex providing a combination of independence with added security and care. Additional features (in comparison with the Project) include evening meals in a congregate dining room, 24-hour security, an "I'm OK" system and an emergency response system, scheduled daily activities, home care services, and enclosed access to beauty and barber shop, bank, and pharmacy. Personal Care Suites. North Ridge Apartments also includes 25 "Personal Care Suites" for assisted living, which is a step between independent apartment living and the routine and supervision provided in the Care Center. Features include private living quarters with half bath and storage space, meals served in the dining area, assistance with bathing and dressing, and a 24-hour nurse on call at all times. North Ridge Care Center. North Ridge Care Center is a 559 -bed licensed and certified skilled -nursing facility divided into several areas each staffed and managed as an independent unit. Some of the units specialize in providing care for residents with complex medical needs, including subacute care and dementia. Since 1966, North Ridge Care Center has served more than 7,000 elderly persons. North Ridge Care Center is also one of the largest licensed for-profit nursing homes in the State of Minnesota. North Ridge Home Health, a division of North Ridge Care Center, Inc., also offers home health services, tailored to fit individual needs, to the tenants of the Project and North Ridge Apartments. North Ridge Home Health is licensed by the Minnesota Department of Health. Other services on the North Ridge Campus include physical, occupational and speech therapy departments; various amenities including a beauty/barber shop, a pharmacy/gift shop, a bank and a dental office; regularly scheduled visits by a podiatrist and an optometrist; and access to dry-cleaning, laundry, transportation and grocery/dairy services. North Ridge Care Center, Inc., with approximately 940 full-time and part-time employees, is one of the largest employers in the Municipality. NONE OF THE FOREGOING FACILITIES OR OPERATIONS, OTHER THAN THE PROJECT, SECURES OR IN ANY MANNER IS OBLIGATED FOR THE PAYMENT OF THE BONDS OR INTEREST THEREON. THE COMPANY General Northridge Properties of New Hope Limited Partnership (the "Company") was organized in 1985 under the laws of the State of Minnesota as a limited partnership for the purpose of developing, constructing, owning, and operating a rental housing facility to be occupied principally by elderly persons. See this Appendix: "THE PROJECT." The Company has four general partners, two of whom are also limited partners. The principal business offices of the Company are located at 5430 Boone Avenue, New Hope, Minnesota 55428 and its telephone number is (612) 536-7000. The Company has, and expects to have, no material assets other than its interest in the Project, revenues derived therefrom, and funds held by the Trustee pursuant to the Indenture. Immediately following issuance of the Bonds, the Company will have no material liabilities other than the amounts owning under the Loan Agreement, the indebtedness to North Ridge Care Center, Inc. described above, and liabilities incurred in the ordinary course of the operation of the Project. Payment obligations of the Company under the Loan Agreement are recourse only to the Company and its assets, but not to the partners or their assets. The Loan Agreement permits the transfer of the Project under certain circumstances to certain qualified transferees, as long as any new owner assumes the obligations of the Company under the Loan Agreement, the Declaration, the Mortgage and the Assignment, the Company A-9 remains fully obligated and responsible under the Loan Agreement and the Trustee is furnished an opinion of Bond Counsel. General Partners of the Company Information about the general partners of the Company is as follows: Charles T. Thompson, 39, is a five percent (5%) general partner and a fifty percent (50%) limited partner of the Company and the chief executive officer and president of North Ridge Care Center, Inc., which position he has held since 1995. From 1979 to 1987, Mr. Thompson was comptroller of North Ridge Care Center, Inc., during which time he managed the planning, financing and construction of elderly housing as well as additions and renovations to the nursing home. As a licensed nursing home administrator, Mr. Thompson serves as administrator of the nursing home from 1988 through 1994. Mr. Thompson received a B.S. in Business Administration from Northern Arizona University in 1975 and participated in the University of Minnesota Graduate Program in Public Health for Long Term Care in 1979 and 1980. He is a member of the board of directors of Marquette Banks Northwest Area, the board of directors of Senior Outreach Services, Inc., and North Memorial Medical Ethics Board. M. Melinda Pattee, 46, is a five percent (5%) general partner and fifty percent (50%) limited partner of the Company and the Secretary/Treasurer of North Ridge Care Center, Inc.. She has been the Administrator of North Ridge Care Center since 1995. From 1978 to 1985, Ms. Pattee was an occupational therapist at the nursing home, from 1985 to 1986 she was the special projects coordinator, and from 1986 through 1994, she was the director of supportive services, in which position her responsibilities included managing the operations of the nursing home. Ms. Pattee is a graduate of the College of St. Catherine, from which she received a B.A. in occupational therapy. She is a licensed nursing home administrator, having done her course work for such licensure at the University of Minnesota. She is a member of the TwinWest Chamber Foundation Advisory Board, Northwest YMCA Advisory Board, Women's Health Leadership Trust, and Independent School District 281, Highview Alternative High School Advisory Board. Charles P. Thompson, 65, is a forty-five percent (45%) general partner of the Company and until 1995 was the chief executive officer of North Ridge Care Center, Inc.. Mr. Thompson has received numerous honors, including entrepreneur of the year in 1991 from the TwinWest Chamber of Commerce, WCCO Good Neighbor Award, also in 1991, and the New Hope Mayor's Outstanding Achievement Award in 1994. In 1995 he received special recognition from the Northwest Hennepin Human Service Council. Mr. Thompson holds a degree in pharmacy from the University of Minnesota and from 1953 to 1971 was an owner of Medical Center Pharmacy. He has also been on the board of directors of numerous organizations, including Marquette Bank New Hope, North Hennepin Community College Foundation, and Presidents Club, University of Minnesota. James J. Parsee, M.D., 71, is a forty-five percent (45%) general partner of the Company and an assistant professor, Department of Family Practice and Community Health, University of Minnesota Medical School. A 1953 graduate of Creighton University Medical School, Dr. Pattee began active practice as a family physician in 1954. From 1966 to 1994, he served as Medical Director of North Ridge Care Center, and from 1976 to 1987, he was coordinator of the Geriatric Program at the University of Minnesota Medical School. His many past and present professional associations include the Aging Committee of the American Medical Association, member and Diplomat of the American Academy of Family Physicians, Certification by the American Board of Family Physicians, American Medical Association Representative, Joint Commission on Accreditation of Hospitals, Professional and Technical Advisory Committee on Long -Term Care, and Board of Directors, American Geriatric Society. From 1988 through 1995, Dr. Pattee has served as program chairperson for fifteen sessions of Medical Directors Training Course. He is currently a member of the American Medical Directors Certification Council, which approves applications to become Certified Medical Directors. He has published more than 35 articles and books and has made well over 100 presentations on A-10 medical and geriatric care topics. In 1995 Dr. Pattee spoke at six workshops and gave five lectures on a variety of health care and geriatric issues at Ain Shams University, Cairo, Egypt. North Ridge Care Center, Inc. On September 30, 1995, two of the general partners of the Company, Charles T. Thompson and M. Melinda Pattee, who together owned 30% of the shares of North Ridge Care Center, Inc., purchased the remaining 70% from Charles P. Thompson and James J. Pattee, respectively, making them the sole owners and sole directors of North Ridge Care Center, Inc., which owns North Ridge Apartments and North Ridge Care Center. Under the Management Agreement dated as of the same date, the Company pays North Ridge Care Center, Inc. a management fee of $4,250 per month, which amount is to be adjusted annually to reflect the actual costs of the services provided thereunder. See this Appendix: "THE PROJECT -- Management." Related Party Transactions At December 31, 1995 and 1994, the Company owed approximately $480,000 and $531,000, respectively, on unsecured demand notes (the "Notes") bearing interest at rates ranging from 6.5% to 8%. Historically, payments of principal have been made at the discretion of management. The Company recorded $36,897, $37,689 and $38,779, respectively, in interest expense on notes payable to related parties for the years ended December 31, 1995, 1994, and 1993. In accordance with a Subordination Agreement dated as of July 1, 1996 among the Company, North Ridge Care Center, Inc. and the Trustee, the Notes will be subordinated to the lien of the Mortgage and payment of the Bonds. North Ridge Care Center, Inc. may make principal and interest payments on the Notes as long as those payments do not result in an Event of Default. Additionally, during 1995, 1994 and 1993, the Company paid $33,100, $28,700 and $28,800, respectively, for management fees due to North Ridge Care Center, Inc. See this Appendix: "THE PROJECT -- Management." North Ridge Care Center, Inc. is reimbursed for any transportation or meal services it provides to the tenants of the Project. A-11 (This page has been left blank intentionally.) APPENDIX B DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF PRINCIPAL DOCUMENTS DEFINITIONS OF CERTAIN TERMS In addition to the terms defined elsewhere in the Official Statement, the following terms shall have the meanings set forth below: Code: the Internal Revenue Code of 1986, as amended. Determination of Taxability: the issuance of a statutory notice of deficiency by the Internal Revenue Service, or a ruling of the National Office or any District Office of the Internal Revenue Service, or a final decision of a court of competent jurisdiction which holds in effect that the interest payable on any Bond is includable in the gross income of an owner of such Bond for federal income tax purposes (other than an owner who is a "substantial user' of the Project or a "related person" as such terms are defined in Section 103(b)(13) of the 1954 Code), if the period, if any, for contest or appeal of such action, ruling or decision by the Company or any Bondholder has expired without any such contest or appeal having been properly instituted by the Company or a Bondholder; provided, that the Company has been given notice of and the right to participate in such proceedings to the extent provided in, and in accordance with, the provisions of the Loan Agreement and the Indenture, and provided further that no such contest or appeal may be undertaken by the Company unless it first delivers to the Trustee an opinion of Bond Counsel dated as of a then current date to the effect that interest payable on the Bonds is not includable in gross income of the owner of the Bonds for federal income tax purposes (other than an owner who is a "substantial user" or "related person" as such terms are defined in Section 103(b)(13) of the 1954 Code). Governmental Obligations: (a) direct general obligations of, or obligations the prompt payment of the principal of and the interest on which is fully and unconditionally guaranteed by, the United States of America, (b) obligations the payment of the principal of, premium, if any, and interest on which is fully guaranteed as a full faith and credit obligation of the United States of America, and (c) certificates or other evidence of ownership in principal to be paid or interest to accrue on a pool of obligations of the type described in (a) or (b) above, which obligations are held by a custodian (any obligation described in (a) or (b) above may be issued or held in book entry form on the books of the Department of Treasury of the United States of America). Land: the real estate subject to the lien of the Mortgage, but excluding any real estate released from the lien of the Mortgage pursuant to the terms of the Mortgage. Management Consultant: an independent firm which is a professional management consultant with respect to operation of senior rental housing developments which is selected by the Company and which has the skill and experience necessary to render the particular report required by the Loan Agreement. Mortgaged Property: the properties subject to the lien of the Mortgage, other than property released from the lien of the Mortgage. Mortgagee: the Municipality or any assignee of its interest in the Mortgage, including the Trustee. M-1 Net Income Available for Debt Service: for any period of calculation the total operating revenue of the Project, including interest earnings on amounts in the Reserve Fund for such period, over expenses of operation of the Project, to which shall be added depreciation, amortization and interest expense on the Bonds, to the extent included in expenses of operation of the Project, and from which shall be excluded any extraordinary items and any gain or loss resulting from either extinguishment of indebtedness or the sale, exchange or other disposition of assets. Outstanding: when used with reference to Bonds, as of the date of determination, all Bonds authenticated and delivered under the Indenture, except: (A) Bonds theretofore canceled by the Trustee or delivered to the Trustee canceled or for cancellation; (B) Bonds deemed paid as described in "The Indenture—Discharge of Lien" in this Appendix B; (C) Bonds in lieu of which other Bonds shall have been authenticated and delivered pursuant to the Indenture; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Bonds have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, Bonds owned by the Municipality or the Company (or a "related person" as defined in Section 147(a) of the Code) shall be disregarded and deemed not to be Outstanding, except that in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which the Trustee knows to be so owned shall be disregarded. Permitted Investments: (i) Government Obligations, (ii) obligations issued or guaranteed as to principal and interest by any agency or person controlled or supervised by and acting as an instrumentality of the United States of America, pursuant to authority granted by the Congress of the United States of America, (iii) obligations of the Government National Mortgage Association (including participation certificates issued by such Association), and the Federal National Mortgage Association (including participation certificates issued by such Association), (iv) interest-bearing deposit accounts (which may be represented by certificates of deposit, time deposit open account agreements or other deposit instruments) in national or state banks (including, without limitation, the Trustee) which deposits are either fully insured by the Federal Deposit Insurance Corporation or are with banks rated "AA," "A-1" or "P-1' by Moody's or Standard & Poors, (v) bankers' acceptances drawn on and accepted by national or state banks (including, without limitation, the Trustee) rated "AA," "A-1" or "P-1" by Moody's or S&P, (vi) notes or commercial paper rated in the highest rating category by Moody's or Standard & Poors, (vii) shares of investment companies (or cash equivalent investments) which are authorized to invest only in assets or securities described in (i), (ii) or (iii) above, (viii) repurchase agreements with financial institutions fully secured by securities described in (i), (ii) or (iii) above, provided that such securities securing repurchase agreements shall be in the possession of the Trustee or a third party (other than the other party to such repurchase agreement) acting solely as agent for the Trustee, and (ix) investment agreements with banks which meet the rating criteria set forth in (iv) above or investment agreements with non-bank financial institutions of which (a) all of the unsecured, direct long-term debt which is rated by a Rating Agency in one of the two highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) for obligations of that nature; or (b) if such non-bank financial institutions have no outstanding long-term debt which is rated, all of the short-term debt which is rated by Standard & Poor's and Moody's is rated the highest rating category (without regard to any refinement or gradation B-2 of rating category by numerical modifier or otherwise) assigned to short-term indebtedness by such Rating Agencies. Each Permitted Investment shall mature no later than the next Interest Payment Date or shall be capable of being sold or liquidated on or prior to such Interest Payment Date at the option of the Trustee at a price of not less than the principal amount thereof plus accrued interest. Project Equipment: all items of machinery, furniture, equipment and other personal property so owned or hereafter acquired by the Company, including the proceeds therefrom, other than such items of machinery, furniture, equipment and other personal property which are disposed of by the Company and replaced with similar items. Reserve Requirement: $205,000. IM THE LOAN AGREEMENT The following is a summary of certain provisions of the Loan Agreement and is qualified in its entirety by reference to the Loan Agreement. Refunding of the Refunded Bonds The Loan Agreement provides that the Municipality will issue the Bonds and that the proceeds will be lent to the Company to pay a portion of the cost of redemption of the Refunded Bonds. Sale of Project Title to the Project will be and remain in the Company, and the Municipality, the Trustee and the Bondholders will have no interest therein except those interests therein granted to the Trustee and the Bondholders by the Mortgage and the Assignment. The Company may sell the Project or enter into a master lease of the Project, or any part thereof, for any lawful purpose provided that (a) no such sale or lease shall be inconsistent with the provisions of the Loan Agreement, the Mortgage, the Assignment or the Indenture; (b) the Company shall remain fully responsible for its obligations under the Loan Agreement and the Mortgage; (c) no purchaser or lessee may utilize a substantial portion of the Project for an activity that would not qualify as a "multifamily housing development' under the Act; (d) any purchaser shall assume all of the obligations of the Company under the Loan Agreement, the Declaration, the Mortgage and the Assignment and shall have a net worth of at least $2,000,000 and experience in owning or operating at least one senior rental housing development which is similar in operation to the Project; and (e) there shall be furnished to the Trustee an opinion of Bond Counsel to the effect that the excludability of interest on the Bonds from gross income will not be adversely affected by such sale or lease. Loan Agreement Term and Payments The term of the Loan Agreement commences on the date of issuance of the Bonds and extends to June 1, 2026, unless sooner terminated in accordance with the provisions thereof. The Company agrees to repay the loan made by the Municipality with interest by making monthly Loan Repayments to the Trustee. The Loan Repayments are scheduled to be sufficient, in the aggregate, to pay in full when due all the Bonds from time to time outstanding, including the total principal and interest becoming due and payable on the Bonds to the respective dates of payment thereof whether at, before or after their stated maturity. In addition, the Company agrees to pay interest on overdue installments of principal and (to the extent lawful) interest on the loan at the rates borne by the Bonds as to which such installments are overdue. The Company further agrees to pay all reasonable fees and expenses of the Trustee for services rendered under the Indenture and make the required deposits to the Repair and Replacement Reserve Fund. The Company's obligations to make Loan Repayments under the Loan Agreement are unconditional. Limitation on Liability of Partners There shall be no personal liability of the general or limited partners of the Company under the Loan Agreement, Mortgage or Assignment except as hereinafter set forth. The personal liability of the Company and its partners shall be limited to the assets of the Company, the Project and any collateral securing the Loan Agreement, including without limitation, the Mortgage and the Assignment, and any and all funds held by or on behalf of the Trustee for the benefit of the bondholders. Notwithstanding the foregoing, the general partners of the Company shall be liable personally for any IRV distributions of profits and loss from the Company made during the pendency of an Event of Default under the Agreement. In addition, the general partners of the Company shall be liable personally for any losses suffered by the Bondholders as a direct result of any intentional waste of all or any portion of the Project; any intentional misapplication of insurance or condemnation proceeds; or any fraud or false representation by the Company in this Official Statement or in any other materials delivered to the Bondholders in connection with the original issuance of the Bonds. Special Covenants of the Company Indemnification. The Company will indemnify and save harmless the Municipality and its officers, agents and employees from and against any and all losses, costs, charges, expenses, judgments and liabilities incurred by it or them in connection with the Project or the transactions contemplated by the Loan Agreement and the Indenture, including but not limited to, the issuance and sale of the Bonds. Existence. The Company will agree to maintain its existence as a Company organized under the laws of the State of Minnesota throughout the term of the Loan Agreement and agree not to wind up or otherwise dispose of all or substantially all of its assets; provided that the Company may sell or otherwise transfer to another Person all or substantially all of it assets as an entirety and thereafter wind up (and be discharged from liability under the Loan Agreement) if the transferee Person assumes in writing all of the obligations of the Company under the Loan Agreement and any sale of the Project complies with the provisions of the Loan Agreement with respect to sale of the Project. See "Sale of Project' above. So long as the Company is the owner of the Project the general partners in the Company as of the date of the Loan Agreement or their lineal descendants shall own at least two-thirds of the general partnership voting interests in the Company. The general partners of the Company as of the date of the Loan Agreement are Charles T. Thompson, Charles P. Thompson, James J. Pattee, M.D. and M. Melinda Pattee. Rates and Charges; Retention of Management Consultant If the Net Income Available for Debt Service of the Company for any fiscal year is less than 110% of the debt service on the Bonds during such fiscal year, then the Company will promptly employ a Management Consultant to review and analyze the financial statements for the Company and the Project, inspect the Project, its operation and administration and submit to the Company and the Trustee a written report, and make such recommendations as to the operation and administration of the Project as such Management Consultant deems appropriate, including any recommendation as to a revision of the rents and fees of the Project or the methods of operation thereof. The Company will consider any recommendations by the Management Consultant and, to the fullest extent feasible, to adopt and carry out such recommendations. So long as the Company is otherwise in full compliance with its obligations under the Loan Agreement, including following, to the fullest extent feasible, the recommendations of the Management Consultant, it shall not constitute an event of default under the Loan Agreement that the Net Income Available for Debt Service of the Company for any fiscal year of the Company is less than 110% of the debt service on the Bonds for such fiscal year. Project Maintenance and Taxes The Company will be obligated to, at its own expense, keep the Project in good repair and operating condition and in as safe condition as its operations will reasonably permit, making all repairs thereto and renewals and replacements thereof which may be necessary for this purpose, in the reasonable judgment of the Company, so that the Project will remain suitable for its intended use. The IM Company will agree to pay all taxes, assessments, utility charges and other governmental charges imposed upon or against the Project. Modifications The Company may from time to time make any additions, modifications, substitutions, deletions, or improvements to the Project that it may deem desirable for its purposes; provided, however, that no addition, modification, substitution, deletion or improvement shall be made in such a manner or to such an extent as to (1) cause the interest on the Bonds (in the hands of any person who is not a "substantial user' of the Project or a "related person") to become includible in gross income for purposes of federal income taxation, (2) adversely and materially affect the operating efficiency of the Project, or (3) materially impair the value of the Project. Casualty or Condemnation If, while any of the Bonds remain outstanding, part or all of the Project is taken by eminent domain or destroyed or damaged, unless the Company exercises its option to accelerate repayment of the loan and to direct the redemption of all outstanding Bonds (see "Company Options' below), the Company will replace, repair, rebuild or restore the Project to substantially the same condition as existed before such taking or event causing damage or destruction. Insurance The Company is obligated to procure and maintain continuously in effect with respect to the Project policies of insurance against such risks and in such amounts, with such deductible provisions, as are customary for a prudent owner of property of the type and size comparable to the Project. Without limiting the generality of the foregoing provision, the Company is specifically required to maintain the following insurance: (A) Direct damage insurance covering the following risks of loss: (i) Fire, (ii) Extended Coverage Perils, (iii) Vandalism and Malicious Mischief, (iv) Boiler Explosion (but only if boilers are present), (v) Water Damage, (vi) Demolition Cost, (vii) Debris Removal, and (viii) Collapse, in an amount equal to the full replacement value of the building, but in no event less than the principal amount of the Outstanding Bonds. ("Full replacement value" shall include the actual replacement cost of the building (exclusive of foundations, footings, architectural, engineering, legal, and administrative fees) and contents therein, without deduction for depreciation.) Coverage on any portion of the Project during construction thereof shall be maintained on a completed value basis during the course of construction. "Full replacement value" shall be determined at least once every three years by an appraisal or report from an appraiser or reputable insurance consultant selected by the Company. A copy of such appraisal or report shall be furnished to the Trustee by the Company. The policies required by this paragraph (A) shall either be subject to no co-insurance or contain an agreed amount clause. (B) General liability insurance against liability for injuries to or death of any person or damage to or loss of property arising out of or in any way relating to the condition of the Project or any part thereof, in an amount not less than $3,000,000 for all personal injuries, deaths and property damage resulting from any one accident on a combined single -limit basis; provided that the requirements of this paragraph (B) with respect to the amount of insurance may be satisfied by an excess coverage policy. (C) Workers' compensation insurance or qualified self-insurance against liability for compensation under the Workers' Compensation Act now or hereafter enacted in Minnesota to cover all persons employed by the Company and to cover liability for compensation under any such act. (D) Business interruption insurance or loss of rental income insurance in an amount adequate to make all loan repayments payable under the Loan Agreement for a period of not less than twelve (12) months after the date of damage to or destruction of the Project. All insurance required above shall be effective under a valid and enforceable policy or policies issued by an insurer of recognized responsibility licensed to do business in the State of Minnesota having a Best's Insurance Guide rating of at least "A". Company Options The Company has the option to prepay the loan in full and to direct the Municipality to call for redemption and prepayment all outstanding Bonds if (a) all or substantially all of the Project is damaged or destroyed to such extent that, in the reasonable opinion of the Company, the repair and restoration is economically not practicable or cannot be accomplished within ninety days, (b) there occurs the condemnation of all or substantially all of the Project or the taking by eminent domain of such use or control of the Project as to render it unsatisfactory for its intended use for longer than ninety days, or (c) as a result of changes in legislation or regulations the obligations of the Company under the Loan Agreement become unenforceable or impossible to perform in accordance with the intent and purposes of the parties as expressed in the Loan Agreement. Tax Exemption The Company will be obligated to observe and cause to be observed applicable provisions of the 1954 Code and the Code and the regulations thereunder to the end of preserving the exemption from federal income taxation of interest on the Bonds. In the event that interest on the Bonds becomes includable in gross income for purposes of federal income taxation, and if the Company has been given written notice of and the opportunity to participate in any proceedings relating thereto to the extent discussed above, the Company shall prepay all Loan Repayments and cause the Trustee to redeem the Bonds in whole, without premium, in accordance with the Indenture. The Company will not contest any action or decision described in the definition of Determination of Taxability unless the Company first delivers to the Trustee an opinion of nationally recognized bond counsel dated as of a then current date to the effect that interest payable on the Bonds is not includible in gross income of the Holder of the Bonds for federal income tax purposes (other than an owner who is a "substantial user" of RN Reserve Fund Upon issuance of the Bonds, $205,000 will be deposited in the Reserve Fund. All earnings from investment of the Reserve Fund shall be transferred to the Bond Fund; provided that at the time of such transfer the balance in the Reserve Fund is not less than the Reserve Requirement. The Trustee will transfer necessary amounts from the Reserve Fund to the Bond Fund if on any payment date there are insufficient funds on hand in the Bond Fund to pay principal of, premium, if any, and interest on the Bonds. Rebate Fund Under the Loan Agreement the Company is required to make deposits into the Rebate Fund in amounts equal to the amount of rebatable arbitrage, if any, which is from time to time required to be paid to the United States under Section 148 of the Code as a condition of maintaining the tax-exempt status of the interest borne by the Bonds. Amounts held in the Rebate Fund, together with investment earnings thereon, are to be paid to the United States at the times and in the amounts required by the Code. Such funds do not secure the Bonds. Repair and Replacement Reserve Fund Commencing on July 20, 1996, and on the twentieth day of each month thereafter, the Company shall deposit with the Trustee the sum of $2,000 for deposit in the Repair and Replacement Reserve Fund. Monies in the Repair and Replacement Reserve Fund shall, to the extent herein provided, be disbursed by the Trustee to and at the written request of the Company and used by the Company to pay for the complete replacement of the roof on the Project, installation of a new boiler to replace the boiler in the Project, installation of new air conditioning units in the Project or the painting and caulking of a substantial portion of the exterior of the building. Monies in the Repair and Replacement Reserve Fund may not be used for any other purpose, except to the extent applied to pay principal and interest on the Bonds upon the occurrence of an Event of Default under the Indenture and the acceleration of the principal of the Outstanding Bonds. Investment of Funds Any money held as part of established funds under the Indenture will be invested or reinvested by the Trustee, as specified by the Company, in Permitted Investments. However, no investment is to be made by the Trustee in such a manner as to cause the Bonds to be considered arbitrage bonds pursuant to Section 148 of the Code. Discharge of Lien The Indenture will be discharged if: (1) the Municipality pays or causes to be paid to the Trustee, for the holders of the Bonds, the principal and interest to become due thereon at the times and in the manner stipulated in the Indenture; (2) the Municipality keeps, performs and observes its covenants and promises in the Bonds and in the Indenture; and mm have been paid. (3) all fees and expenses of the Trustee required by the Indenture to be paid Bonds are deemed paid within the meaning of the Indenture if sufficient cash is deposited with the Trustee to pay such Bonds and the interest thereon in full to their respective maturity dates or to an earlier date on which such Bonds may have been called for redemption or if there is irrevocably deposited in escrow with the Trustee cash and/or Governmental Obligations, in such amount, bearing interest at such rates and maturing on such dates as shall be sufficient, with any cash also so deposited, to provide amounts sufficient to pay all principal and interest due on the Bonds to their stated maturity dates or to an earlier date upon which they are to be called for redemption. Default and Remedies Any of the following events shall be an "Event of Default" under the Indenture: (1) default in the due and punctual payment of any interest on any Bond; (2) default in the due and punctual payment of the principal of any Bond, whether at the stated maturity thereof or at the date fixed for redemption thereof, or upon the maturity thereof by declaration; (3) default in the due and punctual payment of any other money required to be paid to the Trustee under the provisions of the Indenture and failure to remedy such default within thirty days after written notice given pursuant to the terms of the Indenture; (4) default in the performance or observance of any other covenants, agreements or conditions on the part of the Municipality in the Indenture or in the Bonds and failure to remedy such default within thirty days after notice thereof pursuant to the Indenture or for such longer time as the Trustee shall agree in writing or as may be reasonably necessary to remedy such default provided that the Municipality is proceeding with reasonable diligence to remedy the default; or (5) any Event of Default under the Loan Agreement. Upon the occurrence of any Event of Default, the Trustee may, and upon the written request of the holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then outstanding shall, declare the principal amount of all Outstanding Bonds immediately due and payable. The Trustee may also pursue any available remedy by suit at law or in equity to enforce the covenants of the Municipality in the Indenture, including, without limitation, any remedy of a secured party under the Minnesota Uniform Commercial Code, foreclosure and mandamus, and including such appropriate judicial proceedings as the Trustee deems most effective to protect and enforce, or aid in the protection or enforcement of, the covenants and agreements in the Indenture, the Mortgage, the Assignment and the Loan Agreement. Upon the occurrence of any Event of Default under the Loan Agreement the Trustee may enforce any and all rights of the Municipality thereunder and any and all of the Trustee's rights under the Mortgage and the Assignment. Upon the request of the holders of not less than twenty-five percent (25%) in aggregate principal amount of the outstanding Bonds and a satisfactory indemnity bond, the Trustee shall exercise such one or more of the rights and powers conferred by the Indenture, the Assignment or the Mortgage as the Trustee, being advised by counsel, deems most expedient in the interests of the Bondholders; provided, however, that the Trustee may decline to comply with any such request if advised by its B-11 Release of Mortgaged Property The Company may obtain a release from the lien of the Mortgage for any part of the Land that does not contain any permanent structure upon the satisfaction of certain conditions including certification by the Company that the release of such land will not impair the structural integrity or usefulness of the Mortgaged Property or limit access to the Project. Grant of Easements, Liens, Etc. The Partnership may at any time or times grant to itself or others easements, licenses, rights-of-way and other rights or privileges in the nature of easements with respect to the Land, free from the lien of the Mortgage, or the Company may release existing easements, licenses, rights-of-way and other rights or privileges, with or without consideration, and the Trustee will execute and deliver any instrument necessary or appropriate to confirm and grant or release any such easement, license, right-of-way or privilege; provided, however, that prior to any such grant or release, there shall have been supplied to the Trustee a certification of the Company that such grant or release is not detrimental to the proper operation of the Project, and that such grant or release will not materially impair the operating unity or the efficiency of the Project or materially and adversely affect the character thereof. Tie -In Walls The Company may, at its own expense (a) connect or "tie-in" walls (including use of existing walls for the support of future adjacent buildings) and utilities and other facilities located on the Land to other structures erected on the Land or on real property adjacent to or near the Land or partly on such adjacent real property and partly on the Land, or (b) in connection with the expansion or improvement of any building on the Land, tear down any wall of such building and build an addition to such building (either on the Land or on real property adjacent thereto or partly on such adjacent real property and partly on the Land); provided, however, that, prior to any such expansion, addition, improvement, tearing down or connection with the "tie-in" walls, utilities and other facilities, the Company shall have delivered to the Mortgagee a certification of an architect as to the total costs of such expansion or improvement and a certification of the Company that the Company has sufficient funds on hand to complete such expansion or improvement and the Mortgagee shall have approved the same in writing based on a certification and/or opinion of an architect that the same will not impair the structural integrity, operating unity and the efficiency of the improvements on the Land or adversely affect the character thereof, and on an opinion of counsel stating that all party -wall agreements, easements, cross -easements or other instruments relating to such expansion, addition, improvement, tearing down or connection with the "tie-in" walls, utilities and other facilities, which are necessary or desirable to define the relative rights of the owners and encumbrances of the same therein, and to fully preserve the security of the Mortgage, have been duly executed, delivered and recorded. Environmental Matters Under the Mortgage the Company covenants, warrants and represents to the Trustee, its successors and assigns, (i) that it has not used and will not use the Mortgaged Property, and has not permitted and will not permit the Mortgaged Property to be used, whether directly or through contractors, agents or tenants, and to the best of the Company's knowledge and except as disclosed to the Trustee in writing, the Mortgaged Property has not at any time been used for the generating, transporting treating, storage, manufacture, emission of, or disposal of any dangerous, toxic or hazardous pollutants, chemical wastes or substances as defined in the Federal Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"), or the Federal Resource B-14 J Conservation and Recovery Act of 1976 ("RCRA"), or the Minnesota Environmental Response and Liability Act, Minnesota Statutes, Chapter 115A ("MERLA"), or any other federal, state or local environmental laws, statutes, regulations, requirements and ordinances ("Hazardous Materials"); (ii) that there have been no investigations or reports involving the Company or the Mortgaged Property by any governmental authority which in any way pertain to Hazardous Materials; (iii) that the operation of the Mortgaged Property has not violated and is not currently violating any federal, state or local law, regulation, ordinance or requirement governing Hazardous Materials; (iv) that the Mortgaged Property is not listed in the United States Environmental Protection Agency's National Priorities List of Hazardous Waste Sites nor any other list, schedule, log, inventory or record of Hazardous Materials or hazardous waste sites, whether maintained by the United States Government or any other state or local agency; and (v) to the Company's knowledge that the Mortgaged Property does not contain any formaldehyde, urea or asbestos, except as may have been disclosed in writing to the Trustee by the Company at the time of execution and delivery of this Mortgage. The Company agrees to indemnify and reimburse the Trustee, its successors and assigns, for any breach of these representations and warranties and from any loss, damage, expense or cost arising out of or incurred by the Trustee which is a result of a breach, misstatement of or misrepresentation of the above covenants, representations and warranties, together with all attorneys' fees incurred in connection with the defense of any action against the Trustee arising out of the above. Events of Default and Remedies Any Event of Default under the Loan Agreement will constitute an Event of Default under the Mortgage. Upon the occurrence and continuation of an Event of Default the Trustee shall have the right to proceed to enforce its rights by suit in equity or at law, either for specific performance or for the foreclosure of the Mortgage, or for the enforcement of any other appropriate legal or equitable remedy. The Company authorizes the Trustee to sell the Mortgaged Property at public auction and to convey the same to the purchaser in fee simple, the Company to remain liable for any deficiency. Further, the Trustee shall have all of the rights and remedies provided in the Uniform Commercial Code including the right to proceed under the Uniform Commercial Code provisions governing default as to the personal property included in the Mortgaged Property separately from the real estate included therein, or to proceed as to all of the Mortgaged Property in accordance with its rights and remedies in respect of said real estate. THE ASSIGNMENT The following is a summary of certain provisions of the Assignment and is qualified in its entirety by reference to the Assignment. The Company will grant, transfer and assign to the Trustee, its successors and assigns, all of its right, title and interest in and to all leases and tenancies governing all or any part of the Project, together with any and all security deposits made thereunder and all extensions, modifications and renewals of any thereof and any guarantees of the tenants' obligations under any thereof. The Company will further grant, transfer and assign to the Trustee all of the rents, income, issues and profits now or hereafter accruing or owing from such leases and the Project or any part thereof, whether occurring before or after foreclosure of the Mortgage or during the period of redemption therefrom. All of said leases and rentals are granted, transferred and assigned for the purpose of securing payment of all indebtedness evidenced by the Loan Agreement and all other sums secured by the Mortgage and performance and discharge of each and every obligation, covenant and agreement of the Company contained in the Assignment and in the Loan Agreement and the Mortgage. B-15 Upon or at any time during the continuance of an Event of Default under the Loan Agreement, the Trustee may exercise its rights under the Mortgage, or the Trustee may, at its option, without further notice, either in person or by agent, with or without bringing an action or proceeding, or by a receiver or trustee to be appointed by a court, enter upon, take possession of, maintain, manage and operate the Project, either with or without taking possession of the Project, in its own name sue for or otherwise collect and receive all rentals, and apply the same as required by laws. THE DECLARATION The following is a summary of certain provisions of the Declaration and is qualified in its entirety by reference to the Declaration. Section 103(b)(4)(A) of the 1954 Code, which applied to the Project and the Bonds, provides that interest on certain governmental obligations, substantially all (90% or more) of the net proceeds of which are to be used to provide for a project for "residential rental property," shall be excluded from gross income of the holder thereof for purposes of federal income taxation if at all times during the Qualified Project Period (as defined below), twenty percent (20%) or more of the residential units in the Project are occupied by tenants whose adjusted family income is 80% or less of the median income for the Minneapolis/ Saint Paul Metropolitan Statistical Area as determined by the United States Department of Housing and Urban Development ("Median Income"), without adjustment for family size. Tenants meeting the foregoing income requirements are referred to in this summary as "Low Income Tenants." Section 1.103-5(b) of the Income Tax Regulations (the "Regulations") sets forth certain requirements for compliance with Section 103(b)(4)(A) of the 1954 Code. The Regulations require, among other things, that (1) the twenty percent (20%) Low Income Tenant occupancy requirement must be met on a continuous basis during the Qualified Project Period (as defined below), and (2) as long as any Bonds are outstanding, all of the units in the Project must be rented or available for rental to the general public on a continuous basis. Under the Regulations, the failure to satisfy the Rental Housing Requirements (as defined below) of the 1954 Code and the Regulations with respect to the Project may, unless corrected within a reasonable period (i.e., not less than sixty days) after such noncompliance is first discovered or should have been discovered by the exercise of reasonable diligence, cause the loss of the tax-exempt status of the Bonds as of the date of their original issue, irrespective of the date such noncompliance actually occurred. The Company has executed and caused to be recorded the Declaration as covenants and restrictions running with the land on which the Project is located. In order to satisfy the rental housing requirements of the 1954 Code and the Regulations (collectively, the "Rental Housing Requirements") the Company has covenanted in the Declaration to comply with certain provisions therein regarding the operation and occupancy of the Project. The Declaration will be recorded and filed in the appropriate land records office in Hennepin County, Minnesota, and will bind the Company and its successors and assigns, including all subsequent owners of the Project or any part thereof. The provisions of the Declaration are intended to insure compliance with the Rental Housing Requirements and will remain in effect for the Qualified Project Period. The Declaration will, however, terminate with respect to the Project in the event of an involuntary loss of the Project, including the substantial destruction of the Project (unless the Project is restored), provided the Bonds are redeemed. The Declaration provides as follows with respect to the Rental Housing Requirements: ma (a) That the Qualified Project Period will commence on the date that ten percent (10%) of the residential units in the Project are first occupied, and will terminate on the later of (a) the date which is 10 years after fifty percent (50%) of the units in the Project are first occupied, (b) the date which is one-half the term of the obligation with the longest maturity in the Bond issue (including any refunding issue) after the date on which any unit in the Project is first occupied, or (c) the date on which any assistance provided under Section 8 of the United States Housing Act of 1937 terminates. The Qualified Project Period with respect to the Project has commenced. (b) All of the residential units in the Project will remain available for occupancy on a rental basis until the later of the expiration of the Qualified Project Period or the date on which no Bonds remain Outstanding. (c) As required by the Regulations, during the Qualified Project Period, twenty percent (20%) of the residential units in the Project must be occupied at all times or held for occupancy by persons or families whose adjusted family income at the time of their initial occupancy is equal to or less than eighty percent (80%) of the Median Income for the Minneapolis/St. Paul Standard Metropolitan Statistical Area, as determined by the United States Department of Housing and Urban Development. Each tenant's adjusted family income shall be determined in a manner consistent with income determinations under Section 8 of the United States Housing Act of 1937, as amended. (d) The twenty percent (20%) of the units in the Project required to be occupied by Low Income Tenants will be substantially similar to all other residential units in the Project, and the Low Income Tenants will enjoy equal access to all common facilities included in the Project. (e) The Company will report and certify its compliance with the Rental Housing Requirements as required by the Declaration, such reports and certifications to be submitted at the times required to the Trustee. (f) The adjusted family income of each Low Income Tenant will be verified by obtaining an income certification statement for such tenant. If the Company violates the Rental Housing Requirements, the Trustee may exercise whatever remedies may then be available in law or equity, including specifically the right to compel compliance with the Rental Housing Requirements by an action for specific performance. The Company must comply with certain other requirements of tax-exempt financing as well as the foregoing covenants with respect to the Rental Housing Requirements. B-17 (This page has been left blank intentionally.) APPENDIX C FINANCIAL STATEMENTS OF THE COMPANY C-1 Independent Auditor's Report Balance Sheets December 31, 1995, 1994 and 1993 Statements of Operations For the Years Ended December 31, 1995, 1994 and 1993 Statements of Changes in Partners' Deficit For the Years Ended December 31, 1995, 1994 and 1993 Statements of Cash Flows For the Years Ended December 31, 1995, 1994 and 1993 Notes to Financial Statements PAGE 1 2 3 4 5 6-9 #11I LARSON ii'ALLEN ' III' WEISHAIR & CO. CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT Partners Northridge Properties of New Hope dba: Chardon Court New Hope, Minnesota We have audited the accompanying balance sheets of Northridge Properties of New Hope dba: Chardon Court as of December 31, 1995, 1994 and 1993, and the related statements of operations, changes in partners' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Northridge Properties of New Hope dba: Chardon Court as of December 31, 1995, 1994 and 1993, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Minneapolis, Minnesota April 24, 1996 (1) / 6& �� zz? LARSON, ALLEN, WEISHAIR & CO., LLP NG. . HRIDGE PROPERTIES OF NEW HOi DBA: CHARDON COURT BALANCE SHEETS DECEMBER 31, 1995, 1994, AND 1993 ASSETS CURRENT ASSETS Cash Receivables and Other Assets Current Portion of Assets Whose Use is Limited Total Current Assets ASSETS WHOSE USE IS LIMITED Reserve Fund Pledge Account Security Deposits Total Assets Whose Use is Limited Less: Current Portion of Assets Whose Use is Limited Non -Current Assets Whose Use is Limited PROPERTY AND EQUIPMENT Land Land Improvements Buildings Equipment Furniture and Carpet Total Less: Accumulated Depredation Total Property and Equipment (Net) OTHER ASSETS Unamortized Financing Costs Total Assets LIABILITIES AND PARTNERS' DEFICIT CURRENT LIABILITIES Current Maturities - Long -Term Debt Accounts Payable Accrued Real Estate Taxes Accrued Interest Security Deposits Total Current Liabilities 1995 $ 59,711 11,902 116,587 $ 188,200 $ 500,000 45,203 71,384 $ 616,587 116,587 $ 500,000 $ 421,493 25,037 4,899,772 28,688 179,822 $ 5,554,812 1,639,998 $ 3,914,814 41,092 ipl*V $ 51,967 7,452 110,613 $ 170,032 $ 500,000 42,215 68,398 S 610,613 110,613 $ 500,000 $ 421,493 25,037 4,899,772 28,688 179,822 $ 5,554,812 1,495,318 $ 4,059,494 $ 70,976 1993 $ 56,505 14,592 98,713 $ 169,810 $ 500,000 32,640 66,073 $ 598,713 98,713 $ 500,000 $ 421,493 25,037 4,893,306 28,688 179,822 $ 5,548,346 1,348,615 $ 4,199,731 $ 100,861 $ 4,644,106 $ 4,800,502 $ 4,970,402 $ 55,530 27,756 179,449 44,222 70,360 $ 377,317 $ 55,530 23,554 179,909 68,318 69,820 $ 397,131 $ 55,530 24,016 179,878 71,446 64,111 $ 394,981 LONG-TERM DEBT (Net of Current Maturities Shown Above) 4,813,170 4,870,788 4,914,001 OTHER LIABILITIES Notes Payable - Related Party 480,348 531,056 521,277 Total Liabilities PARTNERS' DEFICIT Contribution in Aid of Construction Partners' Deficit (from Page 4) Total Partners Deficit Total Liabilities and Partners' Deficit See accompanying Notes to Financial Statements. $ 5,670,835 $ 1,466,720 (2,493,449) $ (1,026,729) $ 4644,106 (2) $ 5,798,975 $ 1,466,720 (2,465,193) $ (998,473) $ 4,800,502 $ 5,830,259 $ 1,466,720 (2,326,577) S (859,857) $ 4,970,402 NC HRIDGE PROPERTIES OF NEW HO.' DBA: CHARDON COURT STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 REVENUES Elderly Housing Revenue Meals Revenue Other Services Revenue Interest Income Gain on Sale of Property Total Revenues OPERATING EXPENSES Management Fees Meals Contracted Services Insurance Marketing Telephone Administrative Expenses Utilities Purchased Services - Maintenance Repairs Supplies Real Estate Taxes Total Operating Expenses 1995 1994 $ 922,765 48,556 16,737 43,643 $ 1,031,701 $ 33,045 38,212 17,033 16,012 3,819 3,303 8,415 61,923 13,450 7,921 11,005 182,400 $ 396,538 INCOME BEFORE DEPRECIATION, AMORTIZATION, AND INTEREST $ 635,163 DEPRECIATION AND AMORTIZATION 174,565 INTEREST NET LOSS See accompanying Notes to Financial Statements. 488,854 $ (28,256) (3) 879,220 46,137 8,063 48,721 $ 982,141 $ 26,400 32,528 4,937 17,534 8,617 3,332 5,711 65,323 13,349 86,475 7,806 179,880 $ 451,892 $ 530,249 176,588 1993 $ 854,989 41,843 18,539 50,719 4,650 $ 970,740 $ 29,195 33,105 12,642 18,648 5,156 3,282 7,377 59,217 14,599 15,441 11,264 171,334 $ 381,260 $ 589,480 191,706 492,277 497,423 $ (138,616) j--__@9,649) NC- HRIDGE PROPERTIES ter NEW HO DBA: CHARDON COURT STATEMENTS OF CHANGES IN PARTNERVDEF�Cff FOR THE YEARS ENDED DECEMBER 31,1995,1994 AND 1993 PARTNERS' DEFICIT - DECEMBER 31 ,1992 Net Loss for Year ended December 31, 1993 PARTNERS' DEFICIT - DECEMBER 31, 1993 Net Loss for Year ended December 31, 1994 PARTNERS' DEFICIT - DECEMBER 31, 1994 Net Loss for Year ended December 31, 1995 PARTNERS' DEFICIT - DECEMBER 31, 1995 See accompanying Notes to Financial Statements. GENERAL LIMITED NET PARTNERS' PARTNERS' PARTNERS' DEFICIT EQUITY DEFICIT $ (2,227,928) $ 1,000 $ (2,226,928) (99,649) — (99,649) $ (2,327,577) $ 1,000 $ (2,326,577) (138,616) — (138,616) $ (2,466,193) $ 1,000 $ (2,465,193) (28,256) — (28,256) $ (2,494 449) $ 1,000$ (2,493 449) (4) NC HRIDGE PROPERTIES OF NEW HOi DBA: CHARDON COURT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Services Cash Paid to Suppliers Interest Paid Interest Received Real Estate Taxes Paid Net Cash Provided by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property and Equipment Proceeds from Sale of Property Payment of Principal and Interest from Reserve Funds Net Receipts (Payments) to Security Deposit Escrow Interest Income Reinvested in Reserve Fund Payments of Operating Cash into Reserve Fund Net Cash Used by Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Principal Payments of Long -Term Debt Principal Payments of Related Party Notes Payable Proceeds from Borrowing - Related Party Net Cash Used by Financing Activities INCREASE (DECREASE) IN CASH Cash - Beginning CASH - ENDING RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net Loss (Page 3) Adjustment to Reconcile Net Loss to Net Cash Provided by Operating Activities: Depreciation and Amortization Gain on Sale of Property (Increase) Decrease in Other Assets Increase (Decrease) in Accounts Payable (Decrease) Increase in Accrued Expenses Net Cash Provided by Operating Activities See accompanying Notes to Financial Statements. (5) (28,256) 174,565 (4,449) 5,085 (25,439) $ 121.506 (138,616) 176,588 7,140 (1,263) (2,295) $ 41,554 (99,649) 191,706 (4,650) (5,495) (3,442) 21,033 $ 99.503 1995 1994 1993 $ 984,851 $ 934,475 $ 916,400 (211,178) (266,388) (219,892) (512,950) (495,405) (474,082) 43,643 48,721 50,719 (182,860) (179,849) (173,642) $ 121,506 $ 41,554 $ 99,503 $ - $ (6,213) $ (9,210) - - 23,775 507,298 496,794 514,164 (2,448) 3,384 (23,949) (40,870) (47,357) (49,010) (469,416) (459,037) (456,966) $ (5,436) $ (12,429) $ (1,196) $ (57,618) $ (43,213) $ (57,618) (50,708) (30,000) (35,585) - 39,550 - $ (108,326) $ (33,663) $ (93,203) $ 7,744 $ (4,538) $ 5,104 51,967 56,505 51,401 $ 59,711 $ 51,967 $ 56,505 (28,256) 174,565 (4,449) 5,085 (25,439) $ 121.506 (138,616) 176,588 7,140 (1,263) (2,295) $ 41,554 (99,649) 191,706 (4,650) (5,495) (3,442) 21,033 $ 99.503 NORTHRIDGE PROPERTIES OF NEW HOPE DBA: CHARDON COURT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Operations Northridge Properties of New Hope (a Limited Partnership) dba: Chardon Court (Chardon Court) owns and operates a 129 -unit elderly housing facility in New Hope, Minnesota. Occupancy percentages were 97.9%, 94.7% and 91.4% for the years ended December 31, 1995, 1994 and 1993, respectively. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Depreciation Property and equipment are depreciated by the straight-line method over their estimated useful lives, which are 35 years for buildings, 31 years 6 months for land improvements and 8 years for equipment, furniture and carpet. Income Taxes A partnership is not taxed as a separate entity; rather, the portion of income or loss derived by each partner is included in the partner's individual income tax return. Therefore, no provision for income taxes is included in these financial statements. Unamortized Financing Costs Unamortized financing costs relating to the issuance of the 1985 note payable are being amortized over the approximate 12 year term of the note payable, which is due and payable in 1997. Assets Whose Use is Limited Assets whose use is limited include cash deposits held by trustees under various mortgage agreements and security deposits of residents. (6) hKIlia NC—HRIDGE PROPERTIES OF NEIN HO'"c DBA: CHARDON COURT NOTES TO FINANCIAL. STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 LANG -TERM DEBT Description Security 1995 1994 1993 Note Payable - AmerUs Bank, Due April 1997 Variable Interest Rate 6.2 % - 9.2% See Below $ 4,868,700 $ 4,926,318 $ 4,969,531 Less: Current Maturities 55,530 55,530 55,530 Long -Term Debt $ 4,813,170 $ 4,870,788 $ 4,914,001 Maturity Requirements on long-term debt are as follows Year Ending December 31 Amount 1996 $ 55,530 1997 4,813,170 Total $ 4,868,700 On May 1, 1985 the Housing and Development Authority of the City of St. Paul, Minnesota (the issuer) along with other Minnesota municipalities, including the City of New Hope, entered into a joint powers agreement to adopt and implement a rental housing development bond pool program, under which the issuer would make a loan to AmerUs Bank (currently the financial institution) to enable the financial institution to make mortgage loans to provide financing for multifamily rental residential developments to be occupied partially by persons of low income. Under this joint powers agreement the issuer issued Variable Rate Demand Rental Housing Development Bonds, Series 1985-A (Minnesota Multi -City Rental Housing Program in the amount of $37,100,000. These funds were loaned to AmerUs Bank who in tum loaned the funds through developer notes to various developers. On May 1, 1985, Chardon Court was issued a developer note from AmerUs Bank in the amount of $5,200,000. The note was issued to finance the construction of a 129 -unit elderly housing facility. The note has a variable interest rate that will not exceed 9.2% nor be less than 6.2% per annum. Chardon Court has granted a security interest to AmerUs Bank. All payments of principal and interest of the developer note are made by AmerUs Bank from funds transferred to the Pledge Account. The provisions of the developer note contain restrictive covenants pertaining to financial and operational requirements of Chardon Court. (7) NOTE 3 'a T ii M " 1 P1ai)F" DEa�•�: ��H,4hil��,tJ Ct�1JF;'T ' ��TE, Tth Fi°:df:'=1,t:L S1,aTE,.1EtJlS Reserve Fund The Reserve Fund has been established to provide a reserve for payment of principal and interest on the note payable in the event the Partnership's principal and interest payments are insufficient to meet debt service requirements. Interest earned on the Reserve Fund is transferred into the Pledge Account by the Trustee. Pledge Accoun4 The Pledge Account was established for Chardon Court to deposit monthly amounts necessary to pay semi-annual principal and interest on the note payable. Fair Value It is not practicable to determine the fair value of the long-term debt as a reasonable estimate could not be made without incurring excessive costs. RELATED PARTY TRANSACTIONS North Ridge Care Center, Inc. (North Ridge), a corporation, is owned 100% by two of the partners of Chardon Court. North Ridge owns and operates a 559 -bed licensed nursing facility, a 130 -unit congregate housing facility and a 25 -unit assisted living facility for the elderly in New Hope, Minnesota. During the years ended December 31, 1995, 1994, and 1993, Chardon Court purchasedl'incurred the following expenses at cost from North Ridge: Management Fees Meals Interest Expense Contracted Services Total 1995 1994 $ 33,045 $ 26,400 38,212 32,528 36,897 37,689 1993 $ 29,195 33,105 38,779 14,430 4,386 12,642 $ 122,584 $ 101,003 $ 113,721 Chardon Court has borrowed funds from North Ridge for the initial completion of the project's construction and ongoing operations. The borrowings are made under notes payable with principal payments payable at the discretion of Chardon Court as cash is available. The following is a description of the notes and the principal outstanding at December 31, 1995, 1994 and 1993: (8) Original Interest Date of Note Amount Rate 1995 1994 1993 January 1987 $ 462,000 7.41 % $ 462,000 $ 462,000 $ 462,000 May 1988 70,000 7.5 0 29,506 59,277 May 1994 2,500 6.5 2,500 2,500 0 May 1994 4,050 6.5 4,050 4,050 0 October 1994 33,000 6.5 11,798 33,000 0 Total $ 480,348 $ 531,056 $ 521,277 (8) NL 'HRIDGE PROPERTIES OF NEW HC DBA; CHARDON COURT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 All net income (loss) other than from the sale or exchange of the property is allocated to the general partners. Allocation of net income (loss) from sale or exchange of the property is allocated 10% to the general partners and 90% to the limited partners. Distributions of available cash is allocated 10% to the general partners and 90% to the limited partners. In 1985, the City of New Hope, Minnesota issued and sold General Obligation Tax Increment Bonds and contributed a portion of the proceeds to Chardon Court as an incentive to construct an elderly housing facility in the city. Chardon Court has no direct obligation to pay the bonds. The funds contributed from the City of New Hope were used to finance the land acquisition and the development of the land into an elderly housing facility as follows: Cost of the Land $ 440,000 Interest Reduction Program 931,940 Utilities and Miscellaneous Land Improvements 94,780 Total Contribution in Aid of Construction $ 1,466,720 (9) NORTHRIDGE PROPERTIES OF NEW HOPE DBA: CHARDON COURT BALANCE SHEETS APRIL 30, 1996 AND 1995 UNAUDITED PROPERTY AND EQUIPMENT Land APRIL 30, APRIL 30, Land Improvements 1996 1995 ASSETS 4,899,772 4,899,772 CURRENT ASSETS 28,688 28,688 Cash $100,552 $92,935 Security Deposits 72,489 69,167 Receivables and Other Assets 28,495 9,912 Total Currents Assets 201,536 172,014 PROPERTY AND EQUIPMENT Land 421,493 421,493 Land Improvements 25,037 25,037 Buildings 4,899,772 4,899,772 Equipment 28,688 28,688 Furniture and Carpet 179,822 179,822 Total 5,554,812 5,554,812 Less: Accumulated Depreciation 1,688,150 1,543,498 Total Property and Equipment (Net) 3,866,662 4,011,314 OTHER ASSETS Bond Reserve Fund 500,000 500,000 Pledge Account 49,518 100,697 Unamortized Bond Costs 32,098 61,015 Total Other Assets ----- 581,616 --------------- 661,711 Total Assets 4,649,813 --------- --------- 4,845,040 --------- --------- LIABILITIES AND PARTNERS' DEFICIT LIABILITIES Bonds Payable 4,811,083 4,926,318 Notes payable - Related Party 480,348 521,056 Accounts Payable 159,270 152,876 Accrued Real Estate Taxes 149,573 149,279 Accrued Interest 36,222 43,429 Security Deposits 69,068 68,158 Activity Fund 3,463 4,492 Total Liabilities 5,709,026 5,865,608 PARTNERS' DEFICIT General Partners' Capital 10,000 10,000 Limited Partners' Capital 1,000 1,000 Contributed Capital 1,466,720 1,466,720 General Partners' Deficit (2,536,933) (2,498,288) Total Partners' Deficit (1,059,213) (1,020,568) Total Liabilities and Partners' Deficit 4,649,813 ---------- ---------- 4,845,040 ---------- ---------- NORTHRIDGE PROPERTIES OF NEW HOPE DBA: CHARDON COURT STATEMENTS OF OPERATIONS FOUR MONTHS ENDED APRIL 30, 1996 AND 1995 UNAUDITED EXPENSES Operating Expenses APRIL 30, APRIL 30, REVENUES 1996 1995 Rent $309,504 $301,591 Meals 17,694 15,968 Interest 13,755 13,549 Other 6,587 5,356 Total Revenues 347,540 336,465 EXPENSES Operating Expenses 159,889 136,197 Interest 162,022 164,222 Depreciation and Amortization 58,114 58,142 Total Expenses 380,025 358,560 NET LOSS ($32,485) ($22,095) STATEMENTS OF PARTNERS' DEFICIT GENERAL; PARTNERS' DEFICIT - DECEMBER 31, 1995 and 1994 ($2,504,448) ($2,476,193) Net Loss April 30, 1996 and 1995 (32,485) (22,095) GENERAL PARTNERS' DEFICIT ($2,536,933) ($2,498,288) LIMITED PARTNERS' EQUITY $1,000 $1,000 REQUEST AND AUTHORIZATION July 11, 1996 Norwest Bank Minnesota, National Association 6th and Marquette Minneapolis, Minnesota 55479-0069 Ladies and Gentlemen: Responsive to the Indenture of Trust (the "Indenture"), dated as of June 1, 1996, by and between the City of New Hope, Minnesota (the "City") and Norwest Bank Minnesota, National Association, in Minneapolis, Minnesota, as Trustee (the "Trustee") (an original executed counterpart of which is being retained by you) there are delivered to you herewith duly executed on behalf of the City the $5,000,000 in aggregate principal amount of the Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 of the City (the "Bonds"), initially dated as of June 1, 1996, and conforming to the specifications set forth in the Indenture. You are hereby authorized and directed to authenticate and deliver the Bonds on behalf of the City to Dougherty Dawkins, Inc. (the "Underwriter') pursuant to the Bond Purchase Agreement, dated of even date herewith, between the City, the Underwriter and Northridge Properties of New Hope Limited Partnership, upon payment therefor to you of the agreed purchase price therefor, namely $5,038,643.33 (representing $5,000,000 for the principal amount of the Bonds, and $38,643.33 of accrued interest on the Bonds from June 1, 1996) for the Bonds. Upon receipt of such purchase price, you are hereby authorized and directed to deposit and apply such money immediately as provided in Section 5.2 of the Indenture. Being delivered to you herewith are those documents required to be delivered to you under the provisions of Section 3-2 of the Indenture. This instrument constitutes the request and authorization to the Trustee to authenticate and deliver the Bonds, which is the document required to be delivered to you by Section 3-2(d) of the Indenture. CITY OF NEW HOPE, MINNESOTA B` Z Mayor � And Acting City Manager ( Receipt of the above-described money and documents is hereby acknowledged. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee B_t'V LAA Its Aoroor&teThW & -2- f CERTIFICATE OF OFFICIAL ACTION OF THE CITY OF NEW HOPE, MINNESOTA I, the undersigned, do hereby certify that I am the City Clerk of the City of New Hope, Minnesota (the "City") and that: (a) Attached hereto and marked Exhibit A, is a true and correct copy of Resolution No. 96-120 duly adopted by the City Council at a lawful meeting duly called and held on June 10, 1996, at which meeting a quorum was present and acting throughout, which resolution remains in full force and effect in the form in which adopted. (b) Attached hereto and marked Exhibit B is a true and correct copy of the affidavit of publication of a notice of public hearing published on May Q'9,- 1996, in the New Hope -Golden Valley Sun Post. (c) A public hearing was held on June 10, 1996 by the City Council pursuant to the notices of public hearing referred to in paragraph (b) above and all persons who appeared at that hearing were given an opportunity to express their views with respect to the refunding described in the notice. Dated: July 11, 1996. CITY OF NEW HOPE, MINNESOTA Valerie Leone, City Clerk EXHIBIT A CERTIFICATE CITY OF NEW HOPE I, the undersigned being the duly qualified City Clerk of the City of New Hope (the City), hereby attest and certify that: 1. As such officer, I am the recording officer of the City and have the legal custody of the original record from which the attached resolution was transcribed. 2. I have carefully compared the attached resolution with the original record of the meeting at which the resolution was acted upon. 3. I find the attached resolution to be a true, correct and complete copy of the original: CITY COUNCIL RESOLUTION NO. 96-120 RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF MULTIFAMILY HOUSING REFUNDING REVENUE BONDS (CHARDON COURT PROJECT), SERIES 1996, AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS 4. I further certify that the affirmative vote on said resolution was 4 ayes, 0 nayes, and 1 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 City Clerk this 11th day of June , 1996. O Valerie Leone, City Clerk RESOLUTION NO. 96-120 RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF MULTIFAMILY HOUSING REFUNDING REVENUE BONDS (CHARDON COURT PROJECT), SERIES 1996, AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS BE IT RESOLVED by the City Council of the City of New Hope (the "City"), as follows: Section 1. Recitals and Findings. 1.1. By the provisions of Minnesota Statutes, Chapter 462C, as amended (the "Act"), the City is authorized to plan, administer, issue and sell revenue bonds or obligations to make or purchase loans to finance one or more multifamily housing developments within its boundaries, which revenue bonds or obligations shall be payable solely from the revenues of the development. Pursuant to Section 462C.07, Subdivision 1 of the Act, in the purchase or making of multifamily housing loans and the issuance of revenue bonds or other obligations, the City may exercise within its corporate limits any of the powers the Minnesota Housing Finance Agency may exercise under Minnesota Statutes, Chapter 462A, without limitation under the provisions of Minnesota Statutes, Chapter 475. 1.2. By the provisions of the Act, the Housing and Redevelopment Authority of St. Paul, Minnesota, pursuant to a Joint Powers Agreement with the City and certain other Minnesota municipalities, has previously issued its Variable Rate Demand Rental Housing Development Revenue Bonds (Minnesota Multi -City Joint Rental Housing Program), Series 1985-A (the "1985 Bonds") a portion of which were used to provide financing for Chardon Court Apartments, a 129 -unit apartment complex located at 5700 Boone Avenue North in the City ("Development"), which is owned by Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Borrower"). 1.3. This Council has received a proposal from the Borrower that the City issue its refunding revenue bonds under the Act in one or more series (the "Bonds"), for the purpose of refunding and redeeming the portion of the 1985 Bonds issued to finance the Development which remain outstanding (the "Refunded Bonds"). 1.4. The Bonds will be issued pursuant to an Indenture of Trust (the "Indenture"), between the City and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"). The proceeds of the Bonds will be loaned by the City to the Borrower pursuant to a Loan Agreement (the "Loan Agreement"), between the City and the Borrower. Under the Loan Agreement the Borrower will agree to make loan payments sufficient to pay the principal of, premium, if any, and interest on the Bonds as the same shall become due and payable. By the Indenture, the City will grant a security interest to the Trustee in certain revenues and payments to be received by the City under the Loan Agreement. The Bonds are to be purchased by Dougherty Dawkins, Inc. (the "Underwriter") pursuant to a Bond Purchase Agreement (the "Bond Purchase Agreement"), by and among the City, the Borrower and the Underwriter. The Bonds will be secured by a Combination Mortgage, Security Agreement and Fixture Financing Statement (the "Mortgage"), from the Borrower to the City, and by an Assignment of Rents and Leases (the "Assignment of Rents and Leases"), from the Borrower to the City, pursuant to which the City will be granted a first mortgage lien and security interest in the Development and will be assigned all rents and leases with respect to the Development. The City will assign all of its interest in the Mortgage to the Trustee pursuant to an Assignment of Mortgage Agreement (the "City Mortgage Assignment") between the City and the Trustee, and will assign all of its interest in the Assignment of Rents and Leases to the Trustee pursuant to an Assignment of Assignment of Rents and Leases (the "City Rent Assignment") between the City and the Trustee. The Indenture, the Loan Agreement, the Mortgage, the Assignment of Rents and Leases, the City Mortgage Assignment and the City Rent Assignment are referred to as the "City Financing Documents". 1.5. Drafts of the following documents relating to the Bonds have been prepared and submitted to this Council and are hereby directed to be filed in the office of the City Clerk: (i) Loan Agreement; (ii) Indenture; (iii) Bond Purchase Agreement; (iv) Mortgage; (v) Assignment of Rents and Leases; (vi) City Mortgage Assignment; (vii) City Rent Assignment; and (viii) Preliminary Official Statement (the "Preliminary Official Statement") relating to the offering of the Bonds for sale by the Underwriter. 1.6. Pursuant to notice duly published in a newspaper of general circulation in the City not less than 14 days prior to the date fixed therefor, this Council has held a public hearing on June 10, 1996, at which all interested persons were afforded an opportunity to express their views, in person or in writing, on the proposed issuance of the Bonds. This Council has carefully considered the views submitted at the public hearing and the written comments (if any) submitted to the City on the proposed issuance of the Bonds. 1.7. In connection with the acquisition and construction of the Development by the Borrower, the City, the Housing and Redevelopment Authority in and for the City of New Hope, Minnesota (the "HRA"), the Borrower and Charles P. Thompson and Mary Jane Thompson, entered into a 1984 Redevelopment Agreement '(the "Redevelopment Agreement"), dated as of January 30, 1985. By the Redevelopment Agreement, the HRA sold the land on which the Development is located to the Borrower and provided other financial assistance to the Borrower with respect to the Development. The Redevelopment Agreement provides for a payment to be made to, the City upon the occurrence of the HRA Lien Maturity, as defined in the Redevelopment Agreement. Section 2. Approval and Authorization. 2.1. It is hereby determined that it is desirable for the - City to proceed with the issuance of the Bonds in a maximum aggregate principal amount not to exceed $5,100,000. The Bonds shall bear interest at the rates per annum and mature on the dates and in the principal amounts, and shall contain the further terms and conditions, including provisions with respect to redemption of the Bonds prior to the stated maturity thereof, set forth in the Indenture heretofore filed with the City (as the same may be amended or completed as hereinafter provided). The aggregate principal amount of the Bonds, the interest rates to be borne by the Bonds, the principal maturity schedule for the Bonds and the provisions with respect to redemption of the Bonds prior to maturity have not as yet been determined. The Mayor and City Manager are hereby authorized to approve such terms of the Bonds, provided that the maximum aggregate principal amount of the Bonds does not exceed $5,100,000, no interest rate on the Bonds exceeds 8.00% per annum and the Bonds mature no later than 31 years after the date of issuance thereof. 2.2. The form of the Bond Purchase Agreement heretofore filed with the City is hereby approved, subject to such changes therein as may be deemed desirable by the Mayor, the City Manager and the City Attorney. The Bonds are hereby authorized to be sold to the Underwriter upon the terms set forth in the Bond Purchase Agreement. The Mayor and the City Manager of the City are hereby authorized and directed, on behalf of the City, to execute and deliver the Bond Purchase Agreement in substantially the form of the Bond Purchase Agreement heretofore filed with the City, together with such changes and completions thereof as may be approved by the Mayor, the City Manager and the City Attorney, subject to the limitations contained in this resolution, the execution thereof to constitute conclusive evidence of the approval of such changes and completions. 2.3. The forms of the City Financing Documents heretofore filed with the City are hereby approved. The Mayor and the City Manager of the City are hereby authorized and directed, on behalf of the City, to execute and deliver the City Financing Documents in substantially the forms hereby approved, but including such modifications, insertions and additions as are necessary and appropriate in their opinion and in the opinion of the City Attorney and consistent with the Act. The execution of the City Financing Documents by the appropriate officers of the City shall be conclusive evidence of the approval thereof and of the terms of the Bonds by the City. 2.4. The City hereby consents to the distribution by the Underwriter of the Preliminary Official Statement and the final Official Statement to potential purchasers of the Bonds; however, the City makes no representations with respect to, and assumes no responsibility for the sufficiency, accuracy, completeness or contents of, the Preliminary Official Statement or the final Official Statement. To satisfy the requirements of Rule 15c2-12 of the Securities Exchange Commission, as amended, upon the finalization of the Preliminary Official Statement the City Manager is hereby authorized on behalf of the City to deem the information relating to the City contained in the Preliminary Official Statement to be final as of its date. 2.5. The Mayor and the City Manager of the City are authorized and directed to prepare and execute the Bonds and to deliver them to the Trustee pursuant to the Indenture for authentication and delivery to the purchaser or purchasers thereof, together with a certified copy of this resolution and other documents required by the Indenture. As provided in the Indenture, the Bonds shall be executed by the manual or facsimile signatures of the Mayor and City Manager and shall be authenticated by the Bond Registrar (as defined in the Indenture), as authenticating agent, pursuant to Minnesota Statutes, Section 475.55, Subdivision 1. 2.6. As provided in the Indenture, the Bonds are special, limited obligations of the City. Principal of, premium, if any, and interest on the Bonds are payable solely out of the revenues derived from the sources described in the granting clauses of the Indenture. Neither the State of Minnesota nor the County of Hennepin shall in any event be liable for the payment of the principal of, premium, if any, or interest on the Bonds or for the performance of any pledge, mortgage, obligation or agreement of any kind whatsoever that may be undertaken by the City. Neither the Bonds nor any of the agreements or obligations of the City contained in the City Financing Documents shall be construed to constitute an indebtedness of the State of Minnesota, the County of Hennepin or the City, within the meaning of any constitutional or statutory provisions whatsoever, nor to constitute or give rise to a pecuniary liability or be a charge against the general credit or taxing power of the State of Minnesota, the County of Hennepin or the City. The agreement of the City to perform the covenants and other provisions contained in this resolution or the Bonds, the City Financing Documents or the Bond Purchase Agreement shall be subject at all times to the availability of the revenues furnished by the Borrower sufficient to pay all costs of such enforcement or the enforcement thereof, and the City shall not be subject to any personal or pecuniary liability thereon other than as stated above. 2.7. The Mayor, the City Manager and the City Clerk of the City are authorized and directed to prepare and furnish to bond counsel and the Underwriter 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 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 contained therein. 2.8. The City acknowledges and agrees that the payment of the Developer Loan, as defined in the Redevelopment Agreement, in connection with the issuance of the Bonds shall not constitute a HRA Lien Maturity, as defined in the Redevelopment Agreement. Such waiver shall only apply to the payment of the Developer Loan in connection with the issuance of the Bonds, and such waiver shall not apply to any subsequent or other event constituting an HRA Lien Maturity under the Redevelopment Agreement, or impair any right of the City consequent thereto. The City acknowledges that its rights under the Redevelopment Agreement are subordinate to the rights of the Trustee under the Mortgage and Assignment, and if requested by the Borrower, the Mayor and City Manager are authorized and directed to execute such agreement or agreements as may be necessary and appropriate in their opinion and in the opinion of the City Attorney, to evidence such subordination and the waiver of the HRA Lien Maturity upon the payment of the Developer Loan in connection with the issuance of the Bonds as provided in this Section 2.8. 2.9. The Mayor and the City Manager of the City are hereby authorized to execute such additional agreements, documents and certificates in connection with the Bonds and the redemption and defeasance of the Refunded Bonds as may be necessary and appropriate in their opinion and in the opinion of the City Attorney and consistent with the Act. Copies of such additional agreements, documents and certificates, when executed, shall be delivered, filed and recorded as provided therein. 2.10. The approvals hereby given to the various documents referred to above includes approval of such additional details therein as may be necessary and appropriate and such modifications thereof, deletions therefrom and additions thereto as may be approved by the City Attorney and by the Mayor and the City Manager authorized herein to execute said documents prior to their execution; and the Mayor and the City Manager are hereby authorized to approve said changes on behalf of the City. The execution of any instrument by the appropriate officer or officers of the City herein authorized shall be conclusive evidence of the approval of such documents in accordance with the terms hereof. In the absence of the Mayor or the City Manager, the documents authorized by this resolution to be executed may be executed by the Acting Mayor or the Assistant City Manager. Adopted this 10th day of June, 1996. Edw. Erickson, Mayor Attest: City Clerk (SEAL) c:\wp51\cnh\chardon.cnh STATE OF MINNESOTA) ss. COUNTY OF HENNEPIN) JUL 1 8 C1 bddr%l 1N PUBU ATIONS s.rLU.e s..rou s„ -s AFFIDAVIT OF PUBLICATION Denis L. Mindak being duly sworn on an oath says that he/she is the publisher or authorized agent and employee of the publisher of the newspaper known as Sun -Post , and has full knowledge of the facts which are stated below. (A) The newspaper has complied with all of the requirements constituting qualification as a qualified newspaper, as provided by Minnesota Statue 331A.02, 331A.07, and other applicable laws, as amended. (B) The printed Notice of Public Hearing which is attached was cut from the columns of said newspaper, and was printed and published once each week, for one successive weeks; it was first published on Wednesday the 22 day of May , 19.9-6_, and was thereafter printed and published on every the _ day of to and including 19_; 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 and publication of the notice: abcdefghyklmmpgrstuvwryz 0014 TITLE: Publisher Acknowledged before me on this 12 day of July Public NOTARY p!BL1C-MINNESC7A MV RATE INFORMATION '1) Lowest classified rate paid by commercial users $ 2.15 per line for comparable space (2) Maximum rate allowed by law for the above matter $ 5.95 per line (3) Rate actually charged for the above matter $ 1 Offer line City of New Nor EXHIBIT B (Of5eial Publication) NOTICE OF PUBLIC HEARING ON THE ISSUANCE OF REFUNDING REVENUE BONDS City of New Hope, Mimesota NOTICE IS HEREBY GIVEN that the City Counci of the City of New Hope, Minnesota (the City) will meet or June 10, 1896, at 7:00 p.m., at the City Hall, 4401 Nylon Avenue North in the City Of New Hope, Minnesota, to son. duct a public hearing on the proposal that the city issue its nor eseeemng b0,200 U(K1 (the Refunding Bonds), in orders to refund prior to maturity the port ion of revenue bond: previously issued by the Homing and Redevelopment Authority of the City of St. Paul under the Act to finance Chardon Court Apartments; a rental facility for elderly persons, wntaining 129 apartment units, parking and otherrelated facilities, which' is owned by Northridge Properties of New Hope Limited partnership, a Minnesota limited partnership.. Chardon Court Apartments is located at 6700 Beane Avenue North in the City, and twenty per. cent of the units contained therein are available for rental by persons whose inCome'is:80% or less of the area medi- an gross income.. The Refunding Bonds will be limited obligations of the City, payable solely from revenues or the development specifically pledged to the payment of the Bonds and will not constitute a debt of the City. No holder of the Refunding Bonds shall sve[ have the right to compel the exercise of the taring' powai'%f.: the City to pay the Refunding Bonds or the inte",thereon, or to enforce pay- Allpersons may appear and 11 be'heard at the time and place act forth above; or moVii Nrittea `emoments with, the City Clerk prior to. the data 'of the hearing act forth' above. ' Auxiliary aids for pereona with disabilities are avail able upon request at least 96 hours in advance. Please con- tact the City Clerk:to make arrangements (telephone 531- 5117, TDD. amber 5$1-516g).' Dated this 13th'day of May, 1995 /a/ Valmie leope City Clark (May 22,1996) p2 refund - NH -GV GENERAL, INCUMBENCY, AND NO -LITIGATION CERTIFICATE OF THE CITY OF NEW HOPE, MINNESOTA The undersigned, Mayor and Acting City Manager, respectively, of the City of New Hope, Minnesota, a municipality organized and existing under the Constitution and laws of the State of Minnesota (the "City'), acting for the City, do hereby certify that the City is a duly constituted and existing municipal corporation under the laws of the State of Minnesota, and do further certify as follows: 1. We are the duly elected or appointed, qualified and acting Mayor and Acting City Manager, respectively. 2. The following described instruments, as executed and delivered by the Mayor and Acting City Manager, are in substantially the same form and text as the copies of such instruments which were before and approved or ratified by the City Council at a meeting of the City on June 10, 1996, except for such modifications, insertions and additions as may have been approved by the Mayor and City Manager. Document Date Other Party or Parties Indenture of Trust As of 6/1/96 Norwest Bank Minnesota, National Association, as Trustee (the "Trustee") Loan Agreement As of 6/1/96 Northridge Properties of New (the "Loan Agreement") Hope Limited Partnership (the "Partnership") Combination Mortgage, As of 6/1/96 Partnership Security Agreement and Fixture Financing Statement Assignment of Rents and As of 6/1/96 Partnership Leases Assignment of Mortgage As of 6/1/96 Trustee Agreement Assignment of Assignment As of 6/1/96 Trustee Rents and Leases Bond Purchase Agreement 7/11/96 Partnership and Dougherty (the 'Bond Purchase Dawkins, Inc. Agreement") The instruments specified in this paragraph 2 are hereinafter sometimes collectively referred to as the "Documents". 3. The persons named below were on the date or dates of the execution of the Documents, are on the date hereof, the duly elected or appointed and qualified incumbents of the offices of the City set opposite their respective names and the signatures appearing at the right of their respective names are the genuine signatures of said officers. Title Name Mayor Edward J. Erickson City Manager Daniel J. Donahue Acting City Kirk McDonald Manager 4. The Mayor and Acting City Manager of the City have executed the Documents, and the Mayor and City Manager have executed the $5,000,000 aggregate principal amount of Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 (the 'Bonds") of the City, initially dated as of June 1, 1996, substantially in the form set forth in the Indenture, bearing interest and maturing as set forth in the Indenture. Each of the Bonds has been executed with the facsimile signatures of the Mayor and City Manager. 5. To the best of our knowledge and belief, the City has duly authorized, executed and delivered by all necessary actions: (i) the Bonds, and (ii) the Documents, and as of the date hereof, each is in full force and effect, and each constitutes an obligation of the City, and the City is entitled to the benefits of the same. To the best of our knowledge and belief the City has authorized by all necessary action the execution, delivery, receipt and due performance of each of the foregoing instruments and any and all such other agreements and documents as may be required to be executed, delivered and received by the City in order to carry out, give effect to and consummate the transactions contemplated by the foregoing instruments. There is no litigation pending or threatened to restrain or enjoin the issuance or delivery of the Bonds, or in any way contesting or affecting any authority for the issuance of the Bonds or the validity of the Bonds or the Documents or in any way contesting the corporate existence or the power of the City. The Documents have not been modified, amended or repealed as of the date hereof. The representations of the City contained in Section 4 of the Bond Purchase Agreement and in Section 2.01 of the Loan Agreement are true and correct in all material -2- respects as of the date hereof, and the City has performed and complied with all conditions and agreements required by the Bond Purchase Agreement to be performed or complied with by it prior to the Closing Date as defined in the Bond Purchase Agreement. Dated: July 11, 1996. CITY OF NEW HOPE, MINNESOTA 1 B / Ed and J. Erickson, Mayor And�� Kirk McDonald, Acting City Manager -3- CITY OF NEW HOPE, MINNESOTA NO -ARBITRAGE CERTIFICATE We, the undersigned, do hereby certify and declare that we are on the date hereof the Mayor and Acting City Manager, duly qualified and acting as such, of the City of New Hope, Minnesota. We further certify as follows: 1. Definitions. For all purposes of this Certificate the following terms have the following meanings. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Code or the Indenture. Bond Counsel means Dorsey & Whitney LLP or other firm of nationally recognized bond counsel. Bond Fund means the fund so designated created by Section 5-3 the Indenture. Bond Purchase Agreement means the Bond Purchase Agreement, dated as of July 11, 1996, between the City, the Partnership and the Underwriter. Bonds means the $5,000,000 Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 issued by the City under the Indenture. Bond Yield means 7.1002636% as computed in accordance with Section 4.4 hereof. Certificate means this No -Arbitrage Certificate. City means the City of New Hope, Minnesota. Closing Date means July 11, 1996. Code means the Internal Revenue Code of 1986, including any amendment thereof. Gross Proceeds means gross proceeds as defined in Section 1.148- 1(b) of the Regulations. Indenture means the Indenture of Trust, dated as of June 1, 1996, between the City and the Trustee, including any amendment thereof. Interest Payment Date shall have the meaning set forth in the Indenture. Investment Property means any security, obligation, annuity contract, or investment type property (other than a tax-exempt obligation unless such tax-exempt obligation is a "specified private activity bond" within the meaning of Section 57(a)(5)(C) of the Code), annuity contract, or any other investment -type property. Loan Agreement means the Loan Agreement, dated as of June 1, 1996, between the City and the Partnership, including any amendment thereof. Net Proceeds means the original proceeds of the Bonds, as described in Section 4.1 hereof, less the amount thereof credited to the Bond Fund, plus all investment earnings thereon and on amounts credited to the Reserve Fund. 1954 Code means the Internal Revenue Code of 1954, as amended. Nonpurpose Investment means any Investment Property which is not a Purpose Investment, including without limitation, Investment Property acquired with or allocated to Gross Proceeds of the Bonds. PartnershT means Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership and its successors and assigns under the Loan Agreement. Partnership Tax Certificate means the certificate of the Partnership attached hereto as Exhibit A. Project means the 129 -unit rental housing development owned by the Partnership and located in the corporate limits of the City. Purpose Investment means an investment that is acquired to carry out the governmental purpose of the Bonds. Rebate Amount means 100% of the amount owed to the United States under Section 148(f)(2) of the Code with respect to the Bonds, as further defined in Section 1.148-3 of the Regulations. Rebate Fund means the fund so designated created by the Section 5-7 of the Indenture. Refunded Bonds means the portion of the St. Paul HRA's Variable Rate Demand Rental Housing Development Revenue Bonds (Minnesota Multi -City Joint Housing Program), Series 1985 issued to finance the acquisition, -2- construction and equipping by the Partnership of the Project, fund a debt service reserve fund and pay costs of issuance of the Refunded Bonds. Refunded Bonds Trustee means First Trust National Association, as trustee under the Indenture of Trust pursuant to which the Refunded Bonds were issued. Regulations means the Treasury Regulations promulgated, proposed or applicable to the Bonds under the Code, including without limitation Income Tax Regulations, Sections 1.148-1 through 11 and 1.150-1. Repair and Replacement Fund means the fund so designated created by Section 5-8 after Indenture. Reserve Fund means the fund so designated created by Section 5-5 of the Indenture. Reserve Requirement means $205,000. Trustee means Norwest Bank Minnesota, National Association, as Trustee under the Indenture, its successors and assigns. Underwriter means Dougherty Dawkins, Inc. Underwriter's Certificate means the certificate of the Underwriter attached hereto as Exhibit B. Yield means with respect to the Bonds, the yield on the Bonds computed under Section 1.148-4 of the Regulations and, with respect to Nonpurpose Investments, means the yield computed on such Nonpurpose Investments under Section 1.148-5 of the Regulations. 2. Purpose of Certificate; Authority of Signers. 2.1. This Certificate is given to establish the expectations of the City regarding the expenditure of the proceeds of the Bonds, pursuant to Section 148 of the Code, Section 103 of the 1954 Code and Section 1.148-2 of the Regulations. The City and the undersigned have made no independent investigation of the matters stated herein. The expectations of the City described herein are based upon the provisions of the Loan Agreement and Indenture and upon the representations of the Underwriter and the Partnership contained in the Underwriter's Certificate and Partnership Tax Certificate as to the matters contained in their certificates attached hereto. To the best of the City's knowledge, information and belief, the expectations described in this Certificate are reasonable. No facts, estimates, conditions or -3- circumstances that would materially alter the expectations described in this Certificate are known to the City. Nothing has come to the attention of the City which would make unreasonable or incorrect the expectations described herein or the representations of the Underwriter or the Partnership described in their certificates attached hereto. 2.2. The undersigned are officers of the City responsible for issuing the Bonds. 2.3. The City has not been notified of any listing or proposed listing of the City by the Internal Revenue Service as an issuer that is disqualified from making certifications as to its bonds for purposes of Section 1.148-2 of the Regulations. 3. Purpose of Bonds. The Bonds are being issued to provide money to be loaned by the City to the Partnership in order to provide funds to be paid to AmeriUs Bank, in Des Moines, Iowa (the 'Bank"), to reimburse the Bank for amounts to be paid by the Bank to redeem the Refunded Bonds within 90 days of the date of issuance of the Bonds and to fund the Reserve Fund for the Bonds. 4. Issuance of Bonds: Allocation of Sale Proceeds; Issue Price; Yield 4.1 The Bonds have been sold by the City to the Underwriter by the Bond Purchase Agreement. In accordance with the Bond Purchase Agreement the Bonds are being issued on the Closing Date by delivery of the Bonds to the Underwriter for a purchase price calculated as follows: For principal $5,000,000.00 Accrued interest from June 1 to Closing Date 38.643.33 Total purchase price $5,038,643.33 4.2 The Bonds are being issued pursuant to the Indenture. The Indenture establishes the following funds, each to be held by the Trustee: a Bond Fund, a Reserve Fund, a Property Insurance and Award Fund, the Repair and Replacement Fund and a Rebate Fund. 4.3. On the Closing Date the Trustee will allocate and apply the total purchase price of the Bonds, as shown in Section 4.1, as follows: To Bond Fund $ 38,643.33 To Reserve Fund 205,000.00 To Bank 4.795,000.00 Totals $5,038,643.33 in ( 4.4. The yield on the Bonds has been calculated, as provided in Section 1.148-4 of the Regulations, as that discount rate which when used in computing the present value as of the Closing Date of all unconditionally payable payments of principal and interest on the Bonds produces an amount which is equal to the present value, using the same discount rate, of the aggregate "issue price" of the Bonds. The "issue price" of the Bonds is $5,038,643.33, which is the initial offering price of the Bonds to the public, as evidenced by the Underwriter's Certificate with respect to the Bonds. Based on the Underwriter's Certificate the "yield" on the Bonds is 7.1002636%. 5. Use of Funds 5.1. Bond Fund. The money credited on the Closing Date to the Bond Fund, as described in Section 4.3, will be used, with income earned from the investment thereof, to pay a portion of the interest payable on the Bonds on December 1, 1996. The Partnership is obligated by the Loan Agreement to make monthly deposits to the Trustee in amounts sufficient to pay the principal of and interest on the Bonds when due. The principal of and interest on the Bonds are payable from the Bond Fund. It is expected that all amounts credited to the Bond Fund will be used to pay the interest on and principal of the Bonds within 13 months after the date on which the Trustee receives such amounts. The Bond Fund will be used primarily to achieve a proper matching of revenues and debt service within each Bond Year and will be fully depleted at least once a year, on each June 1, except for a reasonable carryover amount which is expected not to exceed one - twelfth of the annual debt service then payable on the Bonds in the immediately preceding twelve months. 5.2. Reserve Fund. On the Closing Date proceeds of the Bonds in an amount equal to the Reserve Requirement will be deposited in the Reserve Fund. Money on hand in the Reserve Fund is to be transferred by the Trustee to the Bond Fund if on any date on which principal of or interest on the Bonds is due and payable the balance then on hand in the Bond Fund is not sufficient to make such payment in full. If, the balance on hand in the Reserve Fund falls below the Reserve Requirement the Partnership is obligated by the Loan Agreement to deposit with the Trustee an amount sufficient to restore the balance in the Reserve Fund to the Reserve Requirement. If the balance on hand in the Reserve Fund equals or exceeds the Reserve Requirement the Trustee is to transfer such excess to the Bond Fund. As set forth in the Underwriter's Certificate the establishment of the Reserve Fund was required by the Underwriter as a condition for its purchase of the Bonds. 5.3. Rebate Fund. As provided in the Indenture, and as described in greater detail in Section 5-7 of the Indenture and Section 9 hereof the Trustee is to -5- credit to the Rebate Fund amounts received from time to time for payment to the United States. The Rebate Fund is not a "trust fund" and does not secure the Bonds. 5.4. Other Funds. The Property Insurance and Award Fund and Repair and Replacement Fund are created by the Indenture, and it is not reasonably expected that amounts in such funds will be used or pledged to pay the principal of or interest on the Bonds. The City has not created or established , and does not expect to create or establish, any fund or account, other than as described in this Certificate, reasonably expected to be used or pledged to pay the principal of or interest on the Bonds. 6. Refunding. 6.1. On the Closing Date, Refunded Bonds in the principal amount of $5,000,000 are outstanding. On the Closing Date the Trustee will transfer to the Bank $4,795,000 of the Net Proceeds of the Bonds. On the Closing Date the Bank will pay to the Trustee under the Refunded Bonds Indenture funds which collectively are sufficient to provide funds to pay the principal and interest on the Refunded Bonds to and including September 3, 1996, and to redeem on such date all of the Refunded Bonds at the principal amount thereof, plus accrued interest. September 3, 1996 is the earliest date on which the Refunded Bonds can be called for redemption. 6.2. The purpose of refunding the Refunded Bonds is to obtain a lower interest rate. Other than amounts held in the reserve fund for the Refunded Bonds, all of the proceeds of the Refunded Bonds have been expended for the purposes for which the Refunded Bonds were issued. 6.3. On the date of issuance of the Bonds the Refunded Bond Trustee $514,200.56 on hand in the Reserve Fund established under the Refunded Bonds Indenture for the account of the Partnership with respect to the Refunded Bonds. Upon payment by the Bank to the Refunded bonds Trustee of the redemption price of the Refunded Bonds, such amount will be paid to the Partnership and applied by the Partnership to pay costs of issuance of the Bonds and to reimburse the Partnership for costs paid with respect to the acquisition, construction and equipping of the Project which were not financed from proceeds of the Refunded Bonds. 7. Yield on the Loan Agreement. The Loan Agreement represents Purpose Investment because it fulfills and carries out the purpose for which the Bonds are issued. Under Section 1.148-2(d)(2) of the Regulations the "yield" on the Loan Agreement, may not exceed the "yield" on the Bonds by more than .125°/x. The aggregate amounts payable as monthly installments under the Loan Agreement never exceed in the aggregate the amount of interest to become due on the Bonds on the next succeeding Interest Payment Date and the amount of principal to become Q:s r due on the Bonds on the next two succeeding Interest Payment Dates. Although receipt of the monthly payments to make semiannual debt service payments on the Bonds would produce a yield on the Loan Agreement higher than the yield on the Bonds, the investment earnings on the amount received by the Trustee on such early payments will be applied as an off -set against the payment due on the Loan Agreement within 12 months of receipt, thus giving the benefit thereof to the Partnership. Accordingly, the monthly installments to be paid under the Loan Agreement have been assumed to be received on the Interest Payment Date on which they are used to pay debt service on the Bonds. 8. General. 8.1. The proceeds of the Refunded Bonds were all expended to pay the cost of acquisition, construction and equipping of the Project, to pay costs of issuance of the Refunded Bonds, or to fund a debt service reserve therefor. 8.2. The proceeds of the Bonds, including income from investment, do not exceed the amount necessary for the governmental purposes of the Bonds. 8.3. No portion of the Bonds is issued for the purpose of investing the sale proceeds thereof at a Yield higher than the Bond Yield. 8.4. The City does not expect to sell or otherwise transfer any of its interest in or rights under the Loan Agreement other than to the Trustee pursuant to the Indenture. 8.5. No other obligations of the City are being issued at substantially the same time as the Bonds, being sold pursuant to a common plan of financing or marketing , or being paid out of substantially the same source as the Bonds. 8.6 At the time of issuance of the Refunded Bonds, the Partnership expected that at least 85% of the spendable proceeds thereof would be used for the Project as defined in the Refunded Bonds Indenture within three years of the date of issuance thereof and that no more than 50% of the proceeds of the Refunded Bonds would be converted in nonpurpose investments having a substantially guaranteed yield for four years or more. 9. Arbitrage Rebate.. The City has agreed in the Indenture to take no action which would cause the Bonds to be classified as "arbitrage bonds" within the meaning of Section 148 of the Code. The City recognizes its obligation to comply with the arbitrage rebate requirements of Section 148(f) of the Code and related Regulations, and has, in the Loan Agreement, required the Partnership to do all things required or necessary to comply with such requirements, including a requirement that the Partnership pay, when due, any Rebate Amount required to be yd paid to the United States. The Partnership Tax Certificate attached hereto sets forth in greater detail the actions to be taken by the Partnership in connection therewith. Dated: July 11, 1996. CITY OF NEW HOPE, MINNESOTA Its Mayor Ann Its Acting City Manager In PARTNERSHIP TAX CERTIFICATE City of New Hope, Minnesota Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 I, the undersigned, a general partner of Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Partnership") hereby certifies on behalf of the Partnership as follows: 1. City No -Arbitrage Certificate. I have read the No -Arbitrage Certificate of the City of New Hope, Minnesota to which this certificate is attached and believe the statements contained therein are correct in all respects. The Partnership represents and agrees that the expectations of the City described therein are reasonable, and that, to the best of the knowledge and belief of the Partnership, no facts, estimates, conditions or circumstances that would materially change such expectations are known to the Partnership. 2. Definitions. For all purposes of this Certificate the terms used herein with initial letters capitalized have the meaning assigned to such terms in the No -Arbitrage Certificate of the City to which this Certificate is attached, except that the term Certificate when used herein refers to this Partnership Tax Certificate. 3. The Project. The representations and warranties of the Partnership contained in Section 7.07 of the Loan Agreement, are true and correct as of the date hereof. As of June 30, 1996, at least 60 of the dwelling units in the Project were occupied by Lower -Income Tenants (as defined in the Declaration, as defined in the Loan Agreement) as shown by the information attached hereto. Except for proceeds deposited in the debt service reserve fund, all proceeds of the Refunded Bonds have been expended. At all times since at least ten percent (10%) of the dwelling units in the Project were first occupied, at least twenty percent (20%) of the dwelling units in the Project have been allocated for occupancy by individuals who on the date of their initial occupancy of dwelling life in the Project were Lower -Income Tenants. 4. IRS Form 8038. 1 have read IRS Form 8038 to be filed by the City with the Internal Revenue Service with respect to the Bonds and believe the information contained therein is correct, in all material respects. 5. No Federal Guarantee. The Partnership represents that the Bonds will not be "federally guaranteed" within the meaning of Section 149(b) of the Code. For purposes of this Section 5, the Bonds are "federally guaranteed" if: (i) the payment of principal or interest with respect to the Bonds is guaranteed, directly or indirectly (in whole or in part) by the United States (or any agency or instrumentality thereof), or j (ii) five percent or more of the proceeds of the Bonds are (A) used to make loans the payment of principal or interest with respect to which is to be guaranteed (in whole or in part) by the United States (or any agency of instrumentality thereof) or (B) invested (directly or indirectly) in federally insured deposits or accounts. For purposes of the previous paragraph, the Bonds shall not be treated as "federally guaranteed" by reason of any investment of Bond proceeds (i) during the initial three-year temporary period until such proceeds are needed for the governmental purpose for which the Bonds are being issued, (ii) during the thirteen -month temporary period applicable to bona fide debt service fund investments, (iii) in bonds issued by the United States Treasury and (iv) in any other investments permitted by the Regulations. 6. Maturity Limitation. In order to comply with Section 147(b) of the Code, the Partnership represents that the average reasonably expected remaining economic life of the facilities financed by the Refunded Bonds (the "Facilities"), by types of assets, calculated as of June 1, 1996, is as follows: Type of Economic Asset Life 1 Structures and Fixtures 40 yrs. (1) The "Economic Life" of an asset is expressed in years and is the longer of (1) reasonably expected economic life of the asset, or (2) the "midpoint life" under the Asset Depreciation Range ("ADR") system, as set forth in Revenue Procedure 77-10,1977-1 C.B. 548, as modified by Revenue Procedure 83-85, 1983-1 C.B. 745, where applicable, and the "guideline lives" under Revenue Procedure 62-21, 1962-2 C.B. 418, in the case of structures. (2) "Prior Years" refers to the number of years prior to the date hereof that an asset was placed in service. (3) "Adjusted Economic Life" of an asset is equal to the Economic Life minus Prior Years.) (4) "Asset Cost' refers to the purchase price of the.asset to the Partnership. (5) The product of the Adjusted Economic Life and Asset Cost. Na Adjusted Adjusted Economic Prior Economic Asset Life x Years 2 Life (3) Cost 4 Asset Cost (5) 10 yrs. 30 $4,900,000 $147,000,000 (1) The "Economic Life" of an asset is expressed in years and is the longer of (1) reasonably expected economic life of the asset, or (2) the "midpoint life" under the Asset Depreciation Range ("ADR") system, as set forth in Revenue Procedure 77-10,1977-1 C.B. 548, as modified by Revenue Procedure 83-85, 1983-1 C.B. 745, where applicable, and the "guideline lives" under Revenue Procedure 62-21, 1962-2 C.B. 418, in the case of structures. (2) "Prior Years" refers to the number of years prior to the date hereof that an asset was placed in service. (3) "Adjusted Economic Life" of an asset is equal to the Economic Life minus Prior Years.) (4) "Asset Cost' refers to the purchase price of the.asset to the Partnership. (5) The product of the Adjusted Economic Life and Asset Cost. Na ( The "average reasonably expected economic life" of the Facilities is 30 years which is computed by dividing the total product of Adjusted Economic Life and the Asset Cost, or $147,000,000, by the total Asset Cost for assets, or $4,900,000. For this purpose, the reasonably expected economic life of each asset has been determined as of the Closing Date. The average maturity of the issue of which the Bonds are part (20.198 years), does not exceed one hundred twenty percent (120%) of the average reasonably expected economic life of the Facilities (30 years). 7. Prohibited Uses of Bond Proceeds. The Partnership represents that none of the Net Proceeds shall be used to provide any airplane, skybox or other private luxury box, any facility primarily used for gambling, or store the principal business of which is the sale of alcoholic beverages for consumption off premises. 8. Undertaking; as to Rebate. (a) General. This Section 8 sets forth procedures to be followed by the Partnership to comply with the requirements of Section 148(f) of the Code as they relate to the Bonds. Pursuant to Section 7.07(K) of the Agreement the Partnership has agreed to comply with such requirements. Final Regulations (TD 8476) have been promulgated by the United States Treasury Department under Section 148 of the Code relating to arbitrage rebate procedures (the "Rebate Regulations"). Said Rebate Regulations are effective for the Bonds. Since the requirements of the Rebate Regulations are subject to amplification and clarification, Bond Counsel selected by the Partnership may provide the Partnership or the Partnership may seek, supplements to this Section 8 from time to time to reflect any additional or different requirements of the Rebate Regulations. Additionally, as a result of future developments, Bond Counsel selected by the Partnership may provide the Partnership with, or the Partnership may seek, supplements to this Section 8 to the effect that any specified action required hereunder is no longer required or that some further or different action is required to maintain or assure the exclusion from federal gross income of interest with respect to the Bonds. (b) Definitions. "Bond Year" means each one-year period that ends on the day selected by the Partnership; provided that the first and last Bond Years may be short periods.. If no day is selected by the Partnership before the earlier of the final maturity date of the Bonds or the date that is 5 years after the date of issue of the Bonds, Bond Years shall end on each anniversary date of the issue date (i.e., June 1) and on the final maturity date. -3- ( "Computation Date' means each date on which the Rebate Amount for the Bonds is computed under Section 1.148-3(e) of the Regulations. For the Bonds, the Partnership may treat any date as a Computation Date; provided that (i) the first Computation Date must not be later than 5 years after the issue date of the Bonds, (ii) each subsequent Computation Date must not be later than 5 years after the previous Computation Date, and (iii) the final Computation Date shall be the date that the Bonds are discharged. "Gross Proceeds" means gross proceeds as defined under Section 1.148-1(b) of the Regulations. "Investment Property" means any security, obligation, annuity contract, or investment -type property, but not including any tax-exempt bond (other than a "specified private activity bond" as defined in Section 57(a)(5)(C) of the Code). "Issue Price" means the initial offering price of the Bonds to the public at which price a substantial amount of the Bonds was sold to the public, all as defined in Section 1.148-1(b) of the Regulations. "Nonpurpose Investment" means any Investment Property which is not a Purpose Investment, including, without limitation, Investment Property acquired with or allocated to Gross Proceeds of the Bonds. "Payments," for purposes of computing the Rebate Amount, means all payments as defined in Section 1.148-3(d)(1) of the Regulations. "Purpose Investment" means an investment that is acquired to carry out the governmental purpose of the Bonds. "Receipts," for purposes of computing the Rebate Amount, means all receipts as defined in Section 1.148-3(d)(2) of the Regulations. "Rebate Amount" means 100% of the amount owed to the United States under Section 148(f)(2) of the Code, as further described in Section 1.148-3 of the Regulations. "Value" means, as to any Bond, value determined under Section 1.148-4(e) of the Regulations and, as to any Nonpurpose Investment, value determined under Section 1.148-5(d) of the Regulations. "Yield" means, with respect to the Bonds, the yield on the Bonds computed under Section 1.148-4 of the Regulations, and, with respect to Nonpurpose Investments, means the yield on such Nonpurpose Investments computed under Section 1.148-5 of the Regulations. M (c) Calculation of Rebate Amount. Section 148(f) of the Code and the Rebate Regulations require the periodic payment to the United States of the Rebate Amount, being, as of any date, the excess of the future value, as of that date, of all Receipts on Nonpurpose Investments over the future value, as of that date, of all Payments on Nonpurpose Investments. Future value is computed in accordance with Section 1.148-3(c) of the Regulations. To meet this rebate requirement the Partnership shall take the following actions consistent with the Rebate Regulations: (A) For each investment of Gross Proceeds in Nonpurpose Investments, the Partnership will record the purchase date of such investment, its purchase price (or fair market value in the case of a deemed acquisition or deemed disposition as specified in Section 1.148-5(d)(3) of the Regulations), accrued interest due on its purchase date, its face amount, its coupon rate, the frequency of its interest payment, its disposition price, the accrued interest due on its disposition date and its disposition date. To the extent investments are made by the Trustee at the direction of the Partnership, the Partnership shall direct the Trustee to record such information. (B) As of each Computation Date, the Partnership shall compute or cause to be computed the Yield on the Bonds. (C) As of each Computation Date, the Partnership will determine the Receipts, and will determine the future value thereof as of said Computation Date. (D) As of each Computation Date, the Partnership will determine the Payments, and will determine the future value thereof as of said Computation Date. (E) Notwithstanding anything in this Certificate to the contrary, Receipts and Payments with respect to Nonpurpose Investments allocated to Gross Proceeds of the Bonds on deposit during a Bond Year in a bona fide debt service fund, as defined in Section 1.148-1(b) of the Regulations, for the Bonds shall not be taken into account in calculating the Rebate Amount if the gross earnings on such bona fide debt service fund for such Bond Year is less than $100,000. The provisions of Section 1.148-3(k) of the Regulations may be applied in making this determination. (F) As of each Computation Date, the Partnership will calculate or cause to be calculated the Rebate Amount and furnish such information to the Trustee. -5- (G) At the time the Partnership provides the Trustee with the calculations of the Rebate Amount in accordance with Clause (F) above, the Partnership shall deposit into, or may withdraw from, the Rebate Fund the amount, if any, necessary to cause the balance therein to equal (i) the Rebate Amount less (ii) the future value, as of the Computation Date, of any previous rebate installment payments made for the Bonds pursuant to Subsection (d) hereof. (d) Payment to the United States of America. (A) The Partnership will pay to the United States or direct the Trustee to pay to the United States from amounts on the Rebate Fund, not later than 60 days after each Computation Date other than the final Computation Date, the required rebate installment payment. The rebate installment payment must be in an amount that, when added to the future value, as of the applicable Computation Date, of previous rebate payments made for the Bonds, equals at least 90 percent of the Rebate Amount as of said Computation Date. (B) The Partnership (or the Trustee if making payments of the Rebate Amount from the Rebate Fund) will pay to the United States or direct the Trustee to pay to the United States from proceeds in the Rebate Fund, no later than 60 days after the final Computation Date, an amount that, when added to the future value of previous rebate payments made for the Bonds, equals 100 percent of the Rebate Amount as of the final Computation Date. (C) Each payment to the United States will be mailed to the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255, or such other place or places designed by the Commissioner of Internal Revenue. Each payment shall be accompanied by an executed and completed copy of the Form 8038-T and a statement summarizing the determination of the Rebate Amount, or such form as may be provided by the Commissioner for this purpose. (e) Recordkeeping. The Partnership will maintain the following records: (A) Records of the determinations made pursuant to Subsection (d) of this Certificate until six years after the retirement of the last Bond. (B) Records of all amounts paid to the United States pursuant to Section 2.2 of this Certificate until six years after the retirement of the last Bond. (f) Termination. The provisions of this Section 8 shall continue in full force and effect until the Partnership has obtained an opinion of Bond Counsel that compliance with the provisions hereof is no longer required. C2 ( (g) Amendments. The Partnership may amend or supplement the provisions of this Section 8 by filing an executed copy of such amendment or supplement with the Trustee accompanied by an opinion of Bond Counsel to the effect that such amendment or supplement is required by, or better complies with, the provisions of Section 148 and applicable Rebate Regulations. 9. Application of Proceeds of Refunded Bonds and Proceeds of Bonds. The Refunded Bonds were a part of a series of bonds issued by the St. Paul HRA to finance the acquisition and construction of eight separate multi -family rental housing developments in the State of Minnesota. The Refunded Bonds were originally issued in the principal amount of $5,200,000. Proceeds of the Refunded Bonds were loaned to Midland Financial Savings and Loan Association ("Midland Financial"), an Iowa savings and loan association located in Des Moines, Iowa, and were used by Midland Financial to make a loan to the Partnership (the "Developer Loan") in the amount of $5,200,000 to finance a portion of the cost of the Project. The Refunded Bonds are required to be paid from loan repayments made by Midland Financial. The total cost of the Project was as follows: Land, Building and Equipment $5,980,648 Financing Costs 346,164 Deposit to Debt Service Reserve Fund for Refunded Bonds 500,000 $6,806,812 The sources of funds to pay such costs was as follows: Developer Loan $5,200,000 Tax Increment Financing from New Hope HRA 1,038,162 Partner's Initial Capital 11,000 Other Advances to Partnership 557,650 $6,806,812 No more than 10% of the net proceeds of the Refunded Bonds were paid to the Partnership or any related person to the Partnership for fees such as development fees, and no contractor for the construction of the Project was the Partnership or a related person to the Partnership. The Developer Loan is presently outstanding in the principal amount of $4,811,083. Upon issuance of the Bonds, there will be paid to AmerUs Bank ("AmerUs Bank") in Des Moines, Iowa, as successor to Midland Financial, a total of $4,892,647.12, to pay the principal, accrued interest and applicable prepayment penalty on the Developer Loan. Of such amount to be paid to AmerUs Bank, $4,795,000 shall be provided from proceeds of the Bonds, and the remaining -7- $97,647.16 shall be provided by the Partnership. Upon such payment AmerUs Bank will pay to the Trustee for the Refunded Bonds, $5,000,000 plus accrued interest on the Refunded Bonds through September 3, 1996 at the highest rate that can be borne on the Refunded Bonds and will direct the Trustee for the Refunded Bonds to redeem the Refunded Bonds on September 3, 1996. Upon such payment by AmerUs Bank to the Trustee for the Refunded Bonds there will be paid to the Partnership the funds held by the Trustee for the Refunded Bonds in the debt service reserve fund for the Refunded Bonds. Such amount will equal $ S/ `/, 200, SC, and will be applied by the Partnership to reimburse the Partnership the portion of the costs of the Project paid by the Partnership from other than the proceeds of the Developer Loan and Tax Increment Financing from the St. Paul HRA. Dated: July 11, 1996. ff:I NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP By 0944/'� Charles P. Thompson, General Partner CERTIFICATE OF UNDERWRITER The undersigned officer of Dougherty Dawkins, Inc. (the "Underwriter'), which is purchasing the $5,000,000 Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 (the 'Bonds"), issued by.the City of New Hope, Minnesota (the "Issuer"), dated, as originally issued, as of July 1, 1996, hereby certifies that: 1. Based upon our records and other information available to us which we have no reason to believe is not correct: (a) All of the Bonds have been the subject of a bona fide initial offering to the public (excluding bond houses, brokers or other persons or organizations acting in the capacity of underwriters or wholesalers) at the respective prices or yields shown on the cover of the Official Statement relating to the Bonds (the "Official Statement"), plus accrued interest (if any). (b) At the time the Underwriter agreed to purchase the Bonds, based upon the then prevailing market conditions, the Underwriter had no reason to believe that any of the Bonds would be initially sold to the public (excluding bond houses, brokers or other persons or organizations acting in the capacity as underwriters or wholesalers) at prices greater than the respective prices, or yields less than the respective yields, shown on the cover of the Official Statement, plus accrued interest (if any). (c) At least ten percent of each maturity of the Bonds was sold to the public (excluding bond houses, brokers or other persons or organizations acting in the capacity as underwriters or wholesalers) at the respective prices or yields shown on the cover of the Official Statement, plus accrued interest (if any). 2. The establishment of a reserve fund in the amount of $205,000 was a vital factor in marketing the Bonds and was a condition of our purchase of the Bonds. 3. We have calculated the yield on the Bonds in accordance with Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), to be not less than 7.1002636%, using the initial offering price of the Bonds, including accrued interest to the public, and the methodology contained in Section 4.4 of the No -Arbitrage Certificate of the Issuer to which this Certificate is attached. 4. We have calculated the average maturity of the Bonds in accordance with Section 147(b) of the Code to be not greater than 20.198 years. Dated: July 11, 1996. DOUGHERTY. DAWKINS, INC. By Its -2- Form 8038 (Rev. March 1995) a.pNmerd of 1M T,...ary Internal Revanw salvo. Information Return for Tax -Exempt Private Activity Bond IssuesI OMB No. 1545-0720 (Under Internal Revenue Code section 149(e)) 0, See separate Instructions. Reporting Authority If Amended Return, check here ► ❑ 1 Issuer's name City of New Hope 2 Mwer'. .mplay., id.ntificelton number 41 :6008870 3 Number and street for P.O. box a mail Is not delivered to street sddress) 4401 Xylon Avenue North Room/suite 4 Report number PA19 96 - 1 5 City, town, or post office, state, and ZIP code New Hope, Minnesota 55428 B Cate of Issue July 11, 1996 7 Nameoflssue Muititamiiy Housing Re un ing Revenue Bon s (Chardon Court Project), Series 1996 e CuSlp number 645464 EM6 (� Type of Issue (check applicable box(es) and enter the issue price for each) Issue Price 9 Exempt facility bond: a ❑ Airport (sections 142(a)(1) and 142(c)) , , . , , , , , , , b ❑ Docks and wharves (sections 142(a)(2) and 142(c)) . . , , , , , , , , , c ❑ Mass commuting facilities (sections 142(a)(3) and 142(c)). , , . . , , , d ❑ Water furnishing facilities (sections 142(a)(4) and 142(e)) . , , , . . . , , , e ❑ Sewage facilities (section 142(a)(5)) . . , , , , , , , , , , f El Solid waste disposal facilities (section 142(a)(6)) . . . . . . . g --jQualified residential rental projects (sections 142(ax7) and 142(d)), as follows:, . , . , , Meeting 20-50 test (section 142(d)(1)(A)) . , , , , , , , , , , ❑ Meeting 40-60 test (section 142(d)(1)(8)) . . . . . . ❑ Meeting 25-60 test (NYC only) (section 142(d)(6)) . , , , , , , , ❑ Has an election been made for deep rent skewing (section 1420(4)(8))? ❑ Yes ❑ No In Far llitles for the local furnishing of electric energy or gas (sections 142(a)(8) and 142(f)) I Local district heating or cooling facilities (sections 142(a)(9) and 142(g)) . . . . . . J ❑ Qualified hazardous waste facilities (sections 142(a)(10) and 142(h)) . k ❑ High-speed intercity rail facilities (sections 142(a)(11), 142(c), and 1420)). . . . . Check box If the owner elected not to claim depreciation or any tax credit (see Instructions) ► ❑WE, I ❑ Environmental enhancements of hydroelectric generating facilities (sections 142(a)(12) and 1420)) . . . . . . . . . . . . . . m ❑ Facilities allowed under a transitional rule of the Tax Reform Act of 1986 (see Instructions) Facilitytype ............................................................................................ .. 1986 Act section ...-• .........................•---....•----.........-•--•- n ❑ Qualified enterprise zone facility bonds (section 1394), . , , , 10 ❑ Qualified mortgage bond (section 143(a)) , , . , , , , , , 11 ❑ Qualified veterans' mortgage bond (section 143(b)), , , , , , , , , , , , , , ► If you elect to rebate arbitrage profits to the United States, check box , , . . . , ❑ 12 ❑ Qualified small issue bond (section 144(a)) (see instructions), . . . , , , , , , , ► For $10 million small issue exemption, check box . . . . . . . . . . . . ❑// 13 ❑ Qualified student loan bond (section 144(b)) , , , , , , , , , , , , 14 ❑ Qualified redevelopment bond (section 144(c)) ,.. . . . . . . . . . . . 15 ❑ Qualified hospital bond (section 145(c)) (attach schedule -see Instructions) . . . 16 ❑ Qualified 501(c)(3) bond other than a qualified hospital bond (attach schedule -see instructions) 17 ❑ Nongovernmental output property bond (treated as private activity bond) (section 1410) 18 ISI Other. Describe see instructions Is -Current refunding bonds for residential 9a 9b 9c 9d 9e 9f 9g 9h j 91 9i 9k 91 F70/2OWN. 9m 9n 10 11 12 / 13 14 15 16 17 18 $5,000, i cilLal ilV UJ iiI�, uuueL OUCL1Vll LJLJ\a/ 01 Description of Bonds Tax Reform Act of 1986 lel (b) (d (d) tel (11 (o) Maturity data Interest rate Issue price Stated redemption Weighted average Yeld Net price at maturity maturity interest coat 19 Final maturity. 6/1/26 7.25%$ 3,190,000.00 $ 380,000.00 20 Entire Issue $ 5 000 000.00 $ 5, 000, 000.00 20.198 ears 7. 1 R 1 7. 13 9'0 For Paperwork Reduction Act Notice, see page t of the Instnictlons. Cat. No- 49973K Form 5038 (Rev. 3-95) 4/3/95 Published by Tax Management Inc., a Subsidiary of The Bureau of National Affairs, Inc. 8038.1 DORSEY & WHITNEY LLP MINNEAPOLIS PILLSBURY CENTER SOUTH NEW YORK WASHINGTON, D.C. 220 SOUTH SIXTH STREET DENVER LONDON MINNEAPOLIS, MINNESOTA 55402-1498 SEATTLE BRUSSELS TELEPHONE: (612) 340-2600 HONG KONG FAX: (612) 340-2868 FARGO DES MOINES BILLINGS ROCHESTER MISSOULA JEROME P. GnUGAN COSTA MESA (612) 340-2962 GREAT PALLS September 11, 1996 Director Internal Revenue Service Center Mid -Atlantic Region 11601 Roosevelt Boulevard Philadelphia, Pennsylvania 19255 Re: $5,000,000 Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 City of New Hope, Minnesota Dear Sir or Madam: Enclosed please find two copies of Form 8038 for the above Bonds filed by City of New Hope, 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 them to the undersigned. Thank you for your cooperation. JPG:cmn Enclosures CERTIFIED MAIL 208 13L 253 Receipt for Certified Mail No Insurance Coverage Provided Do not use for International Mail (See Reverse) )irector hWr%1'Reveflue Service Center r. 1601 Roosevelt Boulevard friladelphia, PA 192 Certified Fee Scrai Do ivei, Fee Rmanoed'Defienur Rod Return Reae.eu Showing to Morn & Date Delivered Return Recept Showing to Mom, Date, and Addressee's Address LOTAL Postage & Fees l Fos(mark,o, Dam q I I I lye ( CERTIFICATE OF NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP I, the undersigned, general partner of Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Partnership"), hereby certifies on behalf of the Partnership as follows: 1. The Partnership is a limited partnership, duly formed and existing under the laws of the State of Minnesota, and is duly authorized to conduct its business in the State of Minnesota. 2. Attached as Exhibit A hereto is a true and complete copy of the Limited Partnership Agreement establishing and organizing the Partnership, together with all amendments thereto (the "Partnership Agreement"), which Partnership Agreement remains in full force and effect as of the date hereof and has not been modified or amended. 3. The Partnership has full right, power and authority (a) to enter into, execute and deliver the documents listed on Exhibit B hereto (the "Documents") and (b) to perform its duties and obligations under the provisions of the Documents. 4. Each of the Documents has been duly authorized, executed and delivered by the Partnership, is in full force and effect and constitute the valid and binding obligation of the Partnership enforceable in accordance with its terms subject to any applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcement of creditors' rights from time to time in effect and to the availability of equitable remedies. 5. The representations and warranties of the Partnership contained in the Documents are true and correct in all material respects, as of the date hereof. The Partnership has performed and complied with all agreements and conditions required by the Bond Purchase Agreement, as defined in Exhibit B, to be performed or complied with by it at or prior to the Closing Date, as defined in the Bond Purchase Agreement. Since the respective dates as of which information is given in the Official Statement, dated July 1, 1996, relating to the $5,000,000 Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 of the City of New Hope, Minnesota, except as set forth therein, there has not been any material or adverse change in the Partnership's condition, financial or otherwise. 6. Charles T. Thompson is hereby designated as Company Representative under the Loan Agreement listed in Exhibit B hereto and Charles P. Thompson is hereby designated as alternate Company Representative. Set forth below are the signatures of such persons: ell l Charles T. Thompson WA&0 � Charles P.' Thompson Dated: July 11, 1996. NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP By: qy�" — Charles P. Thompson, General Partner -2- EXHIBIT B 1. Combination Mortgage, Security Agreement and Fixture Financing Statement from Northridge Properties of New Hope Limited Partnership (the "Partnership"), as mortgagor, to the City of New Hope, Minnesota (the "Issuer"), as mortgagee; 2. Assignment of Rents and Leases from the Partnership to the Issuer; 3. Uniform Commercial Code Financing Statement from the Partnership, as debtor, to the City, as secured party; 4. Loan Agreement between the Partnership and the Issuer; 5. Bond Purchase Agreement (the 'Bond Purchase Agreement'), dated July 11, 1996, among the Issuer, the Partnership and Dougherty Dawkins, Inc.; 6. Declaration of Restrictive Covenants executed by the Partnership in favor of the Trustee; 7. Continuing Disclosure Agreement between the Partnership and the Trustee. Unless otherwise stated, all documents are dated as of June 1, 1996 or are undated. ,,,ate of Minnesota SECRETARY OF STATE Certificate of Good Standing I, Joan Anderson Growe, 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, Chapter 322A by the filing of a Certificiate of Limited Partnership with the Office of the Secretary of State on the date listed below; that this limited partnership is authorized to do business at the time this certificate is issued; and that amendments to the certificate of that limited partnership were filed on the dates listed below. Name: Northridge Properties of New Hope Limited Partnership Date Formed: 04/18/1985 Amendments Filed On: 04/18/1985 -ORIGINAL -CURRENT NAME 01/22/1986 -AMENDMENT 01/29/1988 -AMENDMENT Northridge Properties o Partnership Secretary of State. ,,,a*e of Minnesota SECRETARY OF STATE This certificate has been issued on 07/10/96. Secretary of State. EXHIBIT A LP -2359 1�'12 DOMESTIC LIMITED PARTNERSHIP Certificate of Formation TO ALL TO WHOM THESE PRESENTS CHALL 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 19th day of Anri I A. D. ig 85 for the formation of -- _ - Northridge Properties of New Hope Liwt.Qd Partnerchjn -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 :hat the said Northridge Properties of New Ho Limited Pa rtnershin is a legally organized Limited Partnership under the laws of this State. SC -001 57•01 - v Witness my official signature hereunto sub- scribed and the Great Seat of the State of Minnesota hereunto affixed this eighteenth day of April in the year of our Lord one thousand nine hundred and eighty-five _ secretary of State. L-p-c-�3 -59 LIMITED PARTNERSHIP AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP OF NORTHRIDGE PROPERTIES OF NEW HOPE L'MITEO PARTNERSHIP L' L-p-c-�3 -59 LIMITED PARTNERSHIP AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP OF NORTHRIDGE PROPERTIES OF NEW HOPE L'MITEO PARTNERSHIP I NORTH RIDGE PROPERTIES LIMITED PARTNERSHIP TABLE OF CONTENTS SECTION PAGE Preliminary Statement...... I ................... 1 1 Lexicon ........................................ 1 1.1 Act .................................... 1 1.2 Additional Partnership . Interests..... ......................... 1 1.3 Affiliat,� .............................. 2 1.4 Agreement ............................... 2 1.5 Annual Report .......................... 2 1.6 Bonds .................................. 2 1.7 Break Even ............................. 2 1.8 Capital Account ........................ 2 1.9 Northridge Properties of New Hope...... 4 1.10 Date of Substantial Completion......... 4 1.11 Distribution ........................... 4 1.12 General Partner ......................... 4. 1.13 Gross Income .....................:..... 4 1.14 ' Limited Partner ........................ 4 1.15 Limited Partnership Unit ............... 4 1.16 Majority -in -Interest ................... 4 ' 1.17 Managing General Partner........... 1.18 Net Cash Flow .......................... 4 1.19 Net Cash Proceeds...................... 5 1.20 Partners ............................... 5 1.21 Partnership.. .......................... 5 1."2 Partnership Interest. 5 .._ i. 1.23 Person ................................. 5 -.. ; 1.24 Plans and Specifications ............... 5 1.25 Project ................................ 6 - 1.26 Project Architect ...................... 6 .--, 1.27 Project Documents ...................... 6 - - 1.28 Project Loan ........................... 6 - - 1.29 Project Operating Costs ................ 6 - 1.30 Property ................................ 6 -'- 1.31 Secretary of State ..................... 6 1.32 Tax Matters Partner .................... 7 2 Formation of Partnership ....................... 7 2.1 Confirmation of Formation .............. 7 3 Term and Purposes of Partnership...............'.. 11/17/84 -i- 0 SECTION PAGE 3.1 T-rm of Partnership .................... 7 3.2 Purposes of Partnership ................ 7 4 General Provisions ............................. 8 4..1 Name and Principal Business Address ..................... I........ 8 4.2 Names and Addresses of Partners........ 8 4.3 Managing General Partner, Tax -.:.-- Matters Partner and Agent............ 8 5 Capital Contributions .......................... 9 - 5.1 Capital of the Partnership.............. 9 5.2 No Interest on Capital Contributions ........................ 9 S.! Contribution of General Partners....... 9 5.4 Contribution of Limited Partners....... 9 5.5 Additional Contributions ............... 10 5.6 Determination of C•.pital Accounts...... 10 5.7 Loans to Partnership ................... 10 5.8 No Right to Return of Contribution ......................... 11 5.9 Creditor's Interest in ` Partnership .......................... 11 6 Distributions .................................. 11 F 6.1 Distribution of Net Cash Flow.......... 11 6.2 Time of Distribution ................... 11 --` 6.3 Characterization of Net Cash Flow ............................ 12 6.4 Distribution of Net Cash _ Proceeds --No Termination of Partnership .......................... 12 6.5 Distribution of Net Cash Proceeds Upon Termination of the Partnership.. ............... 12 6.6 Limitation on Distribution ............. 13 -' 6.7 Division of Distribution ............... 13 - 7 Allocation of Profits and Losses ............... 13 7.1 Allocation of Profits and Losses Other Than From a Sale, Exchange, Refinancing, Condemnation or - Other Disposition... ........... .....-�,' 13 11/.17; 84 -ii- 0 10/31/84 0 rncr SECTION 7,2 Allocation of Profits and Losses from a Sale, Exchange, Refinanc- ing, Condemnation or other 14 Disposition ................. ........ 15 7.3 Division Among Partners ...............• 15 7.4 Allocation for Partial Year............ 7.5 Accounting Upon Termination of 15 Interest or Liquidation .............. 7.6 Accounting Upon Withdrawal or 16 Expulsion................ .......... 7,7 Treatment of Gain Upon Term............ 16 tion of Interest............. 7.8 Treatment of Non -Cash Assets 16 Distributed Upon Liquidation......... 16 7,9 Accounting.......... .................. Additional Partnership interests.. .... 16 g Sale of 8.1 Additional Partnership Interests....... 16 17 8,2 Terms of Additional Offering.......:::: - 17 - 8.3 Pre-emptive Rights ............... 9 Powers, Rights and Duties of Partners........... 18 9,1 General Management and 18 Responsibility 18 9,2 Duties, Rights. and Powers .............• - 9.3 - Removal and Replacement of:.._... 21 Designated Parties.......... 21 -9,4 Non -Liability and Indemnification...... 9.5 Rights and Powers ofLinitad• 21 Partners ............... •_..... 21 9.6 Other Interests of Partners............ -9,7 Limitations on Authority of 22 General Partners ................... 22 9.8 No Duty to Transm.t Certificates.. ... 10 Certain Obligations and Warr3 ........... 2.. 2 of General Partners ........... 22 10.1 Filing s ................................ 23. 11 Compensation .� to General Pa'^cr:;............... 11 ..1 Partnership Management Fee........,..... 23 2323 11.2. Letters of Credit Fee .................. 11.3 Project Management Fee........ 10/31/84 0 . C SECTION PAGE 12 Changes in General Partners .................... 23 12.1 Introduction ........................... 23 23 12.2 Voluntary Withdrawals .................. 12.3 Approval of voluntary Withdrawal....... 23 12.4 Effect of Bankruptcy of General Partner ...................... 24 12.5 Expulsion of A General Partner......... 24 12.6 Replacement of a General Partner....... 25 12.7 Alternative to Special Meetings........ 25 12.8 Liability of Withdrawn or Expelled General Partner ............. 25 13 Transfer of Partnership Interests .............. 25 13.1 Transfer of Partial Interest of General aartner................... 25 13.2 Grant of Right of First ReCusal to Remaining General Partners........ 25 13.3 Exercise of Right o;: First Refusal by Remaining General Partners ............................. 25 13.4 Effect of Exercise by More Than One Remaining General Partner......... 26 13.5 Effect of Failure to Exercise by Remaining General Partners......,.... 26 t 13.6 Rights and obligations of. Assignee and Assignor of Partial Interest of General Partner ................... 26 13.7 Sale or Assignment of Interest • of Limited Partner................... 27 13.8 Control of General Partners over . Sale or Assignment of Interest of Limited Partner.... .. .... 27 13.9 Procedure for Transfer of Interest - of Limited Partner ................... 27 13.10 Effective Date of Transfers of Partnership Interests ................ 28 13.11 E.cecution of Doruments by Assignee of Limited Partner ................... 28 13.12 Effect of Unauthorized Sale or Assignment ........................ 28 13.13 Absolute Restriction on Transfer....... 29 13.14 Status oE.Nssignee of. Limited Partner .............................. 29 _ 13.15 Events That Will Not Cause - - - -' -°-- Termination .......................... 29 13.16 Effect of Death or Incompetency of Limited Partner ................... 29 - 13.17 Gift of Partnership Interest........... 29 10/31/84 -iv- . C SECTION PAGE 14 Dissolution and Liquidation of Partnership..... 30 14.1 Sale, Refinancing or Other Dis- position of the Project .............. 30 14.2 Events Causing Dissolution ............. 30 14.3 Continuation of Business of Partnership Following Dissolution.... 30 14.4 No Right to Accounting Upon Dissolution .......................... 31 14.5 Effect on Partnership of Damage - or Destruction of Project............ 3i 14.6 Effect on Partnership of Whole or Partial Condemnation of Project...... 31 14..7 Consent to Sale Not Required........... 32 1Y.8 Liquidation and Winding Up ............. 32 14.9 Disposition of Rererves Required Upon Termination ..................... 32 15 Fiscal Matters ................................. 33 15.1 Books and Records of Partnership....... 33 15.2 Annval Report and Tax Returns.......... 33 15.3 Fiscal Ynar and Accoun`ing Period...... 34 . 15.4 Bank Accounts.. .. .......... .... ... ..... . 34 -- 15.5 Accounting Method and Decisions........ 34 1c.6 Election of Depreciation Method........ 34 - '�- 15.7 - Election to Adjust Bas's ............... 34 16 Amendment of Agreement ......................... 34 >---' 16.1 Procedurn for Anenement................. 34 ,. .•-` 16.2 Adoption of Amendment... .... 35 - 16.3 Distribution of Amendments.. ........ 35 16.4 Effect and Filing of Amendment......... 35 - ; 16.5 Limitation on Amendments ............... 35 - 17 Meetings of Partnership ........................ 36 17.1 General ................................ 36 17.2 Writing in Lieu of Meeting ............. 36 18 Power of Attorney .............................. 36 18.1 General .. .... ..................... 36 18.2 Terms of Power of Attorney ............. 37 18.3 Limitation on Exercise of Power - of Atlornev .......................... 37 10/31/84 -v- A SECTION 19 Miscellaneous .................................. i `i Invalidity .. ... ...................... 19.2 -S 19.3 Interchangeability of Words............ 19.4 Governing Law .......................... SECTION 19 Miscellaneous .................................. 19.1 Invalidity .. ... ...................... 19.2 Captions and Titles .................... 19.3 Interchangeability of Words............ 19.4 Governing Law .......................... 19.5 Notices ..............................:. 19.6 Parties in Interest .................... 19.7 Counterparts...., ....................... 10/31/84 -vi- PAGE 37 37 37 38 38 38 38 38 0 03Y -y LIMITED PARTNERSHIP AGREEMENT AND / CERTIFICATE OF LIMITED PARTNERSHIP OF NORTHRIDGE PROPECTIES OF NEW HOPE LIMITED PARTNERSHIP ry`- THIS AGREEMENT, made this )S day o£�� 1985.11 between CHAP -LES P. THOMPSON, DONALD E. FORSE H and CHARLES T. THOMPSON WITNESSETH: FOR VALUE RECEIVED, it is hereby agreed: Preliminary Statement. 1. The purpose of the Partnership is to develop, construct, own and housinroject one six -Story tapartmentlbuilding containingiahwill consist of total of apartments, more or less, to be constructed on property located in the City of New Rope, Hennepin County, Minnesota (the "Project"). The Project will be constructed beginning in 1985, and the Date of Substantia: Completion is scheduled 'for the end of 1985. 2, The City of New Hope, Minnesota (the "City"), has agreed to authorize, issue and deliver its Housing Development Bonds. Series 1985 (Northridge Properties Project) (the "Bonds"), in the principal amount of Five Million Three Hundred Thousand and 00/100 Dollars ($5,300, 000.00) more or less in connection with the Project. The Bonds will be issued pursuant to an Indenture of Trust between the City and a trustee to be designated, for the purpose of making a loan to the Partnership (the "Project Loan") for the acquisition, construction and ownership of the Project and to fund a reserve fund and to pay certain costs Incurred in connection with the issuance of the Bonds. SECTION 1 Lex icon As used in this Agreement, the following terms shall have the following meanings: - 1.1 "Act" means the 1976 Uniform Limited Partnership Act, Minnesota Statutes Chapter 322A (1982). 1.2 "Additional Partnership Interests" means Partnership Interests offered, sold and issued by the General Partners pursuant to Section 8 of this Agreement to fund cash flow deficits 11/17/84_1 l Q which may occur and to provide for the reasonable acd immediately foreseeable working capital needs of the Pdrtnership. 1.3 "Affiliate" or "Affiliated Person" means, when used with reference to a specified Person: 1.3.1 Any Person directly or indirectly controlling, controlled by or under common control with the specified Person; 1.3.2 Any Person owning or controlling 109 or more of any class of the outstanding voting securities of any Person described in the foregoing subparagraph; 1.3.3 Any officer, director or partner of the specified Person; and 1.3.4 If any Person described in any of the foregoing subparagraphs is an officer, director or partner, any company for which such Person acts in any such capacity. 1.4 "Agreement" means this Limited Partnership Agreement and Certificate of Limited Partnership, and any amendment or supplement hereto. - 1.5 "Annual Report" means the statement prepared by the Partnership at the close of each fiscal year pursuant to Paragraph 15.2 hereof, showing the income and expenses of the Partnership for the fiscal year, the balance sheets thereof as of the end of such year and a summary of the affairs of the Partnership indicating Project occupancy experience for the past 12 -month period and related matters. _ 1.6 'Bonds' means the Rousing Development Bonds, Series 1985 of the City (Northridge Properties Project), issued pursuant to an Indenture of Trust between the City and a trustee to be designated. 1.7 "Break Even" means the date on which Gross Income per month equals or exceeds Project Operating Costs per month for a period of three (3) consecutive months following the Date of Substantial Completion. 1.8 "Capital Account" means an account established and maintained for each Partner, which account shall be credited with: 1.8.1 the amount of the Partner's capital contribution, as more specifically set forth herein; ( 10/31/84 • 1.8.2 the amount of Partnership income (including incor..e exemt therpnf)rallocated ltonsuch Partner come tax) dpursuant ritems to qo�qQF1r1?f1 i(} 9M 713f gn"l shall be debited by: 1.8.3 the amount of Partnership losses, deductions (or items thereof.) allocated to such Partner pursuant to tur arrePnot9raphs 7.1 deductible afor ?federal incl income taxes which purposes; and 1.8.4 the amount of. all Distributions to such .Partner pursuant to Section 6; provided, that: In the eo,tnt the Partnership make, an election under Section 754 of the Internal Revenue Code of 1954, as amended, and during a period in which that election is effective an interest in the Partnership is sold or exchanged, the Capital Account of the transferee Partner shall not be adjusted to reflect the basis adjustment made pursuant to section 743 unless the Managing General Partner determines that at no time will there be any non -tax economic disparit; between the interest of any Partner whose basis is adjusted under partner as a resu Section yother an adjustmentofthe transferee Partnrrts suchf Capital Account. In the event .the .Partnership is deemed to be terminated for federal income tax purposes due to the sale or exchange of 508 or more of the total interests in rind, appropriate ppro riateal and adjustmentstshallhin be a de month period, app P made to the Capital Accounts to reflect the constructive liquidation and reformation deemed to occur upon a termination. Subject to the foregoing subparagraph, in the event Units are sold, exchanged or otherwise transferred and the transfer is recognized under section 13 hereof, or by operation of: law, t)ie Capital Account of the transferee will. equal the Capital Account of rhe transferor immediately before the transfer. 1.8.5 1.8.6 1.8.7 11/01/84 -3- i a 1.9 "North Ridge Pronertics of New hope" means the rental housing project described herein to be constructed with proceeds from the issuance of the Donds. 1.10 "Date of Substantial Completion" mean: tho date certified by the City of New Uope when the Projec'. is sufficiently complete ;n accordance with the Plans and Specifications so the Project may be occupi^d for th^ use [or which it is intended. 1.11 "Distribution" means those amounts of Net Cash Flow and Net Cash Proceeds which from time to time are distributed and paid to Partners pursuant to Section 6. 1.12 "General Partner" means Charles P. Thompson, Donald E. Forseth or Charles T. Thompson, or any Person who at the time of reference thereto has been admitted as a suc: "sso: General Partner in accordance with Section 12 of this Agreement. All references to the General Partners are references to them jointly and severally unless otherwise expressly provided. 1.13 "Gross Income" means the sum of all monies received from operation of the Project in any given period, including any governmental subsidy or assistance payment. on an accrual basis. 1..14 "Limited Partner" means any Person who owns at least one Limited Partnership Unit and has executed this Agreement per- sonally or by an appropriate power of attorney, and any assignee of such Person, whether or not such assignee is admitted a- a. substitute Limited Partner; provided, however, that an assignee shall not be considered a Limited Partner for purposes of Sections 12 and 16 of this Agreement unless such assignee is ai^witted as a substitute Limited Partner pursuant to Section 13 hereof. 1.15 "Limited Partnership Unit" or "Unit" means the interest of a Limited Partner in the profits, losses andcapitalof. the Partnership to which the holder of each Limited Partnership Unit is entitled pursuant to the terms hereof. 1.16 "Majority -in -Interest" of the General Partners cr Limited Partners means, at any specific time, a majority in number of those General Partners or Limited Partners as applicable, respectively, eligible to vote. 1.17 "Managing General Partner" means Charles P. Thompson, as provided in Paragraph 4.3, or any successor to such function elected pursuant to Paragraph 9.3. 1.18 "Net Cash Flow" means the net book income of the Partnership as accounted for pursuant to Paragraph 15.1 of 11/17/84 -4- this -s T Agreement for the Partnership's fiscal year, plus the amount of any deduction for depreciation or amortization ta!een in such fiscal year, and less the amount paid in such fiscal year on the principal of any mortgage or other encumbrance against the Project, including any cash reserve required under any of the Project Documents, and less the amount of any reasonable reserve as determined by the Managing General Partner as of the close of such fiscal year for working capital of the Partnership, for contingent and future liabilities of the Partnership or for repair, replacement or improvement of the Project, plus any net proceeds from the sale of any part but not substantially all of _ the Project. Proceeds from the refinancing of the Project and net proceeds from the sale, exchange, condemnation or other disposition of all or substantially all of the Project shall not be included in Net Cash Flow. 1.19 "Net Cash Proceeds" means amounts realized by the Partnership upon the sale, exchange, refinancing, condemnation or other disposition of the Project or any portion thereof, less payment of all expenses of such sale, exchange, refinancing, - condemnation or other disposition, including any and all sale and refinancing commissions. 1.20 "Partners" means the General Partners and the Limited Partners. - - 1.21 "Partnership" means Northridge Properties of New Hope - Limited Partnership, the limited partnership established under the Act pursuant to this Partnership Agreement as amended. 1.22 "Partnership Interest" means: 1.22.1 In the case of any Limited Partner, the interest of such Limited Partner in the Distributions of the Partnership allocable at a particular time to the class comprised of the Limited Partnersbasedupon such Limited Partner's proportionate share of the capital contributions of the class of Limited Partners; and 1.22.2 In the case of any General Partner, the interest of such General Partner in the profits, losses and Distributions of the Partnership allocable at a particular time to the class comprised of the General Partners pursuant to the terms hereof. 1.23 "Person" means any individual, partnership, corporation, trust, association, or other legal entity. -- 1.24 "Plans and Specifications" means the construction drawings and specifications prepared for use in construction of 11/17/84 _S_ the Project and all documents incorporatrl thereir or related thereto, including any approved change orders. 1.25 "Project" means the Property as it is de.ined herein together with one hundred twenty-nine (129), more or less, rental housing units and related amenities to be constructed thereon, to be known as "North Ridge Properties." 1.26 "Project Architect" means an organization professionally qualified, duly licensed and selected by the Managing General Partner to perform architectural ser,,ices in connection with the Project, including without limitation analysis of Project requirements, creation and development of Project design, preparation of the Plans and Specifications and bidding requirements, and general administration of the construction contract. 1.27 "Project Documents" means each Loan Agreement and any promissory note(s) and any deed or mortgage deed delivered pursuant to its terms, each Contract for Architectural Services and the Assignment thereof, the Contract for Construction and the Assignment thereof, each Assignment of Rents and Leases, each Collateral Agreement, each Declaration of Restrictive Covenants, each Indenture of Trust, each Letter of Credit Agreement, each Regulatory Agreement, each Indemnity Agreement, and each other writing or Certificate as may be required or reasonably necessary to effect the financing, construction or operation of the Project. 1.28 "Project Loan" means the mortgage loan in the principal amount of $5,300,000, more or less, made to the Partnership by the Trustee from the proceeds of the sale of the Bonds. 1.29 "Project Operating Costs" means all expenses of owning and operating the Project and all expenses of operating the Partnership other than project development costs, as determined in accordance with the accrual method of accounting, including without limitation insurance premiums, utility charges, management fees, amortization of the Project Loan (principal and interest), annual financing fees, any applicable income, sales, use and real property taxes and assessments and deposits into reserves for replacement, painting and redecorating costs, but specifically excluding the amount of any deduction for depreciation or amortization and fees paid or accrued to the General Partners (except those paid or accrued pursuant to Section 11). 1.30 "Property" means the parcel of real property described in the Project Documents upon which the Project will be constructed. 1.31 "Secretary of State" means the Secretary of State of the State of Minnesota, or any successor to her functions. 11/17/84 -G- 0 1. 32 "Tax Matters Partner" means Charles P. Thompson, as provided in Paragrcoh 4.3 hereof, or any successor to such function elected pu::uant to Paragraph 9.3. SECTION 2 Formation of Partnership 2.1 Confirmation of Formation. The parties confirm the formation of the Partnership and agree to record promptly this Agreement in the office of the Secretary of State and to comply with the other provisions and requirements of the Act. This Agreement shall govern the affairs of the Partnership from and after the date hereof; provided, however, that the Act shall govern Che rights and liabilities of the Partners except as herein or otherwise expressly stated. . - SECTION 3 Term and Purposes of Partnership 3.1 Term of Partnership. The Partnership shall commence as of the date hereof. The Partnership shall continue until December 31, 2025, and thereafter by mutual consent of all Partners, unless sooner dissolved and terminated by operation of law or as hereinafter provided. 3.2 Purposes of Partnership. The purposes, powers and business of the Partnership shall be: 3-.2.1 To acquire, own and hold title to the Property free and clear of all encumbrances except encumbrances referred to in Paragraph 3.2.6 and easements and restrictions of record and agreements with the City or Trustee relating to the Project; 3.2.2 To construct or cause to be constructed on the Property, a six -story apartment building containing approximately 129 rental housing units and related amenities, collectively referred to herein as the "Project." 3.2.3 To own, develop, improve, manager operate, finance and refinance the Project for investment purposes and eventual resale at a profit; 3.2.4 To acquire any property, re.rL or personal, in tee or under lease, or any rights therein or appurtenant thereto,. necessary or appropriate for construction and operation of. the Project; 10/31/84 -7- 3.2.5 To execute, deliver ano perform the Project Documents and such other undertakings as may be required or reasonably necessary to effect the financing, construction and operation of the Project, with any such documents heretofore executed and delivered on behalf of the Partnership being hereby ratified, adopted and approved and made the act and deed of the Partnership; and 3.2.6 To carry on such other activities as may be necessary, advisable or convenient to the promotion or conduct of the business of the Partnership, including without limitation incurring indebtedness and granting liens and security interests on the real and personal property of the Partnership to secure the payment of such indebtedness. SECTION 4 General Provisions 4.1 Name and Principal Business Address. The Partnership shall be designated as and conduct its business under the name "Northridge Properties of New Hope Limited Partnership." The business and mailing address of the Partnership shall be 5430 Boone Avenue North, New Hope, Minnesota 55428, or such other place within the State of Minnesota as the Managing General Partner shall determine from time to time. 4.2 Names and Addresses of Partners. The names and addresses of the Partners are as follows: Charles P. Thompson 4201 58th Avenue North Brooklyn Center, MN 55423 Donald E. Forseth 1935 Aguila Avenue North Golden Valley, MN 55427 Charles T. Thomison 14051 Lawndale Lane Dayton, MN 55327 4.3 Manaqinq General Partner, Tax Matters Partner and Agent. Charles P. Thompson is. hereby designated the Managing General Partner and Tax Matters Partner for all purposes under this Agreement, and further designated as agent of the Partnership for service of process at the address set forth in subparagraph 4.1. 11/17/84 -8- E "s9 SECTION 5 Capital Contributions 1 5.1 Capital of the Partnership. The capital of the Partner- ship shall be the aggregate amount of cash contributed by the Partners as hereinafter set forth. A Capital Account shall be established for each Partner and credited with the amount of his capital contributions to the Partnership from time to time. Any Partner, including any additional or substitute Partner, who receives an interest in the Partnership or whose Partnership Interest is increased by means of the transfer to him of all or part of the Partnership Interest of another Partner, shall have his Capital Account appropriately adjusted to reflect such transfer. 5.2 No Interest on Capital Contributions. No interest shall be paid on any capital contributed to the Partnership. 5.3 Contribution of General Partners. The General Partners have contributed to the capital of the Partnership as General Partners the following amounts: Amount Percentage Contributed Interest Charles P. Thompson $7,500 758 / Donald E. Forseth $2,000 20E. Charles T. Thompson - $ 500 59 5.4 Contribution of Limited Partners. As Limited Partners the following named persons have agreed to contribute an aggregate amount of One Thousand Dollars ($1,000.00) to the capital of the Partnership. The contribution of the Limited Partners has been divided into one hundred (100) Limited Partnership Units in the amount of Ten Dollars ($10.00) per Unit. The number of Units purchased by each Limited Partner is set forth opposite his name as follows: Number Limited Partner of Units Amount Contributed Charles P. Thompson 50 - $500 Donald E. Forseth 35 $350 CP.arles T. Thompson 15 $150 10/31/84 ( -9- i 11 r] 5.5 Additional Contributions. If a Majority -in -Interest of the General Partners agree by written resolution at ally time or from time to time that additional contributions to the capital of the Partnership are necessary for the conduct of the Partnership business, each General Partner shall promptly contribute the required capital in the ratio that such Partner's initial contribution as a General Partner was to the capital initially - contributed by all of the General Partners pursuant to subparagraph 5.3. If any Partner fails to pay his share of such additional contribution, any additional amount advanced by the other Partners to the extent necessary to fund the additional amount not contributed by other partners shall be regarded as a loan to the Partnership or as a further capital contribution, at their sole option, except that all such Partners shall make the same option. If any General Partner fails to pay his share of the additional capital contribution and the other General Partners do not advance the required amount, then the additional capital contribution payable by such non-contributing Partner shall be a debt from such Partner to the Partnership, payable on demand of the Partnership, and shall bear interest at the reference rate of the First Nationai Bank of Minneapolis in effect on the date of the Partnership resolution setting forth the need Cor additional capital, but not less than the lowest rate required by Section 483 of the Internal Revenue Code and not more than the maximum rate chargeable by law. If the Partnership commences legal action to collect such debt, the Partnership shall be entitled to recover Crom the defaulting Partner the reasonable cost of collection of said debt including attorney's fees. 5.6 Determination of Capital Accounts. Except as otherwise provided in this Agreement, whenever it is necessary to determine the capital Account of any Partner for purposes of Section 6 or Section 7, the Capital Account of the Partner shall be determined after giving effect to all allocations of net income, net gains and net losses for the Partnership's then current year and all Distributions for such year (other than Distributions made in repayment of loans to the Partnership). Loans by any Partner to the Partnershipshall not be considered contributions to the capital of the Partnership. Except as specifically provided in this Agreement, a Partner shall not be entitled to withdraw any part of his Capital Account or to receive any Distribution, and no Partner shall be entitled to make any additional capital contributions to the Partnership other than as provided herein. 5.7 Loans to Partnership. The Partners may make loner to the Partnership from time to time, as authorized by the h.unaging General Partner, in excess of their contributions to the capital of the Partnership. Any such loan shall not be treated as a contribution to the capital of the Partnership for any purpose hereunder, nor entitle the lending Partner to any increase in his 11/17/84 -10- share of the profits and losses and Distributions of the Partner- ship, but the amount of any such lean shall be an obligation of the Partnership to such Partner, with interest thereon at a rate determined by a Major!. ty-in-Interest of the general Partners, which rate will not be less than the lowest rate required by Section 483 of the internal Ravenl,e code of 1954, as amended, and not more than the maximum rate chargeable by law. 5.8 No Aight to Return of Contribution. The Partners shall have no right to Che withdrawal or return of their contribution to the capital of the Partnership, as reflected in their respective Capital Accounts from time to time, except for Distributions to the extent such Distributions are determined to be a return of capital as provided in Paragraph 6, and upon the dissolution and liquidation of the Partnership pursuant to Section 14. 5.9 Creditor's interest in Partnership. No creditor who makes a nonrecourse loan to the Partnership shall have or acquire at any time as a result of making the loan, any direct or indirect interest in the profits, capital or property of the Partnership, except and to the extent only that a security interest is expressly granted to such creditor in any designated assets of the Partnership. SECTION 6 Distributions '- 6.1 Distribution of Net Cash Flow. Net Cash now, when available, shall be distributed in the orderand manner _ hereinafter described: 6.1.1 Net Cash Flow earned or accumulated prior to the Date of Substantial Completion may be used by the Partnership to pay Project Development Costs; 6.1.2 Net Cash Flow earned or accumulated during the three monthi prior to and the time following Break Even shall be used to repay to the extent thereof loans or advances together with interest thereon made by the Partners; 6.1.3 Thereafter Net Cash Flow shall be distributed 10% to the General Partners to be divided among them in proportion to their respective Interests in the Partnership as General Partners and 908 to the j Limited Partners to he divided among them in proportion to their respective Interests as Limited Partners. - 11/17/84 -11- 0 6.2 Time of Distribution. Distributions pursuant to Paragraph 6.1 may be made at reasonable intervals during the fiscal year, and in any event shall be made as soon as practi-able after the close of each fiscal year. If Net Cash Flow is distributed in anticipation of the year-end :'termination thereof, such Distribution shall be subject to adjustment. 6.3 Characterization of Net Cash Flow. A Distribution of Net Cash Flow shall be deemed to have been made from the income of the Partnership to the extent of income, as determined pursuant to Paragraph 15.1, during the year of such Distribution and of any theretofore :,ndistributed income, but otherwise such Distribution shall be deemed to have been made from the capital of the Partnership. At the time of making a Distribution of Net Cash Flow the Managing General Partner shall determine pursuant to the foregoing sentence the portion of such Distribution, if any, which is from income of the Partnership and the portion of such Distribution, if any, which is a return of capital of the Partnership for federal income tax purposes. The Managing General Partner shall advise the other Partners receiving any such Distribution of his determination at the time lie transmits the Annual Report. As soon as practicable after making any Distribution determined to have been made from capital of the Partnership, the Managing General Partner shall sign and record in the appropriate office an amended certificate of limited partnership to reflect such return of capital. Such amendment shall not require the approval or consent of any other Partner. 6.4 Distribution of Net Cash Proceeds --No Termination of Partnership.. At any time prior to termination of the Partnership, Net Cash Proceeds shall be distributed 901 to the - Limited Partners to be diviPed among them in proportion to their respective Limited Partnership Interests and 108 to the General Partners to be divided among them in proportion to their Interests in the Partnership as General Partners. Prior to any such distribution, the Managing General Partner may, at his option, first pay any indebtedness relating to the Project or any indebtedness of the Partnership to any Partner created by loans or advances of such Partner; and establish such cash reserves as he, in his sole discretion, deems reasonably necessary for the proper operation of the Partnership. 6.5 Distribution of Net Cash Proceeds Upon Termination of the Partnership. Net Cash Proceeds resulting Erom the sale, exchange, condemnation orsimilar eminent domain taking, casualty or other disposition of all or substantially all of the Project shall be distributed and applied in the following order of l priority: 6.5.1 First, to the payment of all debts and liabilities of the Partnership and expenses of liquidation, including any indebtedness and liabilities of t:e Partnership to the Partners; 11/17/84 -12- I 6.5.2 Second, to the setting up of any reserve which the - Majority -in -Interest of the General Partners deems _ - necessary to provide for contingent or unforeseen liabilities or obligations of the Partnership; provided, however, that at the expiration of such period of time as the Managing General Partner shall deem advisable, the balance of such reserve remaining after the payment of such contingencies shall be distributed in the manner hereinafter set forth in this Paragraph; and 6.5.3 Third, any balance remaining shall be distributed 90% to the Limited Partners, to be divided among them in proportion to their respective Limited Partnership Interests, and 109 to the General Partners, to be divided among them in proportion to their Interests in the Partnership as General Partners. 6.6 .Limitation on Distribution. Except upon dissolution of the Partnership, no Distributions shall be made unless: 6.6.1 after taking such Distributions into account, the Partnership's assets based on their Ca'.r market - value are in excess of its liabilities (excluding liabilities to Limited Partners on account of their capital contributions); and 6.6.2 payment has been madeto any cash reserve required under any of the Project Documents. 6.7- Division of Distributions. Amounts distributed to the Limited Partners as a class shall be divided among them pri rata based on the number of outstanding Limited Partnership Units at the time of the distribution. Amounts distributed to the General Partners shall be divided among them in proportion to their contributed capital as General Partners at the time of the distribution. Provided, however, if the contributed capital of the General Partners oranyof them is increased or decreased during the fiscal year or the number of Limited Partnership Units isincreasedor decreased during the fiscal year, any distribution for such fisal year shall be prorated among the affected Partnors to fairly reflect the period of increase or decrease in Partnership capital during such fiscal year. SECTICN 7 Alloeatio':s of Pro Cits ane' Lorres 7.1 Allocation of Profits, and Losses Other Than From a Sale ExcF anoe Ee`inancirr -'ondemnation or Other Disposition. 11/17/S-0 -13- Each. item of Partnership income, gain, loss, deduction or credit (other than profits and losses attributable to the sale, exchange, refinancing, condemnation or other disposition o` all or substantially all of the Project) for each respective ycar shall be allocated to the General Partners in the same manner as Net Cash Flow is distributed pursuant to subparagraph 6.1.3 and including any proration pursuant to Paragraph 6.7. 7.2 Allocation or eror— d„,j - Refinancin Condemnatron or Other Drs osition. F.ach item of Partnership income, gain, loss, or deduction attributable to the sale, exchange, refinancing, condemnation or othe_ disposition of all or substantially all of the Project shall be allocated among the Partners as follows, provided, however, that in any event the General Partners shall be allocated 18 of each such item: 7.2.1 First, income and gain (whether ordinary income, Section 1231 gain or capital gain) in an amount equal to the sum of the deficit Capital Account balances, if any, shall be allocated ratably among those Partners with deficit Capital Accounts, in proportion to each such Partner's share of c..; total of the deficit Capital Account balances; 7.2.2 Second, deduction ..:d loss (whether ordinary loss, Section 1231 loss or capital loss) in an amount equal to the sum of the positive Capital Account balances, if any, shall be allocated ratably among those Partners with. positive Capital Accounts, in proportion to each such Partner's share of the total of the positive Capital Account balances; 7.2.3 Third, those• Items of income, gain, loss, deduction or credit, in an aggregate amount not to exceed Net Cash Proceeds distributed to the Partners pursuant to Paragraph 6.5, shall be allocated ratably among those Partners receiving such Distributions in proportion to each Partner's share of the total Net Cash Proceeds distributed; f income, 7.2..4 deduction tor credit, he shallmbeoallocated gain, loss, � 0% to Limited Partners as a class and 108 to the Genernl Partners as a class; and 11/17/84 e -14- 7.2.5 For purposes of the allocation of income and gain under subparagraph 7.2.1 and the allocation of deductions and loss under subparagraph 7.2.2, such items from the sale, exchange, refinancing, condem- nation or other diSPO5i _Lon of all or substantially all of the Property shall be allocated in accordance with the Capital Accounts before their reduction with respect to the Distritution of Net Cash Proceeds arising from that event. Notwithstanding any provision of this Agreement to the contrary, each item of credit recapture shall be allocated in accordance with the prior allocation of the specific credit item to which it relates. 7.3 Division Among Partners. Each item allocated pursuant to Paragraphs 7.1 and 7.2 shall be divided among the Limited Partners in proportion to their respective Limited Partnership Interests and shall be divided among the General Partners in proportion to their respective General Partnership Interests. Provided, however, if the contributed capital of the General Partners or any of them is increased or decreased during the fiscal year or the number of Limited Partnership Units is increased or decreased during the fiscal year, any allocation for such fiscal year shall be pro rated among the affected Partners to fairly reflect the period of increase or decrease in Partnership capital during such fiscal year. 7.4 Allocation for Partial Year. In the event a Person is admitted to the Partnership subsequent to the beginning of a particular fiscal year, or a Person withdraws from the Partnership prior to the close of a particular fiscal year, or the Partnership is terminated prior to the close of a particular fiscal year, the allocation of profits and losses of the Partner or of the Partnership, as applicable, for tax purposes for such fiscal year shall be based upon and shall reflect the results of Partnership operations during the period of such fiscal year for those days in which such person was recognized as c. Limited Partner or the Partnership was active, as applicable. 7.5 Accountinq Upon Termination of Interest or Liauidation. At such time as a Partner ceases to be a Partner or upon liquidation of the Partnership, a deficit balance in such Partner's Capital Account, after the adjustments, if any, provided for in Paragraphs 7.6 through 7.9, and adjustments for the proceeds distributed pursuant to Paragraphs 6.4 and 6.3, shall be repaid by the Partner to the Partnership on the earlier of the date when such Partner ceases to be a Partner or upon liquidation of the Partnership. 11/17/34 _15_ 7.6 Accoun ^_ing Upon jlithdrawal or Exoulsion. In the event a Partner ,4 hdraws or is expelled from the Partnership, the Partner's Capital Account shall be increased by his share of any excess of the fair market value of each apprec'ited asset of the Partnership over the adjusted basis of uach such asset, and shall be decreased by any excess of the adjusted basis of each depreciated asset of the Partnership over the fair market value of each such asset. 1.7 Treatment of Gain Upon Termination of Interest. In the event a Partner ceases to be a Partner, the balance in such Partner's Capital Account shall be increased by the amount of gain recognized by such Partner by reason of Internal Revenue Code Section 752(b). - 7.8 Treatment of Non -Cash Assets Bistriou ted upon Liquidation. If during the -liquidation of the Partnership non-cash assets are distributed to one or more of the Partners, the unrealized appreciation or d:preciation of the distributed Partnership assets shall be calculated, and corresponding adjustments to the Capital Accounts of the Partners shall be made, in accordance with Paragraph 7.6. 7.9 Accounting. All profits and losses of the Partnership shall be determined by the accountants retained by the Partnership, without regard to any special basis adjustment as to any Partner resulting from any election referred to in Section 15 -- hereof, in accordance with the accounting methods followed by the _ Partnership pursuant to Paragraph 15.1. The profits and losses of the P3rcnership, other than Net Cash Proceeds, allocated among the Partners shall be credited or charged, as the case may be, to their respective Capital Accounts prior to the allocation of Net Cash Proceeds. SECTION 8 Sale of Additional Partnership Interests 8.1 Additional Partnership Interests. A Majority -in -Interest of the General Partners shall have the right and authority to cause the Partnership to offer, sell and issue Additional Partnership Interests (and debt instruments, if any) to fund cash -flow deficits which may occur after Break Even and to provide for the reasonable and immediately foreseeable working capital needs of the Partnership, provided all of the following conditions are met: 8.1.1 Project Operating Costs have exceeded Gross Income for three (3) consecutive months; 11/17/84 -t6- 13. i.3 Absolute Restriction on Trcnsfer. Notwithstanding the foregoing provisions of this Section, no rale or assignment of a Pnrtnr•rship Interest may be made if the Partnership Interest sought to be cold 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 termination of the Partnership pursuant to Section 708 of the Internal Revenue Code of 1954, as amended, or any successor section. 13.14 Status of Assignee of Limited Partner. No assignee of all or part of tNe Partnership Interest of any Limited Partner ;hall have the right to become a substitute Limited Partner unless his assignor has stated such intention in the instrument of assignment and the General Partners have consented to the admission of such assignee as a substitute Limited Partner. The admission of a substitute Limited Partner may be effected without the consent of any of the Limited Partners. 13.15 Events That Will Not Cause Termination. The assignment, sale or other disposition of the Limited Partnership Interest of a Limited •Partner or the death, withdrawal, adjudication of incompetency or bankruptcy of a Limited Partner shall not dissolve or terminate the Partnership, unless specifically provided to the contrary in this Agreement. No Limited Partner shall have the right to have the Partnership _ dissolved or terminated or to have his capital investment returned, except as provided in this Agreement. 13.16 Effect of Death or Incompetency of Limited Partner. Except as otherwise provided in this Section, in the event of the death or adjudication of Incompetency of a Limited Partner, the personal representative, administrator, conservator or guardian of the estate of the deceased or Incompetent Limited Partner shall succeed to his Partnership Interest and shall be liable for all of the obligations and liabilities of. such Limited Partner under this Agreement; provided, however, the right of the personal representative, administrator, conservator or guardian to become a substitute Limited Partner shall be subject to all of the provisions of Paragraphs 13.7 through 13.14 hereof. For purposes of settling the estate of a deceased or incompetent Limited Partner, the personal representative,administrator, conservator or guardian thereof shall have only such rights of a Limited Partner as are necessary for that purpose. 13.17 Gift of Partnership lntnr_ct. Any Partner shall have the right, at any time, without the consent of any other Partner, to make a gift or gifts of all or any part of his Limited Partnership Interest to children of such Partner or to a charitable organization as defined under Section 170 of the internal Revenue Code of 1954, as amended. Such gift may be made 10/31/84 V directly or through the utilization of a trust or trust3 the only beneficiaries of which are the children of the donor or a charitable organization as defined under section 170 of the Internal Revenue Code of 1954, as amended. Such donee shall be entitled only to receive the share of net profits and losses, cash flow and distributions of the Partnership as arc attributable to the Partnership interest, cr portion thereof, given to the donee and shall have no other rights in the Partnership and shall not be a Partner therein. SECTION 14 Dissolution and Liquidation of Partnership 14.1 Sale Refinancing or Other Dispo^ition of the Project. The Managing General Partner may sell, exchange, refinance or lease as an entirety the Project only with the prior consent of a Majority -In -Interest of the General Partners; provided, however, that the Managing General Partner may at any time prior to the Date of Substantial Completion, change the principal amount of the Project Loan without obtaining the prior written consent of the Partners, as long assuch change does not increase the liability of the Partners beyond the liability expressly set forth in this Agreement. Nothing in this Paragraph shall be construed to prohibit at any .time the sale, transfer or other conveyance of the Project pursuant to other provisions of this Section. 14.2 Events Causing Dissolution. The Partnership shall be dissolved only upon the occurrence of one of the following. events: 14.2.1 the expiration of the term set forth in Paragraph 3.1; 14.2.2 the written consent of all Partners; 14.2.3 the withdrawal or expulsion of a General Partner; 14.2.4 the death or adjudication of incompetency of a General Partner; 14.2.5 the sale, exchange or other disposition of all or substantially all of the Project; 14.2.6 the final decree of a court of competent jurisdiction that dissolution of the Partnership is required by law; 10/31/04 -30- i .• 1.4.2.7 the occurrence of any event which terminates or dissolves the Partnership in accordance with the Act or other applicable law. 14.3 Continuation of uuslness o[ vauLnec::,,.v ..•. .� Dissolution. Except upon the occurrence of one or more of the events set forth in subparagrap':s 14.2.1, 14.2.2, 14.2.5 and 14.2.6, upon dissolution of. the Partnership the business of the Partnership shall be continued without liquidation and the winding up of Partnership affairs and title to the Project and any other property of the Partnership shall be vested in the partnership continuing the business unless there has not been a timely admission of a substitute General Partner and there is no General Partner remaining. 14.4 No Right to Accounting Upon Dissolution iE DU ^u LnesF• Continues. Upon an event of dissolution, no Partncc and no legal representative of such Partner shall have a right to an account of such Partner's interest as against the Partnership continuing the business. Furthermore, no Partner and no legal representative of such Partner shall have the right., as against the Partnership continuing the business, to have the value of such Partner's interest as of the date of dissolution ascertained, nor shall such Partner or representative thereof have any right as a creditor or otherwise with respect to the value of the Partnership Interest of such Partner. 14.5 Effect on Partnership of Damage or Destruction of �- Project. In the event the Project is damaged or destroyed in whole or in part, a Majority -in -Interest of the General Partners shall determine whether the Project may be restored to economic usefulness within a reasonable time by application of the proceeds of insurance covering such damage or destruction and by application of any other funds available to the Partnership. if such repair or restoration of the Project is feasible, the Managing General Partner shall apply such proceeds to such purpose, and distribute any balance of such proceeds as provided in Paragraph 6.4. If such repair or restoration in not feasible, the remaining assats of the Partnership shall be sold and the proceeds of such sale, together with the Insurance proceeds, shall be distributed in accordance with Paragraph 6.5. 14.6 -Effect on Paeventrtnership of whole or Partial Condemnation of Proiect. In the all or any pact of the Project is taken by condemnation or eminent domain or by sale to a condemning _ authority in lieu thereof, a Majority -in -Interest of the General Partners shall determine whether continued operation of the Project is economically feasible. If continued operation of the Project is economically feasible, the proceeds paid to the Partnership as compensation for such taking shall he applied to _ 11/17/84 - -3.1- i repair or restore the Project as required, and any balance shall be distributed in accordance with Paragraph 6.4. If continued operation of the Project is not economically feasible, the Managing General Partner shall sell any remaining portion of t:,e Project and distribute the proceeds of such sale, together with the proceeds paid to the Partnership as compensation for such taking, in accordance with Paragraph 6.5. 14.7 Consent to Sale Not Required. No further consent of the Partners shall be required for a sale of the Project pursuant to Paragraph 14.5 or Paragraph 14.6. 14.8 Liquidation and Winding Up. If dissolution of the Partnership is effected by: 14.8.1 the expiration of the term set forth in Paragraph 3.1; 14.8.2 the death, adjudication of incompetency, withdrawal or explusion of a General Partner, if a substitute General Partner has not been timely admitted as provided in Section 12 with the result that no General Partner in then acting,- 14.8.3 cting;14.8.3 the sale, exchange or other disposition of all or substantially all of the Project, unless because the Project is sold on an Installment basin the General Partners elect in their sole discretion not to liquidate; or 14.8.4 the final decree of a court of competent jurisdiction that such liquidation and winding up Is required under under the Act or other applicable law; then the Partnership shall be liquidated and the General Partners not wrongfully dissolving the Partnership, or such other person designated by a decree of court, shall wind up the affairs of the Partnership. 14.9 - Disposition of Reserves Required Uoon Termination. Any reserves established pursuant to.Parag[aph 6.5 shall be held, following or in connection with the dissolution of the Partnership, in escrow by a bank or trust company approved by the Managing Partner, who shall have the exclusive power to administer such reserve funds. - 11/17/84 ..3P_ SECTION 15 Fiscal Matters 15.1 Books and Records of Partnership. Durinq the term of the Partnership the Managing General Partner shall keep or cause to be kept full and true books and records of account pursuant to generally accepted accounting principles, in which shall be entered fully and accurately all transactions of the Partnership. The Managing General Partner shall also keep or cause to be kept the following: 15.1.1 A current lis.t of the full name and last known business address of each Partner, in alphabetical order; 15.1.2 A copy of the Certificate of Limited Partnerahip and all certificates of amendment thereto, together with executed copies of any powers of attorney pursuant to which any certificate has been executed; 15.1.3 Copies of the Partnership's federal, state and local income tax returns and reports, if any, for the 5 most recent years; -- 15.1.4 Copies of any then -effective written partnership agreements and of any financial statements of the Partnership for the 5 most recent years-. Such books and records of account and the other documents enumerated above shall at all times be kept and maintained at the principal office of the Partnership, and shall be open to inspection and examination by any Partner or his duly authorized representative at reasonable times upon reasonable notice during. business hours. 15.2 Annual Report and Tax Return:. The Partnership shall each year prepare or cause to be prepared the Annual Report as defined in Paragraph 1.5 and the tax returns of the Partnership. Each Partner shall be furnished within ninety (90) days after the close of the fiscal year 15.2.1 A copy of the Annual Report; 15.2.2 All necessary tax information; and 15.2.3 A reconciliation of any differences between the Annual Report and the Partnership tax returns. The Partnership shall have the right but shall not be obligated to provide certified or audited financial statements or 11/17/84 -33- .-J-) y statements accompanied by an opinion of a certified public accountant. 15.3 Piscat Year and Accounting Period. 'rhe fiscal year of the Partnership shall be the calendar year, and the Partnership shall keep its books and records of account and report its income or loss on such basis. 15.4 Bank Accounts. All funds of the Partnership shall be deposited in such bank account(s) and with such bank(s) as may be selected by the General Partners. Withdrawals from and checks drawn on any such bank account(s) shall be made upon such signature(s) as the General Partners may designate in writing, including the signature(s) of one �r more agents or employees. The General Partners shall not commingle Partnership funds with their own funds or the funds of any other Person. 15.5 Accounting Method andDecisions. Except as specifically provided to the contrary herein, all decisions as to accounting matters shall be made by the Managing General Partner in accordance with generally accepted accounting principles consistently applied. The Managing General Partner may rely upon the advice of independent certified public accountants retained by the. Partnership as to whether such decisions are in accordance with generally accepted accounting principle:;. 15.6 Election of Depreciation Method. The Partnership shall elect to use such method of depreciation for the assets of the Partnership as in the judgment of the Managing General Partner is in the best interests of the Partnership. 15.7 Election to Adjust Basis. With respect to the transfer by a Partner of all or part o£ hi,- Partnership Interest, tile Partnership may, in the sole discretion of the Managing General Partner, elect pursuant to Section 754 of the Internal Revenue Code of 1954, as amended, to adjust the basis of the Partnership's assets. In the event of such eloction, the Partnership shall maintain and annually transmit to the affected Partners all records and other data necessary to permit such Partners to file accurate federal income tax returns, but no derecitin to such e taken into accountainodeterminingenet profits andllosses Of basithe ll b thePartnership SECTION 16 Amendment of Agreement 16.1 Procedure for Amendment. At such time as any of the n General Partners or Limed Partners holding 308 or more of the issued and outstanding Partnership Interests of the Limited Partners may propose an amendment to this Agreement, the General 11/17/84 -34- '4st Partners shall call a special meeting of all Partners for the purpose of considering such proposed amendment, provided that each Partner at least 30 days prior to such meeting receives written notice of the meeting and a written statement of the purpose of the amendment and such other matters as the General Partners deem material to consideration of the amendment. 16.2 Adoption of Amendment. At such meeting an amendment so proposed shall be adopted if approved by a Majority -in -Interest of the General Partners and a Majority -in -Interest of the Limited Partners. As an alternative, this Agreement may be amended by a unanimous written action signed by all of the General Partners and by 2/3 of the Limited Partners, provided that all of the Partners are given written notice of the proposed written action at least 15 days before solicitation of signatures is begun. 16.3 Distribution of Amendments. A copy of each amendment, as filed and recorded, shall be provided to the Limited Partners within 30 days of such amendment. 16.4 Effect and Filing of Amendment. An amendment, when made, shall be binding upon all of the Partners. Upon such amendment being made, the General Partners pursuant to the power of attorney in Section 18 shall, for and on behalf of all Partners, make and file the necessary amendment to the Certificate of Limited Partnership without the necessity of signatures of the Limited Partners, and shall do such other things and execute such other instruments as may in the opinion of the General Partners be necessary to make such amendment effective and in force. 16.5 Limitation on Amendments. Notwithstanding the foregoing provisions of -this Section, no amendment may: 16.5.1 add to, detract from or otherwise modify the purposes of the Partnership without the prior written approval of all Partners; - 16.5.2 enlarge the obligations of any Partner under this Agreement without the prior written approval of such Partner; 16.5.3 modify the order of distribution provided in Section 6 without the prior written approval of each Partner adversely affected by such - 1 modification; , 16.5.4 modify the mothodc provided in Sections 6 and 7 for determining Distributions and allocations of profits and losses, respectively, without the prior written approval of each Partner adversely affected by such modification; - 10/31/04 -35- 16.5.5 mortify the interests, rights, authority or compensation granted to the General Partners hereunder, without the prior written approval of all of the General Partners; 16.5.6 amend this Section without the prior written approval of all of the Partners. SECTION 17 Meetin%s of Partnership 17.1 General. Except as otherwise provided herein, meetings of the Partnership may be called by any General Partner and shall be called by them upon written request of Limited Partners holding 308 of the issued and outstanding Partnership Interests of the Limited Partners. In any matter described in this Agreement in which a Partner is entitled to grant or deny his consent or cast his vote, he may accomplish the same by attending any meeting convened for all of the Partners entitled to vote on the matter, or he may grant to any person a special or general power of attorney to vote for him at any such meeting, or he may. grant or deny his consent in writing. 17.2 Writing in Lieu of Meeting. Except as otherwise provided in this Agreement, unanimous written consent may be utilized in obtaining approval or denial by the Partners, without a meeting, of a matter submitted to all Partners entitled to grant or deny consent on such matter. SECTION 19 Power of Attorney 18.1 General. Each of the Limited Partners irrevocably constitutes and appoints the General Partners, or any one of them, his true and lawful attorney, in his name, place and stead, to make, execute, acknowledge and file: 18.1.1 A Certificate of Limited Partnership, and all Certificates of. Amendment thereto, under the laws of the State of Minnesota; 16.1.2 Any certificate or other instrument which may be required to be filed by the Partnership under the laws of the state of Minnesota or the laws of the United States, including without limitation such certificates or instruments as may be necessary for or incidental to sale of Limited Partnership Units; 18.1.3 Any and all amendments, modifications or cancellations of the instruments described in the 10/31/84 -36- immediately pr^cedinq cubpnragraphs, or which may be necessary for or incidental to the sale of Partnership Interests; 1:3.1.4 All documents which may be required to effectuate the dissolution, continuation or termination of the Partnership, including without limitation a certificate of cancellation for filing with the Secretary of State. Q.2 Terms of Powerof Attorney. It is expressly understood arc. ntended by each of the Limited Partners that the grant of the oregoing power of attorney is coupled with an interest. The forcoinq power of attorney shall survive the delivery of an assignment by any of the Limited Partners of the whole or any .portion of his Partnership Interest, except that where an assignee of such Partnership Interest has been approved by the General Partners as a substitute Limited Partner, then the foregoing power of attorney of the assignor Limited Partner shall survive the delivery of such assignment for the sole purpose of enabling the General Partners to execute, acknowledge and file any and all instruments necessary to effectuate such substitution. Notwithstanding the power of attorney herein granted, upon request each Limited Partner and substitute Limited Partner shall from time to time execute amendments to the Certificate of Limited Partnership as may be required to conform to law, including but not limited to such amendments as may be required to evidence the admission of new Partners, the assignment of Partnership Interests, the withdrawal of a Partner or a change in the amount or character of the contribution of any Partner or in any Partner's obligation to make a contribution. 16.3 Limitation on Exercise of Power of Attorney. :The power of attorney granted hereunder may not be -exercised by the General Partners unless all of the terms of this Agreement have been complied with regarding the action or event which gives rise to the exercise of such power. - SECTION 19 Miscellaneous 19.1 Invalidity. If any part of this Agreement is adjudicated void or invalid, the remaining provisions hereof not specifically so adjudicated shall be executed without reference to the part or portion so adjudicated, insofar as such remaining provisions are capable of execution. 19.2 Cactions and Titles. Titles or captions contained in this Agreement ace inserted only as a matter of convenience and for reference and in no way define, limit, extend or describe the 10/31/94 _37_ scope, content or substance of this Agreement, nor shall they ._ modify or vary the construction of the text hereof. 19.3 Interchangeability of Words. Words and pronouns shall be interchangeable with respect to gender and number as the identity of the person or entity may require, unless the context clearly requires a different interpretation. 19.4 Governing Law. This Agreement shall be subject to and governed by the laws of the State of Minnesota, it being the intention of all of the parties hereto to form, conduct and operate the Partnership as a limited partnership under the lai•:s of the State of Minnesota. 19.5 Notices. All notices, offers, requests and other communications from any of the parties hereto shall be in writing and shall be considered to have been duly given or served if sent by first class certified or registered mail, return receipt requested, postage prepaid, to the party at his or its address set forth below or to such other address as such party may hereafter designate by written notice to the other parties. 19.5.1 If to the Partnership, at the address of the Partnership's agent for service of process. 19.5.2 If to the General Partners, to the address indicated in the foregoing subparagraph c/o the Partnership. 19.5.3 If to any Limited Partner, at the address set forth herein. 19.5.4 If to a withdrawing o: withdrawn General Partner, to the office or home address of such General Partner as set forth in the records of the Partnership. 19.6 Parties in Interest. Except as herein otherwise provided to the contrary, the terms and conditions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their representatives upon their incapacity or death,their successors and their assignees to the extent assignment is permitted under this Agreement. 19.7 Counterparts. This Agreement has been executed in a number of counterparts, each of which shall be deemed an - original but all of which shall constitute one and the same instrument. 10/31/84 -38- a. r C IN WITNESS WHEREOF, each of: the undersigned parties hall executed and delivered the foregoing Agreement as of the date and year first above written. GENERAL PARTNERS: Charles P. Thompson Donald E. Forseth Charles T. Thompson LIMITED PARTNERS: Charles P. Thompson Donald E. Forseth' Charles T. Thompson STATE OF MINNESOTA ) ss. COUNTY OF {�'-".�+�• ) , On this /•} day of Cel" 1954, before me, a . Notary Public within and for said county, personally appeared Charles P. Thompson, to me known to be the person described in, and whoexecutedthe foregoing instrument, and acknowledged that he executed the same as his free act and deed. Notary Rublic - 10/31/84 1 -14 .. coiu, gas I STATE OF MINNESOTA ) ) ss. COUNTY OF - "i"' ) On this !�- day of .ion• 1984, befo-e me, a Notary Public within and for said county, personally appeared Donald E. Forseth, to me known to be the person des.:ribed in, and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. Notary Publlic STATE OF MINNESOTA ) - •�•r,;,� \_ COUNTY OF r<!!"d°•� ) yS On this day of �ii•z:n`. 1984, before me, a Notary Public within and for said county, personally appeared Charles T. Thompson, to me known to be the person described in, and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. /1 / Notary Public TTIIS INSTRUMENT WAS PREPARED BY: Stacker s Ravich 900 First Bank Place West Minneapolis, Minnesota 55402. 10/31/84 -40- I- Pi:PA. TJ%-F.nr n; STATE 1 that the. within Insburneot wos filed for record In this J An`J( Office on Upu: Z /,_ nay of A. D. 19_) , , of `� - To o'clock M., and was duly rccordtd in Book of Incorporations, on page. el EXHIBIT B 1. Combination Mortgage, Security Agreement and Fixture Financing Statement from Northridge Properties of New Hope Limited Partnership (the "Partnership'), as mortgagor, to the City of New Hope, Minnesota (the "Issuer"), as mortgagee; 2. Assignment of Rents and Leases from the Partnership to the Issuer; 3. Uniform Commercial Code Financing Statement from the Partnership, as debtor, to the City, as secured party; 4. Loan Agreement between the Partnership and the Issuer; 5. Bond Purchase Agreement (the "Bond Purchase Agreement'), dated July 11, 1996, among the Issuer, the Partnership and Dougherty Dawkins, Inc.; 6. Declaration of Restrictive Covenants executed by the Partnership in favor of the Trustee; 7. Continuing Disclosure Agreement between the Partnership and the Trustee. Unless otherwise stated, all documents are dated as of June 1, 1996 or are undated. NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP WRITTEN ACTION IN LIEU OF A MEETING OF THE GENERAL PARTNERS $5,000,000 City of New Hope, Minnesota Multifamily Housing Refunding Revenue Bonds (Chardon Court Project) Series 1996 The undersigned, being all of the partners of Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership, do hereby take the following action by unanimous written consent pursuant to the Partnership Agreement, effective the first day of June 1996: WHEREAS, the Partners of this Limited Partnership have determined it to be in the best interests of this Limited Partnership to refinance and refund certain bonds issued in 1985 by the City of New Hope, Minnesota (the "City") in connection with the construction of apartment units for the elderly, located at 5700 Boone Avenue North, New Hope, Minnesota (the "Project") through the issuance of one or more series of bonds to be issued by the City and the borrowing of sums therefrom; NOW THEREFORE, BE IT RESOLVED, that the Managing Partner of this Limited Partnership, or any partner designated by such Managing Partner, be, and each hereby is, authorized and directed to negotiate the terms and conditions of the following documents in connection with such refinancing of the Project and the payment of other costs incurred in connection with the Project and the financing of refinancing thereof through City of New Hope, the above referenced bonds (the "Bonds"): (i) the Bond Purchase Agreement dated July 11, between Dougherty Dawkins, Inc., the City and this Limited Partnership; (ii) the Loan Agreement dated as of November 1, 1995 between the City and this Limited Partnership; (iii) the Indenture of Trust between Norwest Bank Minnesota, National Association (the "Trustee") and the City (the "Indenture"); (iv) the Continuing Disclosure Agreement dated July 11, 1996 between this Limited Partnership and the Trustee; (v) the Combination Mortgage, Security Agreement and Fixture Financing Statement, dated as of July 1, 1996 between the City and this Limited Partnership; (vi) the Assignment of Rents and Leases dated as of June 1, 1996 from this Limited Partnership to the City; (vii) the First Amendment to Declaration of Restrictive Covenants, executed by the Limited Partnership, dated as of July 1, 1996; and (viii) the Preliminary Official Statement and the Official Statement. (Collectively, all of such documents are referred to hereinafter as the "Bond Documents"); FURTHER RESOLVED, that the Managing General Partner of this Limited Partnership or any other Partner designated by the Managing General Partner be, and he or she hereby is, authorized, empowered and directed to execute, acknowledge, deliver and perform, on behalf of and in the name of this Limited Partnership, the Bond Documents (except the Indenture) and any amendments and supplements thereto and such other agreements, certificates, instruments, amendments, supplements and other documents as are reasonable and necessary in order to accomplish the transactions contemplated in the Bond Documents. FURTHER RESOLVED, that any officer of this Limited Partnership be, and he or she hereby is, authorized, empowered and directed to execute, acknowledge, deliver and perform, on behalf of and in the name of this Limited Partnership, any and all other documents necessary to accomplish such refinancing of the Project, to take or cause to be taken any and all other actions relating to such refinancing, and to execute, acknowledge and deliver any and all certificates, opinions, documents, and other instruments in such form as in the judgment of any such officer may be necessary, proper or convenient in order to carry out the foregoing resolutions and comply with the terms, conditions and provisions of the Bond Documents and amendments and supplements thereto. M. Melinda Pattee I:\northrdg\chardon\partner.NA #274.222 AMENDMENT TO CERTIFICATE OF LIMITED PARTNERSHIP OF NORTHRID04 nROPE3TI33 O? NEW HOPE LIMITED PARTNERSH KNOW ALL MEN BY THESE PRESENTS, that the Certificate of Limicad Partnership of Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Partnership"), which was filed ir: the office of the Secretary of State of the State of Minnesota on April 18, 1985 as RI No. 806259, is hereby amended to reflect the occurrence of the following events: (1) Donald E. Forseth has wii.hdrawn as a Partner i.r. the Partnership. (2) James J. Pattee, whose address is 15 South 1st street Minneapolis. MN , has been admittea as a General Partner and as a Limited Partner in the Partnership. IN WITNESS WHEREOF, the undersigned Charles Thompson, a General Partner in the Partnership, and rhe James J. Pattee have hereunto set their hands this 13th of January , 1986 . STATE OF MINNESOTA ss COUNTY OF HENNEPIN The fore oing instrument this /3 day of c..«a+ , 1;36, by James J. Pattee. P. said day was acknowledged before me by Charles P. Thompson and NOtary�Pu.�l ( STATC CF h+,:.: ce Wv u:u a•C whhfn IR§1Mnipfi! win MIM fot rocOM in this uffica oil tho �,�Mtay of_�✓1 A. Q. zJ-Y�-.:aOn..:�A mxl \wrY dui; n� c�Crl .n 5r-.. I 0 CERTIFICATE OF AMENDMENT TO LIMITED PARTNERSHIP AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP OF NORTH RIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP 1. The name of the limited partnership is North Ridge Proverties of New Hope Limited Partnership• was filed with the 2. The Certificate of Limited Partnership Minnesota Secretary of State on April 18, 1985, as Document No. LP -2359. mited Partnership is s: be amended 3. The Certificate of Liis as General Partners: to add the following individuars: M. Melinda Pattee James J. Pattee Dated: December 31, 1987. Charles T. Thompson, General Partner NEW GENERAL PARTNERS: M. Me ttee 5930 Boone Ave 'e Nor h M ' n�dpolis,� ;SS d' -,. c L( '[CE/ J mes J. pit ee North 430 Boone en55920 Minneapolis, MN STATE OF MINNESOTA DEPARTMENT OF STATE HLED 9 Wo Se�iery' �(.5(eta `l v4 a• A V4 Y N i •-• ,�, �Gll. � J S _ ___... � a._._,.��.e._.. _ _ .,.,.. SEP -06-1996 10:40 AnterUs Flank 418 Sixth Avenue Des Moines, IA 50309-2495 515/283.2151 July 11, 1996 VIA FAX TO (612) 244-0712 AND CERTIFIED MATT, First Trust National Association (formerly known as First Trust Company of St_ Paul) 180 E. 5th Street St. Paul, Minnesota 55101 Attention: Diane Chalupsky Re: $37,100,000 Housing and Redevelopment Authority of the City of St. Paul, Minnesota Variable Rate Demand Rental Housing Development Revenue Bonds, Series 1985-A (Minnesota Multi -City Joint Rental Housing Program) (the "Bonds") Ladies and Gentlemen: P. 02/04 AKERUs Barak Capitalized terms used in this letter without definition have the meanings given in that certain Indenture of Trust dated as of May 1, 1985 (the "Indenture") between and among The Housing and Redevelopment Authority of the City of St. Paul, Minnesota (the "Authority") and First Trust Company of Saint Paul, as trustee and paying agent (the "Trustee") with respect to the Bonds. Northridge Properties of New Hope Limited Partnership has prepaid in full through its optional prepayment right under its developer Loan Agreement its Developer Loan with the Lender (the "Northridge Properties of New Hope Developer Loan") relating to the Chardon Court multifamily residential rental project. Pursuant to Section 3.5(B)(vii) of the Lender Loan Agreement, the Lender must prepay a portion of the Lender Loan equal to the entire principal amount of the Northridge Properties of New Hope Developer Loan, plus interest accrued and to accrue thereon on the Bonds allocated to the Northridge Properties of New Hope Developer Loan to the Interest Payment Date on which such allocated Bonds are to be redeemed. The Lender has wire transferred $5,105,205.76 (the "Payment") to the Trustee on July 11, 1996 at First Bank National Association, ABA 091000022 for credit of First Trust National Association Account No. 180121167365, Corporate Trust, Account No. 47300017, Attention: Lillis. This amount represents the entire principal amount of the Bonds outstanding as of July 1, 1996 allocated to the Northridge Properties of New Hope Developer Loan and all interest to accrue on such Bonds from July 1, 1996 to September 3, 1996 at the maximum permissible interest rate of 12% per annum. Pursuant to Section 3.5(8)(vii) of the Lender Loan Agreement and Section 3.02(A)(6) of the Indenture, the Payment is to be applied by the Trustee to the special redemption of the Bonds SEP -06-1996 10:40 P. 03104 allocated to the Northridge Properties of New Hope Developer Loan "on the next following Interest Payment Date for which timely notice of redemption can be given." Section 3.02(A)(6) of the Indenture provides that the Bonds allocated to a particular Developer Loan shall be redeemed upon any prepayment of the Lender Loan Agreement after an optional prepayment by the Developer under the applicable Developer Loan Documents. Section 3.02(A)(6) goes on to require that the Lender pay an amount sufficient to redeem the Bonds on or before thirty (30) days prior to the Interest Payment Date on which the Bonds are to be redeemed. Under Section 3.06(A) of the Indenture, the Trustee must give 15 days mailed notice of redemption. The Payment will suffice to redeem the Bonds allocated to the Northridge Properties of New Hope Developer Loan on September 3, 1996, the next Interest Payment Date which is 15 days or more after the date hereof. Thus, the Lender hereby requests that the Trustee give notice of redemption of all Bonds allocated to the Northridge Properties of New Hope Developer Loan (being the Bonds bearing number R-158-159, 161-176, 178-180, 182-192, and 194-211 and that the Redemption Date be set at September 3, 1996. The Payment should be deposited in the subaccount of the Redemption Account pertaining to the Northridge Properties of New Hope Developer Loan, as described in Section 5.08 of the Indenture. The Payment shall, on the Redemption Date, be used to redeem the Bonds allocated to the Northridge Properties of New Hope Developer Loan, as provided in Section 3.02(A) of the Indenture. Any surplus over that to be used to redeem Bonds shall be deposited in the Revenue Fund upon the determination of the Trustee that such excess will exist, as provided in Section 5.08 of the Indenture. Pursuant to Section 5.10(A)(6) of the Indenture, any such surplus will be returned to the Lender if not needed to satisfy any of the requirements specified in clauses (1) through (5) of Section 5.10(A). The Lender hereby directs that the Payment be invested in Treasury Bills maturing August 29, 1996, which is a Permitted Investment, during the period between the Trustee's receipt thereof and August 29, 1996 and thereafter in the First American CT Treasury Fund Money Market Fund until the Redemption Date. The Lender requests that you provide it with an accounting of the investment proceeds on this investment on September 4, 1996, as it has agreed with Northridge Properties of New Hope that the investment earnings on a portion of the Payment equal to $4,892,647.16 shall be for its account. The Lender also requests that you provide as soon as practicable to the issuer of the 1996 refunding issue and bond counsel a certification that $5,000,000 of the Bonds representing the total outstanding Bonds allocated to the Northridge Properties of New Hope Developer Loan have been noticed for redemption and in accordance with the Indenture will be redeemed on September 3, 1996. The Lender directs the Trustee to liquidate the Debt Service Reserve in the par amount of $501,000 plus accrued interest since April 1, 1996 and any market premium thereon and to wire the liquidation proceeds to Northridge Properties of New Hope in accordance with enclosed wire instructions. -2- SEP -06-1996 1e:40 I=dEQdEI The Lender hereby directs the Trustee to deliver a certificate to the Federal Home Loan Bank of Des Moines, Iowa, reducing the amount of the Letter of Credit, as soon as possible after the Redemption Date. If you have any questions regarding this letter, please call Jackie Van Ekeren, at (515) 242-2388. Otherwise, please sign the enclosed copies of this letter to express your acknowledgment and agreement, return one copy to the Lender and send one copy to the Federal Home Loan Bank of Des Moines at the address set forth below. Very truly yours, AMERUS BANK (formerly known as Midland Financial Savings and Loan Association) By: —t'. Name: D. Richard Ten Braak Title: Sr. Vice President and CFO Acknowledged and agreed as of the L0' i -y of July, 1996, FIRST TRUST NATIONAL ASSOCIATION (formerly known as First Trust Company of St. Paul) By: Name: Diane Chalupsky Title: Assistant Vice President cc: Federal Home Loan Bank of Des Moines 907 Walnut Street Des Moines, Iowa 50309 Attention: Jerry Ferguson d-%b0444Wpau1.doc 52 TOTAL P.04 CERTIFICATE AND RECEIPT OF FIRST TRUST NATIONAL ASSOCIATION First Trust National Association, formerly known as First Trust Company of Saint Paul, as Trustee (the "Trustee") under an Indenture of Trust (the "Indenture"), dated as of May 1, 1985, between The Housing and Redevelopment Authority of the City of Saint Paul, Minnesota (the "HRA") and the Trustee, pursuant to which the HRA has issued its Variable Rate Demand Rental Housing Development Revenue Bonds (Minnesota Multi -City Joint Rental Housing Program), Series 1985-A (the 'Bonds"), hereby certifies as follows: 1. Capitalized terms used herein and not otherwise defined herein shall have the meaning given to them in the Indenture. 2. The Trustee has received notice from AmerUs Bank, the Lender, as defined in the Indenture, that the Developer Loan to Northridge Properties of New Hope Limited Partnership (the "Northridge Developer Loan") has been paid in full and that the Bonds allocated to the Northridge Developer Loan (the "Northridge Bonds") are to be redeemed in whole on September 3, 1996 pursuant to Section 3.02(A)(6) of the Indenture, which is the earliest date on which the Northridge Bonds may be redeemed in accordance with the Indenture. 3. The Trustee acknowledges that the Northridge Bonds in the aggregate principal amount of $5,000,000 are presently Outstanding. 4. The Trustee acknowledges receipt from the Lender of immediately available funds in the amount of $5,105, 205.76 which funds are being held by the Trustee in accordance with Section 3.02(A)(6) of the Indenture and are sufficient without reinvestment to pay the interest on the Northridge Bonds to come due on or prior to September 3, 1996, and to redeem on such date the principal of the Northridge Bonds. 5. The Trustee will cause the notice of redemption required to redeem the Northridge Bonds on September 3, 1996 to be given as provided in the Indenture. 6. All conditions in the Indenture, including specifically Section 7.01(B) of the Indenture, provided for and relating to the payment of the Northridge Bonds have been satisfied. 7. The Trustee has been instructed by the Lender to pay all amounts in the North Ridge Account in the Debt Service Reserve Fund to the order of Northridge Properties of New Hope Limited Partnership. Such amounts total $ 514, 200.56 and will be paid on the date hereof. IN WITNESS WHEREOF, First Trust National Association has caused this instrument to be executed in its name by a duly authorized officer this 11th day of July, 1996. FIRST TRUST NATIONAL ASSOCIATION By LD /2q -Z, .-! Its Assislani Wo PreS1d'ont / -2- When recorded return to: John T. Seitz BELIN HARRIS LAMSON McCORMICK 2000 Financial Building Des Moines, Iowa 50309 Prepare$by:leremy:C.SBarPe,BelinBan^rsLanisouMcCormick,ZOOOFin0044ftter,Dcswoo j 50309,St,5=343-Ti00 RELEASE OF REAL ESTATE MORTGAGE AND ASSIGNMENT OF RENTS AND LEASES KNOW ALL MEN BY THESE PRESENTS: That the undersigned, the present owner of the Mortgage and Assignment of Rents and Leases hereinafter described, does hereby acknowledge that a certain Developer Mortgage, Security Agreement and Fixture Financing Statement and a certain Assignment of Rents and Leases, each bearing date of the 1st day of May, 1985, made and executed by Northridge Properties of New Hope Limited Partnership to Midland Financial Savings and Loan Association, (which by conversion of its charter to a federal charter later became known as Midland Savings Bank FSB and by subsequent name change is now known as AmerUs Bank), which documents were recorded in the records of the office of the Registrar of Titles of the County of Hennepin, State of Minnesota, respectively, as Document No. 1647820 and Document No. 1647821 on the 29 day of May, 1985, are redeemed, paid off, satisfied and discharged in full. Words and phrases herein, including acknowledgment hereof, shall be construed as in the singular or plural number, and as masculine, feminine or neuter gender, according to the context. Dated this _� day of July, 1996. AMERUS BANK f/k/a MIDLAND SAVINGS BANK FSB f/k/a MIDLAND FINANCIAL SAVINGS AND LOAN ASSOCIATION an D. Richard TenBraak. Senior Vice President and CFO STATE OF IOWA ) SS: COUNTY OF FOLK ) On this �� day of July, 1996, before me a Notary Public in and for the -State of Iowa, personally appeared D. Richard Ten Braak, to me personally known, who being by me duly sworn did say that he is Senior Vice President and CFO of said corporation, that the seal affixed to said instrument is the seal of said corporation and that said instrument was signed and sealed on behalf of the said corporation by authority of its board of directors and the said D. Richard TenBraak acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it and by him voluntarily executed. i Notary Public in and for the State of Iowa d:\19200\100\nrthridg.doc o� LAURIE F. TREMMEL MY COMA9SSION E>SpIRES STANDARD FORM for - cxe'mU STATE OF MINNESOTA :A -r Filing UCC-3 STATEMENT OF Officer i CONTINUATION, ASSIGNMENT, RELEASE, ETC. This statement is presented for filing pursuant to Minnesota Uniform Commercial Code Minnesota Statutes Chapter 336.9-402 (Type in Black Ink) 1. Original Financing Statement No. 817227 Original File Date Filed with Secretary of State of Minnesota 1 05/21/85 2. DEBTOR 3. SECURED PARTY (Name and Address) - - - (Name and Address) Northridge Properties of New Drafted By: Hope Limited Partnership Midland Savings Bank FSB f/k/a 5430 Boone Avenue North Midland Financial Savings and New Hope, Minnesota 55428 Loan Association 666 Walnut Street Tax IDI 41-1520724 Des Moines, Iocra 50309 The financing statement described above is changed to show a(n): (Please one function per form with the exception of amendment) 4. CONTINUATION the original financing statement bearing the file number shownabove is continued for an additional 5 years. The original statement is still effective. 5. AMENDMENT the original financing statement bearing the file number shown above is amended as described in BOX 10. See instruction 5 on the reverse side for additional information. F] 6. TOTAL ASSIGNMENT all of the secured party's rights under the original financing statement have been assigned to the assignee whose name and address appear in BOX 10. 10.. RETURN ACKNOWLEDGMENT COPY TO: (name and address) John T. Seitz Be1.in Harris Larson McCoRMICK, a Professional Corporation 2000 rinancial Center Des Moines, Iowa 50309 Please do not type outside the bracketed area. ❑ 7. PARTIAL ASSIGNMENT some of the secured party's rights have been assigned to the Assignee whose name and address appear in BOX 10. A description of the collateral subject to the assignment must also be given. ❑ 8. PARTIAL RELEASE the secured party releases the collateral described in BOX 10 but retains a security interest in the original financing statement bearing the file number shown above. © 9. TERMINATION the secured party of record no longer claims a security interest under the financing statement bearing the file number shown above. - L1• �• IU It � I .��''ss r11�1.1th`II �`rn •� �.�� -... 1�'C.WF*11 Secured Party "- "-"^"�"' `�"��"M Date Senior Vice President 07/ /96 `� tt cl oved by Secretary of State of Minnesota amends 19 acv. 5/93 CERTIFICATE AND RECEIPT OF TRUSTEE NORWEST BANK MINNESOTA. NATIONAL ASSOCIATION Norwest Bank Minnesota, National Association, in Minneapolis, Minnesota, as Trustee (the "Trustee') under the Indenture of Trust (the "Indenture"), dated as of June 1, 1996, by and between the City of New Hope, Minnesota (the "City") and the Trustee, hereby certifies with respect to the City's Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 (the "Bonds") issued under the Indenture as follows: 1. Pursuant to a written request and authorization from the City, dated as of the date hereof, it has authenticated and delivered $5,000,000 aggregate principal amount of the Bonds, the same being initially dated as of June 1, 1996, maturing, bearing interest and otherwise complying with the terms of the Indenture. 2. The Trustee is lawfully empowered to execute and accept the trusts contemplated by the Indenture and to perform its obligations thereunder. 3. The Indenture and Continuing Disclosure Agreement, dated as of June 1, 1996, between Northridge Properties of New Hope Limited Partnership and the Trustee were duly executed on behalf of the Trustee by no its Corporatelfrust Officer , who was at the time of execution df said instruments and is now a duly elected or appointed officer of the Trustee and duly authorized to perform said act. 4. Each of the Bonds have been authenticated on behalf of the Trustee by persons whose names appear on Exhibit A hereto, who at the time of affixing their signature were, and still are, duly authorized and empowered to authenticate said Bonds. 5. The Trustee has received all documents and instruments required to be filed with the Trustee under Section 3-2 of the Indenture, and has received from Dougherty Dawkins, Inc. (the "Underwriter"), the purchase price of the Bonds in the amount of $5,038,643.33 (representing $5,000,000 for the principal of the Bonds, and $38,643.33 of accrued interest from June 1, 1996). Such amounts have been applied as provided in Section 5-2 of the Indenture. The Bonds have been delivered by the Trustee to The Depository Trust Company, on behalf of the Underwriter. IN WITNESS WHEREOF, Norwest Bank Minnesota, National Association, as Trustee, has caused this certificate to be executed in its name by a duly authorized officer, this 11th day of July, 1996. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION B, Its , �A -2- pX)a Norwest Bank Minnesota. N.A. Certified Copy of By -Law 72 and moorwLgsr■AFwAF0 _ Norvesr Center General Signature Resolution Relating tc NNERE' rr' Sixth and Marquette 11'VIl Minneapolis, Minnesota 554,19 Execution of Written Instruments ..+T. iC %_ NCn'u'JESi B.:fIK "v11NNE$OTA. NATIONAL ASSOCIATION All:ns:%: eri$. cocumerts. Or agreements relating :o or affecting the prece: r J Or business and affairs of this Association. or Of this Association when acting any recresertarrre or hcucrary capacity snail be executed, acknowledge¢ verified. delivered or accepted in behalf of this Association by the chief executive ctcer Ire o,es;cenr or any Vice Presicent. or by such Omer officer officers. employees. or designated signers. as the Boarc may from time to time direct. G-FNE.iAL SIGNATURE RESCLUTION "RESOLVED that instruments. documents. Or agreements relating to or affecting the property or business and affairs of this Bank, or of this Bank when acting r any representative or fiduciary capacity, may be executed in its name. with or without its corporate seal, by the persons hereinafter designated. Fcr .he zirooses of this resolution. 'Executive Officer" snail mean any person specifically designated as an Executive Officer of this Bank by resolution of me Boaro of Directors. ane 'Signing Officer" Shall mean the Chairman of the Boaro. the President, any Vice President (including any Executive Vice President or a: Senior Vice President). the Cashier. the Secretary. the Controller. any Assistant Vice President. Assistant Cashier. Assistant Secretary. any Office President. any functional ;.,r!e come.-. includes the wore "Officer' (ag.. Commercial Banking Officer. Personal Banking Officer Trust Officer). or any other functional title nereafte- cesignamc by the Board of Directors as an officer of the aanx. ;. Arty E recutive Officer or any Vice President, acting alone. may execute: a. DeedS..'eases. assignments and conveyances of any real or personal property not held by the Bank in ary .moresemaave or fiduciary capacity or any ir:e.-_..]harem d E,resv ndemmty or atner undertakings and guaranties. c Ary,.. er rs:, umears. documents or agreements Nn;cn .may be fourc necessary, proper or expediert to ce executed irr conducting :tie business of the ?a 2. Any Sicr:ng 0"icer acting alone. may execute: a. Asstcrr.eris of mortgages. releases or satisfactions c.'mortgages. certificares of redemption. assignments of sheriff certificates. trust deeds, declarations trust. and cowers of attorney. b. Traders and assignments of stocks. bonds or other securities. c. Lcar ag.reemenrs. letters of crest, participation agreements anc certificates of participation. d. Secun: y agreements. financing statements. termination statements. continuation statements. and statements of ass;gament with respect to which this L-, is a sec;:rec parry. releases of security interests in ana liens upon personal property e. Recemts fpr any money or prooerry paid or delivered to this Bank. f. Demanes. notices of acceleration. or extensions of the time for payment o1 any note or other obligation held by this Bara. g. Notices o1 cefault and of election to set/ or cause to be sold the prcperri described in any mortgage or deed of trust nein by this Bank, notices to the trustee named in any such deed of trust. and do any other act or sign any other document provided for by law or which may be necessary. expedient or proper m Omer to protect or enforce the rights o1 this Bank unser any such mortgage or deed of trust. h. Checks. drafts. cashiers checks. money orders, certificates of deposit. savings certificates and other similar obligations of this Bank. i. Certifications of checks of customers. 1. Tax returns and related instruments. Guaranties of signatures of customers. anther signatures. whether appearing as endorsements ofbonds. certificates ofstock, other securities. or Otherwise C'aims of this Bank as a creditor of any decedent. or of a person writ is a party to any form of proceeding in bankruptcy receivership. insolvency or similar proceeding or any other claim of this Bank in any other type of action or proceeding. m. Proxies to vote stock held by this Bank. n. Peacings. petitions. accounts. and other documents to be filed in any court or other proceeding involving this Bank. inciuding verifications thereof. c. The 'Oath of Officer of Incorporated Company" requinec by 48 U.S.C. A. 838 or any similar statute. and other documents in favor of or affecting this Bank :r correction with the recording of preferred mortgages. p. Ceecs.leases. assignments and conveyances ofanyrealorpersonalproperyheldbytheBankinanyrepresentativeorficuciarycapacityoranyinteresttnere- q. Trus; mcentures. declarations of trust and trust and agency agreements. acceptances thereof and consents thereto. and any similar documents however derominareo: petitions for the appointment or the confirmation of appointment of this Bank in any representative or fiduciary capacity: certificates of assets tie = ;n any account of this Bank: certificates of authentication with respect to bonds. notes. debentures, and other obligations issued under corporate mortgage trust agreements and otherindentures: certificates for securities deposited. interim certificates and other certificates 1cr and on behalf of this Bank as deposit, or anent countersignatures of bonds. notes, certificates of stock. voting trust certificates or participation certificates on ceha/f of this Bank as transfer ager:: rectsr. ar certificates of cancellation andofcremanon of stocks. bonds or orhersecurities: andresignations of this Bank ,n ary representative or fiduciarycapac::. it Camficanans of records and incumbency, confirmations of status and balances. acknowledgements ane affidavits. Any Executive Officer or any vice President, acting alone. may designate other persons as agents ("Designated Signers') to execute any of the instruments. documents. or agreements listed in the preceding paragraphs t and 2 of this resolution, or may revoke such designation. by filing a written authorization with the Secretary of this Bank. RESOLVED that all signing resolutions authorizing officers or others to sign any instruments. documents or agreements for or on behalf of this Bank, heretofore acopree by the Board of Directors. which are inconsistent or in conflict with the foregoing resolutions. be and they hereby are rescinded - I. S. Have rS tock hereby certify that I am the Secretarylan Assistant Secretary of Norwest Bank Minnesota. National Association. a banking association organized pursuant to the National Bank Pct of the United Stares of America, having an office and place of business at Minneapolis. Min- nesora. that the foregoing is a true complete and correct copy of By -Law 72 of said Association and General Signature Resolution adopted January 4, 1988. ana amended February la, and October 18. 1988, by the Board of Directors of said Association relating to the execution of written instruments, and that the same now are in lull force and effect and have not been revoked. repealed or further amended. I further certify that on the 11 t h day of Ju 1 y , 19 96 , the following named persons were officers or Designated Signers of said Norwest Bank ,Minnesota. National Association. that their true signatures appear beside their names. and that on said date they were duly authorized to execute written instruments in accordance with the terms of said By -Law and said Resolution. Signature Name Title 9 Pam Hamack Avis Helm ,la Marty Authorized Authorized Authorized Signer Signer Sig Timothy Matyi Authorized Sig IN Sw/T,VESS WHEREOF I have hereunto set my hand and affixed the corooram Seal of sat Loan Policy American Land Title Association Loan Policy 10-17-92 (^ Policy Number MM 2188872 SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS, OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY, a Minnesota corporation, herein called the Company, insures, as of Date of Policy shown in Schedule A. against loss or damage, not exceeding the Amount of Insurance stated in Schedule A, sustained or incurred by the insured by reason of:----- - -- 1. Title to the estate or interest described in Schedule A being vested other than as stated therein; 2. Any defect in or lien or encumbrance on the title; 3. Unmarketability of the title; 4. Lack of a right of access to and from the land; 5. The invalidity or unenforceability of the lien of the insured mortgage upon the title; 6. The priority of any lien or encumbrance over the lien of the insured mortgage; 7. Lack of priority of the lien of the insured mortgage over any statutory lien for services, labor or material: (a) arising from an improvement or work related to the land which is contracted for or commenced prior to Date of Policy; or (b) arising from an improvement or work related to the land which is contracted for or commenced subsequent to Date of Policy and which is financed in whole or in part by proceeds of the indebtedness secured by the insured mortgage which at Date of Policy the insured has advanced or is obligated to advance; 8. The invalidity or unenforceability of any assignment of the insured mortgage, provided the assignment is shown in Schedule A, or the failure of the assignment shown in Schedule A to vest title to the insured mortgage in the named insured assignee free and clear of all liens. The Company will also pay the costs, attorneys' fees and expenses incurred in defense of the title or the lien of the insured mortgage, as insured, but only to the extent provided in the Conditions and Stipulations. IN WITNESS WHEREOF, the said OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY has caused its corporate name and seal to be hereunto affixed by its duly authorized officers as of the date shown in Schedule A, the policy to be valid when countersigned by an authorized officer or agent of the Company. EXCLUSIONS FROM COVERAGE The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys' fees or expenses which arise by reason of: 1. (a) Any law, ordinance or governmental regulation (including but not limited to building and zoning laws, ordinances, or regulations) restricting, regulating, prohibiting or relating to (i) the occupancy, use, or enjoyment of the land; (ii) the character, dimensions or location of any improvement now or hereafter erected on the land; (iii) a separation in ownership or a change in the dimensions or area of the land or any parcel of which the land is or was a part; or (iv) environmental protection, or the effect of any violation of these laws, ordinances or governmental regulations, except to the extent that a notice of the enforcement thereof or a notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy. (b) Any governmental police power not excluded by (a) above, except to the extent that a notice of the exercise thereof or a notice of a defect, lien or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy. 2. Rights of eminent domain unless notice of the exercise thereof has been recorded in the public records at Date of Policy, but not excluding from coverage any taking which has occurred prior to Date of Policy which would be binding on the rights of a purchaser for value without knowledge. 3. Defects, liens, encumbrances, adverse claims or other matters: (a) Created, suffered, assumed or agreed to by the insured claimant; (b) not known to the Company, not recorded in the public records at Date of Policy, but known to the insured claimant and not disclosed in writing to the Company by the insured claimant prior to the date the insured claimant became an insured under this policy; (c) resulting in no loss or damage to the insured claimant (d) attaching or created subsequent to Date of Policy (except to the extent that this policy insures the priority of the lien of the insured mortgage over any statutory lien for services, labor or material); or (e) resulting in loss or damage which would not have been sustained if the insured claimant had paid value for the insured mortgage. 4. Unenforceability of the lien of the insured mortgage because of the inability or failure of the insured at Date of Policy, or the inability or failure of any subsequent owner of the indebtedness, to comply with applicable doing business laws of the state in which the land is situated. 5. Invalidity or unenforceability of the lien of the insured mortgage, or claim thereof, which arises out of the transaction evidenced by the insured mortgage and is based upon usury or any consumeccredit protection or truth in lending law. 6. Any statutory lien for services, labor or materials (or the claim of priority of any statutory lien for services, labor or materials over the lien of the insured mortgage) arising from an improvement or work related to the land which is contracted for and commenced subsequent to Date of Policy and is not financed in whole or in part by proceeds of the indebtedness secured by the insured mortgage which at Date of Policy the insured has advanced or is obligated to advance. 7. Any claim, which arises out of the transaction creating the interest of the mortgagee insured by this policy, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws, that is based on: (a) the transaction creating the interest of the insured mortgagee being deemed a fraudulent conveyance or fraudulent transfer; or (b) the subordination of the interest of the insured mortgagee as a result of the application of the doctrine of equitable subordination; or (c) the transaction creating the interest of the insured mortgagee being deemed a preferential transfer except where the preferential transfer results from the failure: (i) to timely record the instrument of transfer; or (ii) of such recordation to impart notice to a purchaser for value or a judgment or lien creditor. Issued through the Office of OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY A Stock Company 400 Second Avenue South, 16121571-1111 BY President x Attest�� ` x / f//� /f Secretary •)10.tC�OL- CONDITIONS AND STIPULATIONS 1. Definition of Terms. The following terms when used in this policy mean: (a) "insured": the insured named in Schedule A. The term "insured" also includes: iii the owner of the indebtedness secured by the insured mortgage and each successor in ownership of the indebtedness except a successor who is an obligor under the provisions of Section 12(c) of these Conditions and Stipulations (reserving, however, all rights and defenses as to any successor that the Company would have had against any predecessor insured, unless the successor acquired the indebtedness as a purchaser for value without knowledge of the asserted defect, lien, encumbrance, adverse claim or other matter insured against by this policy as affecting title to the estate or interest in the land), (ii) any governmental agency or governmental instrumentality which is an insurer or guarantor under an insurance contract or guaranty insuring or guaranteeing the indebtedness secured by the insured mortgage, or any part thereof, whether named as an insured herein or not; )iii) the parties designated in Section 2(a) of these Conditions and Stipulations. (b) "insured claimant': an insured claiming loss or damage. (c) "knowledge" or "known": actual knowledge, not constructive knowledge or notice which may be imputed to an insured by reason of the public records as defined in this policy or any other records which impart constructive notice of matters affecting the land. (d) "land": the land described or referred to in Schedule A, and improvements affixed thereto which by law constitute real property. The term "land" does not include any property beyond the lines of the area described or referred to in Schedule A, nor any right, title, interest, estate or easement in abutting streets, roads, avenues, alleys, lanes, ways or waterways, but nothing herein shall modify or limit the extent to which a right of access to and from the land is insured by this policy. (e) "mortgage": mortgage, deed of trust, trust deed, or other security instrument. (f) "public records": records established under state statutes at Date of Policy for the purpose of imparting constructive notice of matters relating to real property to purchasers for value and without knowledge. With respect to Section 1(a)(iv) of the Exclusions from Coverage, "public records" shall also include environmental protection liens filed in the records of the clerk of the United States District Court for the district in which the land is located. (g) "unmarketability of the title": an alleged or apparent matter affecting the title to the land, not excluded or excepted from coverage, which would entitle a purchaser of the estate or interest described in Schedule A or the insured mortgage to be released from the obligation to purchase by virtue of a contractual condition requiring the delivery of marketable title. 2. Continuation of Insurance. (a) After Acquisition of Title. The coverage of this policy shall continue in force as of Date of Policy in favor of (i) an insured who acquires all or any part of the estate or interest in the land by foreclosure, trustee's sale, conveyance in lieu of foreclosure, or other legal manner which discharges the lien of the insured mortgage; (ii) a transferee of the estate or interest so acquired from an insured corporation, provided the transferee is the parent or wholly-owned subsidiary of the insured corporation, and their corporate successors by operation of law and not by purchase, subject to any rights or defenses the Company may have against any predecessor insureds; and (iii) any governmental agency or governmental instrumentality which acquires all or any part of the estate or interest pursuant to a contract of insurance or guaranty insuring or guaranteeing the indebtedness secured by the insured mortgage. (b) After Conveyance of Title. The coverage of this policy shall continue in force as of Date of Policy in favor of an insured only so long as the insured retains an estate or interest in the land, or holds an indebtedness secured by a purchase money mortgage given by a purchaser from the insured, or only so long as the insured shall have liability by reason of covenants of warranty made by the insured in any transfer or conveyance of the estate or interest. This policy shall not continue in force in favor of any purchaser from the insured of either (i) an estate or interest in the land, or (ii) an indebtedness secured by a purchase money mortgage given to the insured. (c) Amount of Insurance. The amount of insurance after the acquisition or after the conveyance shall in neither event exceed the least of: (i) the Amount of Insurance stated in Schedule A, (ii) the amount of the principal of the indebtedness secured by the insured mortgage as of Date of Policy, interest thereon, expenses of foreclosure, amounts advanced pursuant to the insured mortgage to assure compliance with laws or to protect the lien of the insured mortgage prior to the time of acquisition of the estate or interest in the land and secured thereby and reasonable amounts expended to prevent deterioration of improvements, but reduced by the amount of all payments made; or (iii) the amount paid by any governmental agency or governmental instrumentality, if the agency or instrumentality is the insured claimant, in the acquisition of the estate or interest in satisfaction of its insurance contract or guaranty. 3. Notice of Claim to be Given by Insured Claimant. The Insured shall notify the Company promptly in writing If in case of any litigation as set forth in Section 4(a) below, (ii) in case knowledge shall come to an insured hereunder of any claim of title or interest which is adverse to the title to the estate or interest or the lien of the insured mortgage, as insured, and which might cause loss or damage for which the Company may be liable by virtue of this policy, or (iii) if title to the estate or interest or the lien of the insured mortgage, as insured, is rejected as unmarketable. If prompt notice shall not be given to the Company, then as to the insured all liability of the Company shall terminate with regard to the matter or matters for which prompt notice is required; provided, however, that failure to notify the Company shall in no case prejudice the rights of any insured under this policy unless the Company shall be prejudiced by the failure and then only to the extent of the prejudice. 4. Defense and Prosecution of Actions; Duty of Insured Claimant to Cooperate. (a) Upon written request by the insured and subject to the options contained in Section 6 of these Conditions and Stipulations, the Company at its own cost and without unreasonable delay, shall provide for the defense of an insured in litigation in which any third parry asserts a claim adverse to the title or interest as insured, but only as to those stated causes of action alleging a defect, lien or encumbrance or other matter insured against by this policy. The Company shall have the right to select counsel of its choice (subject to the right of the insured to object for reasonable cause) to represent the insured as to those stated causes of action and shall not be liable for and will not pay the fees of any other counsel. The Company will not pay any fees, costs or expenses incurred by the insured in the defense of those causes of action which allege matters not insured against by this policy. (b) The Company shall have the right, at its own cost, to institute and prosecute any action or proceeding or to do any other act which in its opinion may be necessary or desirable to establish the title to the estate or interest or the lien of the insured mortgage, as insured, or to prevent or reduce loss or damage to the insured. The Company may take any appropriate action under the terms of this policy, whether or not it shall be liable hereunder, and shall not thereby concede liability or waive any provision of this policy. If the Company shall exercise its rights under this paragraph, it shall do so diligently. (c) Whenever the Company shall have brought an action or interposed a defense as required or permitted by the provisions of this policy, the Company may pursue any litigation to final determination by a court of competent jurisdiction and expressly reserves the right, in its sole discretion, to appeal from any adverse judgment or order. (d) In all cases where this policy permits or requires the Company to prosecute or provide for the defense of any action or proceeding, the insured shall secure to the Company the right to so prosecute or provide defense in the action or proceeding, and all appeals therein, and permit the Company to use, at its option, the name of the insured for this purpose. Whenever requested by the Company, the insured, at the Company's expense, shall give the Company all reasonable aid (i) in any action or proceeding, securing evidence, obtaining witnesses, prosecuting or defending the action or proceeding, or effecting settlement, and (ii) in any other lawful act which in the opinion of the Company may be necessary or desirable to establish the title to the estate or interest or the lien of the insured mortgage, as insured. If the Company is prejudiced by the failure of the insured to furnish the required cooperation, the Company's (Continued on inside back cover 1 (Coutiqued from inside front cover.) obligation to the insured under the policy shall terminate, including any liability or obligation to defend, prosecute, or continue any litigation, with regard to the matter or matters requiring such cooperation. 5 Proof of Loss or Damage. r' In addition to and after the notices required under Section 3 of these .mditions and Stipulations have been provided the Company, a proof of loss or damage signed and sworn to by the insured claimant shall be furnished to the Company within 90 days after the insured claimant shall ascertain the facts giving rise to the loss or damage. The proof of loss or damage shall describe the defect in, or lien or encumbrance on the title, or other matter insured against by this policy which constitutes the basis of loss or damage and shall state, to the extent possible, the basis of calculating the amount of the loss or damage. If the Company is prejudiced by the failure of the insured claimant to provide the required proof of loss or damage, the Company's obligations to the insured under the policy shall terminate, including any liability or obligation to defend, prosecute, or continue any litigation, with regard to the matter or matters requiring such proof of loss or damage. In addition, the insured claimant may reasonably be required to submit to examination under oath by any authorized representative of the Company and shall produce for examination, inspection and copying, at such reasonable times and places as may be designated by any authorized representative of the Company, all records, books, ledgers, checks, correspondence and memoranda, whether bearing a date before or after Date of Policy, which reasonably pertain to the loss or damage. Further, if requested by any authorized representative of the Company, the insured claimant shall grant its permission, in writing, for any authorized representative of the Company to examine, inspect and copy all records, books, ledgers, checks, correspondence and memoranda in the custody or control of a third parry, which reasonably pertain to the loss or damage. All information designated as confidential by the insured claimant provided to the Company pursuant to this Section shall not be disclosed to others unless, in the reasonable judgment of the Company, it is necessary in the administration of the claim. Failure of the insured claimant to submit for examination under oath, produce other reasonably requested information or grant permission to secure reasonably necessary information from third parties as required in this fragraph, unless prohibited by law or governmental regulation, shall terminate .,ny liability of the Company under this policy as to that claim. 6. Options to Pay or Otherwise Settle Claims; Termination of Liability. In case of a claim under this policy, the Company shall have the following additional options: (a) To Pay or Tender Payment of the Amount of Insurance or to Purchase the Indebtedness. (i) to pay or tender payment of the amount of insurance under this policy together with any costs, attorneys' fees and expenses incurred by the insured claimant, which were authorized by the Company, up to the time of payment or tender of payment and which the Company is obligated to pay; or (ii) to purchase the indebtedness secured by the insured mortgage for the amount owing thereon together with any costs, attorneys' fees and expenses incurred by the insured claimant which were authorized by the Company up to the time of purchase and which the Company is obligated to pay. If the Company offers to purchase the indebtedness as herein provided, the owner of the indebtedness shall transfer, assign, and convey the indebtedness and the insured mortgage, together with any collateral security, to the Company upon payment therefor. Upon the exercise by the Company of either of the options provided for in paragraphs (aHi) or (ii), all liability and obligations to the insured under this policy, other than to make the payment required in those paragraphs, shall terminate, including any liability or obligation to defend, prosecute, or continue any litigation, and the policy shall be surrendered to the Company for cancellation. (b) To Pay or Otherwise Settle With Parties Other Than the Insured or With the Insured Claimant. (i) to pay or otherwise settle with other parties for or in the name ' an insured claimant any claim insured against under this policy, together with ,y costs, attorneys' fees and expenses incurred by the insured claimant which were authorized by the Company up to the time of payment and which the Company is obligated to pay, or (ti) to pay or otherwise settle with the insured claimant the loss or damage provided for under this policy, together with any costs, attorneys' fees and expenses incurred by the insured claimant which were authorized by the Company up to the time of payment and which the Company is obligated to pay. Upon the exercise by the Company of either of the options provided for in paragraphs (b)(i) or (ii), the Company's obligations to the insured under this policy for the claimed loss or damage, other than the payments required to be made, shall terminate, including any liability or obligation to defend, prosecute, or continue any litigation. 7 Determination and Extent of Liability. This policy is a contract of indemnity against actual monetary loss or damage sustained or incurred by the insured claimant who has suffered loss or damage by reason of matters insured against by this policy and only to the extent herein described. (a) The liability of the Company under this policy shall not exceed the least of: (i) the Amount of Insurance stated in Schedule A, or, if applicable, the amount of insurance as defined in Section 2(c) of these Conditions and Stipulations; (ii) the amount of the unpaid principal indebtedness secured by the insured mortgage as limited or provided under Section 8 of these Conditions and Stipulations or as reduced under Section 9 of these Conditions and Stipulations, at the time the loss or damage insured against by this policy occurs, together with interest thereon; or (iii( the difference between the value of the insured estate or interest as insured and the value of the insured estate or interest subject to the defect, lien or encumbrance insured against by this policy. (h) In the event the insured has acquired the estate or interest in the manner described in Section 2(a) of these Conditions and Stipulations or has conveyed the title, then the liability of the Company shall continue as set forth in Section 7(a) of these Conditions and Stipulations. (c) The Company will pay only those costs, attorneys' fees and expenses incurred in accordance with Section 4 of these Conditions and Stipulations. 8. Limitation of Liability. (a) If the Company establishes the title, or removes the alleged defect, lien or encumbrance, or cures the lack of a right of access to or from the land, or cures the claim of unmarketability of title, or otherwise establishes the lien of the insured mortgage, all as insured, in a reasonably diligent manner by any method, including litigation and the completion of any appeals therefrom, it shall have fully performed its obligations with respect to that matter and shall not be liable for any loss or damage caused thereby. (b) In the event of any litigation, including litigation by the Company or with the Company's consent, the Company shall have no liability for loss or damage until there has been a final determination by a court of competent jurisdiction, and disposition of all appeals therefrom, adverse to the title or to the lien of the insured mortgage, as insured. (c) The Company shall not be liable for loss or damage to any insured for liability voluntarily assumed by the insured in settling any claim or suit without the prior written consent of the Company. (d) The Company shall not be liable for: (i) any indebtedness created subsequent to Date of Policy except for advances made to protect the lien of the insured mortgage and secured thereby and reasonable amounts expended to prevent deterioration of improvements; or (ii) construction loan advances made subsequent to Date of Policy, except construction loan advances made subsequent to Date of Policy for the purpose of financing in whole or in part the construction of an improvement to the land which at Date of Policy were secured by the insured mortgage and which the insured was and continued to be obligated to advance at and after Date of Policy. 9. Reduction of Insurance; Reduction or Termination of Liability. (a) All payments under this policy, except payment made for costs, attorneys' fees and expenses, shall reduce the amount of the insurance pro tanto. However, any payments made prior to the acquisition of title to the estate or interest as provided in Section 2(a) of these Conditions and Stipulations shall not reduce pro tanto the amount of the insurance afforded under this policy except to the extent that the payments reduce the amount of the indebtedness secured by the insured mortgage. (Continued on back cover.l (Conenueo from ioside cover.) - (b) Payment in part by any person of the principal of the indebtedness, or any other obligation secured by the insured mortgage, or any voluntary partial satisfaction or release of the insured mortgage, to the extent of the payment, satisfaction or release, shall reduce the amount of insurance pro tanto. The amount of insurance may thereafter be increased by accruing interest and i� dvances made to protect the lien of the insured mortgage and secured thereby, with interest thereon, provided in no event shall the amount of insurance be greater than the Amount of Insurance stated in Schedule A. (c) Payment in full by any person or the voluntary satisfaction or release of the insured mortgage shall terminate all liability of the Company except as provided in Section 2(a) of these Conditions and Stipulations. 10. Liability Noncumulative. If the insured acquires title to the estate or interest in satisfaction of the indebtedness secured by the insured mortgage, or any part thereof, it is expressly understood that the amount of insurance under this policy shall be reduced by any amount the Company may pay under any policy insuring a mortgage to which exception is taken in Schedule B or to which the insured has agreed, assumed, or taken subject, or which is hereafter executed by an insured and which is a charge or lien on the estate or interest described or referred to in Schedule A, and the amount so paid shall be deemed a payment under this policy. 11. PaymentofLoss. (a) No payment shall be made without producing this policy for endorsement of the payment unless the policy has been lost or destroyed, in which case proof of loss or destruction shall be furnished to the satisfaction of the Company. (b) When liability and the extent of loss or damage has been definitely fixed in accordance with these Conditions and Stipulations, the loss or damage shall be payable within 30 days thereafter. 12. Subrogation Upon Payment or Settlement. (a) The Company's Right of Subrogation. Whenever the Company shall have settled and paid a claim under this policy, all right of subrogation shall vest in the Company unaffected by any act ,f the insured claimant. The Company shall be subrogated to and be entitled to all rights and remedies which the insured claimant would have had against any person or property in respect to the claim had this policy not been issued. If requested by the Company, the insured claimant shall transferto the Companyall rights and remedies against any person or property necessary in order to perfect this right of subrogation. The insured claimant shall permit the Company to sue, compromise or settle in the name of the insured claimant and to use the name of the insured claimant in any transaction or litigation involving these rights or remedies. If a payment on account of a claim does not fully cover the loss of the insured claimant, the Company shall be subrogated to all rights and remedies of the insured claimant after the insured claimant shall have recovered its principal, interest, and costs of collection. (b) The Insured's Rights and Limitations. Notwithstanding the foregoing, the owner of the indebtedness secured by the insured mortgage, provided the priority of the lien of the insured mortgage or its enforceability is not affected, may release or substitute the personal liability of any debtor or guarantor, or extend or otherwise modify the terms of payment, or release a portion of the estate or interest from the lien of the insured mortgage, or release any collateral security for the indebtedness. When the permitted acts of the insured claimant occur and the insured has knowledge of any claim of title or interest adverse to the title to the estate or interest or the priority or enforceability of the lien of the insured mortgage, as insured, the Company shall be required to pay only that part of any losses insured against by this policy which shall exceed the amount, if any, lost to the Company by reason of the impairment by the insured claimant of the Company's right of subrogation. (c) The Company's Rights Against Non-insured Obligors. The Company's right of subrogation against non-insured obligors shall ,xist and shall include, without limitation, the rights of the insured to demnities, guaranties, other policies of insurance or bonds, notwithstanding any terms or conditions contained in those instruments which provide for subrogation rights by reason of this policy. The Company's right of subrogation shall not be avoided by acquisition of the insured mortgage by an obligor (except an obligor described in Section l(a)(ii) of these Conditions and Stipulations) who acquires the insured mortgage as a result of an indemnity, guarantee, other policy of insurance, or bond and the obligor will not be an insured under this policy, notwithstanding Section l(a)(i) of these Conditions and Stipulations. 13. Arbitration. Unless prohibited by applicable law, either the Company or the insured may demand arbitration pursuant to the Title Insurance Arbitration Rules of the American Arbitration Association. Arbitrable matters may include, but are not limited to, any controversy or claim between the Company and the insured arising out of or relating to this policy, any service of the Company in connection with its issuance or the breach of a policy provision or other obligation. All arbitrable matters when the Amount of Insurance is $1,000,000 or less shall be arbitrated at the option of either the Company or the insured. All arbitrable matters when the Amount of Insurance is in excess of $1,000,000 shall be arbitrated only when agreed to by both the Company and the insured. Arbitration pursuant to this policy and under the Rules in effect on the date the demand for arbitration is made or, at the option of the insured, the Rules in effect at Date of Policy shall be binding upon the parties. The award may include attorneys' fees only if the laws of the state in which the land is located permit a court to award attorneys' fees to a prevailing party. Judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof. The law of the situs of the land shall apply to an arbitration under the Title Insurance Arbitration Rules. A copy of the Rules may be obtained from the Company upon request. 14. Liability Limited to This Policy,- Policy Entire Contract. (a) This policy together with all endorsements, if any, attached hereto by the Company is the entire policy and contract between the insured and the Company. In interpreting any provision of this policy, this policy shall be construed as a whole. (b) Any claim of loss or damage, whether or not based on negligence, and which arises out of the status of the lien of the insured mortgage or of the title to the estate or interest covered hereby or by any action asserting such claim, shall be restricted to this policy. (c) No amendment of or endorsement to this policy can be made except by a writing endorsed hereon or attached hereto signed by either the President, a Vice President, the Secretary, an Assistant Secretary, or validating officer or authorized signatory of the Company. 15. Severability. In the event any provision of this policy is held invalid or unenforceable under applicable law, the policy shall be deemed not to include that provision and all other provisions shall remain in full force and effect. 16. Notices, Where Sent. All notices required to be given the Company and any statement in writing required to be furnished the Company shall include the number of this policy and shall be addressed to its Home Office: 400 Second Avenue South, Minneapolis, Minnesota 55401, (612) 371-1111. ST. 22 CNTY. 053 PROP. 3 TRAN. 042 Re -Issue Liability: $5,000,000.00 ORT MORTGAGE 10-17-92 ORT FORM 401 PREMIUM: $--- ORDER NO. H OR919656 C POLICY NO. MM2188872 AMOUNT: $5,000,000.00 SCHEDULE A 1. POLICY DATE: July 11, 1996 AT 5:00 P.M. 2. NAME OF INSURED: City of New Hope, Minnesota, a Minnesota municipal corporation 3. THE TITLE TO THE FEE SIMPLE ESTATE IN SAID LAND IS, AT DATE HEREOF, VESTED IN: Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership 4. THE MORTGAGE AND ASSIGNMENTS, IF ANY, COVERED BY THIS POLICY ARE DESCRIBED AS FOLLOWS: Combination Mortgage, Security Agreement and Fixture Financing Statement executed by Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership in favor of City of New Hope, Minnesota, a Minnesota municipal corporation, dated June 1, 1996, filed July 11, 1996, as Document No. 2722983, in the original amount of $5,000,000.00. The above mortgage has been assigned to Norwest Bank Minnesota, National Association, (a National Banking Association) by assignment dated June 1, 1996, filed July 16, 1996, as Document No. 2724901. 5. THE LAND REFERRED TO IN THIS POLICY IS THE SAME LAND AS DESCRIBED IN THE MORTGAGE SHOWN AT NO. 4 ABOVE. Lot 1, Block 1, Charlie Thompson Addition, according to the recorded plat thereof, and situate in Hennepin County, Minnesota. Being registered land as is evidenced by Certificate of Title No. 664152. ' OLD REPUBLIC ��.�«• rw�w�.i niw �..��.ae comwm ORT Form 3120 H OR919656 C Page: 2 SCHEDULE B -I THIS POLICY DOES NOT INSURE AGAINST LOSS OR DAMAGE BY REASON OF THE FOLLOWING: 1. Special assessments and taxes not yet due and payable. NOTE: The following special assessments are now a lien on the premises: Assessment for water imp, balance $150.50. There are no pending special assessments. 2. First one-half of taxes for 1996 are paid. Second one-half of taxes for 1996 unpaid on which no penalty will accrue if paid on or before October 15, 1996. 3. Utility and drainage easement(s) over the Northeasterly, Northwesterly and Westerly 5 feet as shown on the recorded plat of Charlie Thompson Addition. 4. Easement for Water Main purposes acquired by the City of New Hope as evidenced by Document No. 660737. NOTE: Falls in Boone Avenue North which adjoins the West line of caption legal. 5. Restriction and storm sewer easement contained in Quit Claim Deed from the Housing and Redevelopment Authority in and for the City of New Hope dated May 16, 1985, filed May 29, 1985, as Document No. 1647817. 6. Terms and provisions contained in Assessment Agreement and Assessor's Certification dated January 30, 1985, filed May 29, 1985, as Document No. 1647818. 7. Covenants and restrictions contained in Declaration of Restrictive Covenants dated May 1, 1985, filed May 29, 1985, as Document No. 1647819. 8. Highway easement(s) over a portion of subject premises in favor of County of Hennepin, as created in Document No. 2377790. 9. Covenants and restrictions contained in Declaration of Restrictive Covenants dated June 1, 1996, filed July 11, 1996 OLD REPUBLIC ORT Form 3120 H OR919656 C Page: 3 as Document No. 2722985. SCHEDULE B -II IN ADDITION TO THE MATTERS SET FORTH IN PART I OF THIS SCHEDULE, THE TITLE TO THE ESTATE OR INTEREST IN THE LAND DESCRIBED OR REFERRED TO IN SCHEDULE A IS SUBJECT TO THE FOLLOWING MATTERS, IF ANY BE SHOWN, BUT THE COMPANY INSURES THAT THE LIEN OR CHARGE OF THE INSURED MORTGAGE UPON SAID ESTATE OR INTEREST IS PRIOR TO SUCH MATTERS: 1. Assignment of Rents and Leases by Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership, to City of New Hope, Minnesota, a Minnesota municipal corporation, dated June 1, 1996, filed July 11, 1996, as Document No. 2722984. The above Assignment of Rents and Leases has been assigned to Norwest Bank Minnesota, National Association by assignment dated June 1, 1996, filed July 16, 1996, as Document No. 2724902. "��(•J�[�• �-OLD REPUBLIC �+i• � ±«� Ne11an.I Tllk lnfUflM. COmpeny ORT Form 3120 H OR919656 C O L D R E P U B L I C N A T I O N A L T I T L E I N S U R A N C E C O M P A N Y ENDORSEMENT To be attached to and become a part of Policy No. MM2188872 of Old Republic National Title Insurance Company The Company insures the owner of the indebtedness secured by the insured mortgage against loss or damage sustained by reason of: 1. Any incorrectness in the assurance that, at Date of Policy: a. There are no covenants, conditions or restrictions under which the lien of the mortgage referred to in Schedule A can be divested, subordinated or extinguished, or its validity, priority or enforceability impaired. b. Unless expressly excepted in Schedule B: 2 (1)There are no present violations on the land of any enforceable covenants, conditions or restrictions, nor do any existing improvements on the land violate any building setback lines shown on a plat of subdivision recorded or filed in the public records. (2)Any instrument referred to in Schedule B as containing covenants, conditions or restrictions on the land does not, in addition, (i) establish an easement on the land; (ii) provide a lien for liquidated damages; (iii) provide for private charge or assessment; (iv) provide for an option to purchase, a right of first refusal or the prior approval of a future purchaser or occupant. (3)There is no encroachment of existing improvements located on the land onto adjoining land, nor any encroachment onto the land of existing improvements located on adjoining land. (4)There is no encroachment of existing improvements located on the land onto that portion of the land subject to any easement excepted in Schedule B. Any future violation on the land of any existing covenants, conditions or restrictions occurring prior to the acquisition of title to the estate or interest in the land by the insured, provided the violation results in: a. impairment or loss of the lien of the insured mortgage; or b. loss of title to the estate or interest in the land if the insured shall acquire title in satisfaction of the indebtedness R . f t OLD REPUBLIC ORT Form 3120 secured by the insured mortgage. 3. Damage to existing improvements, including lawns, shrubbery or trees: a. which are located on or encroach upon that portion of the land subject to any easement excepted in Schedule B, which damage results from the exercise of the right to maintain the easement for the purpose for which it was granted or reserved; b. resulting from the future exercise of any right to use the surface of the land for the extraction or development of minerals excepted from the description of the land or excepted in Schedule B. 4. Any final court order or judgment requiring the removal from any land adjoining the land of any encroachment excepted in Schedule B. 5. Any final court order or judgment denying the right to maintain any existing improvements on the land because of any violation of covenants, conditions or restrictions or building setback lines shown on a plat of subdivision recorded or filed in the public records. Wherever in this endorsement the words "covenants, conditions or restrictions" appear, they shall not be deemed to refer to or include the terms, covenants, conditions or limitations contained in an instrument creating a lease. This endorsement is made a part of the policy and is subject to all of the terms and provisions thereof and any prior endorsements thereto. Except to the extent expressly stated, it neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and any prior endorsements, nor does it increase the face amount thereof. Old Republic National Title Insurance Company A, 0OL--alL Authorized Signatory ALTA9 OLD REPUBLIC ORT Form 3120 File No. H OR919656 C Re: Northridge Properties of New Hope O L D R E P U B L I C N A T I O N A L T I T L E I N S U R A N C E C O M P A N Y To be attached to and become a part of Policy No. MM2188872 of old Republic National Title Insurance Company. Notwithstanding anything to the contrary contained in Schedule B hereof or in the Exclusions From Coverage under this Policy, the Company hereby insures the Insured against loss or damage sustained or incurred by the Insured by reason of any inaccuracy in the following assurances, including, but not limited to loss or limitation of marketability, and the cost and expense (including attorney's fees) of defense or prosecution of litigation by the Insured against a claim by any third party which, if successful in whole or in part, would indicate that such assurances are in any respect inaccurate: 1. Contiguity. The land described in Schedule A consists of a single integrated parcel and is internally contiguous and contains no gaps or gores. 2. Access. The insured land abuts on and has access to Boone Avenue North, physically open and dedicated public streets in the City of New Hope, Minnesota. 3. Separate Tax Parcel. The insured land is a separate tax parcel for real estate tax and special assessment purposes and is not taxed together with any other property. 4. Assessments: There are no levied or pending assessments against the insured land, except as follows: Levied water improvement balance $150.50. 5. Subdivision Compliance. The insured land is in compliance with and conforms to all applicable (a) statutes, laws and regulations of the State of Minnesota relating to the subdivision or platting of real property, and (b) ordinances and regulations of the City of New Hope and the County of Hennepin, relating to the subdivision and platting of real property. The insured land may lawfully be conveyed utilizing the insured legal description without violating the foregoing statutes, laws, regulations and ordinances. 6. The insured land is the same as that delineated on the survey dated May 29, 1996, revised July 9, 1996 performed by Sunde Land Surveying, Inc., which survey accurately depicts as of the date thereof, the location of the exterior boundaries of the land as described in the policy, shows the proper location of all easements identified in Schedule B, and correctly reflects the absence of any encroachements or easements (other than shown on IR OLD REPUBLIC e e National Tllb lneUrBMe Company ORT Form 3120 H OR919656 C Page: 2 Schedule B., if any). The Company hereby agrees to provide to any future purchaser or encumbrancers of all or any part of the property, and their successors and assigns, the assurances provided in the foregoing paragraph 1 through 6 of this Endorsement subject only to matters first arising after the effective date hereof and to payment of the Company's then standard additional charges for such assurances, if any. The total liability of the Company under said policy and any endorsement thereto shall not exceed, in the aggregate, the face amount of said policy and costs which the Company is obligated under the Conditions and Stipulations thereof to pay. This endorsement, when signed by an authorized officer or agent, is made a part of said policy as of the policy date thereof and is subject to the Schedules, Conditions and Stipulations and Exclusions from Coverage therein contained, except as modified by the provisions hereof. Old Republic National Title Insurance Company By: A - QAd- Agent or Validating Officer OLD REPUBLIC rfR�'M w�b�.�nib u,,,,,.,K. conoany ORT Form 3120 f� ALTA/ACSM LAND TITLE SURVEY FOR: m== NORTHRIDGE PROPERTIES OF NEW HOPE NORWEST BANK MINNESOTA OLD REPUBLIC NATIONAL TITLE', INSURANCE COMPANY ..c. r�rn w.i[ sari iia XRn56 p n \ /' rTIn 6 xtaN SUf anti I -y. dv� F LS_ y0. e eft, .y - I/J W*LL W e . ral"I a d^ rYJa xiv- ° EXISTING 6 -STORY BLOCK BUILD(NO/STUCCO FACE $TOO EbNE AVENUE Il^gTX O 9E\B AA!! L.et 3J II e� twrr s I 41 �.. a0.wxoXena r 0 I LJI U x. n.1uc„ i \ a J p IIS Z 'b V-0 = ent or5 61 •' ust W �/ yen I yYR c ij C �Yuc E _ d Tti 4. �Rf PG y tce ,�\ I y J $I =PR - gy ice-✓ to x SL CsptucE �\ tO by y,llee[ .nae `+<J wan _ = —_----- an:284.6/ ' --- WEST I PCE ,aX SURF 01t :)Mshp05 n� a„rti°n Te sou ,.no r. urn r v 1 « \ .n is a s id /or rr ss .r n ssa a ..c. r�rn w.i[ sari iia XRn56 p n \ 90 0 gD 60 SfJdE N nET PRD" RTY (Per Old R<publle National TIM laaunoce Company Title Commllmsoa AppSinWa No. H OM19W CI LN 1. Block 1, CIIARLi6 THOMPSON ADDITION, acending to the recorded plat duamE aM Ylam m Hm«pin County. Mi. - Being registered luxI u is nidmsed by Catifines of Titin No. 660152, ON Ell Dmatn ovvlwO Manic DG TELE Daotn mMn yona eekplt«m W Denote wuermw STS Denntnsmm. GV Death gates HYD Detanhydam MH Duwneset CB Dmdamtrb Main GP Denote g -re po s LP Denotes 68th pole PP Denote powen pole PINS Dented tenech pme nm SPRCG Denotes colmado Ww apace n« MPL Dero,nmapkirte M D cs tekdsa box "DTPs; IJ Lo«tiaofW uoBtin nhoaaan it ap«odmna Pinanmal GOPHER STATE ONE CALL a 451-0002 f« uaN butiom bdoe b�v W ting soy cmRmuion 2) TlGasutveyor ummwu. or•nyrawt onodeatvuarna,seadwrotofremrd aRtctinB,M above dewibN WaNrY Ww thyt n Yawn. 1) 1M mtherlY poma dlalkabjem tion Fugh..Y wscmmtto Hennepin County per Dacvmmt No. 21T1190 u sMwna naw auvey. This w rera,ion wN providedm n by w Mosepin Cwmy Mossy, Deearoat We raormnaded that your Tick Company «Attwnyrrakw raid Doevmedwduwd i Rte6monthese",ro,”. 4.) The above dettdbeel propery is mood an: R -5'i. Elderly or Dissbility Housng 5.) SETBACKS: Nath: 50 Ice, Wes: 35 fen Somh: 35 fen Ea,: 20fen 6.) Theabove deasbad«opay lies within Fload Zom C(AreasofminimY flooding) per Me National Flood Inawoee pretreat Rue Map CommaWty Panel Nast 2701V MI B. dated Inner, 2,1981. 1.) AREA: 213;715 at. R« 4.90(i Men 8.) TM above douibed,re"usub3ece to Tema and pmviYom.,,, in Antenna, Agrwnat and Assessors CenuBntioo Docuntm Ne. 164181& 9.) The above deasbed pmpetyit; abj. W Declared. of Realnutive Cmaala Docunew No. 1661819.. - 1 novelty omily m NORTHRIDGE PROPERTIES OF NEW HOPE, Limited Poe«rhip, NORWEST BANK MINNESOTA, National Association and n OLD REPUBLIC NATIONAL )'ITLE INSURANCE COMPANY than Ibis map of survey wan made by me upon Una Bound and Met it and,M,.y an which it is band wem mad: (i) in nee darsee with ,M"Minimum Stanntltud Derail Requircmcros for ALTA/ACSM Land Title Smveya,"pintly m,ablished and adopted by ALTA and ACSM in 1992, sad ialudine Mma I, 3, 4, 6,7.8.9, 10. 11. aad 13 ofTAk A themof, and (u) parental Ne Accuracy SaMmda(ss adopted by ALTA and AC$M ad in eRM an In date of thin cerilioasa) of m Whmti amveY Dant] this r My.fluty 1996 SUNDELANDSURVEYININGO C. Edward 11. Sade, R.L.B. Mita. Reg. No. 8612 Survey on8itimlly dumd December 2,1986 REVISED: Apri12,1996 (Updoo) REVISED: May 29. IM (Certification parties) REVISED: JWY 9, IM (Title CommimNal) 5unde Land Surveying Inc. M1 E. Bloomitigmn Frwway (%W) /' 6 Com\ anti I -y. LS_ I - I/J 90 0 gD 60 SfJdE N nET PRD" RTY (Per Old R<publle National TIM laaunoce Company Title Commllmsoa AppSinWa No. H OM19W CI LN 1. Block 1, CIIARLi6 THOMPSON ADDITION, acending to the recorded plat duamE aM Ylam m Hm«pin County. Mi. - Being registered luxI u is nidmsed by Catifines of Titin No. 660152, ON Ell Dmatn ovvlwO Manic DG TELE Daotn mMn yona eekplt«m W Denote wuermw STS Denntnsmm. GV Death gates HYD Detanhydam MH Duwneset CB Dmdamtrb Main GP Denote g -re po s LP Denotes 68th pole PP Denote powen pole PINS Dented tenech pme nm SPRCG Denotes colmado Ww apace n« MPL Dero,nmapkirte M D cs tekdsa box "DTPs; IJ Lo«tiaofW uoBtin nhoaaan it ap«odmna Pinanmal GOPHER STATE ONE CALL a 451-0002 f« uaN butiom bdoe b�v W ting soy cmRmuion 2) TlGasutveyor ummwu. or•nyrawt onodeatvuarna,seadwrotofremrd aRtctinB,M above dewibN WaNrY Ww thyt n Yawn. 1) 1M mtherlY poma dlalkabjem tion Fugh..Y wscmmtto Hennepin County per Dacvmmt No. 21T1190 u sMwna naw auvey. This w rera,ion wN providedm n by w Mosepin Cwmy Mossy, Deearoat We raormnaded that your Tick Company «Attwnyrrakw raid Doevmedwduwd i Rte6monthese",ro,”. 4.) The above dettdbeel propery is mood an: R -5'i. Elderly or Dissbility Housng 5.) SETBACKS: Nath: 50 Ice, Wes: 35 fen Somh: 35 fen Ea,: 20fen 6.) Theabove deasbad«opay lies within Fload Zom C(AreasofminimY flooding) per Me National Flood Inawoee pretreat Rue Map CommaWty Panel Nast 2701V MI B. dated Inner, 2,1981. 1.) AREA: 213;715 at. R« 4.90(i Men 8.) TM above douibed,re"usub3ece to Tema and pmviYom.,,, in Antenna, Agrwnat and Assessors CenuBntioo Docuntm Ne. 164181& 9.) The above deasbed pmpetyit; abj. W Declared. of Realnutive Cmaala Docunew No. 1661819.. - 1 novelty omily m NORTHRIDGE PROPERTIES OF NEW HOPE, Limited Poe«rhip, NORWEST BANK MINNESOTA, National Association and n OLD REPUBLIC NATIONAL )'ITLE INSURANCE COMPANY than Ibis map of survey wan made by me upon Una Bound and Met it and,M,.y an which it is band wem mad: (i) in nee darsee with ,M"Minimum Stanntltud Derail Requircmcros for ALTA/ACSM Land Title Smveya,"pintly m,ablished and adopted by ALTA and ACSM in 1992, sad ialudine Mma I, 3, 4, 6,7.8.9, 10. 11. aad 13 ofTAk A themof, and (u) parental Ne Accuracy SaMmda(ss adopted by ALTA and AC$M ad in eRM an In date of thin cerilioasa) of m Whmti amveY Dant] this r My.fluty 1996 SUNDELANDSURVEYININGO C. Edward 11. Sade, R.L.B. Mita. Reg. No. 8612 Survey on8itimlly dumd December 2,1986 REVISED: Apri12,1996 (Updoo) REVISED: May 29. IM (Certification parties) REVISED: JWY 9, IM (Title CommimNal) 5unde Land Surveying Inc. M1 E. Bloomitigmn Frwway (%W) ACO RD `CERTIFICATE OF LIABILITY INSURANCE DATE(MMIDD ) ,.,.., 5-29-96 PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION Ernest I. Fink Agency, Inc. ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE ''-OR 729 Carroll Ave. HOLDER. THIS CERTIFICATE DOES NT XTEN ALTER THE COVERAGE AFFORDED BYTHEM EMPOLICIE S BELOW. _. Paul, MN 55104 L __COMPANIES —AFFORDING—COVERAGE COMPANY A St. Paul Fire & Marine Ins. 612) 646-1881- - INSURED COMPANY North Ridge Properties of New Hope B DBA Chardon Court COMPANY 5700 Boone Ave. North C New Hope, MN 55428 _ COMPANY D COY�;RAGES THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. CO LTq TYPE OF INSURANCE POLICY NUMBER POLICY EFFECTIVE POLICY EXPIRATION LIMBS DATE (MMIDDIYY) DATE (MMIDD/1'1') GENERAL IJA8BJTY GENERAL AGGREGATE $ 3 OOO OOO COMMERCIAL GENERAL LIABILITY PRODUCTS-COMP/OP AGG $ 1 .6 000 $1,000,000 CLAIMS MADE OCCUR NK06600235 10-15-95 110-15-96 PERSONAL$ ADV INJURY OWNERS B CONTRACTOR'S PROT EACH OCCURRENCE I $ 1000 v10 0 0 $ 10Q,000 FIRE DAMAGE (Any one lire) $ 5.000 MEDEXP An one erson AUTOMOBILE LIABILITY j !,J ANY AUTO NK06600235 i10-15-95'.10-15-96 COMBINED SINGLE LIMIT j $ iL,0 00 `j ALL OWNED AUTOS ' 1 SCHEDULED AUTOS ! L� BODILY INJURY (Per person) $ — HIRED AUTOS '—X NON -OWNED AUTOS I i BODILY INJURY $ ''. (Per amitlaM) i PROPERTY DAMAGE $ I GARAGE LIABILITY AUTO ONLY - EA ACCIDENT $ % ANY AUTO OTHER THAN AUTO ONLY: f EACH ACCIDENT $ - AGGREGATE' $ EXCESS DABILRY EACH OCCURRENCE hS"�0 UMBRELLA FORM NK06600235 10-15-95 10-15-96 AGGREGATE $ S_rOnn . n_ OTHER THAN UMBRELLA FORM ! $ WORKERS COMPENSATION AND STATU- OTH-j. EMPLOYERS' LIABILITY TWO % ORY L"IT, -- - - THE PROPRIETOR/ EL EACH ACCIDENT $ --- INCL PARTNERS/EXECUTIVE EL DISEASE - POLICY LIMIT $ OFFICERS ARE: EXCI_ _ EL DISEASE - EA EMPLOYEE! $ OTHER I i DESCRIPTION OF OPERATIONSILOCATONS/VEHICUMPECIAL ITEMS City of New Hope and Norwest Bank Minnesota, N.A. are included as additional insureds as respects their financial interest in the premises at 5700 Boone Ave. No., New Hope, MN CERTIF%CA7E dR. _; .. O/4NCECi.A'ryON SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE Norwest Bank Minnesota, N.A. EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL EUVMQE}xw MAIL rporate Trust Department 3 0 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, bth & Marquette Minneapolis, MN 55479-0069 AXg AM MXTT4Kpt94-7€"X9jRII.%M40CKNPPX4R MRQiaT�4CQ07[QA4AY k2MICA��%P ¢gx AUTHOflI ESENTATIVE ACORD-2$-S (1195) n Annan rnoononrrnra �6oa: A/D//1.11® EVIDENCE OF PROPERTY INSURANCE DATE (MM/DD/YY) 5-29-96 THIS IS EVIDENCE THAT INSURANCE AS IDENTIFIED BELOW HAS BEEN ISSUED, IS IN FORCE, AND CONVEYS ALL THE RIGHTS AND PRIVILEGES AFFORDED UNDER THE POLICY. °'WUCER PNC NO En: 612 646-1881 COMPANY ._nest I. Fink Agency, Inc. St. Paul Fire & Marine Insurance 1729 Carroll Avenue St. Paul, MN 55104 CODE: SUB CODE: AGENCY CUSTOMER ID #: INSURED LOAN NUMBER POLICY NUMBER North Ridge Properties of New Hope NK06600235 DBA Chardon Court EFFECTIVE DATE EXPIRATION DATE CONTINUED UNTIL 5700 Boone Ave. No. 10-15— 95 10-15-96 TERMINATED IF CHECKED New Hope, MN 55428 THIS REPLACES PRIOR EVIDENCE DATED: PROPERTY INFORMATION LOCATIO W DESCRIPTION Real Property 5700 Boone Ave. No. New Hope, MN ,yCUV�RAGE.INFORM TION;,: " COVERAGE/PERILS/FORMS AMOUNT OF INSURANCE DEDUCTIBLE Special Cause of Loss - Including Theft Replacement Cost Agreed Amount 'iilding - Incl Bldg Laws Contingent Liability 7,500,000 500 _dg Laws Demolition Cost 100,000 500 Bldg Laws Incr. Cost of Construction 500,000 500 Contents 110,000 500 Loss of Rents 923,000 Extra Expense 10,000 REMARKS (Including Special Conditions) Hartford Steam Boiler Insurance Co. Policy #ASG -MN -8352815 10-15-95 to 10-15-96 Property Damage (Incl Spoilage) Not Limited 500 Business Interruption/Extra Expense 12 Months N/A CANCELLATION _ 411 THE POLICY IS SUBJECT TO THE PREMIUMS, FORMS, AND RULES IN EFFECT FOR EACH POLICY PERIOD. SHOULD THE POLICY BE TERMINATED, THE COMPANY WILL GIVE THE ADDITIONAL INTEREST IDENTIFIED BELOW 30 DAYS WRITTEN NOTICE, AND WILL SEND NOTIFICATION OF ANY CHANGES TO THE POLICY THAT WOULD AFFECT THAT INTEREST, IN ACCORDANCE WITH THE POLICY PROVISIONS OR AS REQUIRED BY LAW. ADDITIONAL INTEREST NAME AND ADDRESS City of New Hope and Norwest Bank j. XMORTGAGEE ADDITIONAL INSURED nnesota, N.A. as Trustee LOSS PAYEE LOAN# .;orporate Trust Department 6th & Marquette AUTMOflIZED PR l —''/`% � Minneapolis, MN 55479-0069 / \�// ACORD 27 (3/93) ,/=YI / © ACORD CORPORATION 1993 DORSEY & WHITNEY LLP MINNEAPOLIS PILLSBURY CENTER SOUTH NEW YORK WASHINGTON, D.C. 220 SOUTH SIXTH STREET DENVER LONDON MINNEAPOLIS, MINNESOTA 55402-149$ SEATTLE BRUSSELS TELEPHONE: (612) 340-2600 FARco HONG KONG FAX: (612) 340-2868 DES MOINES BILLINGS ROCHESTER MISSOULA COSTA MESA CREAT FALLS City of New Hope 4401 Xylon Avenue North New Hope, Minnesota 55428 Dougherty Dawkins, Inc. 90 South Seventh Street, Suite 4300 Minneapolis, Minnesota 55402 Re: $5,000,000 Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 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 Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996, in the aggregate principal amount of $5,000,000 (the Bonds). For the purpose of rendering this opinion, we have examined: (1) a Loan Agreement (the Loan Agreement), dated as of June 1, 1996, between the City and Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the Partnership); (2) the Indenture of Trust (the Indenture), dated as of June 1, 1996, between the City and Norwest Bank Minnesota, National Association, as trustee (the Trustee); (3) the Declaration of Restrictive Covenants; dated as of June 1, 1996 (the Declaration) executed by the Partnership; (4) certified copies of resolutions of the governing body of the City approving and authorizing the execution and delivery of the Loan Agreement, the Indenture, the Bonds and other documents; (5) the form of the Bonds; and (6) such 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 the certified proceedings, certificates, affidavits and DORSEY & WHITNEY LLP i Page -2- City of New Hope, Minnesota Dougherty Dawkins, Inc. other documents furnished to us without undertaking to verify the same by independent investigation. From such examination and on the basis of laws, regulations, rulings and decisions in effect on the date hereof, it is our opinion that: (1) The City is a municipal corporation validly existing under the Constitution and laws of the State of Minnesota and is authorized thereby to issue the Bonds and to enter into and carry out the provisions of the Loan Agreement and the Indenture. (2) The Loan Agreement and the Indenture have each been duly and validly authorized, executed and delivered by the City and are valid instruments legally binding on the City and enforceable in accordance with their terms. (3) The Bonds have been duly and validly authorized, executed and delivered 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. (4) The Bonds are not general obligations or an indebtedness of the City within the meaning of any constitutional or statutory limitation, and do not constitute or give rise to a general liability of the City or a charge against its general credit or taxing power, but are payable solely from revenues pledged to the payment thereof and secured by the provisions of the Indenture, under which the payments made by the Partnership pursuant to the Loan Agreement are to be made to the Trustee for the account of the City and deposited in a special trust account created by the City for that purpose. (5) All interests of the City in the Loan Agreement including amounts payable thereunder to the City by the Partnership (excepting only the right of the City to payment or reimbursement of legal and administrative costs and to indemnification) have been duly pledged and assigned to the Trustee and a security interest therein granted by the Indenture; provided, however, we express no opinion as to the priority of such pledge, assignment and security interest. (6) The interest to be paid on the Bonds is not includable in gross income of the recipient for federal income tax purposes or in taxable net income of individuals, estates and trusts for Minnesota income tax purposes; provided that (a) we express no opinion 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 DORSEY & WHITNEY LLP Page -3- City of New Hope, Minnesota Dougherty Dawkins, Inc. "substantial user" of the Project, as defined in the Loan Agreement 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 Project 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 Declaration and Loan Agreement could cause the interest payable on the Bonds to become subject to federal or Minnesota income taxation. Interest on the Bonds is includable in taxable income of corporations and financial institutions for purposes of the Minnesota franchise tax. Interest to be paid on the Bonds is not an item of tax preference which is included in "alternative minimum taxable income" for purposes of 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. The opinions expressed in paragraph 6 above are subject to the condition of compliance by the City, the Partnership and the Trustee with all requirements of the Internal Revenue Code of 1986, as amended, and the 1954 Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon may be, and continues 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 State of 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. It is to be understood that the rights of the owners of the Bonds and the enforceability of the Bonds, the Indenture and the Loan Agreement may be subject to (i) state and federal laws, rulings, decisions and principles of equity affecting remedies, and (ii) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable. In rendering this opinion we have relied upon factual representations of the City and the Partnership, including representations as to the intended use of the proceeds of the Bonds, the nature, use, cost and useful life of the facilities refinanced by the Bonds, the applications to be made of the proceeds of the Bonds and application made of the proceed of the bonds refunded by the Bonds, the investment of such proceeds and other matters material to the tax exempt status of the interest borne by the Bonds. DORSEY & WHITNEY LLP Page -4- City of New Hope, Minnesota Dougherty Dawkins, Inc. In rendering this opinion we have relied upon the opinion of even date herewith of Orbovich & Gartner Chartered, St. Paul, Minnesota, counsel to the Partnership, as to the due organization and valid existence of the Partnership, as to the due and valid authorization, execution and delivery of the Loan Agreement and certain other documents by the Partnership, and as to the validity and enforceability of these instruments against the Partnership. Dated this 11th day of July, 1996. DORSEY & WHITNEY LLP MINNEAPOLIS PILLSBURY CENTER SOUTH NEW YORK WASHINGTON. D.C. 220 SOUTH SIXTH STREET DENVER LONDON MINNEAPOLIS, MINNESOTA 55402-1498 SEATTLE BRUSSELS TELEPHONE: (612) 340-2600 Fnwco HONG KONG FAX: (612) 340-2868 DES MOINES BILLINGS ROCHESTER MISSOULA 11, 1996 COSTA MESA July GREAT FALLS Dougherty Dawkins, Inc. 90 South Seventh Street, Suite 4300 Minneapolis, Minnesota 55402 Re: $5,000,000 Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 City of New Hope, Minnesota Ladies and Gentlemen: We have heretofore rendered our opinion as Bond Counsel, dated as of July 11, 1996, as to the validity of and certain other matters with respect to the $5,000,000 Multifamily Housing Refunding Revenue Bonds (Chardon Court Project), Series 1996 (hereinafter the 'Bonds") of the City of New Hope, Minnesota (hereinafter the "City"). We further advise you, upon the basis of our examination of the documents referred to in the opinion which we have rendered as Bond Counsel as above described (and, as to paragraph 1 below, the Official Statement, dated July 1, 1996, relating to the Bonds), that: 1. The description of the provisions of the Bonds, the Indenture of Trust, dated as of June 1, 1996 (hereinafter the "Indenture"), between the City and Norwest Bank Minnesota, National Association, as trustee (hereinafter the "Trustee"), the Loan Agreement, dated as of June 1, 1996 (hereinafter the "Loan Agreement"), between the City and Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (hereinafter the "Partnership"), the Combination Mortgage, Security Agreement and Fixture Financing Statement, dated as of June 1, 1996 (hereinafter the "Mortgage"), from the Partnership to the City, the Assignment of Rents and Leases, dated as of June 1, 1996 (hereinafter the "Assignment'), from the Partnership to the City and the Declaration of Restrictive Covenants, dated as of June 1, 1996 (hereinafter the "Declaration"), executed by the Partnership, contained in the Official Statement under the headings "The Bonds" and "Security for the Bonds," and in Appendix B to the Official Statement under the DORSEY & WHITNEY LLP Page -2- Dougherty Dawkins, Inc. July 11, 1996 headings "The Loan Agreement," "The Indenture," "The Mortgage," "The Assignment" and "The Declaration" conform in all material respects to the provisions of the Bonds, the Loan Agreement, the Indenture, the Mortgage, the Assignment and the Declaration which are purported to be summarized therein. The statements on the cover page of the Official Statement and in the first paragraph under the heading "Tax Matters" in the Official Statement conform in all material respects to the corresponding portion of our opinion as Bond Counsel which is purported to be summarized. 2. The Bonds are exempt from registration under the Securities Act of 1933, as amended, and the Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended. Statement. We hereby consent to the references to us included in the Official Very truly yours, ORBOVICH & GARTNER CHARTERED SAMUEL D. ORBOVICH JUDITH R. GARTNER SUSAN M. SCHAFFER THOMAS L. SKORCZESKI Dougherty Dawkins, Inc. 4300 Norwest Center 90 South Seventh Street Minneapolis, MN 55402 BARBARA L BLUMER Of Co sd 710 North Central Life Tower 445 Minnesota Street St. Paul, Minnesota 55101 Telephone: (612) 224-5074 Facsimile: (612) 224-4697 July 11, 1996 Faegre & Benson LLP 2200 Norwest Center 90 South Seventh Street Minneapolis, MN 55402 Norwest Bank Minnesota, NA Dorsey & Whitney Corporate Trust Department Pillsbury Center South Sixth and Marquette 17th Floor Minneapolis, MN 55479-0069 220 South Sixth Street Minneapolis, MN 55492-1498 RE: $5,000,000 Multifamily Housing Refunding Revenue Bonds (Chardon Court Project) Series 1996 Ladies and Gentlemen: We have acted as counsel for Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Company"), in connection with the issuance by the City of New Hope, Minnesota (the "Municipality") of its Multifamily Housing Refunding Revenue Bonds (Chardon Court Project) Series 1996, in the aggregate original principal amount of $5,000,000. This opinion is given pursuant to Schedule I of the Bond Purchase Agreement, dated as of July 11, 1996, between the Company, the Municipality, and Dougherty Dawkins, Inc. (the "Bond Purchase Agreement"). Capitalized terms not otherwise defined in this opinion have the same meanings as in the Bond Purchase Agreement. For the purpose of this opinion, we have examined the original, certified copies or copies otherwise identified to our satisfaction as being true copies of the following: 1. The certificate of limited partnership and the limited partnership agreement of the Company as presently in effect (the "Organizational Documents"); 2. the Loan Agreement dated as of July 1, 1996, (the "Loan Agreement") between the Municipality and the Company, relating to the project described therein (the "Project"); Dougherty Dawkins, Inc. Norwest Bank Minnesota, NA Faegre & Benson LLP Dorsey & Whitney July 11, 1996 Page 2 3. the Combination Mortgage, Security Agreement and Fixture Financing Statement, dated as of July 1, 1996, (the "Mortgage") between the Municipality and the Company; 4. the Assignment of Rents and Leases, dated as of July 1, 1996, (the "Rent Assignment") from the Company to the Municipality (the "Trustee"); 5. the Declaration of Restrictive Covenants, executed by the Company, dated as of June 1, 1996, (the "Declaration"); 6. the Preliminary Official Statement dated June 20, 1996, and the final Official Statement, each relating to the Bonds (the "Official Statement"); 7. the Bond Purchase Agreement; and originals or copies of such other documents, records, certificates, opinions and instruments and have made such other investigation as we have deemed relevant and necessary as a basis for the opinion set forth herein. As to various matters of fact material to this opinion, we have relied upon factual representations made by the Company in the Bond Documents and upon certificates of officers of the Company or of public officials. We have assumed the genuineness of all signatures and authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies. In examining documents executed by parties other than the Company, we have assumed that such parties have all necessary power to enter into and perform all of their obligations thereunder and have also assumed the due authorization by all requisite action of the execution, delivery and performance of such documents by such parties and that such documents are legal, valid and binding on such parties in accordance with their respective terms. We have also assumed that each natural person executing any Bond Document has the capacity and is legally competent to do so. Our opinions expressed below are limited to the law of the State of Minnesota (excluding its conflict of laws principles) and the substantive law of the United States of America. We express no opinion as to the laws of any other state or jurisdiction. We express no opinion on any matter of county, municipal, or special political subdivision law. Based on the foregoing, we are of the opinion that as of the date hereof: Dougherty Dawkins, Inc. Norwest Bank Minnesota, NA Faegre & Benson LLP Dorsey & Whitney July 11, 1996 Page 3 a. The Company is a duly organized and validly existing limited partnership under the laws of the State of Minnesota, and the Company is qualified to do business in the State of Minnesota. To the best of our knowledge, the Company is conducting its business in material compliance with all applicable and valid laws, rules, regulations and restrictions of the jurisdictions where it owns or leases substantial property or where it transacts material intrastate or interstate business. b. The Company has full power and authority to execute and deliver the Loan Agreement, the Mortgage, the Rent Assignment, the Declaration, the Bond Purchase Agreement and the other documents or certificates executed by the Company and delivered on the Closing Date, as defined in the Bond Purchase Agreement, in connection with the issuance of the Bonds (collectively, the "Company Documents") and to carry out the terms thereof. C. The Company Documents have been duly and validly authorized, executed and delivered by the Company and, assuming the due execution and delivery by the other parties to such documents, such documents are in full force and effect and are valid and binding instruments of the Company enforceable in accordance with their respective terms, except to the extent enforceability is limited by any future proceedings with respect to the Company under bankruptcy, reorganization or other laws, decisions and equitable principles of general application relating to or affecting the enforcement of creditors' rights generally. d. The execution, delivery and performance of the Company Documents by the Company will not or conflict with or result in, with the passage of time, with notice or otherwise, a violation of any provision of or in default under the Organizational Documents or, to the best of our knowledge, after appropriate inquiry under the circumstance, any indenture, mortgage, deed of trust, lease, evidence of indebtedness, agreement, instrument, judgment, decree, order, statute, rule regulation or restriction to which the Company is currently bound or subject. e. No further approval, authorization, consent or other order of any public board or body not heretofore obtained (other than the authorization of the Municipality and the compliance with any applicable securities laws to which no opinion is expressed) is legally required for the transactions by the Company contemplated by the Bond Purchase Agreement or the Official Statement. Dougherty Dawkins, Inc. Norwest Bank Minnesota, NA Faegre & Benson LLP Dorsey & Whitney July 11, 1996 Page 4 f. To the best of our knowledge, there is no action, suite, proceeding or investigation at law or in equity before or by any court, public board or body, pending or threatened against or affecting the Company, which, if determined adversely to the Company would have a material adverse effect on the transactions contemplated by the Bond Purchase Agreement or performance under the Company Documents. g. To the best of our knowledge, the company has obtain all requisite approvals of the State and other federal, state, regional and local governmental bodies and the Project is in compliance with applicable federal state or local zoning, subdivision, environmental, pollution control and building laws, regulations, codes, ordinances and orders. h. To the best of our knowledge, the information contained in the Official Statement regarding the Company and its properties is complete, true and correct. Nothing has come to our attention which leads us to believe that the Official Statement as of the date thereof or hereof contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. i. To the best of our knowledge, the Company is not in violation of or default under any law, ordinance, regulation, decree, order, agreement or instrument of any nature whatsoever to which it is a party or to which the Company or any of its properties are subject, or to the best of our knowledge, any statute, rule or regulation to which it is subject or by which its property is bound, other than violations or defaults which separately and collectively would have no material adverse effect on the financial condition of the Company, the ability of the Company to perform its obligations under the Company Documents, or the security of the Bonds. The foregoing opinions are subject to the following qualifications: 1. The opinions expressed above are qualified to the extent that the legality, validity or enforceability of any provisions of the Bond Documents or of any rights granted pursuant to any of those agreements or instruments may be subject to and affected by applicable bankruptcy (including but not limited to the avoidance provisions thereof), insolvency, reorganization, fraudulent transfer or conveyance, equitable subordination, moratorium or similar laws affecting the rights of creditors generally. Dougherty Dawkins, Inc. Norwest Bank Minnesota, NA Faegre & Benson LLP Dorsey & Whitney July 11, 1996 Page 5 2. The enforceability of the Company's obligations under the Bond Documents is subject to general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether enforceability is considered in a proceeding in equity or at law). 3. Certain remedial and waiver provisions of the Bond Documents may be unenforceable, but the inclusion of such provisions therein does not affect the validity of any such documents as a whole, and such documents contain provisions generally considered adequate for enforcing payment of the Company's obligations thereunder. 4. We express no opinion as to the title to any property or as to the creation, perfection or priority of any security interest or lien. 5. We express no opinion as to the enforceability of any prepayment premium, default rate of interest or late charge provided for under the Bond Documents. We consent to the references to us in the Official Statement. This opinion is furnished only to the addressees and is solely for their benefit in connection with the transactions referred to herein. This opinion may not be relied on by the addressees for any other purpose, or relied on by any other person or entity for any purpose whatsoever, without in each instance our prior written consent. ORBOVICH & GARTNER CHARTERED By: ith rtner 1:\USERS\JRG\northrdg\chardon\Opinion.L1 FAEGRE & BENSON PROFESSIONAL LIMITED LIABILITY PARTNERSHIP 2200 NORw= CENTER, 90 SOUTH SEVENTH STREET MINNE"OL's, MINNESOTA 55402-3901 TELEPHONE 612-336-3000 FACSIMdE 612-336-3026 July 11, 1996 Dougherty Dawkins, Inc. Minneapolis, Minnesota RE: $5,000,000 CITY OF NEW HOPE, MINNESOTA MULTIFAMILY HOUSING REFUNDING REVENUE BONDS (CHARDON COURT PROJECT) SERIES 1996. Ladies and Gentlemen: We have acted as your legal counsel in connection with the issuance and sale by the City of New Hope, Minnesota (the "Issuer") of the above -referenced Bonds which were purchased by you pursuant to a Bond Purchase Agreement dated July 11, 1996, between you, as Underwriter, the Issuer and Northridge Properties of New Hope Limited Partnership (the "Borrower"), a Minnesota limited partnership. In the course of our representation of you we have examined the Official Statement dated July 1, 1996 (the "Official Statement"), relating to the Bonds and the documents referred to therein and we have made such other investigation as we deemed appropriate as a basis for the statement hereinafter expressed. In connection therewith we have discussed with representatives of the Borrower, legal counsel to the Borrower, and you, as Underwriter, the contents of the Official Statement. Based upon the foregoing, we advise you that no information 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 Official Statement (except financial and statistical data as to which no view is expressed) as of its date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. This letter is provided solely for the benefit of and may be relied on only by Dougherty Dawkins, Inc. We hereby consent to the references to us in the Official Statement. Very yours, M1:0155844.01 Minneapolis Denver Des Moines W/ bington, D.C. London Frankfurt Almaty No. R - UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF HENNEPIN CITY OF NEW HOPE MULTIFAMILY HOUSING REFUNDING REVENUE BOND (Chardon Court Project) Series 1996 Interest Rate Maturity Date Date of Original Issue CUSIP June 1, `June,1, 1996 645464 e REGISTERED HOLDER: CEDE & CO., V\1 PRINCIPAL AMOUNT: DOLLARS KNOW ALL MEN BY THESE PRESENTS that the City of New Hope, in the County of Hennepin- and the State of Minnesota, for value received, promises to pay to the Registered Holder named above, or registered assigns, from the source and in the manner hereinafter provided, and upon presentation and surrender hereof at the principal 16orporate trust office of the Trustee named below, the principal amount specified above on the maturity date specified above, and to pay interest on said principal amount to the Holder hereof from June 1, 1996, or from the most recent interest payment date to which interest has been paid or duly provided for, until the principal amount is paid or discharged, at the rate per annum specified above, except as the provisions with respect to the redemption of this Bond before maturity may become applicable hereto. Interest is payable semiannually on each June 1 and December 1, commencing on December 1, 1996, by check or draft mailed to the person in whose name this Bond is registered in the Bond Register maintained by the Trustee as of the close of business on the 15th day (whether or not a business day) of the preceding month, at his address as it appears on the Bond Register. Interest on this Bond shall be computed on the basis of a 360 - day year, consisting of twelve 30 -day months. The principal of and interest on this Bond are payable in lawful money of the United States of America. Upon notice to the Trustee delivered not less than 10 days before an Interest Payment Date accompanied by proper wire transfer instructions, any Holder of Bonds in any aggregate principal amount equal to or greater than $1,000,000 may elect to be paid the interest on such Bonds payable on the Interest Payment Date by Federal Reserve wire transfer in immediately available funds to any bank in the United States specified by such Holder which is a member of the Federal Reserve System. This Bond is one of an authorized issue of bonds (the Bonds) issued under and equally and ratably secured and entitled to the protection given by an Indenture of Trust, dated as of June 1, 1996 (the Indenture), duly executed and delivered by the City to Norwest Bank Minnesota, National Association, in Minneapolis, Minnesota, as Trustee (herein called the Trustee, which term includes any successor Trustee under the Indenture). Reference is made to the Indenture, including all indentures supplemental thereto, for the provisions, among others, with respect to the nature and extent of the security, the rights, duties and obligations of the City, the Trustee and the Holders of the Bonds, and the terms upon which the Bonds are issued and secured. This Bond is one of the series specified in its title (the Series 1996 Bonds) issued in the aggregate principal amount of $5,000,000. This Bond and the series of which it forms a part are issued pursuant to and in full compliance with the Constitution and laws of the State of Minnesota, particularly Minnesota Statutes, Chapter 462C, as amended, and pursuant to resolutions adopted and approved by the governing body of the City. The Bonds are issued by the City for the purpose of refunding certain multifamily housing revenue bonds previously issued by the Housing and Redevelopment Authority of St. Paul, Minnesota. The Bonds are payable primarily from revenues received pursuant to a Loan Agreement, dated as of June 1, 1996 (the Agreement), between the City and Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the Company), pursuant to which the Company is obligated to make Loan Repayments in amounts sufficient to pay the principal of and interest on, and the Trustee's fees and expenses in connection with, the Bonds as the same become due and payable. Loan Repayments sufficient for said purposes are to be paid to the Trustee for the account of the City and credited to a Bond Fund as a special trust fund created by the City and have been and are hereby pledged for that purpose. The Bonds are further secured by amounts held by the Trustee in trust funds established under the Indenture and by a Combination Mortgage, Security Agreement and Fixture Financing Statement, dated as of June 1, 1996 (the Mortgage), between the Company and the City, and an Assignment of Rents and Leases (the Assignment), dated as of June 1, 1996, between the Company and the City, which Mortgage and Assignment have been assigned by the City to the Trustee. The obligations of the Company under the Agreement, the Mortgage and the Assignment, including, but not limited to, the obligation to make Loan Repayments, is a recourse obligation of the Company, but there is no personal liability of the general or limited partners of the Company thereunder. Reference is hereby made to the Agreement, the Mortgage and the Assignment, copies of which are on file with the Trustee, for a complete description of the rights, duties and obligations of the Company -2- thereunder and a description of the property encumbered by the Mortgage and the Assignment. The Bonds do not constitute a debt of the State of Minnesota, the County of Hennepin or the City within the meaning of any constitutional or statutory limitation and do not constitute or give rise to a pecuniary liability of the State, the County or the City or a charge against its general credit or taxing powers. The Bonds are payable solely from the revenues and other property pledged to the payment thereof and do not constitute a charge, lien or encumbrance, legal or equitable, upon any other property of the City. No Holder or Holders 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 interest thereon nor to enforce payment thereof against any property of the City. Bonds are each subject to redemption and prepayment, at the option of the City upon direction by the Company on or after June 1, 2001 in whole on any date or in part on any interest payment date, and if in part by lot or such other method as the Trustee deems fair withir each maturity as provided in the Indenture, at a redemption price equal to their principal amount and accrued interest plus the premiums, expressed as percentages of principal amount, set forth in the following table for the designated redemption dates: Redemption Period Premium June 1, 2001 to May 31, 2002 2.0% June 1, 2002 to May 31, 2003 1.0% June 1, 2003 and thereafter none The Bonds maturing on June 1, 2014 are subject to mandatory sinking fund redemption by lot or such other method as the Trustee deems fair, at their principal amount and accrued interest without premium on June 1 in the years and in the principal amounts (unless and to the extent a credit against any such amount is applied as provided in the Indenture) set forth below: Year Principal Year Principal (June 1 Amount(June 1 Amount 2011 $135,000 2013 $155,000 2012 145,000 2014* 165,000 * Stated Maturity -3- The Bonds maturing on June 1, 2026 are subject to mandatory sinking fund redemption by lot or such other method as the Trustee deems fair, at their principal amount and accrued interest without premium on June 1 in the years and in the principal amounts (unless and to the extent a credit against any such amount is applied as provided in the Indenture) set forth below: Year Principal Year Principal (Tune 1 Amount(Tune 1 Amount 2015 $175,000 2021 $265,000 2016 190,000 2022 285,000 2017 200,000 2023 310,000 2018 215,000 20 330,000 2019 235,0005 355,000 2020 250,000 e 0 380,000 " Stated Maturity The Bonds are not otherwise sizbt to redemption prior to maturity, unless (i) the Company exercises its option to direct the redemption of all Outstanding Bonds in the event of damage to, destruction or condemnation of the Project as provided in Section 8.02 of the Agreement, in which event all Outstanding Bonds shall be redeemed in whole and not in part, on the next interest payment date for which notice of redemption can be given, at their principal amount and accrued interest and without premium, or (ii) the Company is obligated to direct the redemption of all Outstanding Bonds in the event of a Determination of Taxability (as defined in the Indenture) as provided in Section 8.03 of the Agreement, in which event all Outstanding Bonds are subject to redemption, in whole and not in part, on the next interest payment date for which notice of redemption can be given after the Trustee receives notice of such Determination, at their principal amount and accrued interest. As provided in the Agreement and the Indenture, no action or decision described in the definition of Determination of Taxability shall give rise to a Determination of Taxability unless the Company has been given written notice and, if it is so desired and is legally allowed, has been given the opportunity to contest the same, either directly or in the name of any Bondholder, and until the conclusion of any appellate review, if sought. Notice of redemption of any Bond shall be mailed at least thirty days before the redemption date to each Holder of a Bond to be redeemed at his last address appearing on the Bond Register maintained with the Trustee, but no defect in or failure to give such mailed notice of redemption shall affect the validity of proceedings for redemption of any Bond not affected by such defect or failure. All Bonds so called for redemption will cease to bear interest on the specified SS redemption date, provided funds for their redemption have been duly deposited, and, except for the purpose of payment, shall no longer be protected by the Indenture and shall not be deemed outstanding under the provisions of the Indenture. It is provided in the Indenture that Bonds of this series of a denomination larger than $5,000 may be redeemed in part ($5,000 or a whole multiple thereof) and that upon any partial redemption of any such Bond the same shall be surrendered in exchange for one or more new Bonds in authorized form for the unredeemed portion of principal. The Holder of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any default or Event of Default under the Indenture, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. In certain events, on the conditions, in the manner and with the effect set forth in the Indenture, the principal of all Bonds issued thereunder and then outstandingamay become or may be declared due and payable before the stated maturity thereof. Alterations of the Indenture, or of any indenture supplemental thereto, may be made only to the extent and in the circumstances permitted by the Indenture. The Bonds are issuable as fully registered Bonds in any denomination which is an integral multiple of $5,000. This Bond is transferable by the Registered Holder hereof upon surrender of this Bond for transfer at the office of the Trustee, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee and executed by the Registered Holder hereof or his attorney duly authorized in writing. Thereupon the City shall execute and the Trustee shall authenticate and deliver, in exchange for this Bond, one or more new fully registered Bonds of the same series in the name of the transferee, of an authorized denomination, in an aggregate principal amount equal to the principal amount of this Bond, of the same maturity, and bearing interest at the same rate. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, to happen and to be performed precedent to and in the execution and delivery of the Indenture and 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 series of which it forms a part, together with all other obligations of the City, does not exceed or violate any constitutional or statutory limitation of indebtedness. -5- ( This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Indenture until the Certificate of Authentication hereon shall have been executed by the Trustee by manual signature of one of its authorized representatives. IN WITNESS WHEREOF, the City of New Hope, Minnesota, by its governing body, has caused this Bond to be executed in its name by the signatures of its Mayor and City Manager. Date of Authentication: July 11, 1996 City Manager Mayor TRUSTEE'S CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds of the series designated therein and issued under the provisions of the within -mentioned Indenture. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee 10 Authorized Representative -6- The following abbreviations, when used in the inscription on the face of this Bond, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM --as tenants in common; TEN ENT --as joint tenants by the entireties; JT TEN --as joint tenants with right of survivorship and not as tenants in common; UNIF TRANS MIN ACT............................. stodian ............................ (Coast) (Minor) under Uniform Transfers to Minors Act ................................... (State) P Additional abbreviations may also be used although not in the above list. -7- ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto (Please Print or Typewrite Name and Address of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: Please Insert Social Security Number or Other Identifying Number of Assignee Notice: The'signature to this assignment must correspond with the name as it appears on the face of this Bond in every particular, without alteration or any change whatsoever. Signature(s) must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Bond Registrar, which requirements include membership or participation in the Securities Transfer Association Medalion Program (STAMP) or such other "signature guaranty program" as may be determined by the Bond Registrar in addition to or in substitution for STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. El $5,000,000 MULTIFAMILY HOUSING REFUNDING REVENUE BONDS (CHARDON COURT PROJECT), SERIES 1996 CITY OF NEW HOPE, MINNESOTA RECEIPT OF UNDERWRITER Dougherty Dawkins, Inc., as the Underwriter of the Bonds described above (the Bonds), hereby acknowledges receipt this date from Norwest Bank Minnesota, National Association, as Trustee, of $5,000,000 aggregate principal amount of Bonds, in fully registered form, fully executed and authenticated, maturing on June 1, in the years and amounts set forth below, and bearing interest at the annual rates set forth opposite such years and amounts, as follows: Year Amount Rate 1997 $ 60,000 4.50% 1998 60,000 5.00 1999 65,000 5.25 2000 70,000 5.50 2001 70,000 5.75 2002 75,000 6.00 2003 80,000 6.10 2004 85,000 6.25 2005 90,000 6.40 2006 95,000 6.50 2007 105,000 6.60 2008 110,000 6.70 2009 120,000 6.75 2010 125,000 6.80 2014 600,000 7.00 2026 3,190,000 7.25 Dated: July 11, 1996 DOUGHERTY DAWKINS, INC. ByK&�" I Its c e CERTIFICATE NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY I, the undersigned being the duly qualified Executive Director of the New Hope Economic Development Authority (the EDA), hereby attest and certify that: 1. As such officer, I am the recording officer of the EDA and have the legal custody of the original record from which the attached resolution was transcribed. 2. I have carefully compared the attached resolution with the original record of the meeting at which the resolution was acted upon. 3. I find the attached resolution to be a true, correct and complete copy of the original: EDA RESOLUTION NO. 96-_11` Resolution Relating to a Redevelopment Agreement with Northridge Properties of New Hope Limited Partnership; Waiving the HRA Lien Maturity Under the Redevelopment Agreement in Connection With the Issuance of Refunding Bonds by the City and Authorizing Execution of Various Documents in Connection With Such Refunding Bonds 4. I further certify that the affirmative vote on said resolution was 4 ayes, 0 nayes, and 1 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 Executive Director this 11th day of June , 1996. f� Daniel Donahue, Executive Director EDA RESOLUTION NO. 96- 11 RESOLUTION RELATING TO A REDEVELOPMENT AGREEMENT WITH NORTHRIDGE PROPERTIES OF NEW HOPE LIMITED PARTNERSHIP; WAIVING THE HRA LIEN MATURITY UNDER THE REDEVELOPMENT AGREEMENT IN CONNECTION WITH THE ISSUANCE OF REFUNDING BONDS BY THE CITY AND AUTHORIZING EXECUTION OF VARIOUS DOCUMENTS IN CONNECTION WITH SUCH REFUNDING BONDS 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, together with amendments thereto, designated as Redevelopment Plan 82-1 ("Redevelopment Plan 82-1"), and a redevelopment project to be undertaken pursuant thereto, as defined in Minnesota Statutes, Section 469.002, subdivision 14, together with amendments thereto, designated as Redevelopment Project 82-1 ("Redevelopment Project 82-1"). In connection with Redevelopment Plan 82-1 and Redevelopment Project 82-1, the HRA and the City of New Hope (the "City") entered into a 1984 Redevelopment Agreement dated January 30, 1985 (the "Redevelopment Agreement"), with Northridge Properties of New Hope Limited Partnership, a Minnesota limited partnership (the "Developer"), and Charles P. Thompson and Mary Jane Thompson whereby the HRA sold certain premises described therein (the "Land") to the Developer. The Developer has constructed a129 -unit apartment building on the Land (the "Project"). 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. Pursuant to Minnesota Statutes, Section 469.094, subdivision 2, the City transferred control of Redevelopment Plan 82-1 and Redevelopment Project 82-1 from the HRA to the EDA. The Developer has proposed that the City issue its Multifamily Housing Development Refunding Revenue Bonds (Chardon Courts Project), Series 1996 (the "Refunding Bonds"), in a principal amount not in excess of $5,100,000 under an Indenture of Trust between the City and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"). The proceeds of the Refunding Bonds will be loaned to the Developer and applied to prepay the Developer Loan, as defined in the Redevelopment Agreement. The Bonds will be secured by a Combination Mortgage, Security Agreement and Fixture Financing Statement (the "Mortgage") from the Developer to the City and an Assignment of Rents and Leases (the "Assignment") from the Developer to the City. The City will assign its interest in the Mortgage and Assignment to the Trustee. R The Developer has requested that the EDA (i) agree that the refinancing of the Developer Loan by the issuance of the Refunding Bonds does not constitute an HRA Lien Maturity, as defined in the Redevelopment Agreement, and (ii) acknowledge that the rights of the EDA under the Redevelopment Agreement are subordinate to the rights of the Trustee under the Mortgage and Assignment. 2. Waiver of HRA Lien Maturity and Approval of Subordination Agreement. The EDA agrees that the payment of the Developer Loan upon the issuance of the Refunding Bonds shall not constitute a HRA Lien Maturity, as defined in the Redevelopment Agreement. Such waiver shall only apply to the refinancing of the Developer Loan by the issuance of the Refunding Bonds, and shall not apply to any subsequent or other event constituting an HRA Lien Maturity under the Redevelopment Agreement, or impair any right of the EDA consequent thereto. The EDA acknowledges that its rights under the Redevelopment Agreement are subordinate to the rights of the Trustee under the Mortgage and Assignment. .If 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 such subordination and to evidence the waiver of the HRA Lien Maturity as provided herein. Passed the 10th day of June, 1996. aGs✓ Edw. -1 frickson, President Attest:t Daniel d. Donahue, Executive Director c: Iwp5l\cnhlchardon.eda FAEGRE & BENSON PROFESSIONAL LIMITED LIABILITY PARTNERSHIP 2200 NORWEST CENTER, 90 SOUTH SEVENTH STREET MINNEAPOLIS, MtHNECOTA 55402-3901 TELEPHONE 612-336-3000 FACSIMILE 612-336-3026 $5,000,000 CITY OF NEW HOPE, MINNESOTA MULTIFAMILY HOUSING REFUNDING REVENUE BONDS, SERIES 1996 (CHARDON COURT PROJECT) July 1, 1996 Dougherty Dawkins, Inc. Minneapolis, Minnesota Re: Blue Sky Memorandum Ladies and Gentlemen: Attached hereto is a Blue Sky Memorandum which is furnished to you for use in connection with the proposed offer and sale of the above -referenced Bonds (the "Bonds"). This Memorandum summarizes certain provisions of the Blue Sky or securities laws (the "Blue Sky laws") of the states mentioned therein (the "States"). This Memorandum is furnished only for your information. It is based upon (a) an examination of the Blue Sky laws of the States and of the rules and regulations, if any, of the authorities administering such laws as reported in standard compilations as of the date hereof, (b) information set forth in the Official Statement relating to the Bonds, and (c) such other examination of documents and investigation as we deemed relevant. Except as noted in the Memorandum, we have not obtained or applied for special rulings of the authorities administering the Blue Sky laws of the States nor have we obtained opinions of local counsel or of our offices in States other than the State of Minnesota. This Memorandum has been prepared by attorneys in our Minneapolis office who are members of the bar of the State of Minnesota and who do not purport to be experts as to the law of any other State. No person is entitled to rely upon this Memorandum as an opinion of counsel. This Memorandum is subject to the existence of broad discretionary powers in the authorities administering such laws in many States, authorizing them, among other things, to withdraw exemptions accorded by statute, to impose additional requirements, to refuse registration and to issue stop orders, and to legislation, administrative regulations and rulings and judicial interpretations, information concerning which is not currently available to us Minneapolis Denver Des Moines Wasbington, D.C. London Frankfurt Almaty through the standard compilations upon which this Memorandum is based. This Memorandum also assumes that no stop order or refusal order is in effect against the Bonds and that no examination or proceedings looking toward such an order is pending. In all instances in which this Memorandum indicates that persons registered or licensed as brokers or dealers may sell the bonds, we have assumed (a) compliance by such persons with all broker or dealer requirements in connection with the sale thereof, (b) registration of such persons as broker-dealers under the provisions of the Securities Exchange Act of 1934 and (c) compliance by such persons with all other federal and state statutes, rules and regulations with respect to registration or licensing. This Memorandum does not purport to cover the requirements or restrictions, if any, with respect to the offer or sale of the Bonds by a salesman of a registered or licensed broker or dealer, who himself is not registered or licensed under the laws of the State in which the offer or sale is made. Prior to such an offer or sale, further inquiry should be made. This Memorandum does not purport to cover whether the Bonds are a legal investment. Prior to any sale of the Bonds to a bank, savings institution, trust company, insurance company, or to any other purchaser which is acting in a fiduciary capacity or is subject to statutory or other restrictions as to investments, further inquiry should be made. This Memorandum does not purport to cover the requirements or restrictions, if any, with respect to the content, filing, approval or use in any State of any advertising materials or the distribution of the Preliminary Official Statement, final Official Statement or any other offering materials. Very truly rs, /AEGRE & BENSON LLP M1:0155244.01 $5,000,000 CITY OF NEW HOPE, MINNESOTA MULTIFAMILY HOUSING REFUNDING REVENUE BONDS, SERIES 1996 (CHARDON COURT PROJECT) BLUE SKY MEMORANDUM July 1, 1996 (Reference is made to the attached letter of Faegre & Benson LLP dated July 1, 1996) A. Jurisdictions Where Filings Not Required In the following jurisdictions, offers and sales of the Bonds to the public may now be made, provided that offers and sales may be made only by dealers or brokers registered or licensed therein: Florida * Illinois Missouri Arizona * Based on representations of the Company and the Issuer. B. Jurisdictions Where Filings Required In the following jurisdictions, offers and sales to the public may be made by dealers or brokers registered or licensed therein after certain registration or filing requirements in such jurisdictions have been met. Action has been taken to meet such requirements, and sales, in an aggregate principal amount not to exceed the amount indicated, to the public, may be made in the following jurisdictions by dealers or brokers registered or licensed therein, subject to the conditions, if any, set forth below: Iowa ($250,000) Minnesota (entire offering) North Dakota ($250,000) South Dakota ($250,000) C. Jurisdictions Where No Action is Being Taken We have been informed by you that you do not intend to offer Bonds in Wisconsin to the public because of their requirement to exclude forward-looking information from the Preliminary Official Statement. Sales may be made to "accredited investors" in Wisconsin provided that the investor has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment. Pursuant to your instructions, no determinations have been made regarding offers and sales to the public of the Bonds nor has any action been taken to register or qualify the Bonds for sale to the public or to meet certain filing requirements, if any, in any other jurisdictions and offers and sales of the Bonds to the public in such jurisdictions should not be made without such review or action. ML0155244.01